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<HEAD>
<TITLE>S-1</TITLE>
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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>As filed with the Securities and Exchange Commission on
September 19, 2005</B>
</DIV>

<DIV align="right" style="font-size: 10pt;">
<B>Registration No.&nbsp;333-</B>
</DIV>

<DIV align="center" style="font-size: 6pt;">
<DIV style="width: 100%; border-top: 2.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 14pt;">
<B>UNITED STATES</B>
</DIV>

<DIV align="center" style="font-size: 14pt;">
<B>SECURITIES AND EXCHANGE COMMISSION</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Washington,&nbsp;D.C. 20549</B>
</DIV>

<DIV align="center" style="font-size: 18pt;">
<B>Form&nbsp;S-1</B>
</DIV>

<DIV align="center" style="font-size: 12pt;">
<B>REGISTRATION STATEMENT</B>
</DIV>

<DIV align="center" style="font-size: 12pt;">
<B>UNDER</B>
</DIV>

<DIV align="center" style="font-size: 12pt;">
<B>THE SECURITIES ACT OF 1933</B>
</DIV>

<DIV align="center" style="font-size: 24pt;">
<B>CRM Holdings, Ltd.</B>
</DIV>

<DIV align="center" style="font-size: 8pt;">
<I>(Exact name of registrant as specified in its charter)</I>
</DIV>

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<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

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    <TD width="32%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="31%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="31%">&nbsp;</TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <B>Bermuda</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <B>6331</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <B>N/A</B></TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <I>(State or other jurisdiction of<BR>
    incorporation or organization)</I></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <I>(Primary Standard Industrial<BR>
    Classification Code Number)</I></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <I>(IRS Employer Identification<BR>
    Number)</I></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>PO Box HM 2062</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Hamilton HM HX</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Bermuda</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(441)&nbsp;295-2185</B>
</DIV>

<DIV align="center" style="font-size: 8pt;">
<I>(Address, including zip code, and telephone number, including
area code, of registrant&#146;s principal executive offices)</I>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Agent for Service:</I></B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Louis J. Viglotti, Esq.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>General Counsel</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Compensation Risk Managers, LLC</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>112 Delafield Street</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Poughkeepsie, New York 12601</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(845)&nbsp;452-4100</B>
</DIV>

<DIV align="center" style="font-size: 8pt;">
<I>(Name and address, including zip code, and telephone number,
including area code, of agent for service)</I>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Copies to:</I></B>
</DIV>

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<TR style="font-size: 1pt;">
    <TD width="52%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="45%">&nbsp;</TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <B>Roslyn Tom, Esq.<BR>
    Baker&nbsp;&#38; McKenzie LLP<BR>
    805 Third Avenue<BR>
    New York, New York 10022<BR>
    (212)&nbsp;751-5700</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <B>Peter S. Kolevzon, Esq.<BR>
    Kramer Levin Naftalis &#38; Frankel LLP<BR>
    1177 Avenue of the Americas<BR>
    New York, New York 10036<BR>
    (212) 715-9100</B></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Approximate date of commencement of proposed sale of securities
to the public: As soon as practicable after the registration
statement becomes effective.
</DIV>

<DIV align="left" style="font-size: 10pt;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to
Rule&nbsp;415 under the Securities Act of 1933, check the
following
box.&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;
</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If this Form is filed to register additional securities for an
offering pursuant to Rule&nbsp;462(b) under the Securities Act,
please check the following box and list the Securities Act
registration statement number of the earlier effective
registration statement for the same
offering.&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;
</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If this Form is a post-effective amendment filed pursuant to
Rule&nbsp;462(c) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering.&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;
</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If this Form is a post-effective amendment filed pursuant to
Rule&nbsp;462(d) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering. If delivery of the prospectus is expected to be made
pursuant to Rule&nbsp;434, please check the following
box.&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;
</FONT>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CALCULATION OF REGISTRATION FEE</B>
</DIV>

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<TR style="font-size: 1pt;">
    <TD width="56%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD><!-- Right VRule -->
    <TD width="2%">&nbsp;</TD>
    <TD width="16%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD><!-- Right VRule -->
    <TD width="2%">&nbsp;</TD>
    <TD width="18%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD><!-- Right VRule -->
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;border-right:1.5pt solid #000000;">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Proposed Maximum</B></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Amount of</B></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Aggregate</B></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Registration</B></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="left" nowrap><B>Title of Each Class of Securities to be Registered</B></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Offering Price(1)</B></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Fee</B></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;border-right:1.5pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Common Shares, $0.01 par value</DIV>
    </TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">
    $100,000,000</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">
    $11,770</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 2pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Estimated solely for the purposes of determining the
    registration fee in accordance with Rule 457(o) under the
    Securities Act of 1933, as amended.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>The Registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section&nbsp;8(a)
of the Securities Act of 1933, as amended, or until the
Registration Statement shall become effective on such date as
the Securities and Exchange Commission, acting pursuant to said
Section&nbsp;8(a), may determine.</B>
</DIV>

<DIV align="center" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 4pt;">
<DIV style="width: 100%; border-top: 2.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<TABLE width="100%" cellpadding="5" style="border: 3pt double #000000; margin-bottom: 6pt; font-size: 10pt"><TR><TD>
<B><FONT style="font-size: 11pt" color="#E8112D">The information
in this prospectus is not complete and may be changed. The
securities may not be sold until the Registration Statement
filed with the Securities and Exchange Commission is effective.
This prospectus is not an offer to sell these securities and it
is not soliciting an offer to buy these securities in any state
where the offer or sale is not
permitted.</FONT></B><FONT style="font-size: 11pt"> <BR>


</FONT>
</TD></TR></TABLE>

<DIV align="center" style="font-size: 10pt; margin-top: 1pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><FONT color="#E8112D">SUBJECT TO COMPLETION, DATED
SEPTEMBER&nbsp;19, 2005</FONT></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>PRELIMINARY PROSPECTUS</B>
</DIV>

<DIV align="center" style="font-size: 20pt; margin-top: 21pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CRM Holdings, Ltd.</B>
</DIV>

<DIV align="center" style="font-size: 14pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">l</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Common
Shares</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
are a leading provider of fee-based management and other
services for workers&#146; compensation self-insured groups in
New York and California. We also reinsure a portion of the
excess workers&#146; compensation coverage these groups obtain.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
are
offering &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">l</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of
our common shares in this firm commitment underwritten public
offering. In addition, the selling shareholders are
offering &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">l</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of
our common shares. We will not receive any of the proceeds from
the sale of our common shares by the selling shareholders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
expect the initial public offering price to be between
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">l</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">l</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share. No public market currently exists for our common shares,
and they are not currently listed on any national exchange or
market system. We intend to apply to the Nasdaq National Market
to list our common shares for quotation under the symbol
&#147;CRMH.&#148;
</DIV>

<DIV align="center" style="font-size: 6pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 26%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 12pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Investing
in our common shares involves certain risks. You should
carefully consider the &#147;Risk Factors&#148; beginning on
page 10 of this prospectus before investing in the common
shares.</B>
</DIV>

<DIV align="center" style="font-size: 6pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 26%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 9pt; ">

<TR style="font-size: 1pt;">
    <TD width="73%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Per Share</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Total</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Price to public</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Underwriting discounts</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net proceeds (before expenses) to us(1)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net proceeds to selling shareholders</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    This amount is the total before deducting legal, accounting,
    printing and other offering expenses payable by us, which are
    estimated
    at &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">l</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The underwriters have been granted a 30-day option to purchase
up to &nbsp;<FONT face="wingdings">l</FONT>&nbsp;additional
common shares at the public offering price, less the
underwriting discounts, solely to cover over-allotments, if any.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>None of the Securities and Exchange Commission, any state
securities regulators, the Registrar of Companies in Bermuda or
the Bermuda Monetary Authority has approved or disapproved of
these securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal
offense.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The underwriters expect to deliver our common shares to
purchasers against payment in New York, New York on or
about &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">l</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2005, subject to customary closing conditions.
</DIV>

<DIV align="center" style="font-size: 6pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 26%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 19pt;">

<TR>
    <TD width="50%"></TD>
    <TD width="50%"></TD>
</TR>

<TR valign="top">
    <TD align="left">Sandler O&#146;Neill&nbsp;&#38; Partners, L.P.</TD>
    <TD align="right">KeyBanc Capital Markets</TD>
</TR>

</TABLE>

<DIV align="center" style="font-size: 12pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 26%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The date of this prospectus
is &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">l</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2005
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>

<DIV align="left" style="font-size: 10pt;">

</DIV>

<DIV align="left" style="font-size: 10pt;">
<!-- TOC -->
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name="tocpage"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>TABLE OF CONTENTS</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="90%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Page</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#101'>Prospectus Summary</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>1</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#102'>Risk Factors</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#103'>Cautionary Note Regarding Forward-Looking
    Statements</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>30</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#104'>Use of Proceeds</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>31</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#106'>Dividend Policy</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>31</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#123'>Capitalization</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>32</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#124'>Dilution</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>33</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#107'>Selected Combined Financial Information</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>34</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#125'>Management&#146;s Discussion and Analysis
    of Financial Condition and Results of Operations</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>36</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#108'>Business</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>53</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#109'>Regulation</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>67</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#110'>Management</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>75</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#113'>Principal Shareholders</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>80</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#114'>Selling Shareholders</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>80</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#111'>Certain Relationships and Related
    Transactions</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>81</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#112'>Material Tax Considerations</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>84</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#115'>Description of Share Capital</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>93</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#116'>Underwriting</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>103</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#117'>Shares Eligible for Future Sale</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>106</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#118'>Legal Matters</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>107</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#119'>Experts</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>107</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#120'>Enforceability of Civil Liabilities under
    U.S.&nbsp;Federal Securities Laws</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>107</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#121'>Where You Can Find More Information</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>108</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#122'>Index to Financial Statements</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>F-1</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y12480exv3w1.txt">EX-3.1: MEMORANDUM OF ASSOCIATION</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y12480exv3w2.txt">EX-3.2: BYE-LAWS OF THE COMPANY</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y12480exv10w3.txt">EX-10.3: INTEREST AND LIABILITIES CONTRACT TO WORKERS' COMPENSATION AND EMPLOYER'S LIABILITY PROPORTIONAL REINSURANCE AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y12480exv10w4.txt">EX-10.4: LEASE AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y12480exv10w5.txt">EX-10.5: LOAN AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y12480exv10w6.txt">EX-10.6: AMENDED AND RESTATED LOAN AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y12480exv10w7.txt">EX-10.7: LOAN AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y12480exv10w8.txt">EX-10.8: LOAN AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y12480exv23w1.txt">EX-23.1: CONSENT OF JOHNSON LAMBERT & CO.</A></FONT></TD></TR>
</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;">
<!-- /TOC -->
</DIV>

<DIV align="center" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 45%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>You may only rely on the information contained in this
prospectus. We have not authorized anyone to provide you with
different information. This prospectus does not constitute an
offer to sell or a solicitation of an offer to buy any
securities other than the common shares offered by this
prospectus. This prospectus does not constitute an offer to sell
or a solicitation of an offer to buy any common shares in any
circumstances in which such offer or solicitation is unlawful.
Neither the delivery of this prospectus nor any sale made in
connection with this prospectus shall, under any circumstances,
create any implication that there has not been a change in our
affairs since the date of this prospectus or that the
information contained in this prospectus is correct as of any
time after its date.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>Until <FONT face="wingdings">l</FONT>, 2005, 25&nbsp;days
after the date of this prospectus, all dealers that buy, sell or
trade our common shares, whether or not participating in this
offering, may be required to deliver a prospectus. This
requirement is in addition to the dealers&#146; obligation to
deliver a prospectus when acting as underwriters and with
respect to unsold allotments or subscriptions.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>Shares may be offered or sold in Bermuda only in compliance
with the provisions of the Investment Business Act of 2003, and
the Exchange Control Act 1972, and related regulations of
Bermuda which regulate the sale of securities in Bermuda. In
addition, specific permission is required from the BMA, pursuant
to the provisions of the Exchange Control Act 1972 and related
regulations, for all issuances and transfers of securities of
Bermuda companies, other than in cases where the BMA has granted
a general permission. The BMA in its policy dated June&nbsp;1,
2005 provides that where any equity securities, including our
common shares, of a Bermuda company are listed on an appointed
stock exchange, general permission is given for the issue and
subsequent transfer of any securities of a company from and/or
to a non-resident, for</B>
</DIV>

<P align="center" style="font-size: 10pt;">i

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>as long as any equities securities of such company remain so
listed. The Nasdaq National Market is deemed to be an appointed
stock exchange under Bermuda law. Notwithstanding the above
general permission, the BMA has granted CRM&nbsp;Holdings
permission to, subject to the common shares in CRM Holdings
being listed on an appointed stock exchange, issue, grant,
create, sale and transfer any of CRM&nbsp;Holdings&#146; shares,
stock, bonds, notes (other than promissory notes), debentures,
debenture stock, units under a unit trust scheme, shares in an
oil royalty, options, warrants, coupons, rights and depository
receipts, or collectively, the Securities, to and among persons
who are either resident or non-resident of Bermuda for exchange
control purposes, whether or not the Securities are listed on an
appointed stock exchange. The BMA and the Registrar of Companies
accept no responsibility for the financial soundness of any
proposal or for the correctness of any of the statements made or
opinions expressed in this prospectus.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>INFORMATION CONCERNING DEFINITIONS AND FINANCIAL
INFORMATION</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>CRM Holdings, Ltd. is a Bermuda exempted holding company
incorporated in September 2005, and will acquire Compensation
Risk Managers, LLC, or CRM, Compensation Risk Managers of
California, LLC, or CRM CA, Twin Bridges (Bermuda) Ltd., or Twin
Bridges, and EIMAR, L.L.C., or Eimar, through a share exchange,
as described in this prospectus, which will occur immediately
prior to the closing of this offering. Accordingly, in this
prospectus, references to the &#147;Company,&#148;
&#147;we,&#148; &#147;us&#148; or &#147;our&#148; refer to CRM
Holdings, Ltd. and its subsidiaries on a combined basis. These
subsidiaries include CRM, CRM CA, Twin Bridges and Eimar, unless
the context suggests otherwise. These references also include a
U.S.&nbsp;intermediate holding company, CRM USA Holdings, Inc.,
or CRM USA Holdings, which will own all of the outstanding
shares of our U.S.&nbsp;subsidiaries. Prior to the closing of
this offering, CRM, CRM CA and Eimar will be converted into
corporations. References to CRM Holdings refer solely to CRM
Holdings, Ltd., and references to CRM include CRM CA, which is a
subsidiary of CRM, unless the context indicates otherwise.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In this prospectus, amounts are expressed in U.S.&nbsp;dollars
and the financial statements have been prepared in accordance
with generally accepted accounting principles in the United
States of America, or US GAAP, except as otherwise indicated.
</DIV>

<P align="center" style="font-size: 10pt;">ii

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<DIV align="left" style="font-size: 10pt;">
<A name='101'></A>
</DIV>

<!-- link1 "PROSPECTUS SUMMARY" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>PROSPECTUS SUMMARY</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>This summary highlights information contained elsewhere in
this prospectus. While we have highlighted what we believe is
important information about us and this offering in this
summary, it does not contain all of the information that you
should consider before investing in us. You should read the
entire prospectus carefully, including the sections entitled
&#147;Risk Factors&#148; and &#147;Cautionary Note Regarding
Forward-Looking Statements&#148; and the financial statements
and the related notes contained in this prospectus before making
an investment decision. Except as otherwise noted, all
information in this prospectus assumes that all of the
</I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">l</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>common
shares offered hereby will be sold, but that the underwriters do
not exercise their over-allotment option. As described more
fully below, we will
exchange&nbsp;</I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">l</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>of
our common shares for all of the outstanding shares of CRM
(including its subsidiary, CRM&nbsp;CA), Eimar and Twin Bridges.
We refer to these transactions as the &#147;restructuring.&#148;
The &#147;restructuring&#148; will occur immediately prior to
the closing of this offering. See &#147;Certain Relationships
and Related Transactions&nbsp;&#151; Restructuring.&#148;</I>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Our Company</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Overview</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are a leading provider of fee-based management and other
services for workers&#146; compensation self-insured groups in
New York and California. We have been in the business of forming
and managing self-insured groups in New York since CRM&#146;s
inception in 1999 and expanded this business to California in
2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We provide the groups with a broad range of services, including
general management, underwriting, risk assessment, medical bill
review and case management, general recordkeeping and regulatory
compliance. We provide safety and loss control services to group
members to help reduce workers&#146; compensation risks and
expenses. In New York, we provide claims management services. We
also act as a broker by placing excess coverage insurance and
any required surety bonds for the groups, and we provide
reinsurance for a portion of this excess coverage through our
subsidiary, Twin Bridges.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The fees we receive for our management services are based on a
percentage of either the manual workers&#146; compensation rates
set by the New York Workers&#146; Compensation Board or the
actual premiums paid to the groups by their members. The fees
for our medical bill review and case management services are
computed on a fee for service basis, and we receive commission
income for placing the excess coverage insurance and surety
bonds.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A self-insured group is an association of employers which
provides workers&#146; compensation insurance to its members.
Each group we manage is composed of employers in the same
industry, all of which are located in a single state. The
premiums paid by the members of the groups we manage provide
funding for claims and loss adjustment expenses. Each member of
a group is jointly and severally liable for the liabilities
incurred by the group during the period of the member&#146;s
participation, even if the member subsequently leaves the group.
We concentrate on industries that we believe have favorable risk
profiles, and regularly screen and monitor the members of each
group we manage.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have formed and currently manage&nbsp;14 self-insured groups
in 12&nbsp;industries. Eight of these groups are in New York and
six are in California. In New York, the groups cover the
following industries: healthcare, contracting, transportation,
wholesale and retail, manufacturing, public entities, real
estate and cemetery management. In California, the groups cover
the healthcare, contracting, new vehicle franchise auto
dealerships, plastic manufacturing, banking and winery
industries.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our fee-based management services business has increased
substantially for CRM since its inception in 1999 and for CRM CA
since its inception in October,&nbsp;2003. The chart below shows
for the six months ended June&nbsp;30, 2005 and the five years
ended December&nbsp;31, 2004, for our New&nbsp;York groups and
our California
</DIV>
</DIV>

<P align="center" style="font-size: 10pt;">1

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<DIV align="left" style="font-size: 10pt;">
groups, total management fees and commission income earned
during each period and the number of groups we managed and the
number of members in each group at the end of each period.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(to June&nbsp;30,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2001</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2000</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="22" align="center" nowrap><B>(Dollar amounts in thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>New York</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Management Fees and Commission Income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>13,023</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>25,662</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>20,747</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>17,614</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7,967</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,563</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Number of Groups (at end of period)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Number of Group Members (at end of period)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,828</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,781</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,617</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,551</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>702</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>359</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>California</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Management Fees and Commission Income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,472</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,993</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>74</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Number of Groups (at end of period)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Number of Group Members (at end of period)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>213</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>84</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We anticipate that our California business will continue its
rapid rate of growth in the near term. The aggregate annualized
premiums paid to the groups we manage in California were
$55,352,395, $24,102,728 and $2,163,674 as of June&nbsp;30,
2005, December&nbsp;31, 2004 and December&nbsp;31, 2003,
respectively. These aggregate annualized premiums are the
annualized total of the actual premiums payable to our groups by
their members in California as in effect as of the dates
specified. Our management monitors the period to period changes
in these amounts because we believe that it is a meaningful
indicator of our expected fee-based management services revenues
in the future.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In contrast, the New York market is substantially more mature
than the California market and experienced relatively stable
rates over the last three years. The aggregate annualized
premiums attributable to the groups we manage in New York were
$106,092,118 and $110,011,630 as of June&nbsp;30, 2005 and
December&nbsp;31, 2004, respectively. These aggregate annualized
premiums are the annualized total of the actual premiums payable
to one of our groups in New York by its members and the
aggregate manual rates set by the New York Workers&#146;
Compensation Board attributable to the members of the other New
York groups as in effect on the dates specified. Our management
also monitors the period to period changes in these amounts for
the reasons described above. New York has presently in effect a
moratorium on the formation of new groups. However, we believe
that our New York business will grow as a result of recently
approved manual rate increases and, to a lesser extent, as a
result of an increase in the number of members in these groups.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Self-insured groups are required to purchase excess
workers&#146; compensation coverage to cover claims that exceed
a minimum level established by state law or regulation or by
administrative determination. We act as a broker and place this
excess insurance coverage and any required surety bonds for the
groups. Since December 2003, we have provided reinsurance for a
portion of this excess coverage through our subsidiary, Twin
Bridges.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our net reinsurance premiums for reinsuring a portion of this
excess coverage and the gross premiums for excess coverage for
the groups we manage have increased since Twin Bridges began
business in December 2003. The chart below shows our net
reinsurance premiums for the six months ended June&nbsp;30, 2005
and the two years ended December&nbsp;31, 2004 and the gross
premiums for excess coverage placed during each period. Gross
premiums for excess coverage during any period is the aggregate
amount of premiums for excess coverage insurance that the groups
we manage will pay under the excess coverage policies written
during such
</DIV>
</DIV>

<P align="center" style="font-size: 10pt;">2

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<DIV align="left" style="font-size: 10pt;">
period. Our management regards the changes in these amounts as a
meaningful indicator of our expected net reinsurance premiums
and commission income in the future.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="64%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(to June&nbsp;30,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>(Dollar amounts in thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net Reinsurance Premiums</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,045</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,110</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>253</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gross Premiums for Excess Coverage</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>16,150</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>24,245</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>17,272</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our reinsurance business represents a significant opportunity to
enhance our profitability. We intend to use a significant
portion of our net proceeds from this offering to provide
additional surplus to Twin Bridges. We believe that this
additional surplus will allow Twin Bridges to provide
reinsurance for an increased amount of the excess coverage
purchased by the groups we manage. We also anticipate that Twin
Bridges will grow as our fee-based management services business
continues to grow.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Further, our ability to provide reinsurance is a significant
element of our plans to grow our fee-based management services
business. We believe that our willingness to reinsure a portion
of the excess coverage our groups obtain and thereby expose our
capital to risk distinguishes us from our competitors and
enhances our ability to:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Successfully form new groups;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Attract new members to join the groups we manage;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Retain group management contracts.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>The Group Self-Insurance Market</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The workers&#146; compensation insurance market has historically
fluctuated with periods of low premium rates and excess
underwriting capacity resulting from increased competition,
followed by periods of high premium rates and shortages of
underwriting capacity resulting from decreased competition.
These conditions, along with poor customer service and
substandard loss control and claims management, have motivated
businesses to self-insure against workers&#146; compensation
claims. Large companies generally have the financial strength to
meet the significant statutory requirements to self-insure, or
to create their own captive insurance companies to insure, these
claims. Small and mid-sized companies generally lack the
financial and administrative resources to do this, and in recent
years have resorted to pooling their resources through the
formation of self-insured groups as a means to obtain
workers&#146; compensation insurance at acceptable rates and
terms. CRM was formed in response to this relatively new market
to manage self-insured groups.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We believe that self-insured groups, when managed effectively,
provide lower and more stable premium rates to their members
than other methods of insuring workers&#146; compensation
liabilities for small and mid-sized businesses. For that reason,
we believe that self-insured groups will continue to be an
attractive workers&#146; compensation insurance option for small
and mid-sized companies.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Competitive Strengths</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We believe that we have the following competitive strengths:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Superior Operational and Financial Track Record.</I> We have
    a well-established track record in forming, managing and growing
    self-insured workers&#146; compensation groups, with over
    $27&nbsp;million in management fees and commission income for
    the year ended December&nbsp;31, 2004. Since we began our group
    management business in 1999, we have formed and currently
    manage&nbsp;14 self-insured groups.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Full Range of Services for Self-Insured Groups.</I> We
    provide a full range of services to the groups we manage,
    including general management, underwriting, risk assessment and
    loss control, claims management and medical bill review and case
    management services.</TD>
</TR>

</TABLE>
</DIV>

<P align="center" style="font-size: 10pt;">3

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<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Managerial Experience and Expertise.</I> Our senior
    management team includes Daniel G. Hickey,&nbsp;Jr. and
    Martin&nbsp;D. Rakoff, each of whom has more than 10&nbsp;years
    of experience in forming groups and managing, structuring and
    underwriting workers&#146; compensation coverage for groups and
    has extensive contacts in the insurance and reinsurance
    industries. We believe that the experience of our senior
    management team provides us with a competitive advantage over
    new entrants into the group management market due to the
    significant regulatory and marketing impediments involved in the
    formation and management of self-insured groups. Our managerial
    expertise is in the following areas:</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="1%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Formation of groups;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Cultivation and maintenance of relationships with our general
    agents and brokers;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Underwriting, loss control and, in New York, claims management
    for the groups;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Relationships with providers of excess coverage.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Strategy</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The key elements of our strategy are:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Continued Growth of Fee-Based Business.</I> Our California
    groups have grown rapidly since we began doing business in
    California. We anticipate continued growth in California in the
    near term both through an increase in membership in our existing
    groups and through an increase in the number of groups we
    manage. In New York, we believe growth will result from recently
    approved rate increases that allow our established groups to
    increase the premiums they charge their members and, to a lesser
    extent, from an increase in membership in these groups.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;&nbsp;</TD>
    <TD align="left">
    We have identified other states which represent possible new
    market opportunities for our self-insured group model, but we
    have not entered these states in order to focus our resources on
    the growth of our California business. Furthermore, in 2006, we
    intend to offer our medical bill review and case management
    services to large, self insured entities, insurance companies,
    self-insured groups and other parties requiring these services.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Growth of Reinsurance Business.</I> We intend to use a
    significant portion of our net proceeds from this offering to
    provide additional surplus to Twin Bridges. Our reinsurance
    business represents a significant opportunity to enhance our
    profitability. We believe that additional surplus will allow
    Twin Bridges to provide reinsurance for an increased amount of
    the excess coverage obtained by the groups we manage.
    Furthermore, as our aggregate management services fees increase,
    our opportunities to grow our reinsurance business should also
    increase.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We intend to explore increasing our fee-based management
services business by developing and offering non-workers&#146;
compensation property and casualty insurance products to
carefully selected members of the groups we manage. Initially,
we would offer these products as a broker through unrelated
U.S.&nbsp;admitted insurers. We believe that our ability to
offer these additional insurance products to members of our
groups will enable us to compete more effectively with
commercial insurers that provide property and casualty insurance
products together with workers&#146; compensation insurance as a
comprehensive package. If we develop and offer these additional
insurance products, Twin Bridges may consider reinsuring a
portion of the risk that is assumed by the U.S. admitted
insurers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Organization and Principal Executive Offices</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
CRM Holdings is a Bermuda exempted holding company incorporated
in September 2005, and will acquire CRM, CRM&nbsp;CA, Eimar and
Twin Bridges through a share exchange, as described below, which
will occur immediately prior to the closing of this offering.
Our principal executive offices are located at Skandia
International House, 16&nbsp;Church Street, Hamilton, Bermuda
HM&nbsp;11, and our telephone number is (441)&nbsp;295-2185. The
headquarters of our U.S. subsidiaries is located at the offices
of CRM at 112&nbsp;Delafield Street, Poughkeepsie,
NY&nbsp;12601, and the telephone number is (845)&nbsp;452-4100.
</DIV>
</DIV>

<P align="center" style="font-size: 10pt;">4

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<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Prior to the consummation of the restructuring, certain members
of our management team, including Daniel&nbsp;G.
Hickey,&nbsp;Jr., Martin&nbsp;D. Rakoff and Louis&nbsp;J.
Viglotti, as well as certain other persons listed in
&#147;Principal Shareholders&#148; are the beneficial owners of
CRM, CRM&nbsp;CA, Eimar and Twin Bridges. We sometimes refer to
these owners in this prospectus as the &#147;existing
shareholders.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Immediately prior to the closing of this offering, CRM,
CRM&nbsp;CA and Eimar will be converted from limited liability
companies into corporations and the existing shareholders will
contribute all of their interests in CRM and Eimar to
CRM&nbsp;USA Holdings, which will be our wholly owned subsidiary
and will hold all of the outstanding shares of our
U.S.&nbsp;subsidiaries. In exchange, the existing shareholders
will receive shares issued by CRM&nbsp;USA Holdings. The
existing shareholders will then contribute their CRM&nbsp;USA
Holdings shares to us in exchange
for &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">l</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of
our common shares. CRM will then distribute its shares in
CRM&nbsp;CA to CRM&nbsp;USA Holdings. In addition, immediately
prior to the closing of this offering, the existing shareholders
will contribute all of their interests in Twin Bridges to us in
exchange
for &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">l</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of
our common shares. We refer to these transactions in this
prospectus as the &#147;restructuring.&#148; The existing
shareholders ultimately will receive a total
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">l</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of
our common shares in exchange for their interests in CRM
(including its subsidiary, CRM CA), Eimar and Twin Bridges.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with the restructuring, CRM, Eimar and Twin
Bridges intend to make a distribution to the existing
shareholders of unpaid earnings and profits in an aggregate
amount equal to the net income for U.S.&nbsp;federal income tax
purposes of CRM and Eimar for the nine months ended
September&nbsp;30, 2005, plus the amount by which the net income
for U.S.&nbsp;federal income taxes purposes of Twin Bridges for
the period from its commencement through September&nbsp;30, 2005
exceeds distributions Twin Bridges previously made to its
shareholders, such net income to be computed on a cash basis,
which has been the basis on which distributions have been made
to the existing shareholders by each of CRM and Eimar since
their inception. We refer to these distributions in this
prospectus as the &#147;Distributions.&#148; We also will
indemnify the existing shareholders for an amount equal to the
amount of U.S.&nbsp;federal income taxes, if any, that would be
payable by them with respect to the combined net income, if any,
for U.S.&nbsp;federal income tax purposes of CRM, Eimar and Twin
Bridges for the period from October&nbsp;1, 2005 through the
consummation of the restructuring, computed on a cash basis as
if such period were a taxable period.
</DIV>
</DIV>

<P align="center" style="font-size: 10pt;">5

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<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following chart summarizes our corporate organization
showing only CRM Holdings and our subsidiaries upon the closing
of this offering. We may change our corporate organization from
time to time in the future.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<IMG src="y12480y1248002.gif" alt="(CHART)">
</DIV>
</DIV>

<P align="center" style="font-size: 10pt;">6

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<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>This Offering</B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt;">

<TR>
    <TD width="28%"></TD>
    <TD width="1%"></TD>
    <TD width="71%"></TD>
</TR>

<TR>
    <TD valign="top">
    Common shares offered by us</TD>
    <TD></TD>
    <TD valign="top">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">l</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Common shares offered by the selling shareholders</TD>
    <TD></TD>
    <TD valign="top">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">l</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Common shares to be outstanding immediately after this offering</TD>
    <TD></TD>
    <TD valign="top">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">l</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Use of net proceeds</TD>
    <TD></TD>
    <TD valign="top">
    We estimate that we will receive net proceeds from this offering
    of approximately
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">l</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million.
    We intend to use these net proceeds to provide additional
    capital and surplus to expand our operations, including
    providing additional surplus to Twin Bridges. We will not
    receive any of the proceeds from the sale of common shares by
    the selling shareholders.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Dividend Policy</TD>
    <TD></TD>
    <TD valign="top">
    We do not presently intend to declare dividends on our common
    shares. See &#147;Dividend Policy.&#148;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Trading</TD>
    <TD></TD>
    <TD valign="top">
    Our common shares are not currently listed on any national
    securities exchange or listed for quotation on the Nasdaq
    National Market. However, we intend to apply to the Nasdaq
    National Market to list our shares for quotation under the
    symbol &#147;CRMH.&#148;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Voting limitation</TD>
    <TD></TD>
    <TD valign="top">
    Our bye-laws contain a provision limiting the voting rights of
    any U.S.&nbsp;person, as defined in the U.S.&nbsp;Internal
    Revenue Code of 1986, as amended, or the Code, who owns
    (directly, indirectly or constructively under the Code) shares
    with more than 9.9% of the total voting power of all shares
    entitled to vote generally in an election of directors to 9.9%
    of such voting power.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <I>Risk Factors</I></TD>
    <TD></TD>
    <TD valign="top">
    Investing in our common shares involves risks. See &#147;Risk
    Factors.&#148;</TD>
</TR>

</TABLE>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Summary Combined Financial Information</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth our summary combined financial
information for the periods ended and as of the dates indicated.
The historical results are not necessarily indicative of results
to be expected in any future period.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The summary unaudited combined income statement information for
the six months ended June&nbsp;30, 2005 and 2004 and the summary
unaudited combined balance sheet information as of June&nbsp;30,
2005 are derived from our unaudited combined financial
statements included elsewhere in this prospectus.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The summary combined income statement information for the years
ended December&nbsp;31, 2004, 2003 and 2002 and the summary
combined balance sheet information as of December&nbsp;31, 2004
and 2003 are derived from our audited combined financial
statements included elsewhere in this prospectus. The summary
unaudited combined income statement information for the years
ended December&nbsp;31, 2001 and 2000 and the summary unaudited
combined balance sheet information as of December&nbsp;31, 2002,
2001 and 2000 are derived from our unaudited combined financial
statements not included in this prospectus.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The summary combined balance sheet information as of
June&nbsp;30, 2005 was prepared:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    on an actual basis;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    on an as adjusted basis to give effect to our sale
    of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">l</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;common
    shares in this offering, after deducting underwriting discounts
    and commissions and the estimated expenses of this offering, the
    restructuring and the Distributions and the application of our
    net proceeds from this offering.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
You should read the following summary combined financial
information in conjunction with the information contained in
this prospectus, including &#147;Management&#146;s Discussion
and Analysis of Financial
</DIV>
</DIV>

<P align="center" style="font-size: 10pt;">7

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<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<DIV align="left" style="font-size: 10pt;">
Condition and Results of Operations,&#148; and the combined
financial statements and related notes included elsewhere in
this prospectus. Many factors may cause our future results to
differ materially from the financial information and results
presented below including, but not limited to, the following:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    We began our group management business in California during
    October 2003;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    We commenced our reinsurance business during December
    2003;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Those factors discussed in &#147;Risk Factors.&#148;</TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="39%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR style="font-size: 7pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Six Months Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="19">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>June&nbsp;30,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap><B>Years Ended December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="3" align="left" nowrap><B>Summary Combined</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="3" align="left" nowrap><B>Income Information</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2001</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2000</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 7pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="26" align="center" nowrap><B>(Dollar amounts in thousands except per share amounts)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Revenues</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Fee-based management services</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>16,494</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>13,920</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>27,656</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>20,821</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>17,614</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7,967</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,563</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net reinsurance premiums</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,045</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,123</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,110</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>253</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Investment income, net of advisory fees</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>54</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>54</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>37</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19,593</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,064</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32,820</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21,090</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,651</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,980</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,563</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Expenses</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Losses and loss adjustment expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,305</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,165</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,528</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>168</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Fees paid to general agents and brokers</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,628</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,126</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,507</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,830</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,651</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,615</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,046</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Selling, general and administrative expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,884</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,275</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,441</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,240</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,471</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,140</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,317</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Policy acquisition costs and other expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>929</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>653</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,538</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>121</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>33</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,746</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,219</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27,014</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,359</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,155</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,776</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,384</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income before taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,847</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,845</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,806</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,731</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,496</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,204</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>179</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Provision for income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,847</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,845</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,806</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,731</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,496</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,204</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>179</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pro forma net income per common share(1)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pro forma cash dividends declared per common share(1)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pro forma common shares outstanding(1)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Based
    on &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">l</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;common
    shares outstanding after giving effect to the restructuring but
    not including shares to be offered by us in this offering.</TD>
</TR>

</TABLE>
</DIV>

<P align="center" style="font-size: 10pt;">8

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="37%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>As of June&nbsp;30,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap><B>As of December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2" align="left" nowrap><B>Summary Combined</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="19">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2" align="left" nowrap><B>Balance Sheet Information</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(As Adjusted)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(Actual)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2001</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2000</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="26" align="center" nowrap><B>(Dollar amounts in thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="30" align="left" valign="top">
    <B>Assets</B></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,493</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,576</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>767</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,644</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,342</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>143</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents, restricted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,270</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,398</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Premiums receivable, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,845</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,758</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,140</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts receivable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>925</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>41</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>90</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>705</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>388</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>562</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred policy acquisition costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,341</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,414</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>824</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Property and equipment, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>955</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>913</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>792</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>796</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>209</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>106</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Loans receivable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>414</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>432</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>173</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>73</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prepaid expenses and other assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>382</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>192</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>96</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>586</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>63</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>16,625</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>12,724</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,882</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6,804</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>818</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="30">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="30" align="left" valign="top">
    <B>Liabilities and shareholders&#146; and members&#146;
    equity</B></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Reserve for losses and loss adjustment expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,001</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,696</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>168</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Unearned reinsurance premiums</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,533</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,780</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,785</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Unearned management fees</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,182</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>671</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>614</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,789</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>341</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Unearned commission income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,383</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,334</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,247</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,163</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,145</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Borrowings under credit facilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,109</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>158</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>285</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,104</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>169</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>200</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Fees payable to general agents and brokers</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>741</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>565</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>578</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>537</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>375</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>172</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,733</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>632</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>369</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>317</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>428</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,683</TD>
    <TD align="left" valign="bottom" nowrap><SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,836</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,046</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,910</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,105</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>800</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Twin Bridges</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Common stock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>120</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>120</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>120</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Additional paid-in capital</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>880</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>880</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>880</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Retained earnings</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,576</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>835</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(51</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    LLC members&#146; equity (deficit)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,634</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(947</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,113</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>894</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>897</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total shareholders&#146; and members&#146; equity</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(58</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>888</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,164</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>894</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>897</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total liabilities and shareholders&#146; and members&#146; equity</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>16,625</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>12,724</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,882</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6,804</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>818</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    Column does not total due to rounding.</TD>
</TR>

</TABLE>
</DIV>

<P align="center" style="font-size: 10pt;">9

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<DIV align="left" style="font-size: 10pt;">
<A name='102'></A>
</DIV>

<!-- link1 "RISK FACTORS" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>RISK FACTORS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>An investment in our common shares involves a high degree of
risk. Before making an investment decision, you should carefully
consider all of the risks described in this prospectus. If any
of the risks discussed in this prospectus actually occur, our
business, financial condition and results of operations could be
materially and adversely affected. If this were to happen, the
price of our common shares could decline significantly and you
may lose all or a part of your investment.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Risks Related to Our Business</B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>We are dependent on our reinsurance business for a
    substantial portion of our revenues and profits and may not be
    able to maintain or increase this business.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The groups we manage purchase excess workers&#146; compensation
coverage from U.S.&nbsp;admitted insurers to cover claims that
exceed a minimum level established by state law or regulation or
by administrative determination. Typically, our managed groups
purchase excess coverage for losses and loss adjustment expenses
in excess of $500,000&nbsp;per occurrence. This &#147;excess
coverage&#148; purchased by the groups provides them with
benefits for losses in excess of the $500,000&nbsp;per
occurrence liability retained by the groups. Our managed groups
also purchase what is called &#147;catastrophic coverage&#148;
for losses and loss adjustment expenses in excess of
$1&nbsp;million per occurrence. The catastrophic coverage
purchased by our managed groups is not subject to a per
occurrence limit. In addition, each of our groups also purchases
coverage to insure against the risk that a large number of
claims will occur and result in losses that are each less than
$500,000 and that the aggregate result of such losses could
exhaust their resources. This &#147;frequency coverage&#148; is
triggered in the event that the aggregate amount of losses and
loss adjustment expenses during the coverage period exceeds a
range from 90% to 150% of the premiums paid to the groups by
their members. If the frequency coverage is triggered, the
insurer pays the next $2&nbsp;million of losses and related loss
adjustment expenses of the group during the coverage period. New
York Marine&nbsp;&#38; General Insurance Company, or NY
Marine&nbsp;&#38; General, provides the excess coverage and the
frequency coverage insurance for 13 of our 14 groups. Under our
reinsurance agreement with NY Marine &#38; General, we reinsure
50% of all of the coverage it provides and receive 50% of the
premiums, which we refer to as our assumed premium, paid to it
by these groups. We allow NY Marine &#38; General a ceding
commission of 28% of our assumed premium to cover its
acquisition, general and administrative expenses, a further 2%
for stop-loss coverage and 1% to cover the U.S. federal excise
tax, or a total of 31% of our assumed premium. The stop loss
coverage limits our losses under our reinsurance agreement to
181.16% of our assumed premiums, net of the ceding commission
and the cost of the stop-loss coverage and the U.S. federal
excise tax. We are required to provide NY Marine&nbsp;&#38;
General with significant security to secure our reinsurance
obligations, which security may consist of a bank-issued letter
of credit, a reinsurance trust fund for the benefit of NY
Marine&nbsp;&#38; General or cash. If we are unable to provide
this security, we may no longer be offered the opportunity to
reinsure any portion of the excess coverage that NY Marine &#38;
General provides to our managed groups.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We derive a significant amount of our income from our
reinsurance business and intend to use a significant portion of
the net proceeds of this offering to seek to assume additional
portions of the excess coverage provided by NY Marine&nbsp;&#38;
General and the other U.S.&nbsp;admitted insurers to our managed
groups. We anticipate that revenues from our reinsurance could
account for an increasing portion of our total revenues and net
income. Neither we nor Twin Bridges is a licensed
U.S.&nbsp;admitted insurer, and we are dependent on NY
Marine&nbsp;&#38; General to offer us a portion of the excess
coverage it insures. In the future, the U.S.&nbsp;admitted
insurers selected by the groups, including NY Marine&nbsp;&#38;
General, may not offer us the opportunity to reinsure a portion
of the excess coverage or may only do so in lower amounts or on
terms and conditions that are not acceptable to us. This may
occur if these insurers are offered a better rate or more
favorable terms from one of our competitors, or if they choose
not to provide excess coverage to our groups at all or not to
offer a portion of the excess coverage to Twin Bridges. We could
lose all or a substantial portion of our reinsurance premium
revenues and this loss would have a material adverse effect on
our business, financial condition and results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, the groups we manage are and will continue to be
exposed to the credit risk of the insurers that provide excess
coverage. Placing excess coverage with these insurers does and
will not relieve the
</DIV>

<P align="center" style="font-size: 10pt;">10

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<DIV align="left" style="font-size: 10pt;">
members of our managed groups from liability. Furthermore, if
any of these insurers no longer maintain the required rating
from A.M. Best, they will not be eligible to insure the excess
coverage. Any failure of these insurers to pay covered losses or
to maintain the required ratings could have a material adverse
effect on our reputation, business, financial condition and
results of operations.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>We may be deemed to have a conflict of interest in
    concurrently managing groups and placing excess coverage for
    these groups with a U.S.&nbsp;admitted insurer that cedes a part
    of this excess coverage to Twin Bridges.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
It is possible that one or more of the groups could conclude
that our acting as manager of the groups and reinsurance broker
for our groups, while also reinsuring NY Marine&nbsp;&#38;
General for a portion of the excess coverage, presents an
unacceptable conflict of interest. If this should occur, we
would lose all or a substantial portion of our reinsurance
business or our brokerage business, either of which would have a
material adverse effect on our business, financial condition and
results of operations. A group of affiliated former members of
one of our groups has filed suit against CRM alleging, among
other things, that CRM had engaged in self dealing and had
committed a breach of fiduciary duties owed to them in
connection with the placement of reinsurance for the members of
the group.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Our business is dependent upon a number of our larger
    managed groups, and we may fail to retain our management
    agreements with these groups.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A significant amount of our existing business is dependent on a
relatively small number of our managed groups. The Healthcare
Insurance Trust of New York provided approximately 27.2% and
38.1% of our revenues from fee-based management services for the
six months ended June&nbsp;30, 2005 and the year ended
December&nbsp;31, 2004, respectively. Two other groups, Elite
Contractors Trust of New York and Transportation Industry
Workers&#146; Compensation Trust of New York, provided
approximately 20.3% and 13.8%, respectively, of our revenues
from fee-based management services for the six months ended
June&nbsp;30, 2005 and approximately 21.9% and 13.7%,
respectively, of our revenues from fee-based management services
for the year ended December&nbsp;31, 2004. The loss of one or
more of these groups would have a material adverse effect on our
business, financial condition and results of operations.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>The failure of any self-insurance group in the state of
    New York could have an adverse effect on our group management
    business.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Each member of a self-insurance group has joint and several
liability for the obligations of the group incurred during the
period of its membership and that group may assess the members
for any short-fall, even after a member leaves a group, if the
loss was incurred during such member&#146;s participation in the
group. If a group is not able to pay its liabilities from its
assets or these assessments, the New York State Workers&#146;
Compensation Board may use the security posted by the group and
can also assess all of the other groups in New York State to pay
these liabilities. The failure of a single large self-insurance
group in New York, even if it is a group that we do not manage,
could have an adverse effect on the other groups in the state
and could affect the regulation of groups by the state. Such a
development may seriously hamper our ability to retain existing
members, attract new members to our managed groups and to form
groups which could have a material adverse effect on our
business, financial condition and our results of operations.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Our groups are dependent on obtaining excess coverage for
    the workers&#146; compensation coverage they provide to their
    members.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our groups are required to purchase excess coverage from
U.S.&nbsp;admitted insurers under state law or regulation or by
administrative determination and thus are dependent on the
availability of this coverage to carry on their business. The
availability and cost of excess coverage for the groups are
subject to market conditions, which are beyond our control.
Currently, there is a high level of demand for excess coverage
and we may experience difficulties in obtaining or renewing this
excess coverage for the groups in future periods. Our managed
groups are dependent on these insurers and may be unable to
provide workers&#146; compensation coverage to their members if,
in future periods, excess coverage becomes unavailable or only
available on
</DIV>

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unacceptable terms and conditions or includes material
sub-limits or exclusions. We cannot assure you that we will be
able to continue to obtain adequate levels of excess coverage
for the groups with U.S.&nbsp;admitted insurers at
cost-effective rates. In such an event, our managed groups may
be unable to retain existing members or attract new members, and
we may not be able to form new groups, which would have a
material adverse effect on our business, financial condition and
results of operations.
</DIV>

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    <TD></TD>
    <TD>
    <B><I>Our geographic concentration ties our performance to the
    business, economic and regulatory conditions in New York and
    California.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our business is conducted entirely in New York and California.
Unfavorable business, economic or regulatory conditions in
either of those two states could negatively impact our business,
and, consequently, we are exposed to economic and regulatory
risks that are greater than the risks faced by insurance
companies that conduct business over a greater geographic area.
Furthermore, the California group self-insurance market is still
developing and remains volatile. This concentration of our
business could have a material adverse effect on our business,
financial condition and results of operations. In addition, the
regulations applicable to our operations in New York and
California are currently undergoing regulatory review and are
subject to change. Any changes in the applicable regulatory
conditions in New York or California could have a material
adverse effect on our business, financial condition or results
of operations.
</DIV>

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    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Our business is heavily dependent upon general agents and
    brokers with whom we do not have an exclusive
    relationship.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
All of the members of the groups we manage are introduced by
general agents and brokers, and these groups derive a
significant portion of their members from a limited number of
these general agents and brokers. Currently, approximately 77%
of the aggregate annualized premiums paid or attributable to the
groups we manage is derived from members referred to our groups
by approximately 20% of our general agents and brokers. We do
not have an exclusive relationship with these general agents and
brokers. They are not obligated to promote our groups and may
sell products offered by our competitors. Many of our
competitors have longer relationships with the general agents
and brokers that we use or intend to use. We cannot assure you
that we will successfully maintain these relationships,
cultivate new ones or be able to meet the future requirements of
these general agents and brokers and their customers. In
addition, consolidation in the general agency and insurance
brokerage industry may lead to the loss of one or more of these
relationships. The failure to maintain satisfactory
relationships with general agents and brokers from whom we
obtain or expect to obtain our business or to develop new
relationships would have a material adverse effect on our
business, financial condition and results of operations.
</DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Our reinsurance business and our managed groups in
    California have limited operating histories.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We began our reinsurance operations in December 2003 by
reinsuring a portion of the excess workers&#146; compensation
coverage NY Marine&nbsp;&#38; General provides to groups we
manage. We started providing management services to our first
workers&#146; compensation group in California in October 2003
and we are still developing name recognition and a reputation in
this market. We must hire and retain additional key employees
and other staff, develop and maintain business relations,
continue to establish operating procedures, acquire or lease
additional facilities, implement new systems, obtain approvals
from regulatory agencies or organizations for our new groups and
complete other similar tasks necessary for the conduct of our
group management business in California. If we are unable to
conduct these activities efficiently, it could have a material
adverse effect on our business, financial condition and results
of operation.
</DIV>

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    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>We may have difficulty managing our growth, which could
    limit our ability to increase revenues and cash flow.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As we have expanded our fee-based management services business
into California and began reinsuring a portion of the excess
coverage obtained by the groups that we manage, we have
experienced significant growth in the scope of our operations
and the number of our employees. We expect this growth to
continue as we grow our California fee-based management services
business and hire additional administrative staff to assist us
</DIV>

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with meeting the increased compliance obligations of being a
publicly-traded company. In addition, part of our strategy
includes the growth of our medical bill review and case
management services. This growth has and will continue to place
significant demands on our management and our financial and
operational resources. Continued growth will likely increase our
challenges in:
</DIV>

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    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    hiring, retention and training of new employees;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    managing a large organization;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    implementing appropriate operating and financial procedures and
    systems; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    acquiring or leasing additional facilities.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
If we cannot scale and manage our business appropriately, we may
not be able to timely execute our business strategies, and our
business and results of operations may be adversely affected.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="3%"></TD>
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</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>We may underestimate the liabilities incurred by the
    managed groups.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Significant periods of time generally elapse between the
underwriting and pricing of workers&#146; compensation insurance
coverage and the payment of claims by our managed groups. As the
groups recognize liabilities for unpaid losses, we will
establish or adjust reserves for the managed groups, which
represent estimates of amounts needed to pay their reported
losses and unreported losses and the related loss adjustment
expenses. These reserves are only an estimate, involving many
variables and subjective judgments, and do not represent an
exact calculation of potential liability, and actual results are
likely to differ from original estimates and could differ by
material amounts. To the extent the loss reserves for any of our
managed groups is insufficient to cover actual losses and loss
adjustment expenses, we will have to adjust its loss reserves
and the group may incur charges to its earnings, which could
have a material adverse effect on its financial condition and
cash flows and could require the group to assess its members.
This could expose us to liability for our management of the
group, have a negative impact on our future management of the
group, and adversely affect our reputation as a manager.
</DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>We may underestimate the liabilities from the risks we
    assume as a reinsurer of a portion of the excess coverage of our
    managed groups.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As with the groups we manage, we establish or adjust reserves
for Twin Bridges as we recognize our liabilities for unpaid
losses, which represent estimates of amounts needed to pay our
reported losses and unreported losses and the related loss
adjustment expenses. Since the period of time that generally
elapses between the underwriting and pricing of our reinsurance
of the excess coverage purchased by the groups we manage and the
payment of a claim pursuant to such reinsurance is even longer
than that for the managed groups, our reserves are more
difficult to estimate and are even less likely to be accurate.
Our reserves are only an estimate, involving many uncertainties
and subjective judgments, and do not represent an exact
calculation of potential liability, and actual results are
likely to differ from original estimates and could differ by
material amounts. These uncertainties include, for example, the
period of time between the occurrence of an insured loss and
actual settlement and the effects of trends in loss severity and
frequency risks, fluctuations in inflation, prevailing economic,
social and judicial trends, legislative changes and internal and
third party claims handling procedures. Furthermore, Twin
Bridges has only been in existence since December 2003, has had
limited loss experience and a relatively small population of
underlying risks, and therefore is exposed to an increased
likelihood that actual results may not conform to our estimates.
Our business strategy includes providing reinsurance for an
increased amount of the excess coverage obtained by the groups
we manage. To the extent we implement this strategy, we will
increase the amount of risk that we assume under the reinsurance
we provide, and the amount of our reserves for losses and loss
adjustment expenses may be required to be increased. To the
extent our loss reserves are insufficient to cover actual losses
and loss adjustment expenses, we will have to adjust our loss
reserves and may incur charges to our earnings, which could have
a material adverse effect on our business, financial condition
and results of operations.
</DIV>

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    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

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    <TD></TD>
    <TD>
    <B><I>Our groups employ a third party administrator to manage
    claims for our California managed groups.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under California law, we are not permitted to manage the claims
of the groups we manage in California. Therefore, our groups in
California contract with an independent third party
administrator, or TPA, to perform this task. As manager of the
groups, we retain claims settlement authority and establish loss
reserves and review the work performed by the TPA on a regular
basis. If the TPA fails to manage the claims of our California
groups effectively, such failure may adversely affect the
operation of these groups and, consequently, may adversely
affect our ability to retain members or attract new members.
Furthermore, all of our California groups are currently managed
by a single TPA, Matrix Absence Management, Inc., or Matrix, a
subsidiary of Delphi Financial Group, Inc. If Matrix were to
fail to continue offering administrative services on competitive
terms to these groups in California, our ability to maintain and
grow our fee-based management services business could be
materially and adversely affected.
</DIV>

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    <TD width="3%"></TD>
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    <TD></TD>
    <TD>
    <B><I>We and the groups we manage face intense competition from
    a large number of companies in the workers&#146; compensation
    insurance business and in the reinsurance business.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We and the groups we manage compete with many companies in the
workers&#146; compensation insurance business. These competitors
include:
</DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the state funds in New York and California;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    specialty, regional and major insurers in New York, such as
    American International Group, Inc., Chubb Group of Insurance
    Companies, Zurich Financial Services, Utica National Insurance
    Group, Greater New York Mutual Insurance Company, Travelers
    Insurance Group Holdings Inc., Liberty Mutual Insurance Company
    and Hartford Financial Services Group Inc, and in California,
    such as Employers Direct Insurance Company, Redwood
    Fire&nbsp;&#38; Casualty Insurance Co., Republic Companies
    Group, Inc., Redlands Insurance Co., St. Paul Travelers, Zenith
    National Insurance Corp, National Liability and Fire Insurance
    Company, Preferred Employers, SeaBright Insurance Company,
    CompWest Insurance Company, Employers Compensation Insurance
    Company of California, Everest Insurance Company, American
    International Group, Inc., Chubb Group of Insurance Companies,
    ICW Group and The Hartford Financial Services Group,
    Inc.;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    groups managed by other group administrators, such as First
    Cardinal Corporation and New York Compensation Managers, Inc. in
    New York and Bickman Risk Services in California.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Many of the insurance companies listed above have more capital,
better name and brand recognition and greater marketing and
management resources than we or the groups we manage have.
Competition within our industry is often intense and from time
to time results in a significant reduction in premiums for
workers&#146; compensation insurance. Many of our competitors
have offered, and may continue to offer, workers&#146;
compensation insurance combined with other lines of insurance
coverage. Some of our competitors offer workers&#146;
compensation insurance on a multi-state basis. We may be
competitively disadvantaged because key members of our groups
may be obliged or inclined to purchase packaged products or
multi-state workers&#146; compensation coverage from our
competitors in order to receive favorable rates for other types
of liability coverage or because our competitors offer superior
premium rates or policy terms. We cannot assure you that we will
be able to implement our business strategy in a manner that will
allow us to be competitive. Increased competition could reduce
the ability of our groups to attract new members and retain
existing members and would adversely impact the groups we
manage. If we are unable to overcome these competitive
disadvantages, it would have a material adverse effect on our
business, financial condition and results of operations.
</DIV>

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    <TD width="3%"></TD>
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</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>We intend to develop a program to offer fee-based services
    to third parties. We may fail to successfully market and provide
    these services to third parties.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our business strategy includes offering our medical bill review
and case management services to large, self-insured entities and
insurance companies, self-insured groups and other parties
requiring these services. We will need to develop new
relationships with these parties and we will incur expenses in
marketing our services to these third parties. If we are unable
to develop new relationships and successfully market these
</DIV>

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services, we will not be able to implement part of our business
strategy and the failure to do so could have a material adverse
effect on our business, financial condition and results of
operations.
</DIV>

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    <TD width="3%"></TD>
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</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>We may pursue opportunities to offer other insurance
    products to the members of our managed groups.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We intend to explore the development and offering of certain
non-workers&#146; compensation property and casualty insurance
products to carefully selected members of the groups we manage.
Initially we would offer these products as a broker through
unrelated U.S. admitted insurers. If we develop and offer these
additional insurance products, Twin Bridges may consider
reinsuring a portion of the risk that is assumed by the
U.S.&nbsp;admitted insurers. Certain risks are inherent in this
strategy. These risks include:
</DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    greater loss exposure, especially if we fail to successfully
    manage or underwrite this new business;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the diversion of management&#146;s attention;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    an increase in our expenses and working capital requirements;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the need to hire additional marketing personnel, underwriters,
    claims personnel and other staff dedicated to the new lines of
    business;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the expense of using an unrelated U.S. admitted insurer to
    underwrite this new business.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If we are unable to effectively manage these or other potential
risks inherent in the marketing and sale of additional insurance
products, it could have a material adverse effect on our
business, financial condition and results of operations.
</DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>We will require additional capital in the future, which
    may not be available on favorable terms or at all.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As we expand our group management business, we intend to
reinsure additional excess coverage which will require us to
have additional capital. Further, if we offer new insurance
products, we may need additional capital. The amount and timing
of these capital requirements will depend on many factors,
including our ability to grow our group management business, to
successfully reinsure the excess coverage required by our groups
and our ability to offer new insurance products. At this time,
we are not able to estimate the amount of additional capital we
will require in the future or predict the timing of our future
capital needs. Any additional equity or debt financing, if
available at all, may be available only on terms that are not
favorable to us. If we are able to raise capital through equity
financings, your interest in our company would be diluted, and
the securities we issue may have rights, preferences and
privileges that are senior to our common shares. If we raise
capital through the issuance of debt, the incurrence and
repayment of any debt could have a material adverse effect on
our business, financial condition and results of operations.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>We depend on our key executives and may not be able to
    hire and retain additional key employees or successfully
    integrate new members of our management team.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our success will depend largely on our continued reliance on the
experience and expertise of our senior management, which
includes, among others, Daniel&nbsp;G. Hickey,&nbsp;Jr. and
Martin&nbsp;D. Rakoff, our Co-Chief Executive Officers, each of
whom has more than 10&nbsp;years of experience in forming,
managing and underwriting workers&#146; compensation coverage
for groups. We plan to enter into employment agreements with
Messrs.&nbsp;Hickey and Rakoff upon the closing of this
offering. Notwithstanding these agreements, these key executives
may terminate their employment with us and seek employment with
others who may seek their expertise. The loss of their expertise
through death, disability or termination of employment would
have a material and adverse effect on our business, financial
condition and results of operations. We are not the beneficiary
of life or disability insurance covering any of our executives,
key employees or other personnel.
</DIV>

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Our ability to implement our business strategy will depend on
our success in recruiting, retaining and successfully
integrating our management team and other personnel. If we are
unable to retain employees and to attract and integrate new
members of our management team, key employees or other
personnel, we may be unable to successfully implement our
business strategy in a timely manner. If we are unable to do so
or if we
</DIV>

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were to lose the services of our senior executives or key
employees, it could have a material adverse effect on our
business, financial condition and results of operations.
</DIV>

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    <TD>
    <B><I>Our fee-based management services business may expose us
    to liability in excess of our current insurance coverage.</I></B></TD>
</TR>

</TABLE>

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The management of our groups exposes us to significant risks. We
may have liability for errors or omissions in the services we
perform. We may also be liable to our groups, third parties and
governmental authorities for, among other things, fines,
penalties and regulatory actions. These liabilities may exceed
our insurance coverage and financial resources. The cost of
obtaining errors and omissions, general liability and
professional liability insurance is rising. We cannot assure you
that our insurance will be sufficient to cover the liabilities
we may incur or that we will be able to maintain insurance at
reasonable rates or at all. If our policies are terminated and
do not contain retroactive coverage, we will not be insured for
claims made after the termination of coverage even if these
claims are based on events or acts that occurred during the term
of the policy. In such an event, we may be exposed to liability
which could have a material adverse effect on our business,
financial condition and results of operations.
</DIV>

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    <TD>
    <B><I>A significant amount of our invested assets will be
    subject to changes in interest rates and market
    volatility.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We currently invest the premiums we receive from our reinsurance
in short-term U.S.&nbsp;Treasury bills, cash and money market
equivalents. Upon the closing of this offering, our board of
directors will establish our investment policies, and management
will implement our investment strategy with the assistance of
independent investment managers. We expect that our investment
portfolio will include a significant amount of interest
rate-sensitive instruments, such as bonds, which may be
adversely affected by changes in interest rates. Interest rates
are highly sensitive to many factors, including governmental
monetary policies, domestic and international economic and
political conditions and other factors beyond our control.
Because of the unpredictable nature of losses that may arise
under reinsurance policies, our liquidity needs could be
substantial and may increase at any time. Increases in interest
rates will decrease the value of our investments in fixed-income
securities. If increases in interest rates occur during periods
when we sell investments to satisfy liquidity needs, we may
experience investment losses. If interest rates decline,
reinvested funds will earn less than expected.
</DIV>

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Our investment results may also be adversely affected by changes
in the business, financial condition or results of operations of
the entities in which we invest, as well as changes in
government monetary policies, general economic and overall
market conditions. Furthermore, general economic conditions may
be adversely affected by U.S.&nbsp;involvement in hostilities
with other countries and large-scale acts of terrorism, or the
threat of hostilities or terrorist acts.
</DIV>

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If we do not structure our investment portfolio so that it is
appropriately matched with our insurance and reinsurance
liabilities, we may be forced to liquidate investments prior to
maturity at a significant loss to cover such liabilities. For
this or any of the other reasons discussed above, investment
losses could significantly decrease our asset base, which will
adversely affect our ability to conduct business.
</DIV>

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Any of these events or changes could have a material adverse
effect on our business, financial condition and results of
operations.
</DIV>

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    <B><I>Our profitability may be adversely impacted by
    inflation.</I></B></TD>
</TR>

</TABLE>

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The effects of inflation could cause the amount of each claim to
rise in the future. Our reserves for losses and loss adjustment
expenses include assumptions about future payments for
settlement of claims and claims handling costs, such as medical
treatments and litigation costs. To the extent inflation causes
these costs to increase above reserves established for these
costs, we would be required to increase our loss reserves with a
corresponding reduction in our net income in the period in which
the deficiency is identified, which could have a material
adverse effect on our business, financial condition and results
of operations.
</DIV>

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    <TD>
    <B><I>Our holding company structure and certain regulatory, tax
    and other constraints affect our ability to pay dividends, make
    other payments and redeploy capital among our
    subsidiaries.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
CRM Holdings is a holding company and, as such, has no
substantial operations. Dividends and other permitted
distributions from our subsidiaries are expected to be our
primary source of funds to meet our ongoing cash requirements
and other expenses, and to pay dividends, if any, to
shareholders. Bermuda law and regulations, including Bermuda
insurance regulations, restrict the declaration and payment of
dividends out of retained earnings, and the making of
distributions out of contributed surplus, by Twin Bridges unless
certain regulatory requirements are met. The inability of Twin
Bridges to pay dividends in an amount sufficient to enable us to
meet our cash requirements could have a material adverse effect
on our business. Any dividends paid from our
U.S.&nbsp;subsidiaries to us would be subject to a
U.S.&nbsp;federal withholding tax of 30%. We therefore do not
expect to receive dividends from our U.S.&nbsp;subsidiaries for
the foreseeable future. This will also restrict our ability to
redeploy capital from our U.S.&nbsp;subsidiaries to our Bermuda
operations. If Twin Bridges requires capital because of
unanticipated losses or for other reasons, and we are unable to
provide the required capital from the profits and cash flow of
our U.S.&nbsp;operations, it could have a material adverse
effect on our business, financial condition and results of
operations.
</DIV>

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    <TD>
    <B><I>We and the groups we manage are subject to extensive
    regulation in the United States and Bermuda that may adversely
    affect our ability to achieve our business objectives. If we and
    these groups do not comply with these regulations, we and they
    may be subject to penalties, including fines, suspensions and
    withdrawals of licenses.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We and the groups we manage are subject to extensive
governmental regulation and supervision. Most insurance
regulations are designed to protect the interests of
policyholders or members of the groups, rather than shareholders
and other investors.
</DIV>

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These regulations, generally administered by a department of
insurance or the workers&#146; compensation or similar board in
each jurisdiction in which we do business, relate to, among
other things:
</DIV>

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    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    approval of premium, contribution and funding rates;</TD>
</TR>

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    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

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    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    ratios of assets to liabilities, credit and risk reserves, net
    worth levels and standards of solvency, including risk-based
    capital standards;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    formation of groups and licensing as a third-party claims
    administrator in New York;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    limits on the size and nature of risks assumed and retained,
    including requiring the purchase of excess coverage for loss
    above levels established by the applicable state regulatory
    agency;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    mandatory guidelines for the investment of funds;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    reserves for unearned premium, losses and other purposes;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    periodic audits and other regulatory reviews of the financial
    statements of the groups and Twin Bridges;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    deposits or security for the benefit of reinsureds or
    policyholders;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    statutory methods of accounting; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    annual reporting and disclosure agreements.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Insurance departments and state workers&#146; compensation or
similar boards also conduct periodic examinations of the affairs
of the insurance companies and groups they regulate and require
the filing of periodic, annual and other reports relating to
financial condition, approval of new members, groups and other
matters. Moreover, the National Association of Insurance
Commissioners, or NAIC, which is an association of the senior
insurance regulatory officials of all 50&nbsp;states and the
District of Columbia, and the state insurance regulators
regularly reexamine existing laws and regulations,
interpretations of existing laws and proposals for new laws,
regulations and interpretations which may be more restrictive or
result in higher costs to us and the groups we manage. In
addition, the laws and regulations applicable to workers&#146;
compensation self-insured groups are undergoing review and
probable change in both New&nbsp;York and California. These
regulatory
</DIV>

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requirements may materially and adversely affect or inhibit our
ability to achieve some or all of our business objectives.
</DIV>

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In addition, regulatory authorities have relatively broad
discretion to deny or revoke licenses or suspend underwriting of
business for various reasons, including the violation of
regulations. We intend to base some of our practices on our
interpretations of regulations or practices that we believe are
generally accepted by the insurance industry. These practices
may turn out to be different from the interpretations of
regulatory authorities. If we, or the groups we manage, do not
have the requisite licenses and approvals or do not comply with
applicable regulatory requirements, insurance regulatory
authorities could preclude or temporarily suspend us or the
groups we manage from carrying on some or all of our or their
activities or otherwise impose penalties. In such an event, our
reputation as well as our ability to operate our business would
be materially and adversely affected. Further, changes in the
level of regulation of the insurance or reinsurance industry or
changes in the laws or regulations or their interpretations by
regulatory authorities could materially and adversely affect our
ability to manage our groups or operate our business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The offshore insurance and reinsurance regulatory framework also
has recently become subject to increased scrutiny in many
jurisdictions, including in the United States. This increased
scrutiny has spawned a number of legislative initiatives,
including a proposal to supervise and regulate reinsurers
domiciled outside the United&nbsp;States. If Twin Bridges were
to become subject to any United States federal or state law or
regulation, Twin Bridges may be required to post deposits or
maintain minimum surplus and may be prohibited from engaging in
lines of business or from writing specified types of policies or
contracts. Compliance with these laws and regulations could have
a material adverse effect on our business, financial condition
and results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Twin Bridges is subject to regulation and supervision in
Bermuda. Among other matters, Bermuda statutes, regulations and
policies of Bermuda Monetary Authority, or BMA, require Twin
Bridges to maintain minimum levels of statutory capital,
statutory capital and surplus, and liquidity, to meet solvency
standards, to obtain prior approval of certain issuances and
transfers of shares as well as to submit to certain periodic
examinations of its financial condition. These statutes and
regulations may, in effect, restrict Twin Bridges&#146; ability
to write reinsurance policies, to make certain investments and
to distribute funds. We cannot predict whether any change to
these regulations will materially and adversely affect our
business.
</DIV>

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    <TD></TD>
    <TD>
    <B><I>Our business could be adversely affected by Bermuda
    employment restrictions.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under Bermuda law, non-Bermudians (other than spouses of
Bermudians) may not engage in any gainful occupation in Bermuda
without an appropriate governmental work permit. Work permits
may be granted or extended by the Bermuda government upon
showing that, after proper public advertisement in most cases,
no Bermudian (or spouse of a Bermudian) is available who meets
the minimum standard requirements for the advertised position.
In 2001, the Bermuda government announced a new policy limiting
the duration of work permits to six years, with certain
exemptions for key employees. We may not be able to use the
services of one or more of our key employees in Bermuda if we
are not able to obtain work permits for them, which could have a
material adverse effect on our business.
</DIV>

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    <TD></TD>
    <TD>
    <B><I>CRM Holdings could be considered a U.S.&nbsp;corporation
    for U.S.&nbsp;federal income tax purposes, and thus subject to
    U.S.&nbsp;tax on its worldwide income (including current income
    of Twin Bridges), under recently enacted U.S.&nbsp;legislation,
    if the value of Twin Bridges does not exceed 20% of the total
    value of CRM, CRM&nbsp;CA, Eimar and Twin&nbsp;Bridges.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The American Jobs Creation Act of 2004 provides that, if a
foreign corporation acquires substantially all of the assets of
a U.S.&nbsp;corporation, and 80% or more of the stock of the
foreign corporation (excluding new stock issued in a public
offering related to the acquisition) is owned by former
shareholders of the U.S.&nbsp;corporation by reason of their
ownership of the U.S.&nbsp;corporation, the foreign corporation
will be considered a U.S.&nbsp;corporation for U.S.&nbsp;federal
income tax purposes. The existing shareholders of CRM and Eimar
will contribute their shares to CRM USA Holdings in return for
common shares in CRM USA Holdings. The existing shareholders
will then contribute their CRM USA Holdings shares to us in
exchange
</DIV>

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for our common shares. CRM will then distribute its shares in
CRM CA to CRM USA Holdings. In addition, immediately prior to
the closing of this offering, the existing shareholders will
contribute all of their interests in Twin Bridges to us in
exchange for our common shares. We do not expect the current
shareholders of CRM and Eimar to obtain 80% or more of the stock
of CRM Holdings (excluding the stock sold in this offering) by
reason of their ownership of CRM and Eimar (i.e.,&nbsp;we
believe that Twin Bridges is worth more than 20% of the combined
value of CRM, CRM&nbsp;CA, Eimar and Twin Bridges).
Nevertheless, the U.S.&nbsp;Internal Revenue Service, or IRS,
may not agree with this valuation. If the IRS successfully
challenges this valuation, we would be subject to United States
federal income tax liability. This tax liability could have a
material adverse effect on our business, financial condition and
results of operations.
</DIV>

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    <TD></TD>
    <TD>
    <B><I>We may be deemed to be engaged in a U.S.&nbsp;trade or
    business or considered to be a personal holding company subject
    to U.S.&nbsp;tax.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
CRM&nbsp;Holdings and Twin Bridges are both Bermuda exempted
companies. We intend to manage our business so that each of
these companies will not be treated as engaged in a trade or
business within the United States and, as a result, will not be
subject to U.S.&nbsp;tax (other than U.S.&nbsp;excise tax on
insurance and reinsurance premium income attributable to
insuring or reinsuring U.S.&nbsp;risks and U.S.&nbsp;withholding
tax on certain U.S.&nbsp;source investment income). However,
because there is considerable uncertainty as to what activities
constitute being engaged in a trade or business within the
United States, we cannot be certain that the IRS will not
successfully contend that CRM&nbsp;Holdings or Twin Bridges is
engaged in a trade or business within the United States. In the
event that CRM&nbsp;Holdings or Twin Bridges is deemed to be
engaged in a business within the United States, we would be
subject to U.S.&nbsp;corporate income and branch profits taxes
on the portion of our earnings effectively connected to such
U.S.&nbsp;business, which could have a material adverse effect
on our business, financial condition and results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Any of CRM Holdings&#146; U.S.&nbsp;subsidiaries might be
subject to additional U.S.&nbsp;tax on a portion of its income
if it is considered a personal holding company, or PHC, for
U.S.&nbsp;federal income tax purposes. This status will depend
on whether more than 50% of our shares by value could be deemed
to be owned (taking into account indirect and constructive
ownership) by five or fewer individuals and whether 60% or more
of such subsidiary&#146;s adjusted ordinary gross income
consists of &#147;personal holding company income,&#148; which
is, in general, certain forms of passive and investment income.
We believe that none of CRM Holdings&#146; subsidiaries should
be considered a PHC. Additionally, we intend to manage our
business to minimize the possibility that we will meet the 60%
income threshold. However, because of the lack of complete
information regarding our ultimate share ownership (i.e., as
determined by the constructive ownership rules for PHCs), we
cannot assure you that none of CRM Holdings&#146; subsidiaries
will be considered a PHC or that the amount of U.S.&nbsp;tax
that would be imposed would be immaterial.
</DIV>

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    <TD></TD>
    <TD>
    <B><I>We may become subject to taxes in Bermuda after
    March&nbsp;28, 2016.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Bermuda Minister of Finance, under the Exempted Undertakings
Tax Protection Act 1966, as amended, of Bermuda has given each
of CRM&nbsp;Holdings and Twin Bridges an assurance that if any
legislation is enacted in Bermuda that would impose tax computed
on profits or income, or computed on any capital asset, gain or
appreciation, or any tax in the nature of estate duty or
inheritance tax, then the imposition of any such tax will not be
applicable to CRM Holdings or Twin Bridges or any of their
operations, shares, debentures or other obligations until
March&nbsp;28, 2016. Given the limited duration of the Minister
of Finance&#146;s assurance, we cannot be certain that we will
not be subject to any Bermuda tax after March&nbsp;28, 2016. In
the event that we become subject to any Bermuda tax after such
date, it would have a material adverse effect on our financial
condition and results of operations.
</DIV>

<P align="center" style="font-size: 10pt;">19

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Risks Related to the Industry</B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>The insurance and reinsurance business is historically
    cyclical, and we expect to experience periods with excess
    underwriting capacity and unfavorable premium rates.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Historically, insurers and reinsurers have experienced
significant fluctuations in operating results due to
competition, frequency of occurrence or severity of catastrophic
and other loss events, levels of capacity, general economic and
social conditions and other factors. The supply of insurance and
reinsurance is related to prevailing prices, the level of
insured losses and the level of industry surplus which, in turn,
may fluctuate in response to changes in rates of return on
investments being earned in the insurance and reinsurance
industry. As a result, the insurance and reinsurance business
historically has been a cyclical industry characterized by
periods of intense price competition due to excessive
underwriting capacity as well as periods when shortages of
capacity permitted favorable premium levels. The supply of
insurance and reinsurance may increase, either due to capital
provided by new entrants or by the commitment of additional
capital by existing insurers or reinsurers, which may cause
prices to decrease. Any of these factors could lead to a
significant reduction in premium rates and additional
competition for business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition to these considerations, changes in the frequency
and severity of losses suffered by insureds and insurers may
affect the cycles of the insurance and reinsurance business
significantly. In the event that negative market conditions
develop in the workers&#146; compensation industry or the
insurance industry as a whole, our groups may experience
difficulties in providing workers&#146; compensation insurance
at competitive rates. Because our groups do not have capital and
surplus, they do not have the ability to provide coverage over
any period of time at rates that produce a loss after
considering investment income and available reinsurance. As a
result, our groups may lose members and experience a reduction
in their premium revenues. We would then experience a reduction
in our fee-based management services revenues and could be
unable to reinsure a portion of the excess coverage at rates
that we consider appropriate relative to the risks assumed. This
could have a material adverse effect on our business, financial
condition and results of operations.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Negative developments in the workers&#146; compensation
    insurance industry could have a material adverse effect on our
    business, financial condition and results of operations.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We principally offer management and other services for
workers&#146; compensation self-insured groups and reinsure a
portion of the excess workers&#146; compensation coverage for
the risks assumed by these groups. Although we are exploring the
possibility of offering to carefully selected members of our
groups property and casualty insurance products through an
unrelated U.S.&nbsp;admitted insurer, we currently do not do so.
As a result, negative developments in the economic, competitive
or regulatory conditions affecting the workers&#146;
compensation insurance industry could have a material adverse
effect on our business, financial condition and results of
operations. Negative developments in the workers&#146;
compensation insurance industry could have a greater effect on
us than on more diversified insurance companies that also sell
other types of insurance.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Our groups may have exposure to losses from terrorism for
    which they are required by law to provide coverage.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our managed groups are required by law to provide workers&#146;
compensation benefits for losses arising from acts of terrorism.
The impact of any terrorist act is unpredictable, and the
ultimate impact on our groups would depend upon the nature,
extent, location and timing of such an act. Currently, the
excess coverage for our groups does not include any sub-limits
or exclusions limiting their excess insurers&#146; obligation to
cover losses caused by acts of terrorism, although we cannot
assure you that sub-limits or exclusions will not be included in
future years, particularly if the Terrorism Risk Insurance Act
of 2002 is not renewed. This Act is set to expire on
December&nbsp;31, 2005 and the U.S.&nbsp;Department of the
Treasury has recommended that Congress not extend the law in its
current form. If this law is not extended or is extended in a
scaled-back form, which is currently proposed by the
U.S.&nbsp;Department of the Treasury, excess coverage for losses
arising from terrorism may be unavailable or prohibitively
expensive, and our managed groups may be further exposed to
losses
</DIV>

<P align="center" style="font-size: 10pt;">20

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<DIV align="left" style="font-size: 10pt;">
arising from acts of terrorism. This could make membership in
our managed groups less attractive, which could have a material
adverse effect on our business, financial condition and results
of operations.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>The effects of emerging claim and coverage issues on our
    business are uncertain.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As industry practices and legal, judicial, social, regulatory
and other conditions change, unexpected issues related to claims
and coverage may emerge. In some instances, as has been the case
with asbestos-related injuries, these issues may not become
apparent until some time after the insurance coverage has been
provided. Such issues may adversely affect the coverage provided
by our managed groups and thus our business of reinsuring a
portion of the excess coverage obtained by the groups, by either
expanding the scope of the coverage provided or by increasing
the number or size of claims. As a result, the full extent of
liability under a group&#146;s coverage or under our reinsurance
may not be known until after coverage is provided.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Recent examples of emerging claims and coverage issues include
post traumatic stress disorder and whether recent legislation
can effectively reduce the incidence of work-related injury
medical treatments (e.g., chiropractor services).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The effects of these and other unforeseen emerging claim and
coverage issues are extremely hard to predict and could have a
material adverse effect on our business, financial condition and
results of operations.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Recent insurance industry investigations and regulatory
    proposals could result in increased regulation.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The insurance industry has recently become the focus of
increased scrutiny by regulatory and law enforcement
authorities, as well as class action attorneys and the general
public, relating to allegations of improper special payments,
price-fixing, bid-rigging, improper accounting practices and
other alleged misconduct, including payments made by insurers to
brokers and the practices surrounding the placement of insurance
business. Formal and informal inquiries have been made of a
large segment of the industry, and a number of companies in the
insurance industry have received or may receive subpoenas,
requests for information from regulatory agencies or other
inquiries relating to these and similar matters. These efforts
are expected to result in both enforcement actions and proposals
for new state and federal regulation. It is difficult to predict
the outcome of these investigations, whether they will expand
into other areas not yet contemplated, whether activities and
practices currently thought to be lawful will be characterized
as unlawful, what form new regulations will have when finally
adopted and the impact, if any, of increased regulatory and law
enforcement action and litigation on our business and financial
condition.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Additionally, proposed legislation or new regulatory
requirements are expected to be imposed on the insurance
industry and may impact our business and the manner in which we
compensate our brokers, particularly if we acquire a U.S.
admitted insurer. In November 2004, the NAIC&#146;s newly formed
Executive Task Force on Broker Activities released draft model
legislation that would implement new disclosure requirements for
brokers. As proposed, the draft model legislation would amend
the current Producer Licensing Model Act of the NAIC. Among the
provisions contained in the draft model legislation, brokers
would be required to first obtain the insured&#146;s written
consent before receiving compensation from the insurer for a
specific transaction. In addition, brokers would be required to
disclose the amount of compensation from the insurer and the
method for calculating the compensation, including any
contingent compensation. As proposed, the draft model
legislation would require brokers to provide a reasonable
estimate of the amount and method for calculating such
compensation. The NAIC held a public hearing on the proposal
during the NAIC&#146;s December meeting and discussed its goal
to adopt model broker disclosure language in the near future.
The draft model language would require all insurance brokers to
disclose to customers:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    that the broker will receive compensation from the insurer for
    the sale;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    that the compensation received by the broker may differ
    depending upon the product and insurer;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    that the broker may receive additional compensation from the
    insurer based upon other factors, such as premium volume placed
    with a particular insurer and loss or claims experience.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">21

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Any of the foregoing could increase our cost of doing business
and otherwise adversely affect the way we conduct business,
which could have a material adverse effect on our business,
financial condition and results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The California Department of Insurance also has proposed new
regulations concerning brokers. If adopted as currently written,
the regulations would apply to all lines of insurance and all
brokers and general agents and would require brokers to disclose
to clients the receipt or potential receipt of any income from a
third party if that income derives from the broker&#146;s
transaction with the client. Under the proposed regulations,
among other provisions, a misrepresentation or unfair act occurs
if the broker does not advise a client whether the broker will
seek a quote from one or more carriers. Also, the broker is
subject to additional disclosure obligations if the broker makes
a recommendation regarding such quotes. We may be subject to
these regulations with respect to the brokerage services we
provide to our groups.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Risks Related to Our Shares Sold in this Offering</B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>An active trading market for our common shares may not
    develop.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our common shares have no established trading market and are not
currently listed on any securities exchange. We intend to apply
to the Nasdaq National Market to list our common shares for
quotation under the symbol &#147;CRMH.&#148; However, an active
trading market for our common shares may not develop. If an
active trading market does not develop or is not maintained,
holders of our common shares may experience difficulty in
reselling, or an inability to sell, their common shares and the
price of our shares may decline significantly.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>The price of our common shares after this offering may be
    volatile and might decline.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The initial public offering price per common share will be
determined by agreement among us and the representatives of the
underwriters and may not be indicative of the trading price of
our common shares after this offering. The trading price of our
common shares may be volatile and decline for many reasons, some
of which are beyond our control, including among others:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    quarterly variations in our results of operations;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    results of operations that vary from those expected by
    securities analysts and investors;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    changes in expectations regarding our future results of
    operations, including financial estimates by securities analysts
    and investors;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    announcements by third parties of claims against us;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    changes in law and regulations;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    future sales of our common shares;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    changes in the overall market for our common shares;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the performance or prospects for companies in our industry.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, the stock market in recent years has experienced
price and volume fluctuations that often have been unrelated or
disproportionate to a company&#146;s operating performance. As a
result, the trading price of our common shares may fall below
the initial public offering price.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Future sales of common shares by our affiliates and other
    shareholders or by us may adversely affect the price, and the
    future exercise of options may lower the price, of our common
    shares.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We cannot predict what effect, if any, future sales of our
common shares, or the availability of shares for future sale,
will have on the trading price of our common shares. Future
sales of common shares by our existing shareholders and other
shareholders or by us, or the perception that such sales may
occur, could adversely affect the market price of our common
shares and may make it more difficult for you to sell your
common shares at a time and price that you determine
appropriate. Upon closing of this offering, there will be
</DIV>

<P align="center" style="font-size: 10pt;">22

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<DIV align="left" style="font-size: 10pt;">
<FONT face="wingdings">l</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of
our common shares outstanding. This includes
the &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">l</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;common
shares we and the selling shareholders are selling in this
offering, which may be resold in the public market immediately
after this offering. The
remaining &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">l</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;common
shares, representing
approximately &nbsp;<FONT face="wingdings">l</FONT>&nbsp;%&nbsp;of
our total outstanding common shares following this offering,
will become available for resale in the public market as shown
in the chart below. Any sales of our shares could reduce the
market price of our common shares and our ability to raise
additional capital in the equity markets may be adversely
affected. Moreover, additional common shares may be issuable
pursuant to any management incentive plan, stock option plan or
similar plan we may adopt. If we adopt any such plans, we may
reserve an aggregate of up
to &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">l</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;common
shares for issuance under the plan. We and our current
directors, our officers and the selling shareholders have
entered into 180-day lock-up agreements and an aggregate
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">l</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
are subject to these lock-up agreements.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="18%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="17%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="61%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2" align="center" nowrap><B>Number of common shares/</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2" align="center" nowrap><B>Percentage of total outstanding</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Date of availability for resale into the public market</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="wingdings">l</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Upon the effectiveness of this prospectus.</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="wingdings">l</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    180&nbsp;days after the date of this prospectus, of
    which &nbsp;&nbsp;&nbsp;<FONT face="wingdings">l</FONT>&nbsp;&nbsp;&nbsp;common
    shares, or &nbsp;<FONT face="wingdings">l</FONT>&nbsp;%, are
    subject to volume limitations under Rule&nbsp;144 under the
    U.S.&nbsp;Securities Act of 1933.</TD>
</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Public investors will suffer immediate and substantial
    dilution as a result of this offering.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The initial price to the public per share is significantly
higher than the pro forma net tangible book value per share of
our common shares as of June&nbsp;30, 2005. Accordingly, if you
purchase shares in this offering, you will suffer immediate and
substantial dilution of your investment. Based upon the issuance
and sale of &nbsp;<FONT face="wingdings">l</FONT>&nbsp;common
shares at an assumed initial price to the public of
$&nbsp;<FONT face="wingdings">l</FONT>&nbsp;&nbsp;per share,
which is the midpoint of the price range set forth on the cover
page of this prospectus, you will incur immediate dilution of
approximately $&nbsp;<FONT face="wingdings">l</FONT>&nbsp;in the
net tangible book value per share of the common shares you
purchase in this offering. In addition, if you purchase shares
in this offering, you will:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    pay a price per share that substantially exceeds the book value
    per share of our assets after subtracting liabilities;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    contribute &nbsp;<FONT face="wingdings">l</FONT>&nbsp;% of the
    total amount invested in us to date, based on an assumed initial
    price to the public of
    $&nbsp;<FONT face="wingdings">l</FONT>&nbsp;&nbsp;per share,
    which is the midpoint of the price range set forth on the cover
    page of this prospectus, but will own
    only &nbsp;<FONT face="wingdings">l</FONT>&nbsp;% of our common
    shares outstanding after closing of this offering.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>We do not intend to pay dividends on our shares.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We currently do not intend to pay dividends on our shares and
even if our board determined to pay dividends, we are subject to
Bermuda regulatory constraints that will affect our ability to
pay dividends on our common shares. Under the Bermuda Companies
Act 1981, as amended, or the Companies Act, we may declare or
pay a dividend out of retained earnings, or make a distribution
out of contributed surplus, only if we have reasonable grounds
for believing that we are, or would after the payment be, able
to pay our liabilities as they become due and if the realizable
value of our assets would thereby not be less than the aggregate
of our liabilities and issued share capital and share premium
accounts.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>As a public company, our expenses and administrative
    workload will increase.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As a public company, we will need to comply with additional laws
and regulations, including the Sarbanes-Oxley Act of 2002 and
related rules of the Securities and Exchange Commission, or the
SEC, and requirements of the Nasdaq National Market, or Nasdaq.
We were not required to comply with these laws and requirements
as a private company. Complying with these laws and regulations
will require the time and
</DIV>

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<DIV align="left" style="font-size: 10pt;">
attention of our board of directors and management and will
increase our general and administrative expenses significantly.
Among other things, we will need to hire additional personnel in
order to:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    design, establish, evaluate and maintain a system of internal
    controls over financial reporting in compliance with the
    requirements of Section&nbsp;404 of the Sarbanes-Oxley Act and
    the related rules and regulations of the SEC, Nasdaq and the
    Public Company Accounting Oversight Board;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    prepare and file with the SEC periodic reports in compliance
    with our obligations under U.S.&nbsp;securities laws;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    establish and maintain new internal policies, principally those
    relating to disclosure controls and procedures and corporate
    governance;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    institute a more comprehensive compliance function;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    involve to a greater degree our outside legal counsel and
    accountants in the above activities.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, we also expect that as a public company, director
and officer liability insurance will be more expensive. We may
be required to accept reduced coverage or incur substantially
higher costs to obtain this coverage. These factors could also
make it more difficult for us to attract and retain qualified
executives and members of our board of directors, particularly
directors willing to serve on the audit committee of our board
of directors. We continue to evaluate and monitor developments
with respect to compliance with public company requirements, and
we cannot predict or estimate the amount or timing of additional
costs we may incur.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>We will be exposed to risks relating to evaluations of our
    internal controls over financial reporting required by
    Section&nbsp;404 of the Sarbanes-Oxley Act of 2002.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are in the process of evaluating our internal control systems
to allow management to report on, and our independent auditors
to assess, our internal controls over financial reporting. We
will be performing the system and process evaluation and testing
(and any necessary remediation) required to comply with the
management certification and auditor attestation requirements of
Section&nbsp;404 of the Sarbanes-Oxley Act. We are required to
comply with Section&nbsp;404 by no later than December&nbsp;31,
2006. However, we cannot be certain as to the timing of
completion of our evaluation, testing and remediation actions or
the impact of these actions on our operations. Furthermore, upon
completion of this process, we may identify control deficiencies
of varying degrees of severity under applicable SEC and Public
Company Accounting Oversight Board rules and regulations. As a
public company, we will be required to report, among other
things, control deficiencies that constitute a &#147;material
weakness&#148; or changes in internal controls that materially
affect, or are reasonably likely to materially affect, internal
controls over financial reporting. A &#147;material
weakness&#148; is a significant deficiency, or combination of
significant deficiencies, that results in more than a remote
likelihood that a material misstatement of the annual or interim
financial statements will not be prevented or detected. If we
fail to implement the requirements of Section&nbsp;404 in a
timely manner, we might be subject to sanctions or investigation
by regulatory agencies such as the SEC or Nasdaq. In addition,
failure to comply with Section&nbsp;404 or the report by us of a
material weakness may cause investors to lose confidence in our
financial statements and the trading price of our common shares
may decline as a result. If we fail to remedy any material
weakness, our financial statements may be inaccurate, our access
to the capital markets may be restricted and the trading price
of our common shares may decline.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Provisions in our charter documents may reduce or increase
    the voting power associated with our common shares.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our bye-laws generally provide that shareholders have one vote
for each share held by them and are entitled to vote, on a
non-cumulative basis, at all meetings of shareholders. However,
pursuant to a mechanism specified in our bye-laws, the voting
rights exercisable by a shareholder will be limited so that
certain persons or groups are not deemed to hold more than 9.9%
of the total voting power conferred by our shares. In addition,
our board of directors retains certain discretion to make
adjustments to the aggregate number of votes attaching to the
shares of any shareholder that they consider fair and reasonable
in all the circumstances
</DIV>

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<DIV align="left" style="font-size: 10pt;">
to ensure that no person will hold more than 9.9% of the total
voting power represented by our then outstanding shares. Our
bye-laws provide generally that any shareholder owning,
directly, indirectly or, in the case of any U.S.&nbsp;person, by
attribution, more than 9.9% of our common shares will have the
voting rights attached to such common shares reduced so that it
may not exercise more than 9.9% of the total voting rights. The
reduction in votes is generally to be applied proportionately
among all shareholders who are members of the first
shareholder&#146;s control group. A control group means, with
respect to any person, all shares directly owned by such person
and all shares directly owned by each other shareholder any of
whose shares are included in the controlled shares of such
person. Controlled shares means all common shares that a person
is deemed to own directly, indirectly (within the meaning of
Section&nbsp;958(a) of the Code) or, in the case of a
U.S.&nbsp;person, constructively (within the meaning of
Section&nbsp;958(b) of the Code). A similar limitation is to be
applied to shares held directly by members of a related group. A
related group means a group of shareholders that are investment
vehicles and are under common control and management. Any
reduction in votes will generally be reallocated proportionately
among members of the shareholder&#146;s control group or related
group, as the case may be. The amount of any reduction of votes
that occurs by operation of the above limitations will generally
be reallocated proportionately among all of our other
shareholders who were not members of these groups so long as
such reallocation does not cause any person to hold more than
9.9% of the total voting power of our shares.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under these provisions, some shareholders may have the right to
exercise their voting rights limited to less than one vote per
share. Moreover, these provisions could have the effect of
reducing the voting power of certain shareholders who would not
otherwise be subject to the limitation by virtue of their direct
share ownership.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As a result of any reduction in the votes of other shareholders,
your voting power might increase above 5% of the aggregate
voting power of the outstanding shares, which may result in your
becoming a reporting person subject to Schedule&nbsp;13D or 13G
filing requirements under the U.S. Securities Exchange Act of
1934, as amended, or the Exchange Act.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We also have the authority to request information from any
shareholder for the purpose of determining whether a
shareholder&#146;s voting rights are to be reallocated pursuant
to the bye-laws. If a shareholder fails to respond to a request
for information from us or submits incomplete or inaccurate
information (after a reasonable cure period) in response to a
request, we, in our reasonable discretion, may reduce or
eliminate the shareholder&#146;s voting rights.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Anti-takeover provisions in our bye-laws could impede an
    attempt to replace or remove our directors, which could diminish
    the value of our common shares.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our bye-laws contain provisions that may entrench directors and
make it more difficult for shareholders to replace directors
even if the shareholders consider it beneficial to do so. In
addition, these provisions could delay or prevent a change of
control that a shareholder might consider favorable. For
example, these provisions may prevent a shareholder from
receiving the benefit from any premium over the market price of
our common shares offered by a bidder in a potential takeover.
Even in the absence of an attempt to effect a change in
management or a takeover attempt, these provisions may adversely
affect the prevailing market price of our common shares if they
are viewed as discouraging changes in management and takeover
attempts in the future.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Examples of provisions in our bye-laws that could have such an
effect include the following:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    election of our directors is staggered, meaning that the members
    of only one of three classes of our directors are elected each
    year;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the total voting power of any shareholder owning more than 9.9%
    of our common shares will be reduced to 9.9% of the total voting
    power of our common shares;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    our directors may, in their discretion, decline to record the
    transfer of any common shares on our share register if the
    shares have not been fully paid for, if the directors are not
    satisfied that all required</TD>
</TR>

</TABLE>

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<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD align="left">
    regulatory approvals for such transfer have been obtained, or if
    the instrument of transfer is in favor of more than five persons
    jointly.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Upon closing of this offering, our principal shareholders
    will still have the ability to significantly influence our
    business, which may be disadvantageous to other shareholders and
    adversely affect the price of our common shares.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Upon closing of this offering Daniel G. Hickey, Sr., Daniel G.
Hickey, Jr., Martin D. Rakoff and Louis J. Viglotti,
collectively, will beneficially own
approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">l</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%
of our outstanding common shares and will possess
approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">l</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%
of the total voting power of our outstanding shares. As a
result, these shareholders, if they act together, will have the
ability to exert substantial influence over all matters
requiring approval by our shareholders, including the election
and removal of directors, any proposed merger, consolidation or
sale of all or substantially all of our assets and other
corporate transactions. These shareholders may have interests
that are different from ours or other investors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our officers, directors and principal shareholders could delay
or prevent an acquisition or merger of our company even if the
transaction would benefit other shareholders. Moreover, this
concentration of share ownership may make it difficult for
shareholders to replace management. This concentration could be
disadvantageous to other shareholders with interests different
from those of our officers, directors and principal shareholders
and the price of our common shares could be adversely affected.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>U.S.&nbsp;persons who own our common shares may have more
    difficulty protecting their interests than U.S.&nbsp;persons who
    are shareholders of a U.S.&nbsp;corporation.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Companies Act, which applies to us, differs in certain
material respects from laws generally applicable to
U.S.&nbsp;corporations and their shareholders. In order to
highlight those differences, we have set forth below a summary
of certain significant provisions of the Companies Act,
including, where relevant, information on the Company&#146;s
bye-laws, which differ in certain respects from the provisions
of Delaware corporate law. Further, under certain circumstances,
our bye-laws impose greater restrictions on us than required by
the Companies Act. Because the following statements are
summaries, they do not discuss all aspects of Bermuda law that
may be relevant to us and our shareholders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Shareholders&#146; Suits.</I> The rights of shareholders
under Bermuda law are not as extensive as the rights of
shareholders in many United States jurisdictions. Class actions
and derivative actions are generally not available to
shareholders under Bermuda law. However, the Bermuda courts
ordinarily would be expected to follow English case law
precedent, which would permit a shareholder to commence a
derivative action in the name of a company where the act
complained of is alleged to be beyond the corporate power of the
company, is illegal or would result in the violation of such
company&#146;s memorandum of association or bye-laws.
Furthermore, consideration would be given by the court to acts
that are alleged to constitute a fraud against the minority
shareholders or where an act requires the approval of a greater
percentage of our shareholders than actually approved it. The
successful party in such an action generally would be able to
recover a portion of the attorney&#146;s fees incurred in
connection with such action. Our bye-laws provide that
shareholders waive all claims or rights of action that they
might have, individually or in our right, against any director
or officer or any person appointed to any committee by the board
of directors or resident representative for any action or
failure to act in the performance of his duties, except such
waiver shall not extend to any claims or rights of action that
would render the waiver void pursuant to the Companies Act and
arise out of fraud or dishonesty on the part of such person or
with respect to the recovery of any gain, personal profit or
advantage to which such person is not legally entitled. Class
actions and derivative actions generally are available to
shareholders under Delaware corporate law, for, among other
things, breach of fiduciary duty, corporate waste and actions
not taken in accordance with applicable law. In such actions
under Delaware law, the court has discretion to permit the
winning party to recover attorney&#146;s fees in connection with
such action.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Indemnification of Directors and Officers.</I> Under Bermuda
law and our bye-laws, we will indemnify our directors or
officers or any person appointed to any committee by the board
of directors and any resident representative (and their
respective heirs, executors or administrators) against all
actions, costs, charges,
</DIV>

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<DIV align="left" style="font-size: 10pt;">
liabilities, loss, damage or expense, to the fullest extent
permitted by law, incurred or suffered by such officer, director
or other person by reason of any act done, conceived in or
omitted in the conduct of our business or in the discharge of
his duties; provided that such indemnification shall not extend
to any matter involving any fraud or dishonesty on the part of
such director, officer or other person. In general,
U.S.&nbsp;companies may limit the personal liability of their
directors as long as they acted in good faith and reasonably
believed their actions were not opposed to the best interests of
the company and, with regard to criminal actions or proceedings,
without knowing violation of law.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>We are a Bermuda company and it may be difficult for you
    to enforce judgments against us.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are a Bermuda company and a substantial portion of our assets
are or may be located in jurisdictions outside the United
States. It may therefore be difficult for investors to effect
service of process against us or to enforce against us judgments
of U.S.&nbsp;courts predicated upon civil liability provisions
of the U.S.&nbsp;federal securities laws.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
There is no treaty in force between the United States and
Bermuda providing for the reciprocal recognition and enforcement
of judgments in civil and commercial matters. As a result,
whether a United States judgment would be enforceable in Bermuda
against us or our directors and officers depends on whether the
U.S.&nbsp;court that entered the judgment is recognized by the
Bermuda court as having jurisdiction over us or our directors
and officers, as determined by reference to Bermuda conflict of
law rules. A judgment debt from a U.S.&nbsp;court that is final
and for a sum certain based on U.S.&nbsp;federal securities laws
will not be enforceable in Bermuda unless the judgment debtor
had submitted to the jurisdiction of the U.S.&nbsp;court, and
the issue of submission and jurisdiction is a matter of Bermuda
(not United States) law.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition to and irrespective of jurisdictional issues, the
Bermuda courts will not enforce a United States federal
securities law that is either penal or contrary to the public
policy of Bermuda. An action brought pursuant to a public or
penal law, the purpose of which is the enforcement of a
sanction, power or right at the instance of the state in its
sovereign capacity, may not be entertained by a Bermuda court.
Certain remedies available under the laws of
U.S.&nbsp;jurisdictions, including certain remedies under
U.S.&nbsp;federal securities laws, will not be available under
Bermuda law or enforceable in a Bermuda court, as they may be
contrary to Bermuda public policy. Further, no claim may be
brought in Bermuda against us or our directors and officers in
the first instance for violations of U.S.&nbsp;federal
securities laws because these laws have no extraterritorial
jurisdiction under Bermuda law and do not have force of law in
Bermuda. A Bermuda court may, however, impose civil liability on
us or our directors and officers if the facts alleged in a
complaint constitute or give rise to a cause of action under
Bermuda law.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>If you acquire 10% or more of our shares, you may be
    subject to taxation under the &#147;controlled foreign
    corporation,&#148; or CFC, rules.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Each &#147;10% U.S.&nbsp;Shareholder&#148; of a foreign
corporation that is a CFC for an uninterrupted period of
30&nbsp;days or more during a taxable year, and that owns shares
in the CFC directly or indirectly through foreign entities on
the last day of the corporation&#146;s taxable year on which
such corporation was a CFC, must include in its gross income for
U.S.&nbsp;federal income tax purposes its pro rata share of the
CFC&#146;s &#147;subpart&nbsp;F income,&#148; even if the
subpart&nbsp;F income is not distributed. Subpart&nbsp;F income
generally includes, among other things, investment income such
as dividends, interest and capital gains, and income from
insuring risks located outside the insurer&#146;s country of
incorporation. A foreign corporation is considered a CFC if
&#147;10% U.S.&nbsp;Shareholders&#148; own more than 50% of the
total combined voting power of all classes of voting stock of
the foreign corporation, or the total value of all stock of the
corporation. A 10% U.S.&nbsp;Shareholder is a U.S.&nbsp;person,
as defined in the Code, that owns at least 10% of the total
combined voting power of all classes of stock of the foreign
corporation entitled to vote. For purposes of taking into
account subpart&nbsp;F income consisting of insurance income, a
CFC also includes a foreign corporation of which more than 25%
of the total combined voting power of all classes of stock (or
more than 25% of the total value of the stock) is owned by 10%
U.S.&nbsp;Shareholders, on any day during the taxable year of
such corporation, if the gross amount of premiums or other
consideration for the reinsurance or the issuing of insurance or
annuity contracts generating subpart F income exceeds 75% of the
gross amount of premiums or other consideration in respect of
all risks. It is
</DIV>

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<DIV align="left" style="font-size: 10pt;">
expected that all of Twin Bridges&#146; income will be
considered subpart&nbsp;F insurance income. For purposes of
determining whether the more-than-50% (or more-than-25%, in the
case of insurance income) and 10% ownership tests have been
satisfied, and therefore whether a corporation is a CFC, shares
owned includes shares owned directly or indirectly through
foreign entities or shares considered owned under constructive
ownership rules. The attribution rules are complicated and
depend on the particular facts relating to each investor.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
CRM Holdings&#146; bye-laws contain provisions that impose
limitations on the concentration of voting power of its shares.
Accordingly, based upon these provisions and the anticipated
dispersion of our share ownership, we do not believe that we
have any 10% U.S.&nbsp;Shareholders. It is possible, however
that the IRS could challenge the effectiveness of these
provisions and that a court could sustain such a challenge.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>U.S.&nbsp;persons who hold shares could be subject to
    adverse tax consequences if we are considered a &#147;passive
    foreign investment company,&#148; or PFIC, for U.S.&nbsp;federal
    income tax purposes.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We do not intend to conduct our activities in a manner that
would cause us to become a PFIC. However, it is possible that we
could be deemed a PFIC by the IRS for 2005 or any future year.
If we were considered a PFIC it could have material adverse tax
consequences for an investor that is subject to
U.S.&nbsp;federal income taxation, including subjecting the
investor to a greater tax liability than might otherwise apply
or subjecting the investor to tax on amounts in advance of when
tax would otherwise be imposed. There are currently no
regulations regarding the application of the PFIC provisions to
an insurance company. New regulations or pronouncements
interpreting or clarifying these rules may be issued in the
future. We cannot predict what impact, if any, this guidance
would have on a shareholder that is subject to U.S.&nbsp;federal
income taxation. We have not sought and do not intend to seek an
opinion of legal counsel as to whether or not we were a PFIC for
the year ending December&nbsp;31, 2005.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>U.S.&nbsp;persons who hold shares may be subject to
    U.S.&nbsp;income taxation on their pro rata share of our
    &#147;related party insurance income,&#148; or RPII.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the event that:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Twin Bridges&#146; gross RPII equals or exceeds 20% of its gross
    insurance income in any taxable year,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    direct or indirect insureds (and persons related to such
    insureds) own (or are treated as owning directly or indirectly)
    20% or more of the voting power or value of the shares of Twin
    Bridges, and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    U.S.&nbsp;persons are considered to own in the aggregate 25% or
    more of the stock of Twin Bridges by vote or value,</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
then a U.S.&nbsp;person who owns any of our shares directly or
indirectly through foreign entities on the last day of Twin
Bridges&#146; taxable year on which it is a CFC would be
required to include in its income for U.S.&nbsp;federal income
tax purposes the shareholder&#146;s pro rata share of Twin
Bridges&#146; RPII for the U.S.&nbsp;person&#146;s taxable year
that includes the end of Twin Bridges&#146; taxable year
determined as if such RPII were distributed proportionately to
such U.S.&nbsp;shareholders at that date regardless of whether
such income is distributed. In addition any RPII that is
includible in the income of a U.S.&nbsp;tax-exempt organization
will be treated as unrelated business taxable income. The amount
of RPII earned by Twin Bridges (generally, premium and related
investment income from the direct or indirect insurance or
reinsurance of any direct or indirect U.S.&nbsp;shareholder of
Twin Bridges or any person related to such shareholder) will
depend on a number of factors, including the identity of persons
directly or indirectly insured or reinsured by Twin Bridges.
Although we do not expect our gross RPII to equal or exceed 20%
of our gross insurance income in the foreseeable future, some of
the factors which determine the extent of RPII in any period may
be beyond Twin Bridges&#146; control. Consequently, Twin
Bridges&#146; gross RPII could equal or exceed 20% of its gross
insurance income in any taxable year and ownership of its shares
by direct or indirect insureds and related persons could equal
or exceed the 20% threshold described above.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The RPII rules provide that if a shareholder that is a
U.S.&nbsp;person disposes of shares in a foreign insurance
corporation that has RPII (even if the amount of RPII is less
than 20% of the corporation&#146;s gross insurance
</DIV>

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<DIV align="left" style="font-size: 10pt;">
income or the ownership of its shares by direct or indirect
insureds and related persons is less than the 20% threshold) and
in which U.S.&nbsp;persons own 25% or more of the shares, any
gain from the disposition will generally be treated as ordinary
income to the extent of the shareholder&#146;s share of the
corporation&#146;s undistributed earnings and profits that were
accumulated during the period that the shareholder owned the
shares (whether or not such earnings and profits are
attributable to RPII). In addition, such a shareholder will be
required to comply with reporting requirements, regardless of
the amount of shares owned by the shareholder. We believe that
these rules should not apply to dispositions of our shares
because CRM Holdings will not itself be directly engaged in the
insurance business and because proposed U.S.&nbsp;Treasury
regulations appear to apply only in the case of shares of
corporations that are directly engaged in the insurance
business. However, the IRS might interpret the proposed
regulations in a different manner and the applicable proposed
regulations may be promulgated in final form in a manner that
would cause these rules to apply to dispositions of our shares.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Changes in U.S.&nbsp;federal income tax law could
    materially adversely affect an investment in our shares.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The U.S.&nbsp;federal income tax laws and interpretations
regarding whether a company is engaged in a trade or business
within the United States, or is a PFIC or whether
U.S.&nbsp;persons would be required to include in their gross
income the subpart&nbsp;F income or the RPII of a CFC are
subject to change, possibly on a retroactive basis. There are
currently no regulations regarding the application of the PFIC
rules to insurance companies and the regulations regarding RPII
are still in proposed form. New regulations or pronouncements
interpreting or clarifying such rules may be issued in the
future. We cannot be certain if, when or in what form such
regulations or pronouncements may be provided and whether such
regulations or guidance will have a retroactive effect.
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<A name='103'></A>
</DIV>

<!-- link1 "CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
This prospectus contains forward looking statements. These
forward looking statements include, in particular, statements
about our plans, strategies and prospects under the headings
&#147;Prospectus Summary,&#148; &#147;Management&#146;s
Discussion and Analysis of Financial Condition and Results of
Operations&#148; and &#147;Business.&#148; These statements are
based on our current expectations and projections about future
events and are identified by terminology such as
&#147;may,&#148; &#147;will,&#148; &#147;should,&#148;
&#147;expect,&#148; &#147;scheduled,&#148; &#147;plan,&#148;
&#147;seek,&#148; &#147;intend,&#148; &#147;anticipate,&#148;
&#147;believe,&#148; &#147;estimate,&#148; &#147;aim,&#148;
&#147;potential,&#148; or &#147;continue&#148; or the negative
of those terms or other comparable terminology. Although we
believe that our plans, intentions and expectations are
reasonable, we may not achieve our plans, intentions or
expectations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
These forward-looking statements involve risks and
uncertainties. Important factors that could cause actual results
to differ materially from the forward looking statements we make
in this prospectus are set forth in &#147;Risk Factors.&#148; We
undertake no obligation to update any of the forward looking
statements after the date of this prospectus to conform those
statements to reflect the occurrence of unanticipated events,
except as required by applicable law.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
You should read this prospectus and the documents that we
reference in this prospectus and have filed as exhibits to the
registration statement on Form&nbsp;S-1, of which this
prospectus is a part, that we have filed with the SEC,
completely and with the understanding that our actual future
results, levels of activity, performance and achievements may be
different from what we expect and that these differences may be
material. We qualify all of our forward looking statements by
these cautionary statements. The forward looking statements
contained in this prospectus are excluded from the safe harbor
protection provided by the Private Securities Litigation Reform
Act of 1995 and Section&nbsp;27A of the Securities Act of 1933,
as amended.
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<A name='104'></A>
</DIV>

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<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>USE OF PROCEEDS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We estimate that we will receive net proceeds from this offering
of approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">l</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million
after the payment of the underwriters&#146; discounts and
commissions and our payment of the expenses of this offering
estimated to
be &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">l</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.
We intend to use our proceeds from this offering to provide
additional capital and surplus to expand our operations,
including providing additional surplus to Twin Bridges. We will
not receive any of the proceeds from the sale of common shares
by the selling shareholders.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='106'></A>
</DIV>

<!-- link1 "DIVIDEND POLICY" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>DIVIDEND POLICY</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our board of directors currently does not intend to declare
dividends or make any other distributions to our shareholders.
Any determination to pay dividends in the future will be at the
board&#146;s discretion and will depend upon our results of
operations, financial condition and prospects as well as other
factors deemed relevant by our board of directors. Under the
Companies Act, we may declare or pay a dividend out of retained
earnings, or make a distribution out of contributed surplus,
only if we have reasonable grounds for believing that we are
and, after the payment of such dividends, will be able to pay
our liabilities as they become due and if the realizable value
of our assets would thereby not be less than the aggregate of
our liabilities and issued share capital and share premium
accounts. As a holding company, we depend on future dividends
and other permitted payments from our subsidiaries to pay
dividends to our shareholders. Our subsidiaries&#146; ability to
pay dividends to us, as well as our ability to pay dividends to
our shareholders, is subject to regulatory, contractual, rating
agency, tax and other constraints. Risks relating to our holding
company structure and its effect on our ability to receive and
pay dividends are described under &#147;Risk Factors&nbsp;&#151;
Risks Related to Our Business&nbsp;&#151; Our holding company
structure and certain regulatory, tax and other constraints
affect our ability to pay dividends, make other payments and
redeploy capital among our subsidiaries&#148; and
&#147;&#151;&nbsp;Risks Related to Our Shares Sold in this
Offering&nbsp;&#151; We do not intend to pay dividends on our
shares.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with the restructuring, CRM, Eimar and Twin
Bridges intend to make a distribution to the existing
shareholders of unpaid earnings and profits in an aggregate
amount equal to the net income for U.S.&nbsp;federal income tax
purposes of CRM and Eimar for the nine months ended
September&nbsp;30, 2005, plus the amount by which the net income
for U.S.&nbsp;federal income taxes purposes of Twin Bridges for
the period from its commencement through September&nbsp;30, 2005
exceeds distributions Twin Bridges previously made to its
shareholders, such net income to be computed on a cash basis,
which has been the basis on which distributions have been made
to the existing shareholders by each of CRM and Eimar since
their inception. We refer to these distributions in this
prospectus as the &#147;Distributions.&#148; We also will
indemnify the existing shareholders for an amount equal to the
amount of U.S.&nbsp;federal income taxes, if any, that would be
payable by them with respect to the combined net income, if any,
for U.S.&nbsp;federal income tax purposes of CRM, Eimar and Twin
Bridges for the period from October&nbsp;1, 2005 through the
consummation of the restructuring, computed on a cash basis as
if such period were a taxable period.
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<A name='123'></A>
</DIV>

<!-- link1 "CAPITALIZATION" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CAPITALIZATION</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth our combined capitalization as of
June&nbsp;30, 2005 on an actual basis and on an as adjusted
basis giving effect to:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the sale
    of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">l</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;common
    shares in this offering at an assumed initial price to the
    public of
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">l</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
    share, which is the mid-point of the price range set forth on
    the cover page of this prospectus, and after deducting
    underwriting discounts and commissions and our estimated
    offering expenses;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the restructuring;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the Distributions;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the application of the net proceeds of this offering.</TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="69%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>As of June&nbsp;30, 2005</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Actual</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>As Adjusted</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>(Unaudited)</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>(Dollar amounts in</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>thousands except for</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>per share amounts)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Debt outstanding:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,109</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Shareholders&#146; and LLC members&#146; equity (deficit):</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Twin Bridges</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Common stock, $1.00 par value per share, 120,000&nbsp;shares
    authorized, 120,000&nbsp;shares issued and outstanding</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>120</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Additional paid-in capital</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>880</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Retained earnings</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,576</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    LLC members&#146; equity (deficit)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,635</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    As adjusted (CRM Holdings, Ltd.):</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Common stock, $0.01 par value per share,
    50,000,000,000&nbsp;shares
    authorized, &nbsp;&nbsp;&nbsp;<FONT face="wingdings">l</FONT>&nbsp;&nbsp;&nbsp;&nbsp;shares
    issued and outstanding</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Additional paid-in capital</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Retained earnings</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Total capitalization</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,050</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
You should read this table in conjunction with &#147;Selected
Combined Financial Information,&#148; &#147;Management&#146;s
Discussion and Analysis of Financial Condition and Results of
Operations&#148; and the combined financial statements and
related notes included elsewhere in this prospectus.
</DIV>

<P align="center" style="font-size: 10pt;">32

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<A name='124'></A>
</DIV>

<!-- link1 "DILUTION" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>DILUTION</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If you invest in our common shares in this offering, your
ownership interest in us will be diluted to the extent of the
differences between the initial public offering price per share
and pro forma net tangible book value per share after this
offering. Our net tangible book value as of June&nbsp;30, 2005
is presented on a pro forma basis, assuming the consummation of
the restructuring and the Distributions. Our pro forma net
tangible book value as of June&nbsp;30, 2005 is determined by
subtracting the total amount of our liabilities as of
June&nbsp;30, 2005 from the total amount of our tangible assets
as of June&nbsp;30, 2005. Our pro forma net tangible book value
per share as of June&nbsp;30, 2005 is determined by dividing our
pro forma net tangible book value as of June&nbsp;30, 2005 by
the number of common shares outstanding as of June&nbsp;30,
2005, after giving effect to the restructuring. Our pro forma
net tangible book value as of June&nbsp;30, 2005 was
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">l</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
or
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">l</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share, calculated as described above.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
After giving effect to the issuance in this offering
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">l</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;common
shares at an assumed initial price to the public of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">l</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share, which is the mid-point of the price range set forth on
the cover page of this prospectus, and the application of our
estimated net proceeds therefrom, and after deducting
underwriting discounts and commissions and our estimated
offering expenses, our pro forma net tangible book value as of
June&nbsp;30, 2005 would have been an aggregate of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">l</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million,
or
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">l</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
common share. This amount represents an immediate increase of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">l</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share to our existing shareholders and an immediate dilution of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">l</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share from the assumed initial price to the public of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">l</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share to new investors purchasing shares in this offering. The
table below illustrates this per share dilution:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="72%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Assumed initial price to the public per share</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pro forma net tangible book value per share as of June&nbsp;30,
    2005</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Increase in pro forma net tangible book value per share
    attributable to this offering</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pro forma net tangible book value per share after this offering</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dilution per share to new investors</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The table below sets forth, as of June&nbsp;30, 2005, the number
of our common shares issued, the total consideration paid and
the average price per share paid by our existing shareholders
and our new investors, after giving effect to the consummation
of the restructuring and the Distributions and the issuance
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;common
shares in this offering at an assumed initial price to the
public of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share, which is the mid-point of the price range set forth on
the cover page of this prospectus:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="41%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Shares Issued</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Total Consideration</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Average Price</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Number</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Percent</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Amount</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Percent</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Per Share</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Existing shareholders</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    New investors</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">33

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<A name='107'></A>
</DIV>

<!-- link1 "SELECTED COMBINED FINANCIAL INFORMATION" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>SELECTED COMBINED FINANCIAL INFORMATION</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth our selected combined financial
information for the periods ended and as of the dates indicated.
The historical results are not necessarily indicative of results
to be expected in any future period.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The selected unaudited combined income statement information for
the six months ended June&nbsp;30, 2005 and 2004 and the
selected unaudited combined balance sheet information as of
June&nbsp;30, 2005 are derived from our unaudited combined
financial statements included elsewhere in this prospectus.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The selected combined income statement information for the years
ended December&nbsp;31, 2004, 2003 and 2002 and the selected
combined balance sheet information as of December&nbsp;31, 2004
and 2003 are derived from our audited combined financial
statements included elsewhere in this prospectus. The selected
unaudited combined income statement information for the years
ended December&nbsp;31, 2001 and 2000 and the selected unaudited
combined balance sheet information as of December&nbsp;31, 2002,
2001 and 2000 are derived from our unaudited combined financial
statements not included in this prospectus.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The selected combined balance sheet information as of
June&nbsp;30, 2005 was prepared:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    on an actual basis;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    on an as adjusted basis to give effect to our sale
    of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">l</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;common
    shares in this offering, after deducting underwriting discounts
    and commissions and the estimated expenses of this offering, the
    restructuring and the Distributions and the application of our
    net proceeds from this offering.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
You should read the following selected combined financial
information in conjunction with the information contained in
this prospectus, including &#147;Management&#146;s Discussion
and Analysis of Financial Condition and Results of
Operations,&#148; and the combined financial statements and
related notes included elsewhere in this prospectus. Many
factors may cause our actual results to differ materially from
the financial information and results presented below including,
but not limited to, the following:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    We began our group administration business in California during
    October 2003;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    We commenced our reinsurance business during December
    2003;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Those factors discussed in &#147;Risk Factors.&#148;</TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="39%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR style="font-size: 7pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Six Months Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="19">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>June&nbsp;30,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap><B>Years Ended December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="3" align="left" nowrap><B>Selected Combined</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="3" align="left" nowrap><B>Income Information</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2001</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2000</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 7pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="26" align="center" nowrap><B>(Dollars amounts in thousands except per share amounts)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Revenues</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Fee-based management services</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>16,494</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>13,920</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>27,656</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>20,821</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>17,614</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7,967</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,563</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net reinsurance premiums</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,045</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,123</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,110</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>253</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Investment income, net of advisory fees</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>54</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>54</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>37</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19,593</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,064</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32,820</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21,090</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,651</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,980</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,563</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Expenses</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Losses and loss adjustment expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,305</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,165</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,528</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>168</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Fees paid to general agents and brokers</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,628</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,126</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,507</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,830</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,651</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,615</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,046</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Selling, general and administrative expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,884</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,275</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,441</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,240</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,471</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,140</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,317</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Policy acquisition costs and other expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>929</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>653</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,538</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>121</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>33</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,746</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,219</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27,014</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,359</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,155</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,776</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,384</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income before taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,847</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,845</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,806</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,731</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,496</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,204</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>179</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Provision for income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,847</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,845</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,806</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,731</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,496</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,204</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>179</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pro forma net income per common share(1)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pro forma cash dividends declared per common share(1)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pro forma common shares outstanding(1)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Based
    on &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">l</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;common
    shares outstanding after giving effect to the restructuring but
    not including shares to be offered by us in this offering.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">34

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="36%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>As of June&nbsp;30,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap><B>As of December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2" align="left" nowrap><B>Selected Combined</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="19">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2" align="left" nowrap><B>Balance Sheet Information</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(As Adjusted)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(Actual)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2001</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2000</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="26" align="center" nowrap><B>(Dollar amounts in thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="30" align="left" valign="top">
    <B>Assets</B></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,493</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,576</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>767</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,644</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,342</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>143</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents, restricted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,270</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,398</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Premiums receivable, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,845</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,758</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,140</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts receivable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>925</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>41</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>90</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>705</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>388</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>562</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred policy acquisition costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,341</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,414</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>824</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Property and equipment, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>955</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>913</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>792</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>796</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>209</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>106</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Loans receivable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>414</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>432</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>173</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>73</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prepaid expenses and other assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>382</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>192</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>96</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>586</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>63</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>16,625</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>12,724</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,882</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6,804</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>818</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="30">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="30" align="left" valign="top">
    <B>Liabilities and shareholders&#146; and members&#146;
    equity</B></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Reserve for losses and loss adjustment expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,001</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,696</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>168</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Unearned reinsurance premiums</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,533</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,780</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,785</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Unearned management fees</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,182</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>671</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>614</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,789</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>341</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Unearned commission income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,383</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,334</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,247</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,163</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,145</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Borrowings under credit facilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,109</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>158</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>285</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,104</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>169</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>200</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Fees payable to general agents and brokers</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>741</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>565</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>578</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>537</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>375</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>172</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,733</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>632</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>369</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>317</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>428</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,683</TD>
    <TD align="left" valign="bottom" nowrap><SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,836</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,046</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,910</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,105</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>800</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Twin Bridges</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Common stock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>120</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>120</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>120</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Additional paid-in capital</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>880</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>880</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>880</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Retained earnings</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,576</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>835</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(51</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    LLC members&#146; equity (deficit)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,634</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(947</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,113</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>894</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>897</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total shareholders&#146; and members&#146; equity</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(58</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>888</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,164</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>894</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>897</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total liabilities and shareholders&#146; and members&#146; equity</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>16,625</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>12,724</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,882</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6,804</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>818</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    Column does not total due to rounding.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">35

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<A name='125'></A>
</DIV>

<!-- link1 "MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>CONDITION AND RESULTS OF OPERATIONS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>The following discussion and analysis of our financial
condition and results of operations should be read in
conjunction with our audited and unaudited financial statements
and related notes included in this prospectus on pages F-1
through F-30. We caution you that our results of operations for
prior periods are not indicative of the actual results that may
be achieved in future periods. In addition, some of the
information contained in this discussion and analysis includes
forward-looking statements that involve risks and uncertainties.
Many factors may cause our actual results to differ materially
from those anticipated or implied by these forward-looking
statements including, but not limited to, those discussed in
&#147;Risk Factors.&#148; You should read the information under
&#147;Risk Factors&#148; beginning on page&nbsp;10 for
information about material risks and uncertainties that affect
us, our business and our common shares and &#147;Cautionary Note
Regarding Forward-Looking Statements&#148; on page&nbsp;30.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Overview</B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Our Business and Operating Segments</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are a leading provider of fee-based management and other
services for workers&#146; compensation self-insured groups in
New York and California. We also provide reinsurance of a
portion of the excess workers&#146; compensation coverage for
these groups, subject to certain limits, through our subsidiary
Twin Bridges. We have two operating segments: fee-based
management services and&nbsp;reinsurance.
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Fee-based Management Services.</I> We provide fee-based
    management services for workers&#146; compensation self-insured
    groups in New York and California. We began conducting our
    business of providing management and other services to
    self-insured workers&#146; compensation groups in New York
    through CRM in 1999 and expanded this business to California
    through CRM&nbsp;CA in October 2003. We form the groups and
    provide them with a broad range of services, including general
    management, underwriting, risk assessment, medical bill review
    and case management, general recordkeeping and regulatory
    compliance. We also provide safety and loss control services to
    group members to help reduce workers&#146; compensation risks
    and expenses. In New York, we provide claims management
    services. In addition, we act as a broker and place excess
    insurance coverage and any required surety bonds for the groups.
    Each group we manage is composed of participants from the same
    industry, all of which are located in a single state. We
    currently manage&nbsp;14 self-insured groups in
    12&nbsp;industries, with eight groups in New York and six in
    California (the sixth California group, which provides
    workers&#146; compensation insurance to wineries, was formed
    after June&nbsp;30, 2005). Investment management services are
    provided for our larger groups by one or more independent
    investment management firms.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Reinsurance.</I> The groups we manage purchase excess
    workers&#146; compensation coverage from U.S.&nbsp;admitted
    insurers to cover claims that exceed a minimum level established
    by state law or regulation or by administrative determination.
    We began reinsuring a portion of this coverage through our
    subsidiary Twin Bridges in December 2003. The U.S.&nbsp;admitted
    insurers issue policies to the groups that we manage. We write
    our reinsurance on a quota share basis also known as
    proportional or pro rata. Under quota share reinsurance, we
    share the premiums as well as the losses and expenses in an
    agreed proportion with the U.S.&nbsp;admitted insurer, subject
    to certain limits.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The determination of these two segments was based on our
methodology for monitoring the performance of our group
management business and reinsurance business. We evaluate each
segment based on management fees and commission income or
reinsurance premiums earned, as applicable, including items of
revenue and expense that are associated with, and directly
related to, each segment.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Our Restructuring</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
CRM Holdings is a Bermuda exempted holding company incorporated
in September 2005 and will acquire CRM, CRM CA, Eimar and Twin
Bridges through a share exchange, as described in
&#147;Business&nbsp;&#151; Organization and Restructuring,&#148;
which will occur immediately prior to the closing of this
offering.
</DIV>

<P align="center" style="font-size: 10pt;">36
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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Prior to the consummation of the restructuring, certain members
of our management team, including Daniel G. Hickey, Jr., Martin
D. Rakoff and Louis J. Viglotti, as well as certain other
persons listed in &#147;Principal Shareholders&#148; are the
beneficial owners of CRM, CRM&nbsp;CA, Eimar and Twin Bridges.
We sometimes refer to these owners in this prospectus as the
&#147;existing shareholders.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Immediately prior to the closing of this offering, CRM,
CRM&nbsp;CA and Eimar will be converted from limited liability
companies into corporations and the existing shareholders will
contribute all of their interests in CRM and Eimar to
CRM&nbsp;USA Holdings, which will be our wholly owned subsidiary
and will hold all of the outstanding shares of our
U.S.&nbsp;subsidiaries. In exchange, the existing shareholders
will receive shares issued by CRM&nbsp;USA Holdings. The
existing shareholders will then contribute their CRM&nbsp;USA
Holdings shares to us in exchange
for &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">l</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of
our common shares. CRM will then distribute its shares in
CRM&nbsp;CA to CRM&nbsp;USA Holdings. In addition, immediately
prior to the closing of this offering, the existing shareholders
will contribute all of their interests in Twin Bridges to us in
exchange
for &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">l</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of
our common shares. We refer to these transactions in this
prospectus as the &#147;restructuring.&#148; The existing
shareholders ultimately will receive a total
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">l</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of
our common shares in exchange for their interests in CRM
(including its subsidiary, CRM&nbsp;CA), Eimar and Twin Bridges.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with the restructuring, CRM, Eimar and Twin
Bridges intend to make a distribution to the existing
shareholders of unpaid earnings and profits in an aggregate
amount equal to the net income for U.S.&nbsp;federal income tax
purposes of CRM and Eimar for the nine months ended
September&nbsp;30, 2005, plus the amount by which the net income
for U.S.&nbsp;federal income taxes purposes of Twin Bridges for
the period from its commencement through September&nbsp;30, 2005
exceeds distributions Twin Bridges previously made to its
shareholders, such net income to be computed on a cash basis,
which has been the basis on which distributions have been made
to the existing shareholders by each of CRM and Eimar since
their inception. We refer to these distributions in this
prospectus as the &#147;Distributions.&#148; We also will
indemnify the existing shareholders for an amount equal to the
amount of U.S.&nbsp;federal income taxes, if any, that would be
payable by them with respect to the combined net income, if any,
for U.S.&nbsp;federal income tax purposes of CRM, Eimar and Twin
Bridges for the period from October&nbsp;1, 2005 through the
consummation of the restructuring, computed on a cash basis as
if such period were a taxable period.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Our Combined Financial Information</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our combined financial statements include the results of CRM
(and its wholly-owned subsidiary, CRM CA), Eimar and Twin
Bridges.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Revenue</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our revenues consist primarily of the following:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Fee-based Management Services Revenue.</I> In New York, the
fees we receive from all but one of our groups are based on a
percentage of the manual workers&#146; compensation rates set by
the New York State Workers&#146; Compensation Board that are
attributable to the members of the groups we manage, and our
fees include claims management services. With respect to our
groups in California and one of our groups in New York, our fees
are based on a percentage of the premiums paid to the groups we
manage by their members. Our groups in California pay the fees
for claims management services directly to a third party
administrator. In addition, our fees for medical bill review and
case management services are paid fees based on the specific
services rendered. We also receive commission income from:
(1)&nbsp;U.S.&nbsp;admitted insurers for placing the excess
coverage which the groups are required to obtain and
(2)&nbsp;insurers for placing the required surety bonds for the
groups we manage.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A significant amount of our existing business is dependent on a
relatively small number of our managed groups. The Healthcare
Insurance Trust of New York provided approximately 27.2% and
38.1% of our revenues from fee-based management services for the
six months ended June&nbsp;30, 2005 and the year ended
December&nbsp;31, 2004, respectively. Two other groups, Elite
Contractors Trust of New York and Transportation Industry
Workers&#146; Compensation Trust of New York, provided
approximately 20.3% and 13.8%, respectively, of our revenues
from fee-based management services for the six months ended
June&nbsp;30, 2005 and
</DIV>

<P align="center" style="font-size: 10pt;">37

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<DIV align="left" style="font-size: 10pt;">
approximately 21.9% and 13.7%, respectively, of our revenues
from fee-based management services for the year ended
December&nbsp;31, 2004. Commission income for the placement of
excess coverage represented placements with 7, 7 and 9
U.S.&nbsp;admitted insurers for the years ended
December&nbsp;31, 2004, 2003 and 2002, respectively. Commission
income from NY Marine&nbsp;&#38; General represented 50%, 4% and
0% of such revenues for the years ended December&nbsp;31, 2004,
2003 and 2002, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Reinsurance Premiums.</I> We reinsure a portion of the excess
coverage obtained by the self-insured groups that we manage.
NY&nbsp;Marine&nbsp;&#38; General provides the excess coverage
for 13 of our 14&nbsp;groups. Under our reinsurance agreement
with NY&nbsp;Marine&nbsp;&#38; General, we reinsure 50% of the
risks it undertakes and receive 50% of the premiums, which we
refer to as our assumed premium, paid to it by these groups. We
allow NY&nbsp;Marine&nbsp;&#38; General a ceding commission of
28% of our assumed premium to cover its acquisition, general and
administrative expenses, a further 2% for stop-loss coverage and
1% to cover the U.S.&nbsp;federal excise tax, or a total of 31%
of our assumed premium. The stop loss coverage limits our losses
under our reinsurance agreement to 181.16% of our assumed
premium, net of the ceding commission and the cost of the
stop-loss coverage and the U.S. federal excise tax. Our net
reinsurance premiums are comprised of our assumed premium, net
of the 2% fee for the stop-loss coverage. The ceding commission
of 28% of our assumed premium and the 1% cost to cover the U.S.
federal excise tax are recorded as part of policy acquisition
costs. NY&nbsp;Marine&nbsp;&#38; General in turn pays a 20%
commission to CRM and CRM&nbsp;CA for any excess coverage placed
with NY&nbsp;Marine&nbsp;&#38; General by CRM or CRM CA.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Investment Income Relating to Our Reinsurance Business.</I>
To date, our entire investment portfolio is comprised of
short-term U.S.&nbsp;treasury bills, cash and money market
equivalents. We anticipate that after the closing of this
offering our investment portfolio will be invested principally
in fixed income securities, short-term liquid funds, cash and
cash equivalents. Our investment income relating to our
reinsurance business will depend on the average invested assets
in our investment portfolio and the yield that we earn on those
invested assets. Our investment yield depends on market interest
rates and the credit quality and maturity period of our invested
assets. In addition, we expect to realize capital gains or
losses on sales of investments as a result of changing market
conditions, including changes in market interest rates and
changes in the credit quality of our invested assets. See
&#147;Risk Factors&nbsp;&#151; Risks Related to Our
Business&nbsp;&#151; A significant amount of our invested assets
will be subject to changes in interest rates and market
volatility.&#148;
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Expenses</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Fee-based Management Services.</I> The expenses of our
fee-based management services segment primarily consist of fees
paid to general agents and brokers for placing business with the
self-insured groups that we manage, and selling, general and
administrative expenses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Reinsurance.</I> The expenses of our reinsurance segment
primarily consist of loss and loss adjustment expenses, policy
acquisition costs and professional fees.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Losses and Loss Adjustment Expenses. </I>Losses and loss
adjustment expenses reflect our best estimate of ultimate losses
and loss adjustment expenses that we expect to incur on each
reinsurance contract written using various actuarial analyses.
Consistent with Bermuda statutory requirements, we do not
discount our estimates to present value. Actual losses and loss
adjustment expenses will depend on actual costs to settle
reinsurance claims. Our ability to accurately estimate ultimate
losses and loss adjustment expenses at the time of pricing each
reinsurance contract will be a critical factor in determining
our profitability. See &#147;Risk Factors&nbsp;&#151; Risks
Related to Our Business&nbsp;&#151; we may underestimate the
liabilities from the risks we assume as a reinsurer of a portion
of the excess coverage of our managed groups.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Fees Paid to General Agents and Brokers.</I> Fees paid to
general agents and brokers consist primarily of commissions paid
to general agents and brokers for introducing members to the
self insured groups we manage.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Policy Acquisition Costs.</I> Policy acquisition costs
consist principally of ceding commissions paid to NY
Marine&nbsp;&#38; General and the U.S.&nbsp;federal excise tax.
These costs are based on a fixed percentage of the premiums
written on reinsurance contracts.
</DIV>

<P align="center" style="font-size: 10pt;">38

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Selling, General and Administrative Expenses.</I> Selling,
general and administrative expenses consist primarily of
personnel expenses, professional fees and other operating costs.
We anticipate that in the future, selling, general and
administrative expenses will increase in relation to our growth.
In addition, we believe that additional regulatory and
compliance costs will increase significantly once we become a
publicly traded company. All non-direct operating expenses are
included in our fee-based management services segment because
our reinsurance segment to date has been small relative to our
fee-based management services segment and our reinsurance
segment has no direct employees. In the future, we intend to
develop a methodology to allocate non-direct items of expenses
between our segments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Income Taxes.</I> Prior to the consummation of the
restructuring, CRM, CRM&nbsp;CA and Eimar have been organized as
limited liability companies. The members of a limited liability
company are taxed on their proportionate share of the limited
liability company&#146;s taxable income. Therefore, no provision
or liability for federal and state income taxes has been
included in the financial statements. Upon the consummation of
the restructuring, CRM, CRM&nbsp;CA and Eimar will be converted
into corporations and will be subject to U.S.&nbsp;federal and
state income taxes, which will reduce our net income.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
CRM Holdings and Twin Bridges have each received an undertaking
from the Bermuda government exempting each company from all tax
computed on profits or income, or computed on any capital asset,
gain or appreciation, or any tax in the nature of estate duty or
inheritance tax until March&nbsp;28, 2016. See &#147;Material
Tax Considerations&nbsp;&#151; Certain Bermuda Tax
Considerations.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Business Trends and Conditions</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The workers&#146; compensation insurance market has historically
fluctuated with periods of low premium rates and excess
underwriting capacity resulting from increased competition,
followed by periods of high premium rates and shortages of
underwriting capacity resulting from decreased competition.
These conditions, along with poor customer service and
substandard loss control and claims management, have motivated
businesses to self-insure against workers&#146; compensation
claims. Large companies generally have the financial strength to
meet the significant statutory requirements to self-insure, or
to create their own captive insurance companies to insure these
claims. Small and mid-sized companies generally lack the
financial and administrative resources to do this, and in recent
years have resorted to pooling their resources through the
formation of self insurance groups as a means to obtain
workers&#146; compensation insurance at acceptable rates and
terms. CRM was formed in response to this relatively new market
to manage self-insured groups.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
California has undergone a period of rapid growth in the
formation of new self-insured groups. From 1999 until 2005,
average workers&#146; compensation rates increased by nearly 50%
after taking into account significant average rate decreases
during the last two years. As a result of this overall increase,
26 private self-insured groups have been formed in California
since 2001 when California authorized the formation of private
self-insured groups. California Bill&nbsp;899 was passed in
April 2004 with the goal of reducing over time the medical and
indemnity benefits paid to injured workers. This legislation has
allowed insurers to reduce rates. Even though average rates in
California have decreased significantly during the last two
years, California workers&#146; compensation insurance rates
remain substantially higher than those charged for similar risks
in New York.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In contrast to the California market, self-insured groups have
existed in New York since the mid-1990s and the market is
substantially more mature, with approximately 64 groups in
existence. New York is in the process of reevaluating its
regulations relating to the formation of new groups. This has
led to a temporary moratorium on the formation of new groups.
This moratorium should not affect our ability to grow in New
York as we believe we have formed groups in all desired industry
classes that we have targeted. We believe growth in our New York
business will occur as a result of rate increases and, to a
lesser extent, increases in the number of members of our
existing groups. Following three years of relatively stable
rates, the New York Workers&#146; Compensation Board passed a
rate increase in August 2005 averaging five percent across all
industry groups. This increase will become effective in October
2005, and manual rates across the industries in which we have
formed self-insured groups will increase by approximately eight
percent on average.
</DIV>

<P align="center" style="font-size: 10pt;">39

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Critical Accounting Policies and Estimates</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our significant accounting policies are described in the notes
to our audited combined financial statements included elsewhere
in this prospectus.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our combined financial statements contain certain amounts that
are inherently subjective in nature and require management to
make certain judgments and assumptions in the application of
accounting policies used to determine those amounts reported in
the combined financial statements. The use of different
assumptions could produce materially different estimates of the
reported amounts. In addition, if factors such as those
described in &#147;Risk Factors&#148; cause actual events to
differ materially from management&#146;s assumptions used in
applying the relevant accounting policy, there could be a
material adverse effect on our financial condition and results
of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We believe that the following are the critical accounting
policies used in the preparation of our combined financial
statements.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Combination Accounting</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our historical combined financial information and statements
include the accounts of CRM, CRM&nbsp;CA, Eimar and Twin
Bridges. These entities, in substance, have common ownership and
common management. These combined financial statements have been
prepared in conformity with U.S.&nbsp;generally accepted
accounting principles. For Twin Bridges, this presentation
differs from the basis of accounting followed in reporting to
insurance regulatory authorities. All significant intercompany
transactions and balances have been eliminated in the combined
financial statements.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Revenue Recognition</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Fee-based Management Services.</I> Our fee-based management
services revenues include management fees received from our
groups for management and other services. In New York, the fees
we receive from all but one of our groups are based on a
percentage of the aggregate manual workers&#146; compensation
rates set by the New York State Workers&#146; Compensation Board
that are attributable to the members of the groups we manage.
With respect to our groups in California and one of our groups
in New York, our fees are based upon a percentage of the
premiums paid to the groups we manage by their members. The
portion of our fees that is equal to the related fees we pay to
general agents and brokers is recorded as revenue when payable
by the groups, which is the same time that fees paid to general
agents and brokers are recorded. The balance of our management
fees is earned ratably over the period to which such fees apply.
The portion of the balance of management fees that relate to the
remaining period at the balance sheet date is recorded as
unearned management fee revenues. Revenue from medical bill
review and case management services also is included in fee
based management services revenues, and is recorded as revenue
as the services are rendered.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We audit our groups on an annual basis to determine whether the
groups&#146; premiums have been properly calculated. Any
adjustments to these premiums resulting from these audits are
recorded as revenues (or as a reduction of revenues) in the
period in which the audits occur.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We also receive commission income for excess coverage and surety
bonds we place for these groups. Such commission income is
earned ratably over the terms of the underlying excess coverage
and surety bonds. The portion of commission income that relates
to the remaining term of the underlying excess coverage or
surety bond at the balance sheet date is recorded as unearned
commission income revenues.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Reinsurance Revenue.</I> Pursuant to SFAS No.&nbsp;113,
Accounting and Reporting for Reinsurance of Short Duration and
Long-Duration Contracts, we have evaluated our reinsurance
agreement with NY&nbsp;Marine&nbsp;&#38; General and have
determined that the reinsurance agreement is a short duration
prospective contract. Accordingly, reinsurance premiums are
earned ratably over the term of the excess coverage that we have
reinsured through our agreement with NY&nbsp;Marine&nbsp;&#38;
General. The portion of the reinsurance premiums that relate to
the remaining term of the underlying excess coverage policy that
we have reinsured at the balance sheet date is recorded as
unearned reinsurance premiums. These reinsurance premiums are
subject to adjustment based upon modification to the premiums
charged on the underlying workers&#146; compensation
</DIV>

<P align="center" style="font-size: 10pt;">40

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<DIV align="left" style="font-size: 10pt;">
coverage. Any adjustments which can be reasonably estimated are
included in income in the period to which they apply. If such
adjustments cannot be reasonably estimated, they are included in
the period in which the adjustment is made. Our net reinsurance
premiums are our assumed premium, net of the 2% fee we pay for
stop-loss coverage.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Policy Acquisition Costs</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Policy acquisition costs are comprised of ceding commissions and
U.S.&nbsp;federal excise tax costs incurred pursuant to our
reinsurance agreement with NY&nbsp;Marine&nbsp;&#38; General.
These costs are deferred and amortized as the related
reinsurance premiums are earned or recorded. We consider
estimated investment income in determining the recoverability of
these costs.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Reserve for Losses and Loss Adjustment Expenses</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The reserve for losses and loss adjustment expenses represents
an estimate of the ultimate cost of all reported and unreported
losses and loss adjustment expenses insured pursuant to
reinsurance agreements associated with reported claims and
claims incurred but not reported which are unpaid at the balance
sheet date. The liability is estimated using actuarial studies
of individual case-basis validations, statistical analyses and
industry data. We believe that our aggregate liability for
losses and loss adjustment expenses at year-end represent our
best estimate, based upon available data, of the amounts
necessary to settle the ultimate cost of expected losses and
loss adjustment expenses. Twin Bridges has only been in
existence since December 2003, has had limited loss experience
and a relatively small population of underlying risks, and
therefore is exposed to an increased likelihood that actual
results may not conform to our estimates. These estimates are
also subject to the effects of trends in loss severity and
frequency risks, fluctuations in inflation, prevailing economic,
social and judicial trends, legislative changes and internal and
third party claims handling procedures. There also may be a
significant delay between the occurrence of the insured event
and the time it is actually reported to us. Accordingly, the
ultimate settlement of losses and related loss adjustment
expenses may vary significantly from the estimates included in
our financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Since we have very limited loss development experience, the
independent external actuarial specialists that estimate our
loss reserves and loss adjustment expenses combine several
methods to calculate reserves for unpaid reported losses as well
as losses incurred-but-not-reported, or IBNR, reserves. The
actuarial methods employed include (i)&nbsp;the paid and
incurred loss development method, (ii)&nbsp;the loss ratio
method, and (iii)&nbsp;the Bornhuetter-Ferguson method. The
Bornhuetter-Ferguson method is a generally accepted actuarial
technique that produces expected loss ratios that are implied by
actual loss experience and developments. The combination of
these three methods has led to a range of estimated total
reserves. We believe that the assumptions by the independent
external actuarial specialists represent a realistic and
appropriate basis for currently estimating our reserves for
losses and loss adjustment expenses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Reserve estimates and reserving methodologies are reviewed
regularly, taking into account all currently known information
and updated assumptions related to unknown information. Reserves
for losses and loss adjustment expenses established in prior
periods are adjusted as claim experience develops and new
information becomes available. Any such adjustments are included
in income in the period in which they are made. Any adjustments
to previously established reserves may significantly impact
current period net income by reducing net income if previous
period reserve estimates prove to be inadequate and are required
to be increased or increasing net income if prior period
reserves become overstated and are required to be reduced. We
also review the estimate of losses and loss adjustment expenses
provided to us by NY Marine&nbsp;&#38; General.
</DIV>

<P align="center" style="font-size: 10pt;">41

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The table below shows the reconciliation of reserves for the six
months ended June&nbsp;30, 2005 and the years ended
December&nbsp;31, 2004 and 2003, reflecting changes in losses
incurred and paid losses for such periods.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="62%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>June&nbsp;30,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>(Dollar amounts in</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance at January&nbsp;1</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,696</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>168</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Incurred related to:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current period end</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,305</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,528</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>168</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prior period end</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total incurred</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,305</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,528</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>168</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Paid related to:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current period end</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prior period end</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total paid</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net increase</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,305</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,528</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>168</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance at period end</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,001</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,696</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>168</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our claims reserving practices are intended to establish
reserves that in the aggregate are adequate to pay all losses
and loss adjustment expenses at their ultimate settlement value.
Thus, our reserves are not discounted for inflation or other
factors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Through June&nbsp;30, 2005, there have been no changes in
subsequent years from prior years&#146; loss estimates. As
actual history develops, there may be adjustments to these
estimates in the future. At December&nbsp;31, 2004, there are no
outstanding case loss reserves. The entire amount of reserves
for losses and loss adjustment expenses is comprised of IBNR and
development.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
While we believe that we will be able to make a reasonable
estimate of our ultimate losses and loss adjustment expenses, we
may not be able to predict our ultimate claims experience as
reliably as other companies that have had reinsurance operations
for a substantial period of time, and we cannot assure you that
our actual losses and loss adjustment expenses will not exceed
our total reserves.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Loans receivable</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A significant portion of our loans receivable comprise amounts
due from a general agent and its principals which were advanced
as a working capital loan in connection with a self-insured
group managed by CRM. CRM is currently engaged in litigation
with this agent as described in &#147;Business&nbsp;&#151; Legal
Proceedings.&#148; The general agent and its principals failed
to make timely installment payments due under the working
capital loan commencing March&nbsp;15, 2005, and CRM has
declared the loan in default and immediately due and payable in
full and brought an action against the borrowers for collection.
Although we believe that the loan receivable balance will be
collectible, and accordingly, we have not established any
reserves with respect to the loan receivable, we cannot predict
the outcome of the litigation. If the loan receivable balance is
not collected, the write-off of this receivable could have a
material adverse impact on our results of operations, and will
be recorded when determinable.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Investments</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Currently, our investment portfolio is comprised of short-term
U.S.&nbsp;Treasury bills, cash and money market equivalents.
Upon the closing of this offering, our board of directors will
establish our investment policies and management will implement
our investment strategy with the assistance of independent
investment managers. We expect that as our investment portfolio
changes from money market funds to other
</DIV>

<P align="center" style="font-size: 10pt;">42

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
investments, such as publicly traded and non-publicly traded
fixed maturity, short-term investments and equity securities, we
will classify such securities as &#147;available-for-sale&#148;
and, accordingly, they will be recorded at estimated fair value
and the difference between cost or amortized cost and fair
value, net of the effect of taxes, will be included as a
separate component of accumulated other comprehensive income in
the combined balance sheet.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Stock-based compensation</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the event we adopt stock-based compensation plans, we intend
to account for stock-based compensation in accordance with the
revised statement SFAS&nbsp;No.&nbsp;123-R, an amendment to
SFAS&nbsp;No.&nbsp;123, &#147;Accounting for Stock-Based
Compensation,&#148; which requires that the cost of share-based
payment transactions be recognized in the financial statements.
Accordingly, our net income will be reduced by the stock
compensation expense required to be recognized by
SFAS&nbsp;No.&nbsp;123-R.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Combined Results of Operations</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following is a discussion of our combined results of
operations for the six months ended June&nbsp;30, 2005 and 2004
and for the three years ended December&nbsp;31, 2004.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Six Months Ended June&nbsp;30, 2005 Compared to Six Months
    Ended June&nbsp;30, 2004</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Total Revenues.</I> Total revenues increased 22%, or
$3,528,775, to $19,593,052 for the six months ended
June&nbsp;30, 2005 from $16,064,277 for the comparable period in
2004. Of this increase, 74% was attributable to growth in our
fee-based management services segment, particularly in
California, and 26% of this increase was attributable to the
increase in our reinsurance segment. Of the revenues from our
fee-based management services segment for the six months ended
June&nbsp;30, 2005, 79% and 21% were attributable to revenues
from our groups in New York and in California, respectively,
compared to 96% and 4%, respectively, of these revenues for the
six months ended June&nbsp;30, 2004. Of the revenues from our
reinsurance segment for the six months ended June&nbsp;30, 2005,
82% and 18% were attributable to our groups in New York and in
California, respectively, compared to 93% and 7%, respectively,
of these revenues for the six months ended June&nbsp;30, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Revenues from Fee-based Management Services.</I> Revenues
from fee-based management services for the six months ended
June&nbsp;30, 2005 increased 18%, or $2,574,261, to $16,494,443
from $13,920,182 for the comparable period in 2004. Of this
increase, 72% was attributable to the growth in our self-insured
groups covering the contracting industry. All of this growth in
revenues is attributable to our groups in California as our
relatively new market presence gained momentum. Revenues from
fee-based management services attributable to our groups in New
York decreased by 2% to $13,022,910 for the six months ended
June&nbsp;30, 2005 from $13,306,468 for the comparable period in
2004. This decrease is primarily due to lower fees received from
the Healthcare Industry Trust of New York, or HITNY, as a result
of modification to our agreement with HITNY. The increase to New
York manual premium rates passed by the New York Workers&#146;
Compensation Board in August 2005 are effective for new and
renewal business after October&nbsp;1, 2005 and should
positively impact management fee revenue that we receive from
most of the New York groups we manage. Over the next year, we
expect moderate growth in New York and relatively more rapid
growth in California. The table below provides information about
our revenues from our fee-based management services segment
attributable to the groups we manage in New York and California:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="45%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B>Six Months Ended June&nbsp;30,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>NY</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>CA</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>NY</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>CA</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total revenues from fee-based management services</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>13,022,910</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,471,533</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>13,306,468</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>613,714</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Revenues from Reinsurance.</I> Net reinsurance premiums
increased 43%, or $922,221, to $3,045,146 for the
six&nbsp;months ended June&nbsp;30, 2005 from $2,122,925 for the
comparable period in 2004. This increase was attributable to the
increase in the number of the self-insured groups that we manage
for which Twin Bridges
</DIV>

<P align="center" style="font-size: 10pt;">43

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
reinsures a portion of the excess coverage these groups obtain.
During the first half of 2005, Twin Bridges reinsured a portion
of the excess coverage obtained by 12 of the 13&nbsp;groups that
we managed at that time. During the first half of 2004, Twin
Bridges reinsured a portion of the excess coverage obtained by
only 7 of the 11&nbsp;groups we then managed. As reinsurance
policies were renewed during the second half of 2004 and into
2005, groups that we managed which previously had obtained
excess coverage from other insurers began to obtain their excess
coverage from NY Marine&nbsp;&#38; General. In turn,
NY&nbsp;Marine&nbsp;&#38; General ceded a portion of these
coverages to Twin Bridges. Management expects that as we form
new groups in California, these groups will obtain excess
coverage from NY&nbsp;Marine&nbsp;&#38; General and
NY&nbsp;Marine&nbsp;&#38; General will cede a portion of this
coverage to Twin Bridges, however, we can provide no assurance
that the groups we manage will continue to obtain excess
coverage from NY&nbsp;Marine&nbsp;&#38; General or that Twin
Bridges will continue to have the opportunity to reinsure a
portion of this coverage. Geographically, 42% of the growth in
net reinsurance premiums in the first half of 2005 was
attributable to the groups we manage in California. Over the
next year, we expect rapid growth in our reinsurance business in
California. The table below provides information about our
revenues from our reinsurance segment attributable to the groups
we manage in New York and California:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="49%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B>Six Months Ended June&nbsp;30,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>NY</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>CA</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>NY</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>CA</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total net reinsurance premiums</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,507,371</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>537,775</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,975,925</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>147,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Investment Income, net of Advisory Fees.</I> Investment
income, net of advisory fees, for the six months ended
June&nbsp;30, 2005 increased to $53,463 from $21,170 for the
comparable period in 2004. This increase was due to an increased
level of investments held by our reinsurance segment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Total Expenses.</I> Total expenses increased 27%, or
$3,526,892, to $16,745,758 for the six months ended
June&nbsp;30, 2005 from $13,218,866 for the comparable period in
2004. Of the total expenses for the six months ended
June&nbsp;30, 2005, $14,401,787, or 86%, was attributable to our
fee-based management services segment, and $2,343,971, or 14%,
was attributable to our reinsurance segment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Losses and loss adjustment expenses.</I> Losses and loss
adjustment expenses increased 12%, or $139,458, to $1,305,062
for the six months ended June&nbsp;30, 2005 from $1,165,604 for
the comparable period in 2004. This increase was much less than
the 43% increase in net reinsurance premiums during the same
period because of the refinement of estimated loss reserves.
During the start up phase of Twin Bridges in 2004, we estimated
ultimate losses and loss adjustment expenses to be 55% of net
reinsurance premiums. For the six months ended June&nbsp;30,
2005, we estimated losses and loss adjustment expenses to be 42%
of net reinsurance premiums. These loss reserve estimates are
reviewed regularly and are adjusted as experience develops or
new information becomes known; such adjustments are included in
income in the period in which they are made.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Fees paid to general agents and brokers.</I> Fees paid to
general agents and brokers increased 10%, or $501,875, to
$5,627,711 for the six months ended June&nbsp;30, 2005 from
$5,125,836 for the comparable period in 2004. The entire
increase is attributable to the growth of our California groups.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Policy Acquisition Costs.</I> Policy acquisition costs
increased 43%, or $272,717, to $900,496 for the six months ended
June&nbsp;30, 2005 from $627,779 for the comparable period in
2004. These costs are a fixed percentage (approximately 29%) of
our assumed reinsurance premiums and grew in proportion to the
43% increase in net reinsurance premiums discussed above.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Selling, general and administrative expenses.</I> Selling,
general and administrative expenses increased 42%, or
$2,609,062, to $8,883,709 for the six&nbsp;months ended
June&nbsp;30, 2005 from $6,274,647 for the comparable period in
2004. Approximately $1,190,000, or 46%, of this increase is
attributable to increased payrolls and related employee expenses
for our fee-based management services segment. The total number
of employees in our fee-based management services segment
increased from 117 at June&nbsp;30, 2004 to 133 at
January&nbsp;1, 2005 and to 146 at June&nbsp;30, 2005. During
this period, we added 13 employees in New York for CRM, 11
employees in California for CRM CA and 5&nbsp;employees in New
York for Eimar. We will need to add additional employees to
complete our anticipated staffing needs to operate as a public
company, and as our fee-based
</DIV>

<P align="center" style="font-size: 10pt;">44

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<DIV align="left" style="font-size: 10pt;">
management services business continues to grow, we will need to
hire additional staff. Approximately $1,143,000, or 47%, of the
increase in selling, general and administrative expenses for the
six months ended June&nbsp;30, 2005 is attributable to increases
in other components of selling, general and administrative
expenses, including professional fees, advertising and marketing
expenses, claims review expenses and occupancy costs. These
expenses rose significantly as we expanded in California. All
non-direct operating expenses are included in our fee-based
management services segment because our reinsurance segment to
date has been small relative to our fee-based management
services segment and our reinsurance segment has no direct
employees. Direct selling, general and administrative expenses
of our reinsurance segment amounted to $138,413 for the six
months ended 2005 compared with $83,354 for the six months ended
2004. We contract with Quest Management Services Limited, an
independent management firm based in Bermuda, to perform general
and administrative functions for Twin Bridges.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Net Income.</I> Net income increased less than 1%, or $1,883,
to $2,847,294 for the six months ended June&nbsp;30, 2005 from
$2,845,411 for the comparable period in 2004. The increase in
our total revenues was offset to a significant extent by the
increase in selling, general and administrative expenses
described above. Net income as a percentage of revenues was 15%
for the six months ended June&nbsp;30, 2005 compared to 18% for
the comparable period in 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Net Income from Fee-based Management Services.</I> Net income
from our fee-based management services segment for the six
months ended June&nbsp;30, 2005 decreased 19%, or $489,045, to
$2,106,046, or 13% of our fee-based management services revenues
for that period, from $2,595,091, or 19% of our fee-based
management services revenues, for the comparable period in 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Net Income from Reinsurance.</I> Net income from our
reinsurance segment for the six months ended June&nbsp;30, 2005
increased 196%, or $490,908, to $741,248, or 24% of our net
reinsurance premiums for that period, from $250,320, or 12% of
our net insurance premiums, for the comparable period in 2004.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Year Ended December&nbsp;31, 2004 Compared to Year Ended
    December&nbsp;31, 2003</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Total Revenues.</I> Total revenues increased 56%, or
$11,730,002, to $32,820,086 for the year ended December&nbsp;31,
2004 from $21,090,084 for the year ended December&nbsp;31, 2003.
Of this increase, 58% was attributable to growth in our
fee-based management services segment, particularly in
California, and 42% of this increase was attributable to the
increase in our reinsurance segment. Of the revenues from our
fee-based management services segment for the year ended
December&nbsp;31, 2004, 93% and 7% were attributable to revenues
in New York and in California, respectively, compared to nearly
100% and less than 1%, respectively, of these revenues for the
year ended December&nbsp;31, 2003. Of the revenues from our
reinsurance segment for the year ended December&nbsp;31, 2004,
87% and 13% were attributable to our groups in New York and in
California, respectively, compared to 100% and 0%, respectively,
of these revenues for the year ended December&nbsp;31, 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Revenues from Fee-based Management Services.</I> Revenues
from fee-based management services for the year ended
December&nbsp;31, 2004 increased 33%, or $6,834,598, to
$27,655,726 from $20,821,128 for the year ended
December&nbsp;31, 2003. Approximately 64% of this growth was
attributable to our self-insured groups in the following
industries: healthcare, contracting, transportation and auto
dealerships. Geographically, revenues from groups in New York
grew 24%, or $4,914,988, to $25,662,420 for the year ended
December&nbsp;31, 2004 from $20,747,432 for the year ended
December&nbsp;31, 2003, while revenues from groups in California
grew by $1,919,611 to $1,993,307 for the year ended
December&nbsp;31, 2004 from $73,696 for the year ended
December&nbsp;31, 2003 primarily because we formed three new
groups in California. California commenced operations in October
2003 and recorded only minimal revenues for that year.
</DIV>

<P align="center" style="font-size: 10pt;">45

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The table below provides information about our revenues from
fee-based management services to each of the groups we manage in
New York and California:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="46%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B>Years Ended December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>2003</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>NY</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>CA</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>NY</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>CA</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total revenues from fee-based management services</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>25,662,420</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,993,307</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>20,747,432</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>73,696</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Revenues from Reinsurance.</I> Our reinsurance segment
commenced operations in December 2003 and we had recorded
minimal revenue for that year. Net reinsurance premiums
increased to $5,109,883 for the year ended December&nbsp;31,
2004 from $253,167 for the year ended December&nbsp;31, 2003. As
reinsurance policies were renewed during December 2003 and into
2004, five of the New York groups that we manage which
previously had obtained excess coverage from other insurers
began to obtain their excess coverage from
NY&nbsp;Marine&nbsp;&#38; General. We also formed two groups in
California which purchased their excess coverage from
NY&nbsp;Marine&nbsp;&#38; General. In turn, Twin Bridges
reinsured a 50% portion of these excess coverages. The table
below provides information about our net reinsurance premiums
attributable to the groups we manage in New York and California:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="57%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B>Years Ended December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>2003</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>NY</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>CA</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>NY</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>CA</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total net reinsurance premiums</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,458,183</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>651,700</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>253,167</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Investment Income, net of Advisory Fees.</I> Investment
income, net of advisory fees, increased to $54,477 for the year
ended December&nbsp;31, 2004 from $15,789 for the year ended
December&nbsp;31, 2003 as a result of an increased level of
investments held by our reinsurance segment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Total Expenses.</I> Total expenses increased 56%, or
$9,655,238, to $27,014,256 for the year ended December&nbsp;31,
2004 from $17,359,018 for the year ended December&nbsp;31, 2003.
Of the total expenses for the year ended December&nbsp;31, 2004,
84%, or $22,768,870, was attributable to our fee-based
management services segment and 16%, or $4,245,386, was
attributable to our reinsurance segment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Losses and loss adjustment expenses.</I> Losses and loss
adjustment expenses increased to $2,528,083 for the year ended
December&nbsp;31, 2004 from $167,917 for the comparable period
in 2003 and grew as our reinsurance segment grew. Management
estimated losses and loss adjustment expenses for the year ended
December&nbsp;31, 2004 to be 49% of net reinsurance premiums.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Fees paid to general agents and brokers.</I> Fees paid to
general agents and brokers increased 21%, or $1,677,861, to
$9,507,546 for the year ended December&nbsp;31, 2004 from
$7,829,685 for the year ended December&nbsp;31, 2003. The
increase was attributable to our managed groups in New York and
was consistent with the 24% increase in fee-based management
services revenues from these groups.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Policy Acquisition Costs.</I> Policy acquisition costs
increased to $1,511,065 for the year ended December&nbsp;31,
2004 from $74,865 for the comparable period in 2003. These costs
are a fixed percentage (approximately 29%) of our assumed
reinsurance premiums and grew in proportion to the increase in
net reinsurance premiums discussed above.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Selling, general and administrative expenses.</I> Selling,
general and administrative expenses increased 45%, or
$4,200,247, to $13,440,809 for the year ended December&nbsp;31,
2004 from $9,240,562 for the year ended December&nbsp;31, 2003.
Approximately $2,266,131, or 54%, of this increase was
attributable to increased payrolls and related employee expenses
for our fee-based management services segment. The total number
of employees in our fee-based management services segment
increased from 80 at January&nbsp;1, 2003 to 110 at
January&nbsp;1, 2004 and to 133 at December&nbsp;31, 2004.
During 2004, we added 9&nbsp;employees in New York for CRM,
4&nbsp;employees in California for CRM CA and 10&nbsp;employees
in New York for Eimar. Approximately $1,934,116, or 46%, of the
increase in selling, general and administrative expenses for the
year ended
</DIV>

<P align="center" style="font-size: 10pt;">46

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<DIV align="left" style="font-size: 10pt;">
December&nbsp;31, 2004 is attributable to increases in other
components of selling, general and administrative expenses,
predominately advertising, marketing, claims review expenses and
occupancy costs. During 2004 we began implementing a new
marketing campaign. Also, claims review expenses relating to our
medical bill review and case management services grew
significantly as the corresponding fee-based revenues from these
services grew. Occupancy costs grew as we opened offices in
California and leased additional space in New York. All
non-direct operating expenses are included in our fee-based
management services segment because our reinsurance segment to
date has been small relative to our fee-based services segment
and our reinsurance segment has no direct employees. Direct
selling, general and administrative expenses of our reinsurance
segment amounted to $206,238 for the year ended
December&nbsp;31, 2004 compared with $61,749 for the year ended
December&nbsp;31, 2003. We contract with Quest Management
Services Limited, an independent management firm based in
Bermuda, to perform general and administrative functions for
Twin Bridges.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Net Income.</I> Net income increased 56%, or $2,074,764, to
$5,805,830 for the year ended December&nbsp;31, 2004 from
$3,731,066 in the year ended December&nbsp;31, 2003. Net income
was 18% of total revenues in both periods.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Net Income from Fee-based Management Services.</I> Net income
from our fee-based management services segment for the year
ended December&nbsp;31, 2004 increased 30%, or $1,137,321, to
$4,919,663, or 18% of our fee-based management services revenues
for that year, from $3,782,342, or 18% of our fee-based
management services revenues, for the year ended
December&nbsp;31, 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Net Income from Reinsurance.</I> Net income from our
reinsurance segment for the year ended December&nbsp;31, 2004
increased to $886,167, or 17% of our net reinsurance premiums
for that year, from a net loss of $51,276, or (20%) of our net
reinsurance premiums, for the year ended December&nbsp;31, 2003.
Our reinsurance business commenced in December 2003.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Year Ended December&nbsp;31, 2003 Compared to Year Ended
    December&nbsp;31, 2002</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Total Revenues.</I> Total revenues increased 19%, or
$3,438,760, to $21,090,084 for the year ended December&nbsp;31,
2003, from $17,651,324 for the year ended December&nbsp;31,
2002. All of our revenues were attributable to our fee-based
management services segment since our reinsurance segment did
not commence operations until December 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Revenues from Fee-based Management Services.</I> Revenues
from fee-based management services increased 18%, or $3,206,803,
to $20,821,128 for the year ended December&nbsp;31, 2003, from
$17,614,325 for the year ended December&nbsp;31, 2002.
Approximately 88% of this growth was attributable to the growth
in fees from three of our self-insured groups covering the
following industries: healthcare, transportation and
wholesale&nbsp;&#38; retail. Geographically, nearly all of our
revenues were attributable to our managed groups in New York
since our California fee-based management services business
commenced operations in October 2003. In 2003, we formed one
self-insured group in California which generated revenues from
fee-based management services in the amount of $73,696.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Revenues from Reinsurance.</I> Net reinsurance premiums were
only $253,167 for the year ended December&nbsp;31, 2003. Our
reinsurance segment commenced operations in December 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Investment Income, net of Advisory Fees.</I> Investment
income, net of advisory fees, for the year ended
December&nbsp;31, 2003 decreased to $15,789 from $36,999 for the
comparable period in 2002, resulting largely from a decline in
overall market interest rates during those periods.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Total Expenses.</I> Total expenses increased 23%, or
$3,203,943, to $17,359,018 for the year ended December&nbsp;31,
2003 from $14,155,075 for the comparable period in 2002. All of
our expenses were attributable to our fee-based management
services segment since our reinsurance segment did not commence
operations until December 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Losses and loss adjustment expense.</I> Losses and loss
adjustment expenses for the year ended December&nbsp;31, 2003
were $167,917. There were no such costs in the prior year
because our reinsurance segment did not commence operations
until December 2003.
</DIV>

<P align="center" style="font-size: 10pt;">47

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Fees paid to general agents and brokers.</I> These expenses
increased 2%, or $179,056, to $7,829,685 for the year ended
December&nbsp;31, 2003 from $7,650,629 for the year ended
December&nbsp;31, 2002. Geographically, all of our fees paid to
general agents and brokers were attributable to our fee-based
management services business in New York. No fees were paid to
general agents and brokers in California in 2003 or 2002.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Policy Acquisition Costs.</I> Policy acquisition costs were
$74,865 for the year ended December&nbsp;31, 2003. There were no
such costs in the prior year because our reinsurance segment did
not commence operations until December 2003. These costs are a
fixed percentage (approximately 29%) of our assumed reinsurance
premiums and grew in proportion to the increase in net
reinsurance premiums discussed above.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Selling, general and administrative expenses.</I> Selling,
general and administrative expenses increased 43%, or
$2,769,289, to $9,240,562 for the year ended December&nbsp;31,
2003 from $6,471,273 for the year ended December&nbsp;31, 2002.
Approximately $1,037,871, or 37%, of this increase is
attributable to increased payrolls and related employee
expenses. The total number of employees in our fee-based
management services segment increased from 65 at January&nbsp;1,
2002 to 80 at January&nbsp;1, 2003 and to 110 at
December&nbsp;31, 2003. During 2003, we added 14&nbsp;employees
in New York for CRM, 3 employees in California for CRM CA and
13&nbsp;employees in New York for Eimar. Approximately
$1,328,060, or 48%, of the increase is attributable to increases
in other components of selling, general and administrative
expenses including professional fees, advertising and marketing
expenses and medical bill review expenses of Eimar, which
commenced operations in 2003. Non-payroll costs associated with
the services provided by Eimar, primarily software costs, added
approximately $818,327 to selling, general and administrative
expenses for the year ended December&nbsp;31, 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Net Income.</I> Net income increased 7%, or $234,817, to
$3,731,066 for the year ended December&nbsp;31, 2003 from
$3,496,249 for the year ended December&nbsp;31, 2002. Net income
was 18% of total revenues in the year ended December&nbsp;31,
2003 and 20% in the prior year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Net Income from Fee-based Management Services.</I> Net income
from our fee-based management services segment for the year
ended December&nbsp;31, 2003 increased 8%, or $286,093, to
$3,782,342, or 18% of our fee-based management services revenues
for that year, from $3,496,249, or 20% of our fee-based
management services revenues, for the year ended
December&nbsp;31, 2002.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Net Loss from Reinsurance.</I> Net loss from our reinsurance
business for the year ended December&nbsp;31, 2003 was $51,276.
Our reinsurance business commenced in December 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Liquidity and Capital Resources</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are organized as a Bermuda exempted holding company, and as
such, have no direct operations. Our assets consist of
investments in our subsidiaries through which we conduct
substantially all of our management and other services for the
self-insured groups that we manage and our reinsurance
operations. Upon the closing of this offering, we will have
subsidiary operations in Bermuda and the United States. Funds to
meet any obligations we may have will come primarily from
dividends, interest and other statutorily permissible payments
from our subsidiaries. The ability of our subsidiaries to make
these payments will be limited by the applicable laws and
regulations of the domiciles in which the subsidiaries operate.
In addition, we are subject to a U.S.&nbsp;federal withholding
tax of 30% on any dividends paid to us from our
U.S.&nbsp;subsidiaries. Accordingly, we do not expect to receive
dividends from our U.S.&nbsp;subsidiaries for the foreseeable
future. In addition, Bermuda law and regulations will restrict
the payment of dividends from retained earnings, or
distributions out of contributed surplus, by Twin Bridges unless
certain regulatory requirements are met. See &#147;Risk
Factors&nbsp;&#151; Our holding company structure and certain
regulatory, tax and other constraints affect our ability to pay
dividends, make other payments and redeploy capital among our
subsidiaries.&#148;
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Cash Flows</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Net cash provided by operating activities amounted to $3,885,879
for the six&nbsp;months ended June&nbsp;30, 2005, compared to
$3,738,798 for the same period in 2004. For the first six months
of 2005, major components of cash provided by operating
activities were net income of $2,847,294, and the increases in
reserves for losses
</DIV>

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<DIV align="left" style="font-size: 10pt;">
and loss adjustment expenses of $1,305,062 and accrued expenses
of $1,101,553 offset by the increase of $1,871,336 in restricted
cash and cash equivalents. Major components of cash provided by
operating activities in the first six&nbsp;months of 2004 were
net income of $2,845,411 and the increases in reserves for
losses and loss adjustment expenses of $1,165,604 and accrued
expenses of $627,765 offset by the increase of $1,318,282 in
restricted cash and cash equivalents.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Net cash provided by operating activities was $5,259,549 for the
year ended December&nbsp;31, 2004, $3,006,623 for the year ended
December&nbsp;31, 2003, and $5,632,897 for the year ended
December&nbsp;31, 2002. Major components of cash provided by
operating activities for the year ended December&nbsp;31, 2004
were net income of $5,805,830, the increase in unearned
reinsurance premiums of $1,995,116 and the increase in reserves
for losses and loss adjustment expenses of $2,528,083 offset by
the increase of $3,398,342 in restricted cash and cash
equivalents. Major components of cash provided by operating
activities for the year ended December&nbsp;31, 2003 were net
income of $3,731,066 and the increase in reserves for losses and
loss adjustment expenses of $167,917 offset by the increase of
$1,000,000 in restricted cash and cash equivalents. Major
components of cash provided by operating activities for the year
ended December&nbsp;31, 2002 were net income of $3,496,249 and
the increase in deferred management fees of $1,447,682 and
deferred commissions of $1,018,217.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Net cash used in investing activities amounted to $127,184 for
the six&nbsp;months ended June&nbsp;30, 2005 as compared to
$460,296 for the same period in 2004. For the first
six&nbsp;months of 2005, investing activities were primarily
capital expenditures. For the first six&nbsp;months of 2004,
capital expenditures totaled $130,966 and net advances of notes
receivable were $329,330.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Net cash used in investing activities was $569,177 for the year
ended December&nbsp;31, 2004, $275,109 for the year ended
December&nbsp;31, 2003 and $767,813 for the year ended
December&nbsp;31, 2002. In 2004, capital expenditures totaled
$310,238 and net advances of notes receivable totaled $258,939.
In 2003, capital expenditures totaled $175,442 and net advances
of notes receivable totaled $99,667. In 2002, capital
expenditures totaled $694,813 and net advances of notes
receivable totaled $73,000.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Net cash used in financing activities for the six months ended
June&nbsp;30, 2005 totaled $2,842,610 as compared to $1,911,430
for the six months ended June&nbsp;30, 2004. Major components of
cash used in financing activities for the first six&nbsp;months
of 2005 were proceeds from the bank line of credit of $1,000,000
offset by member distributions of $3,793,702. Major components
of cash used in financing activities for the first
six&nbsp;months of 2004 were proceeds from the bank line of
credit of $350,000 offset by member distributions of $2,060,191
and net payments of notes payable of $201,239.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Net cash used in financing activities was $3,880,590 for the
year ended December&nbsp;31, 2004, $6,608,892 for the year ended
December&nbsp;31, 2003, and $2,563,151 for the year ended
December&nbsp;31, 2002. Major components of cash used in
financing activities for the year ended December&nbsp;31, 2004
were member distributions of $3,753,866 and reductions of net
borrowings under credit facilities of $126,724. In 2003, Twin
Bridges was capitalized with proceeds of capital stock of
$120,000 and additional paid-in capital of $880,000. This
additional paid-in capital was offset by repayment of short term
borrowings of $704,482, member distributions of $6,789,106 and
borrowings under credit facilities of $115,304. Major components
of cash used in financing activities for the year ended
December&nbsp;31, 2002 were member distributions of $3,498,782
offset by net proceeds from borrowings under credit facilities
of $935,631.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Liquidity and Capital requirements</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our principal cash requirements are expected to be the expenses
to develop and implement our business strategy, as well as
capital expenditures, losses and loss adjustment expenses, fees
paid to general agents and brokers, the servicing of future
borrowing arrangements, taxes and other operating expenses. In
addition, we may be required to increase the amount of security
we provide to NY Marine&nbsp;&#38; Magic as we increase the
amount of excess coverage we reinsure. This security may be in
the form of letters of credit or a pledge of cash. The potential
for a large claim under one of our reinsurance contracts means
that we may need to make substantial and unpredictable payments
within relatively short periods of time. While our board of
directors currently does not intend to declare dividends or make
any other distributions to the shareholders of
</DIV>

<P align="center" style="font-size: 10pt;">49

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<DIV align="left" style="font-size: 10pt;">
CRM&nbsp;Holdings, our cash requirements will also include the
payment of any future dividends to our shareholders if and when,
our board of directors determines to change our dividend policy.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have an option to purchase a building, which is currently
under construction, with parking space and office space on
approximately three acres in Poughkeepsie, New York. The option
is exercisable 120&nbsp;days prior to the anticipated occupancy
of the building under our lease. The term of the lease will
commence March&nbsp;1, 2007 or such later date on which the
construction is substantially complete and the building is
available for occupancy. The option price is approximately
$3,500,000 plus all documented out-of-pocket construction costs
after May&nbsp;1, 2005. If we fail to exercise this initial
option, we have an additional option to purchase the building
during the first two years of our lease for the fair market
value of the property, which will not be less than $3,500,000
plus the costs incurred by the landlord in developing and
constructing the building. If we do exercise the option, we
intend to finance the acquisition of the property with proceeds
from a commercial mortgage.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Other than the possible exercise of the option to purchase the
property in Poughkeepsie, capital expenditures for the next
12&nbsp;months are expected to be approximately $400,000 for
furniture, equipment and technology systems.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Sources of cash</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We expect our future sources of funds will consist of fees and
commissions earned from our fee-based management services
business, premiums written in connection with our reinsurance
business, investment income and proceeds from sales and
redemptions of investment assets. CRM has entered into a
revolving credit facility with KeyBank National Association, or
KeyBank, under which CRM is entitled to borrow up to
$5&nbsp;million until December&nbsp;31, 2005. Borrowings under
the facility may be used for general business purposes,
including distributions to members. Loans under the facility are
due on demand, and any loan outstanding on December&nbsp;31,
2005, if not sooner demanded, shall be fully amortized in 12
equal monthly installments. Interest on the loans outstanding
under the facility is payable monthly at a rate per annum equal
to KeyBank&#146;s prime rate from time to time. All of
CRM&#146;s obligations under the facility are secured by a lien
on substantially all of CRM&#146;s assets and by the personal
guarantees of the existing shareholders. It is anticipated that
these guarantees will be released upon the closing of this
offering. The facility limits CRM&#146;s ability to purchase or
sell assets otherwise than in the ordinary course of business,
prohibits CRM from permitting any liens on its assets, subject
to customary exceptions, prohibits CRM from incurring debt for
borrowed money, including leases, except for trade debt incurred
in the normal course of business and indebtedness or leases for
term loans, leases, vehicles or equipment of up to $400,000,
limits mergers and consolidations of CRM and prohibits
investments and loans by CRM. The facility also requires CRM to
maintain a minimum level of members&#146; equity, which
requirement was waived at December&nbsp;31, 2004 and
June&nbsp;30, 2005. At June&nbsp;30, 2005, $1,000,000 was
outstanding under the facility, and the weighted average
interest rate for the six months ended June&nbsp;30, 2005 was
5.4%.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We believe that our cash from operations and, if needed,
borrowings under our credit facility will be sufficient to meet
our working capital and other operating requirements over the
next 12&nbsp;months.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Adequacy of Capital</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
While insurance regulations differ by location, each
jurisdiction requires that minimum levels of capital be
maintained in order to write new insurance business. Factors
that affect capital requirements generally include premium
volume, the extent and nature of loss and loss expense reserves,
the type and form of insurance and reinsurance business
underwritten and the availability of reinsurance protection on
terms that are acceptable to us.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The proceeds from this offering will be used to provide
additional capital and surplus to expand our operations,
including providing additional surplus to Twin Bridges.
</DIV>

<P align="center" style="font-size: 10pt;">50

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In Bermuda and the United States, insurers and reinsurers are
required to maintain certain minimum levels of capital and
risk-based capital, the calculation of which includes numerous
factors specified by the respective insurance regulatory
authorities and the related insurance regulations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We may need to raise additional funds to expand our business and
manage our growth. The amount and timing of these capital
requirements will depend on many factors. At this time, we are
not able to quantify the amount of additional capital we will
require in the future or predict the timing of our future
capital needs. If we cannot maintain or obtain adequate capital
to manage our business strategy and expected growth targets, our
business, results of operations and financial condition may be
adversely affected.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Posting of Security by Twin Bridges</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under Twin Bridges&#146; contract with NY Marine&nbsp;&#38;
General, Twin Bridges is required to post security, which may be
in the form of letters of credit issued by an acceptable bank,
in order to cover any unpaid liabilities under the contract.
Twin Bridges has entered into a loan agreement with KeyBank
under which Twin Bridges is entitled to draw letters of credit
in the principal amount of up to $3&nbsp;million, for which Twin
Bridges pays a fee of 1.50% of the principal amount of each
letter of credit drawn. Any payments under the letters of credit
must be repaid by Twin Bridges within 90&nbsp;days. The loan
agreement terminated on June&nbsp;30, 2005 but has been extended
until September&nbsp;30, 2005. The loan agreement contains
covenants similar to the covenants in CRM&#146;s revolving
credit facility with KeyBank described elsewhere in this
prospectus and borrowings outstanding under it have been
guaranteed by the existing shareholders. We intend to renew this
loan agreement when it expires on September&nbsp;30, 2005, but
do not intend to renew it after the completion of this offering.
Rather, to the extent that Twin Bridges is required to post
security with NY Marine &#38; General, we intend to obtain cash
collateralized letters of credit under informal arrangements
with KeyBank and Smith Barney Citigroup. At June&nbsp;30, 2005,
letters of credit in the principal amount of $2,449,781 were
outstanding under the Unsecured Letter of Credit Facility.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Contractual Obligations</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table summarizes information about our contractual
obligations as of December&nbsp;31, 2004.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="39%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap><B>Payment due by period</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Less than</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>More than</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Total</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>1&nbsp;Year</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>1-3&nbsp;Years</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>3-5&nbsp;Years</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>5&nbsp;Years</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Contractual Obligations</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Long-Term Debt Obligations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Capital Lease Obligations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating Lease Obligations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,217,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>493,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>633,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>91,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Purchase Obligations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other Long-Term Liabilities Reflected on our Balance Sheet under
    GAAP</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,217,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>493,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>633,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>91,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Off-Balance Sheet Transactions</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have no off-balance sheet arrangements or transactions with
unconsolidated, special purpose entities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Quantitative and Qualitative Disclosures about Market Risk</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Market risk can be described as the risk of change in fair value
of a financial instrument due to changes in interest rates,
creditworthiness, foreign exchange rates or other factors. We
will seek to mitigate that risk by a number of actions, as
described below.
</DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Interest Rate Risk</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our exposure to market risk for changes in interest rates is
concentrated in our investment portfolio. We expect that changes
in investment values attributable to interest rate changes will
be mitigated, however, through careful monitoring of portfolio
maturities. See &#147;Risk Factors&nbsp;&#151; A significant
amount of our invested assets will be subject to changes in
interest rates and market volatility.&#148;
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Credit Risk</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As we broaden our array of invested assets, we expect our
portfolio will primarily include fixed income securities and
short-term investments, which will be subject to credit risk.
This risk is defined as default or the potential loss in market
value resulting from adverse changes in the borrower&#146;s
ability to repay the debt. Our risk management strategy and
investment policy will be to earn competitive relative returns
while investing in a diversified portfolio of securities of high
credit quality issuers, and to limit the amount of credit
exposure to any one issuer.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Effects of Inflation</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We do not believe that inflation has had a material affect on
our combined results of operations. The effects of inflation
could cause the severity of claims to increase in the future.
Our estimates for losses and loss adjustment expenses include
assumptions, including those relating to inflation, about future
payments for settlement of claims and claims handling expenses.
To the extent inflation causes these costs to increase above our
estimated reserves that are established for these claims, we
will be required to increase reserves for losses and loss
adjustment expenses with a corresponding reduction in our
earnings in the period in which the deficiency is identified.
The actual effects of inflation on our results cannot be
accurately determined until claims are ultimately settled.
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<A name='108'></A>
</DIV>

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<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>BUSINESS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>While we intend to operate our business as described in this
prospectus, we are a company with a new structure and limited
operating history for significant portions of our business. Our
experience and changes in market conditions and other factors
outside our control may require us to alter our methods of
conducting our business.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Overview</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are a leading provider of fee-based management and other
services for workers&#146; compensation self-insured groups in
New York and California. We have been in the business of forming
and managing self-insured groups in New York since CRM&#146;s
inception in 1999 and expanded this business to California in
2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We provide the groups with a broad range of services, including
general management, underwriting, risk assessment, medical bill
review and case management, general recordkeeping and regulatory
compliance. We provide safety and loss control services to group
members to help reduce workers&#146; compensation risks and
expenses. In New York, we provide claims management services. We
also act as a broker by placing excess coverage insurance and
any required surety bonds for the groups, and we provide
reinsurance for a portion of this excess coverage through our
subsidiary, Twin Bridges.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The fees we receive for our management services are based on a
percentage of either the manual workers&#146; compensation rates
set by the New York Workers&#146; Compensation Board or the
actual premiums paid to the groups by their members. The fees
for our medical bill review and case management services are
computed on a fee for service basis, and we receive commission
income for placing the excess coverage insurance and surety
bonds.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A self-insured group is an association of employers which
provides workers&#146; compensation insurance to its members.
Statutory workers&#146; compensation insurance provides coverage
for employees&#146; medical expenses and lost wages arising from
work-related injuries and coverage for employers&#146; liability
to injured employees and others arising from the circumstances
that resulted in the injury.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Each group we manage is composed of employers in the same
industry, all of which are located in a single state. The
premiums paid by the members of the groups we manage provide
funding for claims and loss adjustment expenses. Each member of
a group is jointly and severally liable for the liabilities
incurred by the group during the period of the member&#146;s
participation, even if the member subsequently leaves the group.
We concentrate on industries that we believe have favorable risk
profiles, and regularly screen and monitor the members of each
group we manage.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have formed and currently manage&nbsp;14 self-insured groups
in 12&nbsp;industries. Eight of these groups are in New York and
six are in California. In New York, the groups cover the
following industries: healthcare, contracting, transportation,
wholesale and retail, manufacturing, public entities, real
estate and cemetery management. In California, the groups cover
the healthcare, contracting, new vehicle franchise auto
dealerships, plastic manufacturing, banking and winery
industries.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Self-insured groups are required to purchase excess
workers&#146; compensation coverage to cover claims that exceed
a minimum level established by state law or regulation or by
administrative determination. Since December 2003, we have
provided reinsurance for a portion of this excess coverage
through our subsidiary, Twin Bridges.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our net reinsurance premiums for reinsuring a portion of this
excess coverage have increased significantly since Twin Bridges
began business. Our reinsurance business represents a
significant opportunity to enhance our profitability. We intend
to use a significant portion of our net proceeds from this
offering to provide additional surplus to Twin Bridges. We
believe that this additional surplus will allow Twin Bridges to
provide reinsurance for an increased amount of the excess
coverage purchased by the groups we manage. We also anticipate
that Twin Bridges will grow as our fee-based management services
business continues to grow. Our ability to provide reinsurance
is a significant element of our plans to grow our fee-based
management services
</DIV>

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<DIV align="left" style="font-size: 10pt;">
business. We believe that our willingness to reinsure a portion
of the excess coverage our groups obtain and thereby expose our
capital to risk distinguishes us from our competitors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>The Group Self-Insurance Market</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The workers&#146; compensation insurance market has historically
fluctuated with periods of low premium rates and excess
underwriting capacity resulting from increased competition,
followed by periods of high premium rates and shortages of
underwriting capacity resulting from decreased competition.
These conditions, along with poor customer service and
substandard loss control and claims management, have motivated
businesses to self-insure against workers&#146; compensation
claims. Large companies generally have the financial strength to
meet the significant statutory requirements to self-insure, or
to create their own captive insurance companies to insure, these
claims. Small and mid-sized companies generally lack the
financial and administrative resources to do this, and in recent
years have resorted to pooling their resources through the
formation of self-insured groups as a means to obtain
workers&#146; compensation insurance at acceptable rates and
terms. CRM was formed in response to this relatively new market
to manage self-insured groups.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
California has undergone a period of rapid growth in the
formation of new self-insured groups. From 1999 until 2005,
average workers&#146; compensation rates increased by nearly 50%
after taking into account significant average rate decreases
during the last two years. As a result of this overall increase,
26 private self-insured groups have been formed in California
since 2001 when California authorized the formation of private
self-insured groups. California Senate Bill&nbsp;899 was passed
in April of 2004 with the goal of reducing the medical and
indemnity benefits paid to injured workers over time. This bill
has allowed insurers to reduce rates. Even though average rates
in California have decreased significantly, as compared to 2003
and 2004, California workers&#146; compensation rates remain
substantially higher than those charged for similar risks in New
York.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In contrast to the California market, self-insured groups have
existed in New York since the mid-1990s and the market is
substantially more mature than the California market, with
approximately 64&nbsp;groups in existence. New York is in the
process of reevaluating its regulations relating to the
formation of new groups. This has led to a temporary moratorium
on the formation of new groups. This moratorium should not
affect our ability to grow in New York as we believe we have
formed groups in all desired industry classes that we have
targeted. We believe growth in our New York business will occur
as a result of rate increases and, to a lesser extent, increases
in the number of members of our existing groups. Following three
years of relatively stable rates, the New York Workers&#146;
Compensation Board passed a rate increase in August 2005
averaging five percent across all industry groups. This increase
will become effective in October 2005, and manual rates across
the industries in which we have formed self-insured groups will
increase by approximately eight percent on average.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We believe that self-insured groups, when managed effectively,
provide lower and more stable premium rates to their members
than other methods of insuring workers&#146; compensation
liabilities for small and mid-sized businesses. For that reason,
we believe that self-insured groups will continue to be an
attractive workers&#146; compensation insurance option for small
and mid-sized companies.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Competitive Strengths</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We believe that we have the following competitive strengths:
</DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Superior Operational and Financial Track Record.</I> We have
    a well-established track record in forming, managing and growing
    self-insured workers&#146; compensation groups, with over
    $27&nbsp;million in management fees and commission income for
    the year ended December&nbsp;31, 2004. Since we began our group
    management business in 1999, we have formed and currently
    manage&nbsp;14 self-insured groups.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Full Range of Services for Self-Insured Groups.</I> We
    provide a full range of services to the groups we manage,
    including general management, underwriting, risk assessment and
    loss control, claims management and medical bill review and case
    management services.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Managerial Experience and Expertise.</I> Our senior
    management team includes Daniel&nbsp;G. Hickey,&nbsp;Jr. and
    Martin&nbsp;D. Rakoff, each of whom has more than 10&nbsp;years
    of experience in forming groups and</TD>
</TR>

</TABLE>

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<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD align="left">
    managing and underwriting workers&#146; compensation coverage
    for groups and has extensive contacts in the insurance and
    reinsurance industries. We believe that the experience of our
    senior management team provides us with a competitive advantage
    over new entrants into the group management market due to the
    significant regulatory and marketing impediments involved in the
    formation and management of self-insured groups. Our managerial
    expertise is in the following areas:</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="10%"></TD>
    <TD width="1%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Formation of groups.</I> We have significant experience
    assembling the critical number of initial group members,
    producing required documentation and obtaining regulatory
    approvals. We have effective working relationships with the
    regulatory agencies in New York and California, and serve on a
    number of advisory bodies that evaluate and recommend regulatory
    reform.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Cultivation and maintenance of relationships with our general
    agents and brokers.</I> Our business heavily relies on our
    relationships with general agents and brokers and our executives
    have established excellent relationships with well-screened
    general agents and brokers. We also work closely with our
    general agents and brokers in order to develop new groups,
    maintain our established groups and attract additional members
    to our groups. We offer general agents and brokers competitive
    commissions for coverage placed by our groups and we provide
    training programs to general agents and brokers in order to
    educate them regarding the benefits of workers compensation
    self-insured groups. We believe that these strong relationships
    enhance our ability to attract and retain members of our groups
    and provide us with an advantage over many of our competitors.
    Currently, approximately 77% of the aggregate annualized
    premiums paid or attributable to the groups we manage is derived
    from members introduced to our groups by approximately 20% of
    our general agents and brokers.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>General management, underwriting, loss control and claims
    management for the groups.</I> We have a skilled management
    team, that is experienced in structuring workers&#146;
    compensation insurance and reinsurance of excess coverage, a
    group of underwriters experienced in writing group workers&#146;
    compensation insurance, an effective risk assessment and loss
    control group and, in New&nbsp;York, a skilled and effective
    claims management team.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Relationships with providers of excess coverage.</I> New
    self-insured groups often experience difficulty in obtaining
    excess coverage because they have few members during their
    start-up phase. We use our significant premium volume and
    established relationships with providers of excess coverage to
    obtain for our managed groups the full excess coverage required
    by statute. This provides us with a significant advantage in
    forming new groups and penetrating new markets.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Strategy</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The key elements of our strategy are:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Continued Growth of Fee-Based Business.</I> Our California
    groups have grown rapidly since we began doing business in
    California. We anticipate continued growth in California in the
    near term both through an increase in membership in our existing
    groups and through an increase in the number of groups we
    manage. In New York, we believe growth will result from recently
    approved rate increases that allow our established groups to
    increase the premiums they charge their members and, to a lesser
    extent, from an increase in membership in these groups.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="3%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD align="left">
    We have identified other states which represent possible new
    market opportunities for our self-insured group model, but we
    have not entered these states in order to focus our resources on
    the growth of our California business. Furthermore, in 2006, we
    intend to offer our medical bill review and case management
    services to large, self insured entities, insurance companies,
    self-insured groups and other parties requiring these services.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">55

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<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Growth of Reinsurance Business.</I> We intend to use a
    significant portion of our net proceeds from this offering to
    provide additional surplus to Twin Bridges. Our reinsurance
    business represents a significant opportunity to enhance our
    profitability. We believe that additional surplus will allow
    Twin Bridges to provide reinsurance for an increased amount of
    the excess coverage obtained by the groups we manage.
    Furthermore, as our aggregate management services fees increase,
    our opportunities to grow our reinsurance business should also
    increase.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We intend to explore increasing our fee-based management
services business by developing and offering non-workers&#146;
compensation property and casualty insurance products to
carefully selected members of the groups we manage. Initially,
we would offer these products as a broker through unrelated U.S.
admitted insurers. We believe that our ability to offer these
additional insurance products to members of our groups will
enable us to compete more effectively with commercial insurers
that provide property and casualty insurance products together
with workers&#146; compensation insurance as a comprehensive
package. If we develop and offer these additional insurance
products, Twin Bridges may consider reinsuring a portion of the
risk that is assumed by the U.S. admitted insurers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Organization and Restructuring</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
CRM Holdings is a Bermuda exempted holding company incorporated
in September 2005, and will acquire CRM, CRM&nbsp;CA, Eimar and
Twin Bridges through a share exchange, as described below, which
will occur immediately prior to the closing of this offering.
Our principal executive offices are located at Skandia
International House, 16&nbsp;Church Street, Hamilton, Bermuda
HM&nbsp;11, and our telephone number is (441)&nbsp;295-2185. The
headquarters of our U.S. subsidiaries is located at the offices
of CRM at 112&nbsp;Delafield Street, Poughkeepsie,
NY&nbsp;12601, and the telephone number is (845)&nbsp;452-4100.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We conduct our operations principally through the following
subsidiaries domiciled in Bermuda and the United States:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Compensation Risk Managers, LLC, or CRM, is a limited liability
    company organized under the laws of New&nbsp;York that is based
    in New&nbsp;York. Since 1999, CRM has provided management and
    other services to groups in New&nbsp;York and since October 2003
    has assisted CRM&nbsp;CA in providing its management services;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Compensation Risk Managers of California, LLC, or CRM&nbsp;CA,
    is a limited liability company organized under the laws of
    California that is based in California. Since October 2003,
    CRM&nbsp;CA has provided management services to groups in
    California;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Twin Bridges (Bermuda) Ltd., or Twin Bridges, is a Bermuda
    exempted insurance company, incorporated in 2003, that reinsures
    a portion of the excess coverage that NY Marine&nbsp;&#38;
    General provides to the groups that CRM and CRM CA
    manage;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    EIMAR, L.L.C., or Eimar, is a limited liability company
    organized under the laws of New&nbsp;York that is based in New
    York. Since 2002, Eimar has provided medical bill review and
    case management services to our groups in New York and
    California.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Prior to the consummation of the restructuring, certain members
of our management team, including Daniel&nbsp;G.
Hickey,&nbsp;Jr., Martin&nbsp;D. Rakoff and Louis&nbsp;J.
Viglotti, as well as certain other persons listed in
&#147;Principal Shareholders&#148; are the beneficial owners of
CRM, CRM CA, Eimar and Twin Bridges. We sometimes refer to these
owners in this prospectus as the &#147;existing
shareholders.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Immediately prior to the closing of this offering, CRM,
CRM&nbsp;CA and Eimar will be converted from limited liability
companies into corporations and the existing shareholders will
contribute all of their interests in CRM and Eimar to CRM USA
Holdings, which will be our wholly owned subsidiary and will
hold all of the outstanding shares of our
U.S.&nbsp;subsidiaries. In exchange, the existing shareholders
will receive shares issued by CRM USA Holdings. The existing
shareholders will then contribute their CRM USA Holdings shares
to us in exchange
for &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">l</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of
our common shares. CRM will then distribute its shares in
CRM&nbsp;CA to CRM USA&nbsp;Holdings. In addition, immediately
prior the closing of this offering, the existing shareholders
will
</DIV>

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<DIV align="left" style="font-size: 10pt;">
contribute all of their interests in Twin Bridges to us in
exchange
for &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">l</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of
our common shares. We refer to these transactions in this
prospectus as the &#147;restructuring.&#148; The existing
shareholders ultimately will receive a total
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">l</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of
our common shares in exchange for their interests in CRM
(including its subsidiary, CRM CA), Eimar and Twin Bridges.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We expect the restructuring to be tax free to CRM, CRM&nbsp;CA,
Eimar, CRM USA Holdings, Twin Bridges and us.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
After completion of the restructuring and this offering, the
existing shareholders will
own &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">l</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of
our common shares,
representing &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">l</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%
of the total voting power of our shares then outstanding.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with the restructuring, CRM, Eimar and Twin
Bridges intend to make a distribution to the existing
shareholders of unpaid earnings and profits in an aggregate
amount equal to the net income for U.S.&nbsp;federal income tax
purposes of CRM and Eimar for the nine months ended
September&nbsp;30, 2005, plus the amount by which the net income
for U.S.&nbsp;federal income taxes purposes of Twin Bridges for
the period from its commencement through September&nbsp;30, 2005
exceeds distributions Twin Bridges previously made to its
shareholders, such net income to be computed on a cash basis,
which has been the basis on which distributions have been made
to the existing shareholders by each of CRM and Eimar since
their inception. We refer to these distributions in this
prospectus as the &#147;Distributions.&#148; We also will
indemnify the existing shareholders for an amount equal to the
amount of U.S.&nbsp;federal income taxes, if any, that would be
payable by them with respect to the combined net income, if any,
for U.S.&nbsp;federal income tax purposes of CRM, Eimar and Twin
Bridges for the period from October&nbsp;1, 2005 through the
consummation of the restructuring, computed on a cash basis as
if such period were a taxable period.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Our Business Segments</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We operate two business segments: fee-based management services
and reinsurance. Through CRM, CRM CA and Eimar, we provide
management and other services to workers&#146; compensation
self-insured groups in New&nbsp;York and California. Through
Twin Bridges, we reinsure a portion of the excess coverage
obtained by the self-insured groups that we manage. The
revenues, net income and assets of each of our segments for the
six&nbsp;months ended June&nbsp;30, 2005 and 2004 and the three
years ended December&nbsp;31, 2004 are set forth in the notes to
our combined financial statements included elsewhere in this
prospectus.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Our Fee-Based Management Services Business</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In 1999, we began our business in New York of forming, managing
and operating workers&#146; compensation self-insured groups and
presently manage eight groups in New York. We expanded our
business to California in 2003 and presently manage six groups
there. In the aggregate, the members of our groups are engaged
in a broad range of businesses. While we expect to form
additional managed groups, particularly in California, we intend
to focus on the following industries:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Healthcare</I>&nbsp;&#151; We manage groups in New&nbsp;York
    and California that provide workers&#146; compensation insurance
    to nursing homes, hospitals and physician groups. We believe the
    New&nbsp;York group is one of the largest workers&#146;
    compensation self-insured groups in New&nbsp;York.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Contractors</I>&nbsp;&#151; We manage groups in New&nbsp;York
    and California that provide workers&#146; compensation insurance
    to artisan contractors, including carpenters, masons, plumbers,
    electricians and those in other skilled trades.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Transportation</I>&nbsp;&#151; We manage a group in
    New&nbsp;York that provides workers&#146; compensation insurance
    to companies engaged in highway-borne transportation, including
    local package delivery, bulk hauling of industrial commodities,
    milk hauling and for-hire limousine services.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Wholesale/Retail</I>&nbsp;&#151; We manage a group in
    New&nbsp;York that provides workers&#146; compensation insurance
    to companies engaged in local and regional retail grocery sales
    and entities involved primarily in the distribution of food
    products.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">57

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<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Auto Dealers</I>&nbsp;&#151; We manage a group in California
    that provides workers&#146; compensation insurance to new
    vehicle franchise auto dealerships.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Banks</I>&nbsp;&#151; In the six months ended June&nbsp;30,
    2005, we formed a group in California that provides
    workers&#146; compensation insurance to banks.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Wineries</I>&nbsp;&#151; Since June&nbsp;30, 2005, we formed
    a group in California that provides workers&#146; compensation
    insurance to wineries.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have formed other self-insured groups with smaller operations
in New&nbsp;York to provide workers&#146; compensation insurance
to the following industries:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    real estate management, including janitorial, building
    maintenance and management services;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    cemeteries;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    public entities, including cities, towns, villages and school
    districts;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    manufacturing companies, which includes machine shops, injection
    molding and metal fabrication establishments.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have also established a small group with operations in
California, which provides workers&#146; compensation insurance
to injection and blow molding establishments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We provide the groups with a broad range of services, including
general management, underwriting, risk assessment, medical bill
review and case management, general recordkeeping and regulatory
compliance. We provide safety and loss control services to group
members to help reduce workers&#146; compensation risks and
expenses. In New York, the fees we receive from all but one of
our groups are based on a percentage of the manual workers&#146;
compensation rates set by the New York Workers&#146;
Compensation Board that are attributable to the members of the
groups we manage, and our fees include claims management
services. With respect to our groups in California and one of
our groups in New York, our fees are based on a percentage of
the premiums paid to the groups we manage by their members. Our
groups in California pay the fees for claims management services
directly to a third party administrator. In addition, we receive
fees on a fee-for-service basis for medical bill review and case
management services. We also receive commission income from:
(1)&nbsp;U.S.&nbsp;admitted insurers for placing the excess
coverages which the groups are required to obtain and
(2)&nbsp;insurers for placing the required surety bonds for the
groups we manage.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A significant amount of our existing business is dependent on a
relatively small number of our managed groups. The Healthcare
Insurance Trust of New York provided approximately 27.2% and
38.1% of our revenues from fee-based management services for the
six months ended June&nbsp;30, 2005 and the year ended
December&nbsp;31, 2004, respectively. Two other groups, Elite
Contractors Trust of New York and Transportation Industry
Workers&#146; Compensation Trust of New York, provided
approximately 20.3% and 13.8%, respectively, of our revenues
from fee-based management services for the six months ended
June&nbsp;30, 2005 and approximately 21.9% and 13.7%,
respectively, of our revenues from fee-based management services
for the year ended December&nbsp;31, 2004.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Production of Business</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
All of our group management business is generated by general
agents and brokers, who receive a commission usually equal to a
percentage of gross premiums the groups charge their members.
These commissions are generally uniform based on the industry
and group involved. We currently have relationships with
approximately 160 general agents and brokers in New York and
approximately 40&nbsp;general agents and brokers in California.
Currently, approximately 77% of the aggregate annualized
premiums paid or attributable to the groups we manage is derived
from members referred to our groups by approximately 20% of our
general agents and brokers. We carefully screen the general
agents and brokers with whom we do business. No general agent or
broker produces more than 10% of the business underwritten by
the groups that we manage based on our aggregate annualized
premiums paid or attributable to the groups we manage. Our
management and underwriting officers generally have excellent
relationships with these general agents and brokers and both
</DIV>

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value and place a strong emphasis on maintaining these
relationships. We offer brokers and general agents competitive
commissions for coverage placed by our groups and we provide
training programs to brokers and general agents in order to
educate them regarding the benefits of workers&#146;
compensation self-insured groups. We believe that these strong
relationships enhance our ability to attract and retain members
of our groups and provide us with an advantage over many of our
competitors.
</DIV>

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    <TD width="3%"></TD>
    <TD width="97%"></TD>
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    <TD></TD>
    <TD>
    <I>Underwriting</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our management services include a determination of the
appropriate level of premium for each member of a group. Our
underwriting department achieves this by adjusting base premium
rates based on:
</DIV>

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    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
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    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the historical modification factor applicable to the member;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the member&#146;s loss history for the past three years;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    our loss control and risk assessment of the member.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
By individually analyzing the appropriate premium for each
member of a group, we distinguish ourselves from other
self-insurance services that typically maintain common pricing
among group members. Our underwriting department attempts to
determine premiums that are sufficient to cover the expected
losses and loss adjustment expenses and fixed costs of the
groups we manage.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
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    <TD></TD>
    <TD>
    <I>Risk Assessment and Loss Control Services</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have structured our risk assessment and loss control services
to provide high level, customized service to the members of each
group. Our services include on-site assessments of safety issues
for all members, annual service plans, compliance reviews and
safety score card and training programs to assess development.
Our model focuses on employee training and behavior modification
in an effort to minimize losses on a prospective basis. We
believe that the industry practice involves inspection-based
loss control on a reactive basis.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Unlike many of our competitors in the insurance industry, all
risk assessment and loss control services are performed by our
employees and no independent contractors are used. Nearly all of
our loss control employees have met our minimum educational
requirement of a bachelors degree or better, and each possesses
one or more of three nationally recognized professional
accreditations and has a minimum of five years of multi-line
carrier loss control experience. We provide each group with a
dedicated service consultant, which gives us greater control of
the work product. We do not provide risk assessment and loss
control services based on premium size, and we do not bill any
members of a group separately for these services. Instead, we
allocate our service resources based on need for improvement,
not premium size. By targeting the accounts that need
professional assistance the most, our loss control function
improves the overall quality of the business by reducing the
aggregate number of workers&#146; compensation claims made by
the members of our managed groups. The loss control personnel
also address workplace safety issues by identifying and
correcting the behavior or condition that resulted in a claim.
Our risk assessment and loss control services are
training-intensive and personal and seek to ensure
accountability for workplace safety among all levels of the
member&#146;s management structure.
</DIV>

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    <TD></TD>
    <TD>
    <I>Claims Management and Group Reserving</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our claims management services involve the administration and
management of a claim from the time it is brought to our
attention until the claim is finally settled. We perform these
services for our New York groups, but do not perform claims
services for our California groups because California law
prohibits self-insured group managers from providing claims
management services. We have established procedures to record
reported insurance claims, regardless of size, in a claims
database upon receipt of notice of the claim. We attempt to make
contact with the injured worker, treating physician and employer
within 24&nbsp;hours after receiving a claim. This focus on
timely reporting and follow up allows us to mitigate claims and
loss adjustment expenses and identify potential fraud. We
periodically update our database for any developments affecting
a claim.
</DIV>

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Our claims personnel divide claims into three categories: claims
involving only medical expenses, claims involving medical
expenses and up to an estimated 16&nbsp;weeks of disability and
claims involving medical expenses and longer periods of
disability. The more serious claims are allocated to more senior
employees who typically have a lighter case load. These teams
investigate, evaluate and monitor the claims and each claim is
reviewed at least once every 30&nbsp;days. We employ a number of
resolution adjustors whose sole job is to resolve these claims
and obtain any approval required by the workers&#146;
compensation group board. As a potential insurance claim
develops, the claims teams will draw on all available resources
to manage and settle the claim.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As required by California law, our California groups retain an
independent claims handling company. All of our California
groups currently retain Matrix Absence Management, Inc., or
Matrix, a subsidiary of Delphi Financial Group, Inc., to perform
these services under a contract negotiated between Matrix and
the group. However, we retain claims settlement authority,
establish loss reserves and review the work performed by Matrix
on a regular basis. With the agreement of each group, we also
have required Matrix to utilize the same independent claims
management software that we use.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
 We use our claims database as an electronic workflow management
tool for loss adjustment, coverage issues and litigation and to
provide each group and its board with claims and loss
information and to establish claims reserves for each group.
These reserves are reviewed each year in the course of the
independent audit performed for each group. In addition, the New
York groups are subject to review by the New York Workers&#146;
Compensation Board and the groups in California are subject to
review by the California Department of Industrial Relations.
</DIV>

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    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

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    <TD></TD>
    <TD>
    <I>Medical Bill Review and Case Management</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In 2002, we expanded our fee-based management services to
include medical bill review and case management services.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The services include:
</DIV>

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    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
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    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Medical Bill Review.</I> This service reviews medical bills,
    reconciles them to the appropriate state fee schedule and
    subsequently reduces them to the allowable amount of payment. We
    attempt to be competitive by providing superior turn-around time
    and a quality review process which produces relatively few
    errors.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Independent Medical Examinations.</I> This service provides
    for the scheduling of independent medical examinations for
    verification of the medical diagnosis and treatment plan for
    injured workers. We believe that this service is very
    competitive because we have assembled a high-quality physician
    network to provide the members of our groups with objective
    medical opinions.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Medical Case Management/ Utilization Review.</I> Through this
    service we supplement our claims management services by hiring
    registered nurses to coordinate communication among claims
    adjusters, treating physicians and injured workers.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Currently, nearly all of the income we receive for these
services is attributable to our self-insured groups. We have
recently hired a vice president of sales and marketing to help
to sell these medical bill review and case management services
to third parties. Our business strategy includes offering these
services to large self-insured entities, insurance companies,
self-insured groups and others that require these services.
</DIV>

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    <TD width="3%"></TD>
    <TD width="97%"></TD>
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    <TD></TD>
    <TD>
    <I>Brokerage Services for the Groups</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Self-insured groups are required to purchase excess
workers&#146; compensation coverage above certain levels
established by state law or regulation or by administrative
determination. We act as a broker and place this excess
insurance coverage and any required surety bonds for the groups
for which we earn commissions. The gross premiums for excess
coverage for the groups we manage and our net reinsurance
premiums for reinsuring a portion of this excess coverage have
increased since Twin Bridges began business in December 2003.
Gross premiums for excess coverage placed during any period is
the aggregate amount of premiums for excess coverage insurance
that the groups we manage will pay under the excess coverage
policies written
</DIV>

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during that period. Our management regards the changes in these
amounts as a meaningful indicator of our expected net
reinsurance premiums and commission income in the future.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Our Reinsurance Business</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The groups we manage purchase excess workers&#146; compensation
coverage from U.S.&nbsp;admitted insurers to cover claims that
exceed a minimum level established by state law or regulation or
by administrative determination. Typically, our managed groups
purchase excess coverage for losses and loss adjustment expenses
in excess of $500,000&nbsp;per occurrence. This &#147;excess
coverage&#148; purchased by the groups provides them with
benefits for losses in excess of the $500,000&nbsp;per
occurrence liability retained by the groups. Our managed groups
also purchase what is called &#147;catastrophic coverage&#148;
for losses and loss adjustment expenses in excess of
$1&nbsp;million per occurrence. The catastrophic coverage
purchased by our managed groups is not subject to a per
occurrence limit. In addition, each of our groups also purchases
coverage to insure against the risk that a large number of
claims will occur and result in losses that are each less than
$500,000 and that the aggregate result of such losses could
exhaust their resources. This &#147;frequency coverage&#148; is
triggered in the event that the aggregate amount of losses and
loss adjustment expenses during the coverage period exceeds a
range from 90% to 150% of the premiums paid to the groups by
their members. If the frequency coverage is triggered, the
insurer pays the next $2&nbsp;million of losses and related loss
adjustment expenses of the group during the coverage period. NY
Marine&nbsp;&#38; General provides the excess coverage and the
frequency coverage insurance for 13 of our 14 groups. Under our
reinsurance agreement with NY&nbsp;Marine&nbsp;&#38; General, we
reinsure 50% of all of the coverage it provides and receive 50%
of the premiums (or our assumed premium) paid to it by these
groups. We allow NY&nbsp;Marine&nbsp;&#38; General a ceding
commission of 28% of our assumed premium to cover its
acquisition, general and administrative expenses, a further 2%
for stop-loss coverage and 1% to cover the U.S.&nbsp;federal
excise tax, or a total of 31% of our assumed premium. The stop
loss coverage limits our losses under our reinsurance agreement
to 181.16% of our assumed premium, net of the ceding commission
and the cost of the stop-loss coverage and the U.S.&nbsp;federal
excise tax. Our net reinsurance premiums are comprised of our
assumed premiums, net of the 2% fee for the stop-loss coverage.
The ceding commission of 28% of our assumed premium and the 1%
cost to cover the U.S. federal excise tax are recorded as part
of policy acquisition costs. NY Marine &#38; General in turn
pays a 20% commission to CRM for any excess coverage placed with
NY Marine&nbsp;&#38; General by CRM or CRM CA. We are required
to provide NY Marine &#38; General with significant security to
secure our reinsurance obligations, which security may consist
of a bank-issued letter of credit, a reinsurance trust fund for
the benefit of NY Marine &#38; General or cash. The groups
purchase the catastrophic coverage for losses above these levels
from other insurers. The groups place this excess coverage on
different dates during the year, generally on
January&nbsp;1st&nbsp;and April&nbsp;1st.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our agreement with NY Marine&nbsp;&#38; General automatically
renews each year unless previously cancelled with
120&nbsp;days&#146; notice prior to the anniversary of the
effective date of the agreement. This agreement covers the
reinsurance of each group which purchases excess coverage from
NY Marine&nbsp;&#38; General. If NY Marine&nbsp;&#38; General
were to increase the amount of the excess coverage it provides
for the groups in the future, we would seek to reinsure NY
Marine&nbsp;&#38; General for a 50% pro rata share of the
increased level of coverage. In addition, we intend to seek the
opportunity to increase the percentage of excess coverage that
we reinsure.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our Bermuda-based reinsurance operations are managed by Quest
Management Services Limited, an independent Bermuda manager.
Quest provides certain general and administrative services to
Twin Bridges on an hourly time and expense fee basis.
</DIV>

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    <TD width="3%"></TD>
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    <TD></TD>
    <TD>
    <I>Reserves</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Twin Bridges, our reinsurance subsidiary, is required to
establish reserves for losses and loss adjustment expenses under
applicable insurance laws and regulations and U.S.&nbsp;GAAP.
These reserves are balance sheet liabilities representing
estimates of future amounts required to pay losses and loss
adjustment expenses for reinsured claims that have occurred at
or before the balance sheet date, reported to us or incurred but
not yet reported to us. Our policy is to establish these losses
and loss adjustment reserves prudently after considering all
information known to us as of the date they are recorded.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Loss reserves fall into two categories: case reserves for
reported losses and loss adjustment expenses associated with a
specific reported insured claim, and reserves for
incurred-but-not-reported, or IBNR, losses and loss adjustment
expenses. We have established these two categories of loss
reserves as follows:
</DIV>

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    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Case reserves&nbsp;&#151; Following the receipt and analysis of
    a notice of claim, Twin Bridges establishes a case reserve for
    the estimated amount of its ultimate settlement and its
    estimated loss adjustment expenses. Twin Bridges establishes
    case reserves based upon the amount of claims reported and may
    subsequently supplement or reduce the reserves as our claims
    department deems necessary.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    IBNR reserves&nbsp;&#151; An independent actuary estimates and
    establishes reserves for loss amounts incurred but not yet
    reported, including expected development of reported claims.
    These IBNR reserves include estimated loss adjustment expenses.
    The actuary calculates IBNR reserves by using generally accepted
    actuarial techniques, relying on the most recent information
    available, including pricing information, industry information
    and our historical losses and expenses and revises these
    reserves for losses and loss adjustment expenses as additional
    information becomes available and as claims are reported and
    paid.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The reserve for losses and loss adjustment expenses represents
an estimate of the ultimate cost of all reported and unreported
losses and loss adjustment expenses insured pursuant to
reinsurance agreements associated with reported claims and
claims incurred but not reported which are unpaid at the balance
sheet date. The liability is estimated using actuarial studies
of individual case-basis validations, statistical analyses and
industry data. We believe that our aggregate liability for
losses and loss adjustment expenses at year-end represent our
best estimate, based upon available data, of the amounts
necessary to settle the ultimate cost of expected losses and
loss adjustment expenses. Twin Bridges has only been in
existence since December 2003, has had limited loss experience
and relatively small population of underlying risks, and
therefore is exposed to an increased likelihood that actual
results may not conform to our estimates. These estimates are
also subject to the effects of trends in loss severity and
frequency risks, fluctuations in inflation, prevailing economic,
social and judicial trends, legislative changes and internal and
third party claims handling procedures. There also may be a
significant delay between the occurrence of the insured event
and the time it is actually reported to us. Accordingly, the
ultimate settlement of losses and related loss adjustment
expenses may vary significantly from the estimates included in
our financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Since we have very limited loss development experience, the
independent external actuarial specialists that estimate our
loss reserves and loss adjustment expenses combine several
methods to calculate reserves for unpaid reported losses as well
as losses incurred-but-not-reported, or IBNR, reserves. The
actuarial methods employed include (i)&nbsp;the paid and
incurred loss development method, (ii)&nbsp;the loss ratio
method, and (iii)&nbsp;the Bornhuetter-Ferguson method. The
Bornhuetter-Ferguson method is a generally accepted actuarial
technique that produces expected loss ratios that are implied by
actual loss experience and developments. The combination of
these three methods has led to a range of estimated total
reserves. We believe that the assumptions by the independent
external actuarial specialists represent a realistic and
appropriate basis for currently estimating our reserves for
losses and loss adjustment expenses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Reserve estimates and reserving methodologies are reviewed
regularly, taking into account all currently known information
and updated assumptions related to unknown information. Reserves
for losses and loss adjustment expenses established in prior
periods are adjusted as claim experience develops and new
information becomes available. Any such adjustments are included
in income in the period in which they are made. Any adjustments
to previously established reserves may significantly impact
current period net income by reducing net income if previous
period reserve estimates prove to be inadequate and are required
to be increased or increasing net income if prior period
reserves become overstated and are required to be reduced. We
also review the estimate of losses and loss adjustment expenses
provided to us by NY&nbsp;Marine &#38; General.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
While we believe that we will be able to make a reasonable
estimate of our ultimate losses, we may not be able to predict
our ultimate claims experience as reliably as other companies
that have had reinsurance operations for a substantial period of
time, and we cannot assure you that our actual losses and loss
adjustment expenses will not exceed our total reserves.
</DIV>

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<B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Investments</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Currently, our investment portfolio is comprised of short-term
U.S.&nbsp;Treasury bills, cash and money market equivalents.
Upon the completion of the offering, our board of directors will
establish our investment policies and management will implement
our investment strategy with the assistance of independent
investment managers. We currently intend to retain KeyBank,
Smith Barney Citigroup and Wachovia Securities&nbsp;LLC to act
as our external investment managers. Our investment guidelines
will specify minimum criteria on the overall credit quality,
liquidity and risk-return characteristics of our investment
portfolio and include limitations on the size of particular
holdings, as well as restrictions on investments in different
asset classes. The board of directors will monitor our overall
investment returns and review compliance with our investment
guidelines.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our investment strategy seeks to preserve principal and maintain
liquidity while trying to maximize total return through a high
quality, diversified portfolio. Investment decision making will
be guided primarily by the nature and timing of our expected
losses and loss adjustment expenses payouts, management&#146;s
forecast of our cash flows and the possibility that we will have
unexpected cash demands, for example, to satisfy claims due to
catastrophic losses. We expect our investment portfolio will
consist primarily of highly rated and liquid fixed income
securities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If we do not structure our investment portfolio so that it is
appropriately matched with any of our insurance and reinsurance
liabilities, we may be forced to liquidate investments prior to
maturity at a significant loss to cover such liabilities.
Investment losses could significantly decrease our asset base,
which will adversely affect our ability to conduct business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Possible Insurance Products</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We intend to explore increasing our fee-based management
services business by developing and offering certain
non-workers&#146; compensation property and casualty insurance
products to carefully selected members of the groups we manage.
Initially, we would offer these products as a broker through
unrelated U.S.&nbsp;admitted insurers. We will carefully select
the members of our groups to which we offer these additional
insurance products by analyzing the workers&#146; compensation
loss experiences of these members as well as other relevant
factors. We believe that our ability to offer these additional
insurance products to members of our groups will enable us to
compete more effectively with commercial insurers that provide
property and casualty insurance products together with
workers&#146; compensation insurance as a comprehensive package.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The experience of our management team includes significant
expertise in underwriting and marketing these additional
insurance products, and we believe that there is a demand for
these products by members of our groups. If we develop and offer
these additional insurance products, Twin Bridges may consider
reinsuring a portion of the risk assumed by the
U.S.&nbsp;admitted insurers that underwrite the products.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our assessment of these insurance products is in the early
stages, and there can be no assurance that we will successfully
develop or market any of these insurance products or that Twin
Bridges will be offered the opportunity to reinsure any of the
risks of the U.S.&nbsp;admitted insurers that may provide this
insurance. Nevertheless, we anticipate that we will need to
devote management time and working capital resources to complete
our assessment of these opportunities and to implement the
strategy, if any, that we adopt. Furthermore, in the event we
develop and offer these insurance products, and Twin Bridges
reinsures a portion of the resulting risk, Twin Bridges will be
subject to potential additional losses and loss adjustment
expenses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Competition</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We and the groups we manage compete with many companies in the
workers&#146; compensation insurance business. These competitors
include:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the state funds in New York and California;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    specialty, regional and major insurers in New York, such as
    American International Group, Inc., Chubb Group of Insurance
    Companies, Zurich Financial Services, Utica National Insurance
    Group,</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">63

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<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD align="left">
    Greater New York Mutual Insurance Company, Travelers Insurance
    Group Holdings Inc., Liberty Mutual Insurance Company and
    Hartford Financial Services Group Inc, and in California, such
    as Employers Direct Insurance Company, Redwood Fire&nbsp;&#38;
    Casualty Insurance Co., Republic Companies Group, Inc., Redlands
    Insurance Co., St. Paul Travelers, Zenith National Insurance
    Corp, National Liability and Fire Insurance Company, Preferred
    Employers, SeaBright Insurance Company, CompWest Insurance
    Company, Employers Compensation Insurance Company of California,
    Everest Insurance Company, American International Group, Inc.,
    Chubb Group of Insurance Companies, ICW Group and The Hartford
    Financial Services Group, Inc.,&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    groups managed by other group administrators, such as First
    Cardinal Corporation and New York Compensation Managers, Inc. in
    New York and Bickman Risk Services in California.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Many of the insurance companies listed above have more capital,
name and brand recognition, marketing and management resources
than we or the groups we manage have. Many of our competitors
have offered, and may continue to offer, workers&#146;
compensation insurance combined with other insurance coverage.
Some of our competitors offer workers&#146; compensation
insurance on a multi-state basis. Competition in our industry is
very intense and from time to time results in a significant
reduction in premiums for workers&#146; compensation insurance,
and we may be competitively disadvantaged because key group
members may be obliged or inclined to purchase packaged products
or multi-state workers&#146; compensation coverage from our
competitors in order to receive favorable rates for other types
of liability coverage or because our competitors offer superior
premium rates or policy terms. We cannot assure you that we will
be able to implement our business strategy in a manner that will
allow us to be competitive. Increased competition could reduce
the ability of our groups to attract new members and retain
existing members and would adversely impact the groups we manage
and our business, financial condition and results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Ratings</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Ratings by independent agencies are an important factor in
establishing the competitive position of commercial insurance
and reinsurance companies. Rating organizations continually
review the financial positions of insurers. Standard &#38;
Poors, or S&#38;P, maintains a letter scale rating system
ranging from &#147;AAA&#148; (Extremely Strong) to &#147;R&#148;
(under regulatory supervision). A.M.&nbsp;Best maintains a
letter scale rating system ranging from &#147;A++&#148;
(Superior) to &#147;F&#148; (in liquidation). The objective of
S&#38;P and A.M. Best&#146;s ratings systems is to provide an
opinion of an insurer&#146;s or reinsurer&#146;s financial
strength and ability to meet ongoing obligations to its
policyholders. Unlike commercial insurers and reinsurers,
workers&#146; compensation groups do not generally obtain
ratings from S&#38;P or A.M.&nbsp;Best. We do not believe that
the small to mid-sized companies buying workers&#146;
compensation from self-insured groups, such as the ones we
manage, give any material consideration to the lack of ratings
of these groups. Rather they rely on the management and boards
of directors of these groups, the excess coverage obtained by
the groups and the joint and several liability of the members of
the groups as security for their coverage. Twin Bridges has not
been affected by its lack of a rating with respect to its
reinsurance with NY&nbsp;Marine&nbsp;&#38; General, which is
currently rated &#147;A&#148; by A.M.&nbsp;Best, the insurer
that provides excess coverage insurance to 13 of the
14&nbsp;groups we manage, since we believe that NY
Marine&nbsp;&#38; General relies primarily on the security
provided by Twin Bridges in the form of letters of credit.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Employees</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of September&nbsp;14, 2005, we employed approximately
154&nbsp;full-time employees and 7&nbsp;part-time employees. The
number of employees in each of our subsidiaries as of
September&nbsp;14, 2005 was as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="93%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    CRM</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>117</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    CRM CA</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Eimar</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>28</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">64

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have the following number of employees performing the
following functions as of September&nbsp;14, 2005:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="81%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Employees</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Administrative</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>52</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Managers</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Claims Management</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>40</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Risk Assessment and Loss Control Services</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Sales and Marketing</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Underwriting</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Medical Bill Review and Case Management</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>161</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We expect that we will continue to hire additional employees as
we expand our business. We believe that our relations with our
employees are good. None of our employees is subject to a
collective bargaining agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Properties</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our U.S.&nbsp;operations are currently headquartered in
Poughkeepsie, New York at one location, which contains
approximately 8,000&nbsp;square feet. The initial term of the
lease for these premises expires around March, 2007, with an
option to extend the lease term for two additional five-year
terms. The annual lease payments for these offices are
approximately $155,000.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Eimar maintains office space in Poughkeepsie, New York. The
offices consist of approximately 1,400&nbsp;square feet and the
term of the lease expires on December&nbsp;31, 2005. The annual
lease payments for these premises are approximately $21,000. One
of the lessors under this lease is Daniel G. Hickey,&nbsp;Sr.,
who is a director and one of our shareholders and is the father
of Daniel G. Hickey,&nbsp;Jr., who is a Co-Chief Executive
Officer and the Chairman of our Board of Directors. See
&#147;Certain Relationships and Related Transactions.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
CRM currently leases office space in Hyde Park, New York,
consisting of approximately 7,000&nbsp;square feet with
additional parking space. The lease expires on October&nbsp;1,
2009. The annual lease payments for these premises are
approximately $120,000.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have executed a lease for approximately 26,400 rentable
square feet with parking space located in Poughkeepsie, New York
for a building that is currently under construction. The term of
the lease will commence March&nbsp;1, 2007 or such later date on
which the construction is substantially complete and the
building is available for occupancy. The lease term is fifteen
years with options to renew for two additional 5&nbsp;year
terms. Annual lease payments are $924,000 in the first five
years, $1,016,400 in years five through ten, $1,118,040 in years
ten through fifteen, $1,257,696 in the first renewal term and
$1,415,040 in the second. The lease also provides for an option
to purchase the building. The option is exercisable
120&nbsp;days prior to the anticipated occupancy of the building
under the lease. The option price is approximately $3,500,000
plus all documented out-of-pocket construction costs after
May&nbsp;1, 2005. If we fail to exercise this initial option, we
have an additional option to purchase the building during the
first two years of our lease for the fair market value of the
property, which will not be less than $3,500,000 plus the costs
incurred by the landlord in developing and constructing the
building.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
CRM CA has executed leases for office space in Roseville and
Irvine, California. The annual lease payments for these office
spaces are approximately $87,000 in the aggregate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We believe that the premises under construction in Poughkeepsie
facilities and our space in California are sufficient for our
foreseeable needs.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Legal Proceedings</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In April, 2005, Cornerstone Program Management&nbsp;&#38;
Insurance Services, Inc., or Cornerstone, one of its affiliates
and their principals sued CRM, CRM CA and Contractors Access
Group of California, Inc., or CAP in the Superior Court of
California, Orange County, Case No.&nbsp;05CC04720. In May 2005,
the plaintiffs dropped Cornerstone&#146;s affiliate as a
plaintiff and CAP as a defendant. The amended complaint alleges
that in November 2004, CRM wrongfully caused Cornerstone to be
terminated as general agent for a workers&#146; compensation
self-insured group for California contractors, and wrongfully
assumed Cornerstone&#146;s responsibilities under that program.
Cornerstone also alleges that CRM had falsely accused
Cornerstone and its principals of wrongfully diverting money and
of other wrongful conduct. The amended complaint alleges six
claims. None of the claims seeks a specific amount of damages.
CRM intends to defend the litigation vigorously and has asserted
counterclaims against Cornerstone and others for breach of
contract, fraud and intentional interference with economic
advantage and alleging that Cornerstone had wrongfully used
confidential information it had received from CRM to establish a
workers&#146; compensation self-insurance program for California
automobile dealers. No trial date has been scheduled as yet.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
CRM loaned Cornerstone and its principals $468,782.82, to be
used by them as working capital, of which $371,758.55 remains
outstanding. The borrowers failed to make timely installment
payments due under the working capital loan commencing
March&nbsp;15, 2005 and CRM has declared the loan in default and
immediately due and payable in full and brought an action
against the borrowers for collection. On July&nbsp;15, 2005, CRM
sued to recover the debt in the federal court in the Central
District of California. CRM is currently awaiting the
defendants&#146; answer to its amended complaint.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On December&nbsp;29, 2004 H.F.C.A. Associates Corp. and
17&nbsp;related companies, all of which were members or former
members of the Healthcare Industry Trust of New York or HITNY,
sued HITNY and CRM in the Supreme Court of the State of New
York, Ulster County, Case No.&nbsp;4133/04, alleging, among
other things, that the defendants had improperly terminated
their membership in HITNY and failed to process claims on their
behalf. The plaintiffs also alleged that CRM had engaged in self
dealing and had committed a breach of fiduciary duties owed to
them in connection with the placement of reinsurance for the
members of HITNY. The complaint asks for damages of
$1&nbsp;million against both defendants, and a judgment that the
plaintiffs did not owe HITNY the outstanding premium for which
they had been invoiced.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
HITNY answered the complaint, denying the plaintiffs&#146;
material allegations. HITNY alleged that the plaintiffs&#146;
membership had been properly terminated and asserted a
counterclaim against the plaintiffs in the amount of $107,000
for unpaid premium. HITNY also asserted a claim against CRM
alleging generally that if the plaintiffs suffered any damages
they were caused by CRM&#146;s actions or wrongdoing.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
CRM answered the complaint, denying the plaintiffs&#146;
material allegations, including the allegations of self dealing
and breach of fiduciary duty, and asserting a claim based on
breach of contract and contribution against HITNY for whatever
damages the plaintiffs may recover from CRM.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
This litigation is in its early stages; the parties have not yet
exchanged any responses to discovery demands.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Other than the foregoing, we are not a party to any material
litigation.
</DIV>

<P align="center" style="font-size: 10pt;">66

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<A name='109'></A>
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<B>REGULATION</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>General</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The business of insurance and reinsurance is regulated in most
countries, although the degree and type of regulation varies
significantly from one jurisdiction to another. Our reinsurance
business is subject to direct regulation in Bermuda, although
this regulation is less pervasive than regulations applicable to
primary insurers. The groups we manage in New York and
California are subject to extensive financial regulation under
applicable statutes in those jurisdiction.
</DIV>

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<B>Bermuda Regulation</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As a holding company, CRM Holdings is not subject to insurance
regulations in Bermuda.
</DIV>

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Twin Bridges is subject to regulation under the Insurance Act
1978 and its related regulations, or the Bermuda Insurance Act,
which provides that no person may carry on any insurance
business in or from or within Bermuda unless registered as an
insurer under the Bermuda Insurance Act by the BMA, which is the
regulatory body responsible for the day-to-day supervision of
insurers. Under the Bermuda Insurance Act, insurance business
includes reinsurance business. The BMA, in deciding whether to
register a company as an insurer, has broad discretion to act as
the BMA thinks fit in the public interest. The BMA is required
by the Bermuda Insurance Act to determine whether the applicant
is a fit and proper body to be engaged in the insurance business
and, in particular, whether it has, or has available to it,
adequate knowledge and expertise. The registration of an
applicant as an insurer is subject to its complying with the
terms of its registration and such other conditions as the BMA
may impose from time to time. The BMA issues four types of
general business insurance licenses (Class&nbsp;1, Class&nbsp;2,
Class&nbsp;3 and Class&nbsp;4). A Class&nbsp;3 license allows a
company to underwrite third party risks. Twin Bridges was
registered under the Bermuda Insurance Act as a Class&nbsp;3
insurer in December 2003.
</DIV>

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A Bermuda insurance advisory committee appointed by the Bermuda
Minister of Finance advises the BMA on matters connected with
the discharge of the BMA&#146;s functions and sub-committees
thereof supervise and review the law and practice of insurance
in Bermuda, including reviews of accounting and administrative
procedures.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Bermuda Insurance Act imposes on Bermuda insurance companies
solvency and liquidity standards and auditing and reporting
requirements and grants to the BMA powers to supervise,
investigate and intervene in the affairs of insurance companies.
Certain significant aspects of the Bermuda insurance regulatory
framework are set forth below.
</DIV>

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The BMA has recently moved to a risk based approach when it
comes to licensing and supervising insurance companies in
Bermuda. As part of the BMA&#146;s risk based system, an
assessment of the inherit risks within each particular class of
insurer is utilized in the first instance to determine the
limitations and specific requirements which may be imposed.
Thereafter the BMA keeps its analysis of relative risk within
individual institutions under review on an ongoing basis,
including through scrutiny of regular audited statutory
financial statements, and, as appropriate, meeting with senior
management during onsite visits. The initial meetings with
senior management and any proposed onsite visit will primarily
focus, upon companies that are licensed as Class&nbsp;3 and
Class&nbsp;4 insurers. The BMA has also recently adopted
guidance notes, or the Bermuda Guidance Notes, in order to
ensure those operating in Bermuda have a good understanding of
the nature of the requirements of, and the BMA&#146;s approach
in implementing, the Bermuda Insurance Act.
</DIV>

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    <B><I>Classification of Insurers</I></B></TD>
</TR>

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The Bermuda Insurance Act distinguishes between insurers
carrying on long-term business and insurers carrying on general
business. There are four classifications of insurers carrying on
general business; with Class&nbsp;4 insurers are subject to the
strictest regulation. Twin Bridges is registered as a
Class&nbsp;3 insurer. We do not intend, at this time, to obtain
a license for Twin Bridges to carry on long-term business.
Long-term business includes life insurance and disability
insurance with terms in excess of five years. General business
broadly includes all types of insurance that is not long-term
business.
</DIV>

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    <B><I>Cancellation of Insurer&#146;s Registration</I></B></TD>
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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
An insurer&#146;s registration may be canceled by the BMA on
certain grounds specified in the Bermuda Insurance Act,
including failure of the insurer to comply with its obligations
under the Bermuda Insurance Act or if, in the opinion of the
BMA, the insurer has not been carrying on business in accordance
with sound insurance principles.
</DIV>

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    <B><I>Principal Representative</I></B></TD>
</TR>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
An insurer is required to maintain a principal office in Bermuda
and to appoint and maintain a principal representative in
Bermuda. For the purpose of the Bermuda Insurance Act, the
principal office of Twin Bridges is at our principal executive
offices in Bermuda, and Twin Bridges&#146; principal
representative is Quest Management Services Limited. Without a
reason acceptable to the BMA, an insurer may not terminate the
appointment of its principal representative, and the principal
representative may not cease to act as such, unless
30&nbsp;days&#146; notice in writing to the BMA is given of the
intention to do so. It is the duty of the principal
representative to notify the BMA forthwith of his reaching the
view that there is a likelihood of the insurer for which the
principal representative acts becoming insolvent or that a
reportable &#147;event&#148; has, to the principal
representative&#146;s knowledge, occurred or is believed to have
occurred, and within fourteen days of such notification, to make
a report in writing to the BMA setting out all the particulars
of the case that are available to the principal representative.
Examples of such a reportable &#147;event&#148; include failure
by the insurer to comply substantially with a condition imposed
upon the insurer by the BMA relating to a solvency margin or
liquidity or other ratio.
</DIV>

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    <B><I>Independent Approved Auditor</I></B></TD>
</TR>

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Every registered insurer must appoint an independent auditor
approved by the BMA which we refer to as an approved auditor who
will annually audit and report on the statutory financial
statements, solvency certificate and declaration of statutory
ratios. The statutory financial statements and the statutory
financial return of the insurer, in the case of Twin Bridges,
will be required to be filed annually with the BMA. The approved
auditor of Twin Bridges may be the same person or firm which
audits Twin Bridges&#146; statutory financial statements and
statutory financial returns. Twin Bridges&#146; approved auditor
is currently PriceWaterhouseCoopers.
</DIV>

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    <TD>
    <B><I>Loss Reserve Specialist</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As a registered Class&nbsp;3 insurer, Twin Bridges will be
required to submit annually an opinion of a loss reserve
specialist, who must be approved by the BMA, with its statutory
financial return and statutory financial statement in respect of
its loss and loss adjustment expense provisions. We have
appointed Simon Lambert, FIA, MAA, as our qualified loss reserve
specialist.
</DIV>

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    <B><I>Statutory Financial Statements</I></B></TD>
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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Twin Bridges is required to file with the BMA statutory
financial statements no later than four months after its
financial year end (unless specifically extended). The Bermuda
Insurance Act prescribes rules for the preparation and form of
such statutory financial statements (which include, in statutory
form, a balance sheet, an income statement, a statement of
capital and surplus and notes thereto). The insurer is required
to give detailed information and analyses regarding premiums,
claims, reinsurance and investments. The statutory financial
statements are not prepared in accordance with U.S. generally
accepted accounting principles and are distinct from the
financial statements prepared for presentation to the
insurer&#146;s shareholders under the Companies Act, which
financial statements will be prepared in accordance with U.S.
generally accepted accounting principles. Twin Bridges, as a
general business insurer, is required to submit the annual
statutory financial statements as part of the annual statutory
financial return. The statutory financial statements and the
statutory financial return are retained by the BMA and do not
form part of the public records.
</DIV>

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    <B><I>Annual Statutory Financial Return</I></B></TD>
</TR>

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Twin Bridges is required to file with the BMA a statutory
financial return no later than four months after its financial
year end (unless specifically extended). The statutory financial
return for a Class&nbsp;3 insurer
</DIV>

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includes, among other matters, a report of the approved auditor
on the statutory financial statements of such insurer, the
solvency certificates, the declaration of statutory ratios, the
statutory financial statements and the opinion of the approved
loss reserve specialist. The solvency certificates must be
signed by the principal representative and at least two
directors of the insurer who are required to certify, among
other matters, whether the minimum solvency margin has been met
and whether the insurer complied with the conditions attached to
its certificate of registration. The approved auditor is
required to state whether in its opinion it was reasonable for
the directors to so certify. Where an insurer&#146;s accounts
have been audited for any purpose other than compliance with the
Bermuda Insurance Act, a statement to that effect must be filed
with the statutory financial return.
</DIV>

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    <TD>
    <B><I>Solvency Margin and Restrictions on Dividends and
    Distributions</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under the Bermuda Insurance Act, the value of the general
business assets of a Class&nbsp;3 insurer must exceed the amount
of its general business liabilities by an amount greater than
the prescribed solvency margin. Twin Bridges is required, with
respect to its general business, to maintain a minimum solvency
margin equal to the greatest of:
</DIV>

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<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="45%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="46%">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    (A)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    $1,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    (B)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Net Premium Written (&#147;NPW&#148;)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Prescribed Amount</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Up to $6,000,000</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    20% of NPW</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Greater than $6,000,000</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    The aggregate of $1,200,000 and 15% of the amount by which NPW
    exceeds $6,000,000 in that year;&nbsp;and</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

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    <DIV style="margin-left: 10px; text-indent: -10px">
    (C)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    15% of the aggregate of the insurer&#146;s loss expense
    provisions and other general business insurance reserves.</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Generally, net premium written equals gross premium written
after deduction of any premium ceded by the insurer for
reinsurance.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Twin Bridges is prohibited from declaring or paying any
dividends during any financial year if it is in breach of its
solvency margin or minimum liquidity ratio or if the declaration
or payment of such dividends would cause it to fail to meet such
margin or ratio. In addition, if it has failed to meet its
minimum solvency margin or minimum liquidity ratio on the last
day of any financial year, Twin Bridges will be prohibited,
without the approval of the BMA, from declaring or paying any
dividends during the next financial year. Twin Bridges is
prohibited, without the approval of the BMA, from reducing by
15% or more its total statutory capital as set out in its
previous year&#146;s financial statements, and any application
for such approval shall provide such information as the BMA may
require. In addition, if Twin Bridges at any time fails to meet
its solvency margin, it will be required, within 30&nbsp;days
after becoming aware of such failure or having reason to believe
that such failure has occurred, to file with the BMA a written
report containing certain information as outlined in the Bermuda
Insurance Act.
</DIV>

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Additionally, under the Companies Act, Twin Bridges may not
declare or pay a dividend, or make a distribution from
contributed surplus, if there are reasonable grounds for
believing that it is, or would after the payment be, unable to
pay its liabilities as they become due, or if the realizable
value of its assets would be less than the aggregate of its
liabilities and its issued share capital and share premium
accounts.
</DIV>

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    <TD></TD>
    <TD>
    <B><I>Minimum Liquidity Ratio</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Bermuda Insurance Act provides a minimum liquidity ratio for
general business insurers. An insurer engaged in general
business is required to maintain the value of its relevant
assets at not less than 75% of the amount of its relevant
liabilities. Relevant assets include cash and time deposits,
quoted investments, unquoted bonds and debentures, first liens
on mortgage loans on real estate, investment income due and
accrued, accounts and premiums receivable, reinsurance balances
receivable and funds held by ceding reinsurers. There are
certain categories of assets which, unless specifically
permitted by the BMA, do not automatically qualify
</DIV>

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as relevant assets, such as unquoted equity securities,
investments in and advances to affiliates and real estate and
collateral loans. The relevant liabilities are total general
business insurance reserves and total other liabilities less
deferred income tax and sundry liabilities and letters of
credit, guarantees and other instruments (by interpretation,
those not specifically defined).
</DIV>

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    <TD></TD>
    <TD>
    <B><I>Supervision, Investigation and Intervention</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The BMA may appoint an inspector with extensive powers to
investigate the affairs of an insurer if the BMA believes that
an investigation is required in the interest of the
insurer&#146;s policyholders or persons who may become
policyholders. In order to verify or supplement information
otherwise provided to the BMA, the BMA may direct an insurer to
produce documents or information relating to matters connected
with the insurer&#146;s business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If it appears to the BMA that there is a risk of the insurer
becoming insolvent, or that it is in breach of the Bermuda
Insurance Act or any conditions imposed upon its registration,
the BMA may, among other things, direct the insurer:
</DIV>

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    <TD width="96%"></TD>
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    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    not to take on any new insurance business;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    not to vary any insurance contract if the effect would be to
    increase the insurer&#146;s liabilities;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    not to make certain investments;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    to realize certain investments;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    to maintain in, or transfer to the custody of, a specified bank,
    certain assets;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    not to declare or pay any dividends or other distributions or to
    restrict the making of such payments;&nbsp;and/or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    to limit its premium income.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Disclosure of Information</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition to powers under the Bermuda Insurance Act to
investigate the affairs of an insurer, the BMA may require the
insurer (or certain other persons) to produce certain
information to it. Further, the BMA has been given powers to
assist other regulatory authorities, including foreign insurance
regulatory authorities, with their investigations involving
insurance and reinsurance companies in Bermuda but subject to
restrictions. For example, the BMA must be satisfied that the
assistance being requested is in connection with the discharge
of regulatory responsibilities of the foreign regulatory
authority. Further, the BMA must consider whether cooperation is
in the public interest. The grounds for disclosure are limited
and the Bermuda Insurance Act provides sanctions for breach of
the statutory duty of confidentiality.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Bermuda Guidance Notes</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Insurance Amendment Act 2004, or the Amendment Act,
authorized the BMA to issue guidance notes, which we refer to as
the Bermuda Guidance Notes, on the application of the Insurance
Act in respect of the duties, requirements and standards to be
complied with by persons registered under the Bermuda Insurance
Act or otherwise regulated under it and the procedures and sound
principles to be observed by such persons and by auditors,
principal representatives and loss reserve specialists. In March
2005, the BMA issued the Bermuda Guidance Notes through its web
site at www.bma.bm, which provides guidance on, among other
things, the roles of the principal representative, approved
auditor, and approved actuary and corporate governance for
Bermuda insurers. The BMA has stated that the Bermuda Guidance
Notes should be understood as reflecting the minimum standard
that the BMA expects insurers such as Twin Bridges and other
relevant parties to observe at all times. With respect to the
regulatory changes brought about by the Amendment Act and which
are referenced in the Bermuda Guidance Notes, parties must take
immediate steps to ensure they are in compliance with the same.
In relation to other matters contained in the Bermuda Guidance
Notes, the BMA encourages insurers and other relevant parties to
come into compliance as soon as
</DIV>

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<DIV align="left" style="font-size: 10pt;">
possible and, in any event, no later than 31st&nbsp;December
2005 or a later date as may be agreed with the BMA in a
particular case.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Certain other Considerations</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Although CRM Holdings is incorporated in Bermuda, we are
classified by the BMA as a non-resident of Bermuda for exchange
control purposes. As a result, we may engage in transactions in
currencies other than Bermuda dollars and there are no
restrictions on its ability to transfer funds (other than funds
denominated in Bermuda dollars) in and out of Bermuda or to pay
dividends to U.S.&nbsp;residents who are holders of its common
shares.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under Bermuda law, exempted companies are companies formed with
the ability to conduct business outside Bermuda from a principal
place of business in Bermuda. As &#147;exempted&#148; companies,
neither we, nor our subsidiary Twin Bridges may, without the
express authorization of the Bermuda legislature or under a
license or consent granted by the Minister of Finance,
participate in certain business transactions, including:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the acquisition or holding of land in Bermuda (except land held
    by way of lease or tenancy agreement which is required for its
    business and held for a term not exceeding 50&nbsp;years, or
    which is used to provide accommodation or recreational
    facilities for its officers and employees and held with the
    consent of the Bermuda Minister of Finance, for a term not
    exceeding 21&nbsp;years);</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    (subject to certain provisos) the taking of mortgages on land in
    Bermuda to secure an amount in excess of $50,000 (or whereby any
    such mortgage shall together with any other principal sum or
    sums received by any other mortgage or mortgages held by such
    company from the same mortgagor or mortgagors exceed the sum of
    $50,000);</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    to acquire any bonds, or debentures secured on any land in
    Bermuda, except bonds or debentures issued by the Government of
    Bermuda or a public authority of Bermuda;&nbsp;or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the carrying on of business of any kind or type for which it is
    not licensed in Bermuda, except in certain limited circumstances
    such as doing business with another exempted undertaking in
    furtherance of CRM&nbsp;Holdings&#146; or Twin Bridges&#146;
    business carried on outside Bermuda.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Twin Bridges is a licensed insurer in Bermuda, and it is
expected that it will be able to carry on activities from
Bermuda that are related to and in support of its insurance
business in accordance with its license.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Shares may be offered or sold in Bermuda only in compliance with
the provisions of the Investment Business Act of 2003, and the
Exchange Control Act 1972, and related regulations of Bermuda
which regulate the sale of securities in Bermuda. In addition,
specific permission is required from the BMA, pursuant to the
provisions of the Exchange Control Act 1972 and related
regulations, for all issuances and transfers of securities of
Bermuda companies, other than in cases where the BMA has granted
a general permission. The BMA in its policy dated June&nbsp;1,
2005 provides that where any equity securities, including our
common shares, of a Bermuda company are listed on an appointed
stock exchange, general permission is given for the issue and
subsequent transfer of any securities of a company from and/or
to a non-resident, for as long as any equities securities of
such company remain so listed. The Nasdaq National Market is
deemed to be an appointed stock exchange under Bermuda law.
Notwithstanding the above general permission, the BMA has
granted CRM Holdings permission to, subject to the common shares
in CRM Holdings being listed on an appointed stock exchange,
issue, grant, create, sale and transfer any of CRM
Holdings&#146; shares, stock, bonds, notes (other than
promissory notes), debentures, debenture stock, units under a
unit trust scheme, shares in an oil royalty, options, warrants,
coupons, rights and depository receipts, or collectively the
Securities, to and among persons who are either resident or
non-resident of Bermuda for exchange control purposes, whether
or not the Securities are listed on an appointed stock exchange.
The BMA and the Registrar of Companies accept no responsibility
for the financial soundness of any proposal or for the
correctness of any of the statements made or opinions expressed
in this prospectus.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under Bermuda law, there are no restrictions on the degree of
foreign ownership, neither we nor our subsidiary Twin Bridges
are currently subject to taxes computed on profits or income or
computed on any
</DIV>

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<DIV align="left" style="font-size: 10pt;">
capital asset, gain or appreciation, or any tax in the nature of
estate duty or inheritance tax or to any foreign exchange
controls in Bermuda. See &#147;Material Tax
Considerations&nbsp;&#151; Certain Bermuda Tax
Considerations.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under Bermuda law, non-Bermudians (other than spouses of
Bermudians and permanent residents) may not engage in any
gainful occupation in Bermuda without a work permit issued by
the Bermuda Department of Immigration. Such work permits may be
granted or extended upon showing that, after proper public
advertisement, no Bermudian, or spouse of a Bermudian or
individual holding a permanent resident certificate is available
who meets the minimum standards for the advertised position.
None of our executive officers is a Bermudian, and all such
officers will be working in Bermuda under work permits. In April
2001, the Bermuda government announced a policy that places a
six-year term limit on individuals with work permits, subject to
certain exceptions for key employees. We expect to employ
primarily non-Bermudians.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>U.S.&nbsp;State and Federal Regulation</B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Credit for Reinsurance</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Self-insured groups are required to purchase excess
workers&#146; compensation coverage from an admitted insurer to
cover claims that exceed a minimum level established by state
law or regulation or by administrative determination. NY
Marine&nbsp;&#38; General and other insurers provide this
coverage and we provide reinsurance to NY Marine&nbsp;&#38;
General for a portion of its coverage, through our subsidiary
Twin Bridges.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Admitted insurers, such as NY Marine&nbsp;&#38; General,
ordinarily will enter into a reinsurance agreement only if it
can obtain credit for the reinsurance ceded on its statutory
financial statements. In general, credit for reinsurance is
allowed in the following circumstances:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    if the reinsurer is licensed in the state in which the primary
    insurer is domiciled or, in some instances, in certain states in
    which the primary insurer is licensed;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    if the reinsurer is an &#147;accredited&#148; or otherwise
    approved reinsurer in the state in which the primary insurer is
    domiciled or, in some instances, in certain states in which the
    primary insurer is licensed;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    in some instances, if the reinsurer (a)&nbsp;is domiciled in a
    state that is deemed to have substantially similar credit for
    reinsurance standards as the state in which the primary insurer
    is domiciled and (b)&nbsp;meets financial requirements;&nbsp;or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    if none of the above apply, to the extent that the reinsurance
    obligations of the reinsurer are secured appropriately,
    typically through the posting of a letter of credit for the
    benefit of the primary insurer or the deposit of assets into a
    trust fund established for the benefit of the primary insurer.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Because Twin Bridges is not licensed, accredited or otherwise
approved by or domiciled in any state in the United States, a
U.S.&nbsp;admitted insurer, such as NY Marine&nbsp;&#38;
General, is generally only willing to cede business to us if we
provide adequate security to allow it to take credit on its
balance sheet for the reinsurance it purchases. We are only able
to provide adequate security, typically through the posting of a
letter of credit or deposit of assets into a security fund for
the benefit of the U.S.&nbsp;admitted insurer, if we have in
place a letter of credit facility or are otherwise able to
provide necessary security. We currently have a facility with
KeyBank National Association and informal arrangements with
KeyBank and Smith Barney Citigroup, and through these
arrangements we provide NY Marine&nbsp;&#38; General with
letters of credit as security for our aggregate liability under
our reinsurance agreement with NY Marine &#38; General. If we
fail to maintain an adequate letter of credit facility on terms
acceptable to us and are unable to otherwise provide the
necessary security, insurance companies, such as
NY&nbsp;Marine&nbsp;&#38; General, may be unwilling to reinsure
with us.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Operations of Twin Bridges</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Twin Bridges is not licensed or admitted to do business in the
United States. The insurance laws of each state of the United
States and of many other countries regulate or prohibit the sale
of insurance and reinsurance within their jurisdictions by
non-domestic insurers and reinsurers that are not admitted to do
business within such jurisdictions. We do not intend to allow
Twin Bridges to maintain an office or solicit, advertise, settle
claims or conduct other insurance activities in any jurisdiction
without a license, unless it can
</DIV>

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<DIV align="left" style="font-size: 10pt;">
do so subject to an exemption from the licensing requirement or
as an approved or accredited surplus lines insurer. We intend to
operate Twin&nbsp;Bridges in compliance with the U.S.&nbsp;state
and federal laws, however, it is possible that a
U.S.&nbsp;regulatory agency may raise inquiries or challenges to
this subsidiary&#146;s insurance and reinsurance activities in
the future. If Twin Bridges fails to respond to such inquiries
or challenges in a manner that satisfies the regulatory agency,
they may take legal or administrative action against Twin
Bridges. Such action may have a material adverse effect on our
reputation, business and financial condition.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Federal Regulation</B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Gramm Leach Bailey Act</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Gramm Leach Bailey Act, or GLBA, which made fundamental
changes in the regulation of the financial services industry in
the United States was enacted on November&nbsp;12, 1999. The
GLBA permits the transformation of the already converging
banking, insurance and securities industries by permitting
mergers that combine commercial banks, insurers and securities
firms under one holding company, a &#147;financial holding
company.&#148; Bank holding companies and other entities that
qualify and elect to be treated as financial holding companies
may engage in activities, and acquire companies engaged in
activities, that are &#147;financial&#148; in nature or
&#147;incidental&#148; or &#147;complementary&#148; to such
financial activities. Such financial activities include acting
as principal, agent or broker in the underwriting and sale of
life, property, casualty and other forms of insurance and
annuities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Until the passage of the GLBA, the Glass-Steagall Act of 1933
had limited the ability of banks to engage in securities-related
businesses, and the Bank&nbsp;Holding Company Act of 1956, as
amended had restricted banks from being affiliated with
insurers. With the passage of the GLBA, among other things, bank
holding companies may acquire insurers, and insurance holding
companies may acquire banks. The ability of banks to affiliate
with insurers may materially and adversely affect our
U.S.&nbsp;subsidiaries&#146; business and financial condition by
substantially increasing the number, size and financial strength
of potential competitors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>New York and California Regulation</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The groups we manage in New York and California are subject to
state law and regulation by workers&#146; compensation boards or
similar authorities in the states in which they operate. As part
of our fee-based management services, we assist the groups we
manage in complying with these laws and regulations. In
addition, we become subject to these same laws and regulations
arising from our activities in forming and marketing these
self-insured groups.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Although such requirements vary from state to state, each
self-insured group must generally meet certain minimum
requirements including:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    each group must be composed of employers in the same industry,
    all of which must be located in a single state;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the members of a group must have and maintain a minimum
    aggregate net worth; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the members of a group must have and maintain a minimum
    aggregate annual payroll.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As we form new groups, we must submit a comprehensive
application to the state regulatory agencies. These applications
must include, among other things, the following information:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    current payroll reports for each member of the proposed group;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    a description of the proposed safety program for the proposed
    group;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    an actuarial feasibility study directed and certified by an
    independent qualified actuary; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    a report identifying the projected rate of contribution and
    assessments to be paid by each member for the first year of the
    proposed group&#146;s operations.</TD>
</TR>

</TABLE>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, in connection with the formation of a new
self-insured group, each new group will be required to deposit
with the applicable regulatory agency securities, surety bonds
or irrevocable letters of credit which may be liquidated by the
regulatory agency in the event that the group is unable to pay
its liabilities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
After a group is formed, it is subject to a number of
regulations with respect to its operations. Pursuant to these
regulations, each group:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    must receive prior approval from the applicable state regulatory
    agency prior to admitting a new member;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    is required to purchase excess workers&#146; compensation
    coverage to cover loss above levels established by the
    applicable state regulatory agency;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    must follow mandatory guidelines with respect to the investment
    of the funds collected by the group and must follow additional
    guidelines with respect to the use of the funds;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    is subject to periodic audit and review of the group&#146;s
    financial statements and contribution rates by the applicable
    regulatory agency; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    must maintain assets in an amount which exceeds its liabilities.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the event that a group is unable to maintain assets in an
amount which exceeds its liabilities, the group may be limited
in the amount of new members that it may add, may be required to
assess its members in order to remedy such deficiency, deposit
additional security with the applicable regulatory agency or, in
certain circumstances, be dissolved.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Each group is also subject to periodic reporting and disclosure
requirements and must file with the applicable regulatory agency
audited financial statements, actuarial reports and payroll
reports. In California, the self-insured groups are required to
periodically submit audited or reviewed financial statements of
their members.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Both we and the groups we manage are subject to certain
disclosure requirements and other regulations with respect to
the solicitation of new members and the preparation of marketing
material with respect to the groups.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are licensed by the New York Workers&#146; Compensation Board
as a third party claims administrator in New York. Under
California law, we are not permitted to manage the claims of the
groups we manage in California. Therefore, our groups in
California contract with an independent third party
administrator to perform this task.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
These regulations are undergoing review and we believe that
these regulations will likely change in both New York and
California.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Legislative and Regulatory Proposals</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
From time to time, various regulatory and legislative changes
have been proposed in the insurance and reinsurance industry.
These proposals have included the possible introduction of
federal regulation in addition to, or in lieu of, the current
system of state regulation of insurers. Federal legislation is
also being discussed that would require all states to adopt
uniform standards relating to the regulation of products,
licensing, rates and market conduct. We are unable to predict
whether any of these or other proposed laws and regulations will
be adopted, the form in which any such laws and regulations
would be adopted, or the effect, if any, these developments
would have on our operations and financial condition.
</DIV>

<P align="center" style="font-size: 10pt;">74

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<A name='110'></A>
</DIV>

<!-- link1 "MANAGEMENT" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>MANAGEMENT</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth certain information regarding our
executive officers and directors.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="47%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="43%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="left" nowrap><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Age</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Title</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Daniel G. Hickey,&nbsp;Jr.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>38</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Co-Chief Executive Officer and Chairman of the Board</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Martin D. Rakoff</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>41</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Co-Chief Executive Officer and Deputy Chairman of the Board</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Louis J. Viglotti, Esq.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>49</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    General Counsel</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Chester J. Walczyk</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Chief Operating Officer</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    James J. Scardino</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>52</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Chief Financial Officer</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Daniel G. Hickey,&nbsp;Sr.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>61</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Director</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    David M. Birsner</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>38</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Director</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Philip J. Magnarella</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>68</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Director</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Louis Rosner, Esq.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>57</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Director</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Sal Patafio</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>61</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Director</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Daniel G. Hickey,&nbsp;Jr.&nbsp;&#151; Co-Chief Executive
Officer and Chairman of the Board.</I> Mr. Hickey has served as
our Co-Chief Executive Officer and Chairman of the Board since
September 2005, and has served as President of CRM since its
formation in 1999. He also has served as President of Eimar and
CRM CA, since 2001 and 2003, respectively, and as Chairman of
the Board of Twin Bridges since 2003. Mr.&nbsp;Hickey has over
10&nbsp;years of experience with workers&#146; compensation
insurance as well as experience with the broker community and
property and casualty insurance. Mr.&nbsp;Hickey graduated from
Northeastern University with a B.A. in Finance (with
concentrations in insurance and investments). Daniel G.
Hickey,&nbsp;Jr. is the son of Daniel G. Hickey,&nbsp;Sr., who
is a director of the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Martin D. Rakoff&nbsp;&#151; Co-Chief Executive Officer and
Deputy Chairman of the Board.</I> Mr.&nbsp;Rakoff has served as
our Co-Chief Executive Officer and Deputy Chairman of the Board
since September 2005, and has served as Chief Executive Officer
of CRM since its formation in 1999. He also has served as Chief
Executive Officer of Eimar and CRM CA since 2000 and 2003,
respectively, and as Deputy Chairman of the Board of Twin
Bridges since 2003. He began his career in 1984, as a national
administrator and has since developed significant experience
working in claims administration. Mr.&nbsp;Rakoff graduated from
Temple University with a B.A. in Journalism.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Louis J. Viglotti, Esq.&nbsp;&#151; General Counsel.</I>
Mr.&nbsp;Viglotti has served as our General Counsel since
September, 2005 and has served as General Counsel of CRM since
2001, and has served as General Counsel of Eimar and CRM CA
since 2001 and 2003, respectively. He also has served as a
Director of Twin Bridges since 2003. Mr.&nbsp;Viglotti has over
20&nbsp;years of legal experience. Prior to 2001, he was a
partner in the law firm of Vergilis, Stenger, Roberts,
Pergament&nbsp;&#38; Viglotti in Poughkeepsie, New York, and he
continues to be associated with such firm as a contract
attorney. Mr.&nbsp;Viglotti graduated from Marist College, with
a B.A. in Pre-Law and holds a J.D. from Pace University School
of Law.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Chester J. Walczyk&nbsp;&#151; Chief Operating Officer.</I>
Mr.&nbsp;Walczyk has served as our Chief Operating Officer since
September 2005 and has served as Vice President of Loss Control
of CRM from 2000 to January 2003, when he was promoted to Senior
Vice President of Loss Control and Risk Management, which
position he also held with regard to CRM&nbsp;CA from October
2003. In November 2004, he became Chief Operating Officer of
CRM&nbsp;CA. In July 2005, he became Chief Operating Officer of
CRM. Mr.&nbsp;Walczyk began his career in the industry in 1980
as a Loss Control Consultant. Mr.&nbsp;Walczyk holds the
professional designation of Associate in Risk Management
(ARM)&nbsp;and has significant experience in the areas of risk
management, underwriting, product development and marketing,
which he has used to develop and present training seminars
throughout the country. Mr.&nbsp;Walczyk graduated from the
State University of New York at Buffalo with a B.S. in
Industrial Technology.
</DIV>

<P align="center" style="font-size: 10pt;">75

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>James J. Scardino&nbsp;&#151; Chief Financial Officer.</I>
Mr.&nbsp;Scardino has served as our Chief Financial Officer
since September 2005 and has served as Senior Vice President and
Chief Financial Officer of CRM since August 2005. From 2003 to
2005, Mr.&nbsp;Scardino held the position of Senior Vice
President, Finance with RSC Insurance Brokerage, Inc., where his
responsibilities included financial management. From March 2000
until May 2003, Mr.&nbsp;Scardino was Executive Vice President
of Allied American Insurance Agency, Inc., where he was
responsible for program management. Mr.&nbsp;Scardino graduated
from the University of California, Berkeley with a B.A. in
Anthropology and holds an M.B.A. from the Tuck School of
Business at Dartmouth College.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Daniel G. Hickey,&nbsp;Sr.&nbsp;&#151; Director.</I>
Mr.&nbsp;Hickey has served as a member of our board of directors
since September 2005. He also has served as a Director of Twin
Bridges since 2003. Mr.&nbsp;Hickey has served as President of
Hickey-Finn and Company, Inc., an insurance brokerage firm,
since 1980, where his responsibilities have involved sales and
management functions. Mr.&nbsp;Hickey graduated from Marist
College with a B.A. in Psychology. Daniel G. Hickey,&nbsp;Sr. is
the father of Daniel G. Hickey,&nbsp;Jr., who is our Co-Chief
Executive Officer and Chairman of the Board.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>David M. Birsner&nbsp;&#151; Director.</I> Mr.&nbsp;Birsner
has served as a member of our board of directors since September
2005. Since 1996, Mr.&nbsp;Birsner has served as an insurance
broker for and a member of the board of directors of Hickey-Finn
and Company, Inc., where his responsibilities have involved
insurance sales and service. Mr.&nbsp;Birsner graduated from
Siena College with a B.A. in Marketing.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Philip J. Magnarella&nbsp;&#151; Director.</I>
Mr.&nbsp;Magnarella has served as a member of our board of
directors since September 2005. Mr.&nbsp;Magnarella has
significant experience working in various areas of education.
From 1994 until 2004, Mr.&nbsp;Magnarella held various
administrative and consulting positions with the Moore County
Schools in Carthage North Carolina. From 2000 until 2004,
Mr.&nbsp;Magnarella was also a program evaluator for Sandhills
Community College and Hoke County Schools, both in North
Carolina. Mr.&nbsp;Magnarella graduated from the State
University College at Buffalo with a B.S. degree in Industrial
Arts Education and holds an M.Ed from the State University New
York at Buffalo in Counseling and Guidance, a CAS from the State
University College, New Paltz, a N.Y. in Education
Administration, and an Ed.D from Columbia University, New York,
N.Y. in Education Administration.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Louis Rosner, Esq.&nbsp;&#151; Director.</I> Mr.&nbsp;Rosner
has served as a member of our board of directors since September
2005. Mr.&nbsp;Rosner has been involved in the private practice
of law, concentrating in employment, labor relations and related
business matters, since 1981. Prior to such time he was a Board
Attorney and Litigation Specialist with the National Labor
Relations Board. Mr.&nbsp;Rosner graduated from Cornell
University with a B.S. degree and holds a J.D. from Antioch
School of Law.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Sal Patafio&nbsp;&#151; Director.</I> Mr.&nbsp;Patafio has
served as a member of our board of directors since September
2005. Mr.&nbsp;Patafio has extensive experience in various
aspects of human resources. Mr.&nbsp;Patafio has served as Human
Resources Manager, Commercial Alliances at IBM Corporation since
July 2004. From 2002 until 2004, Mr.&nbsp;Patafio held the
position of Manager of Human Resources at Micron Technology. For
more than five&nbsp;years prior to 2002, Mr.&nbsp;Patafio was a
Human Resources Consultant at Dominion Semiconductor L.L.C.
Mr.&nbsp;Patafio graduated from the University of Bridgeport
with a B.S. in Industrial and Labor Relations.
</DIV>

<P align="center" style="font-size: 10pt;">76

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Executive Compensation</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth certain information concerning
the compensation of our co-chief executive officers and each of
our other executive officers who earned over $100,000 for the
year ended December&nbsp;31, 2004. These individuals are
collectively referred to as the &#147;Named Executive
Officers&#148;. The compensation set forth below reflects their
compensation as executives of CRM.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="28%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Annual Compensation</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B>Long Term Compensation</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Awards</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Payouts</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Restricted</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Securities</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Other Annual</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Stock</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Underlying</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>LTIP</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>All Other</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2" align="left" nowrap><B>Name and</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Salary</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Bonus</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Compensation</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Awards(s)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Options/</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Payouts</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Compensation</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2" align="left" nowrap><B>Principal Position</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Year</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>($)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>($)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>($)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>($)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>SARs&nbsp;(#)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>($)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>($)(1)</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Daniel G. Hickey,&nbsp;Jr.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>250,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>692,383</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,650</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Co-chief Executive Officer</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Martin D. Rakoff</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>250,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>692,383</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>325</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Co-chief Executive Officer</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Louis J. Viglotti</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>250,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,016</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    General Counsel</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Chester J. Walczyk</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>112,306</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,513</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Chief Operating Officer</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    These amounts are composed of life insurance policies for the
    benefit of the officers, and 401(k) matching contributions.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Our Board of Directors and Corporate Action</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our bye-laws provide that the board of directors shall consist
of not less than two nor more than twenty&nbsp;directors, as
determined by the shareholders at an annual general meeting of
the shareholders, divided into three approximately equal
classes. Upon the closing of this offering, our board of
directors will be comprised of three Class&nbsp;I directors
whose initial term will expire at our 2006 annual
shareholders&#146; meeting and three Class&nbsp;II directors
whose initial term will expire at our 2007 annual
shareholders&#146; meeting and three Class&nbsp;III directors
whose initial term will expire at our 2008 annual
shareholders&#146; meeting. After the initial terms of these
directors, the term of each class of directors elected shall be
three years. Directors may only be removed prior to the
expiration of such director&#146;s term at a special meeting of
shareholders called for that purpose. The appointment or removal
of a director requires the simple majority of votes cast, in
person or by proxy, at the meeting at which the proposal is put
forth.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Board Committees</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our board of directors has established a compensation committee
comprised entirely of independent members. Upon the closing of
this offering, our board of directors will establish an audit
committee and a governance and nominating committee.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Audit Committee</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The audit committee will assist our board of directors in
monitoring the integrity of our financial statements, the
independent auditor&#146;s qualifications and independence,
performance of our independent auditors and our compliance with
legal and regulatory requirements. The audit committee&#146;s
responsibilities will also include appointing, reviewing,
determining funding for and overseeing our independent auditors
and their services. Further, the audit committee, to the extent
it deems necessary or appropriate among other responsibilities,
shall:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    review and discuss with appropriate members of our management
    and the independent auditors our audited financial statements,
    related accounting and auditing principles, practices and
    disclosures;</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">77

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    review and discuss our audited annual and unaudited quarterly
    financial statements prior to the filing of such statements;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    establish procedures for the receipt, retention and treatment of
    complaints we receive regarding accounting, internal accounting
    controls or auditing matters, and the confidential, anonymous
    submission by employees of concerns regarding our financial
    statements or accounting policies;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    review reports from the independent auditors on all critical
    accounting policies and practices to be used for our financial
    statements and review the results of those audits;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    monitor the adequacy of our operating and internal controls as
    reported by management and the independent or internal auditors.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under the listing requirements of the Nasdaq National Market, we
are required to maintain an audit committee consisting of at
least three directors, all whom must be independent under Nasdaq
listing requirements. Prior to the closing of this offering, we
intend to establish an audit committee that satisfies these
criteria.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Compensation Committee</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The compensation committee&#146;s responsibilities include:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    reviewing and approving corporate and individual goals and
    objectives relevant to the compensation of our Co-Chief
    Executive Officers and other executive officers;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    evaluating the performance of our Co-Chief Executive Officers
    and other executive officers in light of such corporate and
    individual goals and objectives and, based on that evaluation,
    together with the other independent directors if directed by the
    board of directors, determining the base salary and bonus of the
    Co-Chief Executive Officers and other executives officers;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    administering any management incentive plan, stock option plan
    or other similar plan we may adopt and approving all grants made
    pursuant to such plan;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    making recommendations to our board of directors regarding
    director compensation and any equity-based compensation plans.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Sal Patafio is the chairman of our compensation committee, and
the other member of our compensation committee is Philip&nbsp;J.
Magnarella. We believe that each of these members qualifies as
an independent director under the Nasdaq listing standards.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Governance and Nominating Committee</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The governance and nominating committee will be responsible for
assisting our board of directors by:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    identifying individuals qualified to become directors for
    recommendation to our board of directors;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    identifying and recommending for appointment to our board of
    directors, directors qualified to fill vacancies on any
    committee of our board of directors;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    having sole authority to select, retain and terminate any
    consultant or search firm to identify director candidates and
    having sole authority to approve the consultant or search
    firm&#146;s fees and other retention terms;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    developing and recommending to the board a set of corporate
    governance principles and code of business conduct and ethics
    applicable;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    exercising oversight of the evaluation of the board and
    management.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">78

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Prior to the closing of this offering, we intend to form a
governance and nominating committee composed entirely of
directors who qualify as independent under the Nasdaq listing
standards.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Non-Employee Director Compensation</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We will reimburse our non-employee directors for any
out-of-pocket expenses incurred by them in connection with
services provided in such capacity. In addition, we may
compensate directors for services provided in such capacity in
the form of cash payments and/or option grants.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Employment Agreements</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We intend to enter into employment agreements with
Daniel&nbsp;G. Hickey,&nbsp;Jr. and Martin&nbsp;D. Rakoff, our
Co-Chief Executive Officers, upon the closing of this offering.
We do not currently maintain key man life insurance policies
with respect to any of our employees.
</DIV>

<P align="center" style="font-size: 10pt;">79

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<A name='113'></A>
</DIV>

<!-- link1 "PRINCIPAL SHAREHOLDERS" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>PRINCIPAL SHAREHOLDERS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth the total number and percentage
of our common shares beneficially owned on the date of this
prospectus after giving effect to the restructuring and the
closing of this offering by: (1)&nbsp;each person known to us to
be the beneficial owner of more than 5% of any class of our
outstanding voting shares; (2)&nbsp;each director; (3)&nbsp;each
of our Named Executive Officers; and (4)&nbsp;all executive
officers and directors as a group. Except as otherwise noted
below, the address of each of the persons in the table is
c/o&nbsp;CRM Holdings Ltd., P.O. Box&nbsp;HM 2062, Hamilton HM
HX, Bermuda.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="69%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Shares Beneficially Owned</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="center" nowrap><B>Beneficial Owner</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Number</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Percent</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Daniel G. Hickey,&nbsp;Sr.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Daniel G. Hickey,&nbsp;Jr.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Martin D. Rakoff</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Louis J. Viglotti</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Chester J. Walczyk</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    David M. Birsner</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Philip J. Magnarella</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Louis Rosner</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Sal Patafio</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Executive officers and directors as a group</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;">
<A name='114'></A>
</DIV>

<!-- link1 "SELLING SHAREHOLDERS" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>SELLING SHAREHOLDERS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The table below sets forth the name of each selling shareholder
and the number of common shares that each selling shareholder is
offering pursuant to this prospectus. Except as noted in
&#147;Management&#148; and in &#147;Certain Relationships and
Related Transactions,&#148; none of the selling shareholders
has, or within the past three years has had, any material
relationship with us or any of our predecessors or affiliates,
except as officers and directors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Beneficial ownership and percentage ownership are determined in
accordance with the rules of the SEC. To our knowledge, except
as indicated in the footnotes to the following table and subject
to community property laws where applicable, the persons named
in this table have sole voting and investment power with respect
to all of our common shares shown as beneficially owned by them.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="21%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Shares Beneficially Owned</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B>Shares Beneficially Owned</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Prior to this Offering</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B>After this Offering</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Shares to be</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Shares to be</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Percentage</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Percentage</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Sold Before</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Sold Upon Full</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Before</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>After Full</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Exercise of</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Exercise of</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Exercise of</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Exercise of</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Underwriters&#146;</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Underwriters&#146;</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Underwriters&#146;</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Underwriters&#146;</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="left" nowrap><B>Name and Address of</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Common</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Percentage</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Over-allotment</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Over-allotment</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Over-allotment</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Over-allotment</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="center" nowrap><B>Beneficial Owner</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Shares</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>of Class</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Option</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Option</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Option</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Option</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">80

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<A name='111'></A>
</DIV>

<!-- link1 "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Restructuring</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Prior to the consummation of the restructuring, certain members
of our management team, including Daniel&nbsp;G.
Hickey,&nbsp;Jr., Martin&nbsp;D. Rakoff and Louis&nbsp;J.
Viglotti, as well as certain other persons listed in
&#147;Principal Shareholders&#148; are the beneficial owners of
CRM, CRM&nbsp;CA, Eimar and Twin Bridges. We sometimes refer to
these owners in this prospectus as the &#147;existing
shareholders.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Immediately prior to the closing of this offering, CRM,
CRM&nbsp;CA and Eimar will be converted from limited liability
companies into corporations and the existing shareholders will
contribute all of their interests in CRM and Eimar to
CRM&nbsp;USA Holdings, which will be our wholly owned subsidiary
and will hold all of the outstanding shares of our
U.S.&nbsp;subsidiaries. In exchange, the existing shareholders
will receive shares issued by CRM&nbsp;USA Holdings. The
existing shareholders will then contribute their CRM&nbsp;USA
Holdings shares to us in exchange
for &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">l</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of
our common shares. CRM will then distribute its shares in
CRM&nbsp;CA to CRM&nbsp;USA Holdings. In addition, immediately
prior to the closing of this offering, the existing shareholders
will contribute all of their interests in Twin Bridges to us in
exchange
for &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">l</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of
our common shares. The existing shareholders ultimately will
receive a total
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">l</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of
our common shares in exchange for their interests in CRM
(including its subsidiary, CRM CA), Eimar and Twin Bridges.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We expect the restructuring to be tax free to CRM, CRM&nbsp;CA,
Eimar, CRM USA Holdings, Twin Bridges and us.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
After completion of the restructuring and this offering, the
existing shareholders will
own &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">l</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of
our common shares,
representing &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">l</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%
of the total voting power of our shares.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with the restructuring, CRM, Eimar and Twin
Bridges intend to make a distribution to the existing
shareholders of unpaid earnings and profits in an aggregate
amount equal to the net income for U.S.&nbsp;federal income tax
purposes of CRM and Eimar for the nine months ended
September&nbsp;30, 2005, plus the amount by which the net income
for U.S.&nbsp;federal income taxes purposes of Twin Bridges for
the period from its commencement through September&nbsp;30, 2005
exceeds distributions Twin Bridges previously made to its
shareholders, such net income to be computed on a cash basis,
which has been the basis on which distributions have been made
to the existing shareholders by each of CRM and Eimar since
their inception. We refer to these distributions in this
prospectus as the &#147;Distributions.&#148; We also will
indemnify the existing shareholders for an amount equal to the
amount of U.S.&nbsp;federal income taxes, if any, that would be
payable by them with respect to the combined net income, if any,
for U.S. federal income tax purposes of CRM, Eimar and Twin
Bridges for the period from October&nbsp;1, 2005 through the
consummation of the restructuring, computed on a cash basis as
if such period were a taxable period.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Compensation Risk Managers Agency, Captive, LLC, or the Agency
Captive, is a licensed insurance broker that is owned by the
existing shareholders. It was originally formed to underwrite a
business unrelated to the self-insured groups managed by CRM.
The Agency Captive currently holds the brokerage license that
CRM and CRM CA use to place the excess coverage with
U.S.&nbsp;admitted insurers and surety bonds, and receives the
commission income which are then remitted in full to CRM or
CRM&nbsp;CA, as applicable. The brokerage license is owned by
Daniel&nbsp;G. Hickey,&nbsp;Jr., one of our Co-Chief Executive
Officers and Chairman of the Board. Upon the closing of this
offering, the license will be transferred to CRM and commission
income will be paid directly to CRM.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Relationship between Twin Bridges and our Managed Groups</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The groups we manage purchase excess workers&#146; compensation
coverage from U.S.&nbsp;admitted insurers to cover claims that
exceed a minimum level established by state law or regulation or
by administrative determination. Typically, our managed groups
purchase excess coverage for losses and loss adjustment
</DIV>

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<DIV align="left" style="font-size: 10pt;">
expenses in excess of $500,000&nbsp;per occurrence. This
&#147;excess coverage&#148; purchased by the groups provides
them with benefits for losses in excess of the $500,000&nbsp;per
occurrence liability retained by the groups. Our managed groups
also purchase what is called &#147;catastrophic coverage&#148;
for losses and loss adjustment expenses in excess of
$1&nbsp;million per occurrence. The catastrophic coverage
purchased by our managed groups is not subject to a per
occurrence limit. In addition, each of our groups also purchases
coverage to insure against the risk that a large number of
claims will occur and result in losses that are each less than
$500,000 and that the aggregate result of such losses could
exhaust their resources. This &#147;frequency coverage&#148; is
triggered in the event that the aggregate amount of losses and
loss adjustment expenses during the coverage period exceeds a
range from 90% to 150% of the premiums paid to the groups by
their members. If the frequency coverage is triggered, the
insurer pays the next $2&nbsp;million of losses and related loss
adjustment expenses of the group during the coverage period.
NY&nbsp;Marine&nbsp;&#38; General provides the excess coverage
and the frequency coverage insurance for 13 of our 14 groups.
Under our reinsurance agreement with NY Marine&nbsp;&#38;
General, we reinsure 50% of all of the coverage it provides and
receive 50% of the premiums, subject to certain liability limits
and premium retentions by NY&nbsp;Marine&nbsp;&#38; General for
certain expenses and services. We therefore act as manager of
the groups and reinsurance broker for the groups, while also
reinsuring NY&nbsp;Marine&nbsp;&#38; General for a portion of
the excess coverage, through our subsidiary Twin Bridges, and
therefore may be deemed to have a conflict of interest. See
&#147;Risk Factors&nbsp;&#151; We may be deemed to have a
conflict of interest in concurrently managing groups and placing
excess coverage for these groups with a U.S. admitted insurer
that cedes a part of this excess coverage to Twin Bridges.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Other Agreements</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We conduct business with Hickey-Finn and Company, Inc., or
Hickey-Finn, an insurance broker whose owners include Daniel G.
Hickey,&nbsp;Sr., one of our directors and an existing
shareholder and the father of Daniel&nbsp;G. Hickey,&nbsp;Jr.,
our Co-Chief Executive Officer and Chairman of the Board. We pay
broker commissions to Hickey-Finn for business placed with
several of the self-insured groups that we manage. In addition,
we lease office space and purchase various liability, property
and casualty insurance coverage from Hickey-Finn. For the six
months ended June&nbsp;30, 2005 and the years ended
December&nbsp;31, 2004, 2003 and 2002, we paid Hickey-Finn for
its services and operating expenses $144,632, $269,093, $302,341
and $320,370, respectively. David&nbsp;M. Birsner, one of our
directors and an existing shareholder, is also a director of
Hickey-Finn.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Eimar maintains office space in Poughkeepsie, New&nbsp;York. The
offices consist of approximately 1,400&nbsp;square feet and the
term of the lease expires on December&nbsp;31, 2005. The annual
lease payments for these premises are approximately $21,000. One
of the lessors under this lease is Daniel&nbsp;G.
Hickey,&nbsp;Sr.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
CRM has entered into a revolving credit facility with KeyBank,
under which CRM is entitled to borrow up to $5&nbsp;million
until December&nbsp;31, 2005. All of CRM&#146;s obligations
under the facility are secured by a lien on substantially all of
CRM&#146;s assets and by the personal guarantees of the existing
shareholders, including (i)&nbsp;Daniel&nbsp;G. Hickey, Jr., our
Co-Chief Executive Officer and Chairman of the Board,
(ii)&nbsp;Martin&nbsp;D. Rakoff, our Co-Chief Executive Officer
and Deputy Chairman of the Board, (iii)&nbsp;Daniel&nbsp;G.
Hickey, Sr., one of our directors and the father of
Daniel&nbsp;G. Hickey,&nbsp;Jr. (iv)&nbsp;Village Holdings, LLC,
of which Louis&nbsp;D. Viglotti, our General Counsel, is a
member and (v)&nbsp;David&nbsp;M. Birsner, one of our directors.
In addition, Twin Bridges has entered into a loan agreement with
KeyBank under which Twin Bridges is entitled to draw letters of
credit in the principal amount of up to $3&nbsp;million, which
agreement expires on September&nbsp;30, 2005, and had entered
into a second letter of credit loan facility under which it was
entitled to draw letters of credit in the principal amount of up
to $7.5&nbsp;million. This second letter of credit loan facility
terminated on June&nbsp;30, 2005. Borrowings under both letter
of credit facilities is or had been guaranteed by the same
existing shareholders mentioned above. It is anticipated that
these personal guarantees will be released upon the closing of
this offering.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In August 2004, we advanced to Martin D. Rakoff, our Co-Chief
Executive Officer and Deputy Chairman of the Board, $200,000
against his bonus earned and payable in December&nbsp;2004. Mr.
Rakoff paid us $1,825 in interest with respect to such advance.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Prior to the completion of this offering, our non-management
existing shareholders have been entitled to distributions made
by CRM in certain guaranteed amounts that were paid as part of
selling, general and administrative expenses. Two of our
non-management existing shareholders have been entitled to
annual guaranteed payments of $80,000, and one of our
non-management existing shareholders has been entitled to annual
guaranteed payments of $20,000, in addition to any distributions
that generally were made to all existing shareholders from net
income. For the year ended December&nbsp;31, 2004, Daniel G.
Hickey,&nbsp;Sr., one of our directors and the father of Daniel
G. Hickey,&nbsp;Jr., our Co-Chief Executive Officer and Chairman
of the Board, and Village Holdings LLC, of which Louis J.
Viglotti, our General Counsel, is a member, each received
guaranteed payments of $80,000 from CRM. In addition,
David&nbsp;M. Birsner, one of our Directors, received a
guaranteed payment of $20,000 from CRM for the year ended
December&nbsp;31, 2004. These guaranteed payments will cease
upon the completion of this offering.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Louis Rosner, one of our directors, has provided legal services
to CRM from time to time.
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<A name='112'></A>
</DIV>

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<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>MATERIAL TAX CONSIDERATIONS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>The following summary of our taxation and the taxation of our
shareholders is based upon current law and does not purport to
be a comprehensive discussion of all the tax considerations that
may be relevant to a decision to purchase shares. Legislative,
judicial or administrative changes may be forthcoming that could
affect this summary.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following legal discussion (including and subject to the
matters and qualifications set forth in such summary) of the
material tax considerations under (1)&nbsp;&#147;Certain Bermuda
Tax Considerations&#148; is based upon the advice of Appleby
Spurling Hunter, Bermuda legal counsel and
(2)&nbsp;&#147;Certain U.S.&nbsp;Federal Income Tax
Considerations&#148; is based upon the advice of
Baker&nbsp;&#38; McKenzie LLP. Each of these firms has reviewed
the relevant portion of this discussion (as set forth above) and
believes that such portion of the discussion constitutes, in all
material respects, a fair and accurate summary of the relevant
income tax considerations relating to CRM Holdings and its
subsidiaries and the ownership of CRM Holdings shares by
investors that are U.S.&nbsp;Persons (as defined below). The
advice of such firms does not include any factual or accounting
matters, determinations or conclusions such as insurance
accounting determinations or determinations pertaining to RPII,
amounts and computations and amounts or components thereof (for
example, amounts or computations of income or expense items or
reserves entering into RPII computations) or facts relating to
the business, income, reserves or activities of CRM Holdings and
its subsidiaries. The advice of these firms relies upon and is
premised on the accuracy of factual statements and
representations made by CRM Holdings concerning the business and
properties, ownership, organization, source of income and manner
of operation of CRM Holdings and its subsidiaries. The
discussion is based upon current law. Legislative, judicial or
administrative changes or interpretations may be forthcoming
that could be retroactive and could affect the tax consequences
to holders of shares. The tax treatment of a holder of shares,
or of a person treated as a holder of shares for
U.S.&nbsp;federal income, state, local or non-U.S.&nbsp;tax
purposes, may vary depending on the holder&#146;s particular tax
situation. Statements contained in this prospectus as to the
beliefs, expectations and conditions of CRM Holdings and its
subsidiaries as to the application of such tax laws or facts
represent the view of management as to the application of such
laws and do not represent the opinions of counsel.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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    <TD></TD>
    <TD>
    <B><I>Prospective investors should consult their own tax
    advisors concerning the U.S.&nbsp;federal, state, local and
    non-U.S.&nbsp;tax consequences to them of owning shares.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Certain Bermuda Tax Considerations</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Bermuda does not currently impose any income, corporation or
profits tax, withholding tax, capital gains tax, capital
transfer tax, estate duty or inheritance tax on us or our
shareholders, other than shareholders ordinarily resident in
Bermuda, if any. There is currently no Bermuda withholding or
other tax on principal, interest or dividends paid to holders of
the shares, other than holders ordinarily resident in Bermuda,
if any. We cannot assure you that we or our shareholders will
not be subject to any such tax in the future.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
CRM Holdings and Twin Bridges have received written assurance
dated September&nbsp;15, 2005 and December&nbsp;29, 2003,
respectively, from the Bermuda Minister of Finance under the
Exempted Undertakings Tax Protection Act 1966 of Bermuda, as
amended, that, if any legislation is enacted in Bermuda imposing
tax computed on profits or income, or computed on any capital
asset, gain or appreciation, or any tax in the nature of estate
duty or inheritance tax, then the imposition of that tax would
not be applicable to CRM Holdings or Twin Bridges or to any of
their respective operations, shares, debentures or obligations
until March&nbsp;28, 2016; provided, that the assurance is
subject to the condition that it will not be construed to
prevent the application of such tax to people ordinarily
resident in Bermuda, or to prevent the application of any taxes
payable by CRM Holdings or Twin Bridges in respect of real
property or leasehold interests in Bermuda held by them. We
cannot assure you that we will not be subject to any such tax
after March&nbsp;28, 2016.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Certain U.S.&nbsp;Federal Income Tax Considerations</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following discussion is a summary of certain
U.S.&nbsp;federal income tax considerations relating to CRM
Holdings, Twin Bridges, and CRM USA Holdings and its
subsidiaries, and the ownership of our shares by investors who
acquire such shares in the offering. As discussed further in
this prospectus and based on our
</DIV>

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<DIV align="left" style="font-size: 10pt;">
expected business, properties, ownership, organization, source
of income and manner of operation, we believe that (1)&nbsp;no
U.S.&nbsp;Person that owns shares in CRM Holdings directly or
indirectly through foreign entities subsequent to the offering
should be subject to treatment as a 10% U.S.&nbsp;Shareholder of
a controlled foreign corporation, or CFC, and (2)&nbsp;CRM
Holdings should not be considered a passive foreign investment
company, or PFIC, for the year ended December&nbsp;31, 2005. We
have not sought and do not intend to seek an opinion of legal
counsel as to whether or not we were a PFIC for the year ended
December&nbsp;31, 2005, or with respect to any other tax issues.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
This summary is based upon the Internal Revenue Code, the
Treasury Regulations promulgated under the Internal Revenue
Code, rulings and other administrative pronouncements issued by
the IRS, judicial decisions, and the tax treaty between the
United States and Bermuda (the &#147;Bermuda Treaty&#148;) all
as currently in effect, and all of which are subject to
differing interpretations or to change, possibly with
retroactive effect. No assurance can be given that the IRS would
not assert, or that a court would not sustain, a position
contrary to any of the tax consequences described below. No
advance ruling has been or will be sought from the IRS regarding
any matter discussed in this prospectus. This summary is for
general information only, and does not purport to discuss all
aspects of U.S.&nbsp;federal income taxation that may be
important to a particular investor in light of such
investor&#146;s investment or tax circumstances, or to investors
subject to special tax rules, such as shareholders who own
directly, or indirectly through certain foreign entities or
through the constructive ownership rules of the Internal Revenue
Code, 10% or more of the voting power or value of CRM Holdings
(or how those ownership rules may apply in certain
circumstances), tax-exempt organizations, dealers in securities,
banks, insurance companies, persons that hold shares that are a
hedge or that are hedged against interest rate or insurance
risks or that are part of a straddle or conversion transaction,
or persons whose functional currency is not the
U.S.&nbsp;dollar. This summary generally does not discuss
federal taxes other than income tax or other U.S.&nbsp;taxes
such as state or local income taxes. This summary assumes that
an investor will acquire our shares in this offering and hold
our shares as capital assets, which generally means as property
held for investment. Prospective investors should consult their
tax advisors concerning the consequences, in their particular
circumstances, of the ownership of shares under
U.S.&nbsp;federal, state, local and other tax laws.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For U.S.&nbsp;federal income tax purposes and purposes of the
following discussion, a &#147;U.S.&nbsp;Person&#148; means
(1)&nbsp;a citizen or resident of the United States for
U.S.&nbsp;tax purposes, (2)&nbsp;a corporation, partnership or
other entity taxable as a corporation or partnership created or
organized in the United States or under the laws of the United
States or of any of its political subdivisions, (3)&nbsp;an
estate the income of which is subject to U.S.&nbsp;federal
income tax without regard to its source or (4)&nbsp;a trust if a
court within the United States is able to exercise primary
supervision over the administration of the trust and one or more
U.S.&nbsp;Persons have the authority to control all substantial
decisions of the trust, as well as certain electing trusts.
</DIV>

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    <TD></TD>
    <TD>
    <B><I>U.S.&nbsp;Taxation of CRM Holdings, Twin Bridges and CRM
    USA Holdings</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>U.S.&nbsp;Income and Branch Profits Tax.</I> A foreign
corporation deemed to be engaged in the conduct of a trade or
business in the U.S.&nbsp;will generally be subject to
U.S.&nbsp;federal income tax (at a current maximum rate of 35%),
as well as a 30% branch profits tax in certain circumstances, on
its income which is treated as effectively connected with the
conduct of that trade or business unless the corporation is
entitled to relief under an applicable income tax treaty, as
discussed below. Such tax, if imposed, would be based on
effectively connected income computed in a manner generally
analogous to that applied to the income of a
U.S.&nbsp;corporation, except that a foreign corporation is
entitled to deductions and credits only if it timely files a
U.S.&nbsp;federal income tax return (which requirement may be
waived if the foreign corporation establishes that it acted
reasonably and in good faith in its failure to timely file such
return). CRM Holdings and Twin Bridges intend to operate in such
a manner that they will not be considered to be conducting a
trade or business within the United States for purposes of
U.S.&nbsp;federal income taxation. Whether a trade or business
is being conducted in the United States is an inherently factual
determination. Because the Internal Revenue Code, Treasury
Regulations and court decisions fail to identify definitively
activities that constitute being engaged in a trade or business
in the United States, we cannot assure you that the IRS will not
contend successfully that CRM Holdings and/or Twin Bridges are
or will be engaged in a trade or business in the United States.
CRM Holdings and Twin Bridges intend to file protective
U.S.&nbsp;federal income tax returns on a timely basis in order
</DIV>

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<DIV align="left" style="font-size: 10pt;">
to preserve the right to claim income tax deductions and credits
if it is ever determined that they are subject to
U.S.&nbsp;federal income tax.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
An insurance enterprise resident in Bermuda generally will be
entitled to the benefits of the Bermuda Treaty if (1)&nbsp;more
than 50% of its shares are owned beneficially, directly or
indirectly, by individual residents of the United States or
Bermuda or U.S.&nbsp;citizens and (2)&nbsp;its income is not
used in substantial part, directly or indirectly, to make
disproportionate distributions to, or to meet certain
liabilities to, persons who are neither residents of either the
United States or Bermuda nor U.S.&nbsp;citizens. Twin Bridges
expects to be entitled to the benefits of the Bermuda Treaty.
Assuming Twin Bridges is entitled to the benefits under the
Bermuda Treaty, it will not be subject to U.S.&nbsp;federal
income tax on any insurance income found to be effectively
connected with a U.S.&nbsp;trade or business unless that trade
or business is conducted through a permanent establishment in
the United States. Whether business is being conducted in the
United States through a permanent establishment is an inherently
factual determination. Twin Bridges intends to conduct its
activities so as not to have a permanent establishment in the
United States, although we cannot assure you that it will
achieve this result.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Foreign corporations also are subject to U.S.&nbsp;withholding
tax at a rate of 30% of the gross amount of certain &#147;fixed
or determinable annual or periodical gains, profits and
income&#148; derived from sources within the United States (such
as dividends and certain interest on investments), to the extent
such amounts are not effectively connected with the foreign
corporation&#146;s conduct of a trade or business in the United
States. The tax rate is subject to reduction by applicable
treaties. Dividends, if any, paid by CRM USA Holdings to CRM
Holdings will be subject to U.S.&nbsp;withholding tax at a rate
of 30%.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The United States also imposes an excise tax on insurance and
reinsurance premiums paid to foreign insurers or reinsurers with
respect to risks located in the United States. The rate of tax
applicable to premiums paid to Twin Bridges is 4% for insurance
premiums and 1% for reinsurance premiums.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
CRM USA Holdings, CRM, CRM CA and Eimar will be Delaware
corporations prior to closing of this offering. Each of them
will be subject to taxation in the United States on its
worldwide income at regular corporate rates (of which the
maximum rate is currently 35%).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Personal Holding Companies.</I> CRM Holdings&#146;
U.S.&nbsp;subsidiaries could be subject to additional
U.S.&nbsp;tax on a portion of their income if any of them is
considered to be a personal holding company, or PHC, for
U.S.&nbsp;federal income tax purposes. A corporation generally
will be classified as a PHC for U.S.&nbsp;federal income tax
purposes in a given taxable year if (1)&nbsp;at any time during
the last half of such taxable year, five or fewer individuals
(without regard to their citizenship or residency) own or are
deemed to own (pursuant to certain constructive ownership rules)
more than 50% of the stock of the corporation by value and
(2)&nbsp;at least 60% of the corporation&#146;s adjusted
ordinary gross income, as determined for U.S.&nbsp;federal
income tax purposes, for such taxable year consists of &#147;PHC
income.&#148; PHC income includes, among other things,
dividends, certain interest, certain royalties, annuities and,
under certain circumstances, rents. The PHC rules contain an
exception for foreign corporations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If any of CRM Holdings&#146; subsidiaries were a PHC in a given
taxable year, such corporation would be subject to PHC tax on
its &#147;undistributed PHC income&#148; at a rate of 15%. For
taxable years beginning after December&nbsp;31, 2008, the PHC
tax rate would be the highest marginal rate on ordinary income
applicable to individuals, which is currently 35%.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Although CRM Holdings believes that none of its subsidiaries is
a PHC, we cannot provide assurance that this will be the case
because of factors including legal and factual uncertainties
regarding the application of the constructive ownership rules,
the makeup of CRM Holdings&#146; shareholder base, the gross
income of CRM Holdings or any of its subsidiaries and other
circumstances that could change the application of the PHC rules
to CRM Holdings&#146; subsidiaries. In addition, if any of CRM
Holdings&#146; subsidiaries were to become PHCs we cannot be
certain that the amount of PHC income would be immaterial.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Anti-Inversion Legislation.</I> The American Jobs Creation
Act of 2004 provides that, if a foreign corporation acquires
substantially all of the assets of a U.S.&nbsp;corporation, and
80% or more of the stock of the foreign corporation (excluding
new stock issued in a public offering related to the
acquisition) is owned by
</DIV>

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<DIV align="left" style="font-size: 10pt;">
former shareholders of the U.S.&nbsp;corporation by reason of
their ownership of the U.S.&nbsp;corporation, the foreign
corporation will be considered a U.S.&nbsp;corporation for
U.S.&nbsp;federal income tax purposes. The existing shareholders
of CRM and Eimar will contribute their shares to CRM USA
Holdings in return for common shares in CRM USA Holdings. The
existing shareholders will then contribute their CRM USA
Holdings shares for shares to us in exchange for our common
shares. CRM will then distribute its shares in CRM CA to CRM USA
Holdings. In addition, immediately prior to the closing of this
offering, the existing shareholders will contribute all of their
interests in Twin Bridges to us in exchange for our common
shares. We do not expect the current shareholders of CRM and
Eimar to obtain 80% or more of the stock of CRM Holdings
(excluding the stock sold in this offering) by reason of their
ownership of CRM and Eimar, (i.e., we believe that Twin Bridges
is worth more than 20% of the combined value of CRM, Eimar and
Twin Bridges). Accordingly, we do not expect to be adversely
affected by the legislation. Nevertheless, the IRS may not agree
with this valuation. If the IRS successfully challenges this
valuation, we would be subject to United States federal income
tax liability. This liability could have a material adverse
effect on our business, financial condition and results of
operations.
</DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>U.S.&nbsp;Taxation of Holders of Shares</I></B></TD>
</TR>

</TABLE>

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<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Shareholders Who Are U.S.&nbsp;Persons:</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Dividends.</I> Subject to the discussion below relating to
the potential application of the &#147;controlled foreign
corporation,&#148; &#147;related person insurance income,&#148;
and &#147;passive foreign investment company&#148; rules,
distributions, if any, made with respect to common shares will
constitute dividends for U.S.&nbsp;federal income tax purposes
to the extent paid out of current or accumulated earnings and
profits of CRM Holdings (as computed under U.S.&nbsp;tax
principles). Certain dividends paid before 2009 to
U.S.&nbsp;individuals, entities or trusts may be eligible for
reduced rates of tax. We do not expect dividends paid by CRM
Holdings to be eligible for the reduced rate of tax unless
shares of CRM Holdings become readily tradable on an established
securities market in the United States. Even in such case,
dividends paid by CRM Holdings would not be eligible for the
reduced rate of tax if CRM Holdings were to be a PFIC in the
year in which the dividends are paid, or in the prior year, or
if certain holding period and other requirements were not met by
the shareholder receiving the dividend. Legislation was recently
introduced in the U.S.&nbsp;Senate, which, if enacted, would
provide that dividends received from CRM Holdings after the date
of enactment would not be eligible for the reduced rate of tax.
Dividends paid by CRM Holdings generally will be foreign source
income for U.S.&nbsp;federal income tax purposes and will not be
eligible for the dividends-received deduction allowed to
U.S.&nbsp;corporations under the Internal Revenue Code. The
amount of any distribution in excess of the current and
accumulated earnings and profits of CRM Holdings will first be
applied to reduce a holder&#146;s tax basis in the shares, and
any amount in excess of tax basis will be treated as gain from
the sale or exchange of such holder&#146;s shares.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Classification of CRM Holdings or Twin Bridges as a
Controlled Foreign Corporation.</I> In general, a foreign
corporation is considered a controlled foreign corporation, or
CFC, if &#147;10% U.S.&nbsp;Shareholders&#148; own more than 50%
of the total combined voting power of all classes of voting
stock of such foreign corporation, or the total value of all
stock of such corporation. A 10% U.S.&nbsp;Shareholder is a
U.S.&nbsp;Person who owns at least 10% of the total combined
voting power of all classes of stock entitled to vote of the
foreign corporation. Each 10% U.S.&nbsp;Shareholder of a foreign
corporation that is a CFC for an uninterrupted period of
30&nbsp;days or more during a taxable year, and that owns shares
in the CFC directly or indirectly through foreign entities on
the last day of the foreign corporation&#146;s taxable year on
which it is a CFC must include in its gross income for
U.S.&nbsp;federal income tax purposes its pro rata share (based
on its actual direct and indirect, through foreign entities,
ownership) of the CFC&#146;s &#147;subpart F income,&#148; even
if the subpart F income is not distributed. Subpart F income
generally includes, among other things, investment income such
as dividends, interest and capital gains, and income from
insuring risks located outside the insurer&#146;s country of
incorporation. For purposes of taking into account subpart F
insurance income, a CFC also includes a foreign corporation in
which more than 25% of the total combined voting power of all
classes of stock (or more than 25% of the total value of the
stock) is owned by 10% U.S.&nbsp;Shareholders on any day during
the taxable year of such corporation, if the gross amount of
premiums or other consideration for the reinsurance or the
issuing of insurance contracts generating subpart F income
exceeds 75% of the gross amount of all premiums or other
consideration in respect of all
</DIV>

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<DIV align="left" style="font-size: 10pt;">
risks. It is expected that all of Twin Bridges&#146; income will
be considered subpart F insurance income. In addition, Twin
Bridges may be considered a CFC under the RPII rules discussed
below.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For purposes of determining whether the more-than-50% (or
more-than-25%, in the case of insurance income) and 10%
ownership tests have been satisfied, and therefore whether a
corporation is a CFC, shares owned includes shares owned
directly, indirectly through foreign entities or shares
considered as owned by application of certain constructive
ownership rules. Pursuant to those constructive ownership rules:
</DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    an individual is treated as owning stock owned by certain
    members of his or her family;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    a corporation is treated as owning stock owned by a 50% or
    greater shareholder;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    a partnership is treated as owning stock owned by its partners
    (regardless of their percentage ownership of the
    partnership);&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    stock owned by a partnership or a corporation is treated as
    owned proportionately by the owners of the entity (in the case
    of corporations, only if the shareholder owns 10% or more of the
    stock of the corporation).</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Additional rules apply to trusts and estates. Operating rules
apply to prevent reattribution of ownership in certain
circumstances, as well as attribution that would cause stock to
be treated as not owned by a U.S.&nbsp;person. <B>Because the
attribution rules are complicated and depend on the particular
facts relating to each investor, you are urged to consult your
own tax advisors regarding the application of the rules to your
ownership of our shares.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Due to the anticipated dispersion of CRM Holdings&#146; share
ownership among holders and its bye-law provisions that impose
limitations on the concentration of voting power of its voting
shares and other factors, CRM&nbsp;Holdings believes that no
U.S.&nbsp;Person that owns shares in CRM&nbsp;Holdings directly
or indirectly through foreign entities should be subject to
treatment as a 10% U.S.&nbsp;Shareholder of a CFC after the
offering. These bye-law provisions are described in &#147;Risk
Factors&nbsp;&#151; Risks Related to Our Shares Sold in this
Offering&#148; and &#147;Description of Share
Capital&nbsp;&#151; Voting Adjustments.&#148; We cannot assure
you, however, that the IRS will not challenge the effectiveness
of these provisions for purposes of preventing CFC and 10%
U.S.&nbsp;Shareholder status and that a court will not sustain
such challenge.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>RPII Companies:</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Generally.</I> The CFC rules described above also apply (with
certain modifications) to certain insurance companies that earn
related person insurance income, or RPII. For purposes of
applying the CFC rules to foreign corporations that earn RPII, a
foreign corporation will be treated as a CFC if RPII
Shareholders collectively own directly, indirectly through
foreign entities or by application of the constructive ownership
rules 25% or more of the stock of the corporation by vote or
value. The term &#147;RPII Shareholder&#148; means any
U.S.&nbsp;Person who owns, directly or indirectly through
foreign entities, any amount (rather than stock possessing 10%
or more of the total combined voting power) of the foreign
corporation&#146;s stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
RPII is defined as any &#147;insurance income&#148; attributable
to policies of insurance or reinsurance with respect to which
the person (directly or indirectly) insured is a &#147;RPII
Shareholder&#148; of the foreign corporation or a &#147;related
person&#148; to such RPII Shareholder. In general, and subject
to certain limitations, &#147;insurance income&#148; is income
(including premium and investment income) attributable to the
issuing of any insurance or reinsurance contract which would be
taxed under the provisions of the Internal Revenue Code relating
to insurance companies if the income were the income of a
domestic insurance company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For purposes of the RPII rules, &#147;related person&#148; means
someone who controls or is controlled by the RPII Shareholder or
someone who is controlled by the same person or persons that
control the RPII Shareholder. &#147;Control&#148; is measured by
either more than 50% in value or more than 50% in voting power
of stock, applying constructive ownership principles. A
corporation&#146;s pension plan is ordinarily not a
&#147;related person&#148; with respect to the corporation
unless the pension plan owns, directly or indirectly through the
application of constructive ownership rules, more than 50%,
measured by vote or value, of the stock of the
</DIV>

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<DIV align="left" style="font-size: 10pt;">
corporation. In the case of a partnership, trust or estate,
control means the ownership, directly or indirectly, of more
than 50&nbsp;percent (by&nbsp;value) of the beneficial interests
in such partnership, estate or trust.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If none of the exceptions described below applies, each
U.S.&nbsp;Person who owns shares in CRM&nbsp;Holdings (and
therefore, indirectly in Twin Bridges) on the last day of the
tax year in which Twin Bridges is a CFC, will be required to
include in its gross income for U.S.&nbsp;federal income tax
purposes its share of RPII of Twin Bridges for the
U.S.&nbsp;Person&#146;s taxable year that includes the end of
Twin Bridges&#146; taxable year. This inclusion generally will
be determined as if such RPII were distributed proportionately
only to such U.S.&nbsp;Persons holding shares at that date. The
inclusion will be limited to the current-year earnings and
profits of Twin Bridges reduced by the shareholder&#146;s pro
rata share, if any, of certain prior-year deficits in earnings
and profits. Even if one or more of the exceptions to the RPII
rules applies, the general CFC rules described earlier may still
apply to require 10% U.S.&nbsp;Shareholders to include in income
their pro rata share of RPII, among other things.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>RPII Exceptions.</I> The special RPII rules described above
will not apply to Twin Bridges if (1)&nbsp;direct or indirect
insureds and persons related to such insureds, whether or not
U.S.&nbsp;Persons, own, at all times during Twin Bridges&#146;
taxable year directly or indirectly, less than 20% of the voting
power and less than 20% of the value of the stock of Twin
Bridges (the &#147;20% Ownership Exception&#148;),
(2)&nbsp;RPII, determined on a gross basis, is less than 20% of
Twin Bridges&#146; gross insurance income for the taxable year
(the &#147;20% Gross Income Exception&#148;), (3)&nbsp;Twin
Bridges elects to be taxed on its RPII as if the RPII were
effectively connected with the conduct of a U.S.&nbsp;trade or
business and to waive all treaty benefits with respect to RPII
and meets certain other requirements or (4)&nbsp;Twin Bridges
elects to be treated as a U.S.&nbsp;corporation for
U.S.&nbsp;tax purposes. Twin Bridges intends to monitor its
share ownership in order to operate in a manner that is designed
to ensure that it qualifies for either the first or second
exception to the RPII rules.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Computation of RPII.</I> In order to determine how much RPII
Twin Bridges has earned in each taxable year, CRM Holdings
intends to obtain and rely upon information from Twin
Bridges&#146; insureds and reinsureds to determine whether any
of the insureds, reinsureds or other persons related to such
insureds or reinsureds own shares of CRM Holdings and are
U.S.&nbsp;Persons. CRM Holdings may not be able to determine
whether any of the underlying insureds of the insurance
companies to which Twin Bridges provides insurance or
reinsurance are RPII shareholders or related persons to such
shareholders. Consequently, CRM&nbsp;Holdings may not be able to
determine accurately the gross amount of RPII earned by Twin
Bridges in a given taxable year. For any taxable year in which
Twin Bridges&#146; gross RPII may be 20% or more of its gross
insurance income for the year, CRM&nbsp;Holdings may also seek
information from its shareholders to determine whether direct or
indirect owners of CRM&nbsp;Holdings shares at the end of the
year are U.S.&nbsp;Persons so that the RPII may be determined
and apportioned among such persons. To the extent CRM Holdings
is unable to determine whether a direct or indirect owner of
shares is a U.S.&nbsp;Person, CRM Holdings may assume that such
owner is not a U.S.&nbsp;Person, thereby increasing the per
share RPII amount for all shareholders identified as
U.S.&nbsp;Persons.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Uncertainty as to Application of RPII.</I> Regulations
interpreting the RPII provisions of the Internal Revenue Code
exist only in proposed form. It is not certain whether these
Regulations will be adopted in their proposed form or what
changes might ultimately be made or whether any such changes, as
well as any interpretation or application of the RPII rules by
the IRS, the courts or otherwise, might have retroactive effect.
Accordingly, the meaning of the RPII provisions and their
application to Twin Bridges is uncertain. These provisions
include the grant of authority to the U.S.&nbsp;Treasury to
prescribe &#147;such regulations as may be necessary to carry
out the purposes of this subsection, including .&nbsp;.&nbsp;.
regulations preventing the avoidance of this subsection through
cross insurance arrangements or otherwise.&#148; In addition we
cannot assure you that the IRS will not challenge any
determinations by Twin Bridges as to the amount, if any, of RPII
that should be includible in income or that the amounts of the
RPII inclusions will not be subject to adjustment based upon
subsequent IRS examination. Prospective investors should consult
their tax advisors as to the effects of these uncertainties.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Apportionment of RPII to U.S.&nbsp;Shareholders.</I> If Twin
Bridges&#146; RPII for a year equals or exceeds 20% of its gross
insurance income and the 20% Ownership Exception does not apply
then every RPII Shareholder
</DIV>

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<DIV align="left" style="font-size: 10pt;">
who owns shares in CRM Holdings on the last day of the tax year
on which Twin Bridges is a CFC will be required to include in
gross income its share of Twin Bridges&#146; RPII for the
portion of the taxable year during which Twin Bridges was a CFC
under the RPII provisions, even if such RPII Shareholder did not
own the shares throughout such period. A RPII Shareholder who
owns shares of CRM Holdings during the taxable year of Twin
Bridges during which it was a CFC, but not on the last day in
such taxable year on which it is a CFC, will not be required to
include any RPII into income, whether or not distributed.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Basis Adjustments.</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A U.S.&nbsp;shareholder&#146;s tax basis in its CRM Holdings
shares will be increased by the amount of any subpart F income
that the shareholder includes in income, including any RPII
included in income by an RPII shareholder. Any distributions
made by CRM&nbsp;Holdings out of previously taxed subpart&nbsp;F
income, including RPII income will be exempt from further
U.S.&nbsp;income tax in the hands of the U.S.&nbsp;shareholder.
The U.S.&nbsp;shareholder&#146;s tax basis in its CRM Holdings
shares will be reduced by the amount of any distributions that
are excluded from income under this rule.
</DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Information Reporting.</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under certain circumstances, U.S.&nbsp;Persons owning stock in a
foreign corporation are required to file IRS Form&nbsp;5471 with
their U.S.&nbsp;federal income tax returns. Generally,
information reporting on IRS Form&nbsp;5471 is required with
respect to (1)&nbsp;a person who is treated as a RPII
Shareholder, (2)&nbsp;a 10% U.S.&nbsp;Shareholder of a foreign
corporation that is a CFC for an uninterrupted period of
30&nbsp;days or more during any tax year of the foreign
corporation, and who owned the stock on the last day of that
year and (3)&nbsp;under certain circumstances, a
U.S.&nbsp;Person who acquires stock in a foreign corporation,
and as a result thereof owns 10% or more of the voting power or
value of such foreign corporation, whether or not such foreign
corporation is a CFC. For any taxable year in which CRM Holdings
determines that gross RPII constitutes 20% or more of Twin
Bridges&#146; gross insurance income and the 20% Ownership
Exception does not apply, CRM Holdings intends to mail to all
U.S.&nbsp;Persons registered as holders of its shares IRS
Form&nbsp;5471, completed with information from
CRM&nbsp;Holdings, for attachment to the U.S.&nbsp;federal
income tax returns of such shareholders. A tax-exempt
organization that is treated as a 10% U.S.&nbsp;Shareholder or a
RPII Shareholder also must file IRS Form&nbsp;5471 in the
circumstances described above. Failure to file IRS
Form&nbsp;5471 may result in penalties.
</DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Tax-Exempt Shareholders.</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Tax-exempt entities will be required to treat certain subpart F
insurance income, including RPII, that is includible in income
by the tax-exempt entity as unrelated business taxable income.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Dispositions of Shares.</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Subject to the discussion below relating to the potential
application of Internal Revenue Code section&nbsp;1248 or the
&#147;PFIC&#148; rules, any gain or loss realized by a
U.S.&nbsp;Person on the sale or other disposition of shares in
CRM&nbsp;Holdings will be subject to U.S.&nbsp;federal income
taxation as capital gain or loss in an amount equal to the
difference between the amount realized upon such sale or
exchange and such person&#146;s tax basis in the shares. Capital
gains received by individuals from the disposition of shares
held for more than one year are subject to tax at preferential
rates; the use of capital losses is subject to limitations.
Moreover, gain, if any, generally will be U.S.&nbsp;source gain
and generally will constitute &#147;passive income&#148; for
foreign tax credit limitation purposes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Internal Revenue Code section&nbsp;1248 provides that if a
U.S.&nbsp;Person sells or exchanges stock in a foreign
corporation and such person owned directly, indirectly through
certain foreign entities or constructively 10% or more of the
voting power of the corporation at any time during the five-year
period ending on the date of disposition when the corporation
was a CFC, any gain from the sale or exchange of the shares will
be treated as a dividend to the extent of the CFC&#146;s
earnings and profits (determined under U.S.&nbsp;federal income
tax principles) during the period that the shareholder held the
shares and while the corporation was a CFC (with certain
adjustments). A 10% U.S.&nbsp;Shareholder may in certain
circumstances be required to report a
</DIV>

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<DIV align="left" style="font-size: 10pt;">
disposition of shares of a CFC by attaching IRS Form&nbsp;5471
to the U.S.&nbsp;federal income tax or information return that
it would normally file for the taxable year in which the
disposition occurs. Section&nbsp;1248 also applies to the sale
or exchange of shares in a foreign corporation if the foreign
corporation would be treated as a CFC for RPII purposes and
would be taxed as an insurance company if it were a domestic
corporation, regardless of whether the shareholder is a 10%
U.S.&nbsp;Shareholder or whether RPII constitutes 20% or more of
the corporation&#146;s gross insurance income or the 20%
Ownership Exception applies. Existing Treasury Regulations do
not address whether section&nbsp;1248 would apply if a foreign
corporation is not a CFC but the foreign corporation has a
subsidiary that is a CFC or that would be taxed as an insurance
company if it were a domestic corporation. Prospective investors
should consult their tax advisors regarding the effects of these
rules on a disposition of shares.
</DIV>

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</TR>

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    <TD></TD>
    <TD>
    <I>Passive Foreign Investment Companies.</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In general, a foreign corporation will be a PFIC during a given
year if (1)&nbsp;75% or more of its gross income constitutes
&#147;passive income&#148; or (2)&nbsp;50% or more of its assets
produce passive income or are held for the production of passive
income. For these purposes, passive income generally includes
interest, dividends, annuities and other investment income. The
PFIC statutory provisions contain an express exception for
income derived in the active conduct of an insurance business by
a corporation that is predominantly engaged in an insurance
business. This exception is intended to ensure that income
derived by a bona fide insurance company is not treated as
passive income, except to the extent such income is attributable
to capital in excess of the reasonable needs of the insurance
business. CRM Holdings expects for purposes of the PFIC rules
that Twin Bridges will be considered to be predominantly engaged
in an insurance business and that it is unlikely to have capital
in excess of the reasonable needs of its insurance business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The PFIC statutory provisions also contain a look-through rule
stating that, for purposes of determining whether a foreign
corporation is a PFIC, such foreign corporation shall be treated
as if it received &#147;directly its proportionate share of the
income ...&#148; and as if it &#147;held its proportionate share
of the assets ...&#148; of any other corporation in which it
owns at least 25% by value of the shares. While no explicit
guidance is provided by the statutory language, under this
look-through rule, we believe that CRM Holdings should be deemed
to own the assets and to have received the income (characterized
as non-passive income) of Twin Bridges directly for purposes of
determining whether it qualifies for the insurance exception
and, consequently, that CRM Holdings should not be treated as a
PFIC for U.S.&nbsp;federal income tax purposes for the year
ended December&nbsp;31, 2005. This interpretation of the
look-through rule is consistent with the legislative intention
generally to exclude bona fide insurance companies from the
application of the PFIC provision. No assurance can be given
that the IRS would not challenge this position or that a court
would not sustain such challenge. Prospective investors should
consult their tax advisor as to the effects of the PFIC rules to
them. We have not sought and do not intend to seek an opinion of
legal counsel as to whether or not we were a PFIC for the year
ended December&nbsp;31, 2005. In addition, there can be no
assurance that we will not become a PFIC in a later year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If CRM Holdings were characterized as a PFIC during a given
year, a U.S.&nbsp;Person owning shares would be subject to a
penalty tax at the time of the sale of such shares at a gain
(including gain deemed recognized if the shares are used as
security for a loan), or upon receipt of an &#147;excess
distribution&#148; with respect to its shares, unless such
shareholder made a &#147;qualified electing fund election&#148;
or &#147;mark-to-market&#148; election. In general, a
shareholder receives an &#147;excess distribution&#148; if the
amount of the distribution is more than 125% of the average
distribution with respect to the shares during the three
preceding taxable years (or shorter period during which the
taxpayer held the shares). In general, the gain or excess
distribution received in a year must be allocated ratably to
each day that the U.S.&nbsp;Person held our shares. A
U.S.&nbsp;Person must include amounts allocated to the year of
receipt, as well as amounts allocated to taxable years prior to
the first year in which we were a PFIC, in its gross income as
ordinary income for that year. All amounts allocated to prior
years of the U.S.&nbsp;Person during which we were a PFIC would
be taxed at the highest tax rate for each such prior year
applicable to ordinary income. The U.S.&nbsp;Person also would
be liable for interest on the deferred tax liability for each
such prior year calculated as if such liability had been due
with respect to each such prior year.
</DIV>

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    <TD width="3%"></TD>
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</TR>

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    <TD></TD>
    <TD>
    <I>Other</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Except as discussed below with respect to backup withholding,
dividends paid by CRM Holdings will not be subject to
U.S.&nbsp;withholding tax.
</DIV>

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</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Shareholders Who Are Non-U.S.&nbsp;Persons</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Subject to certain exceptions, non-U.S.&nbsp;Persons will be
subject to U.S.&nbsp;federal income tax (including potential
branch profits tax in the case of shareholders that are
corporations) on dividend distributions with respect to, and
gain realized from the sale or exchange of, shares only if such
dividends or gains are effectively connected with the conduct of
a trade or business within the United States. Gain recognized by
an individual non-U.S.&nbsp;Person will be subject to
U.S.&nbsp;tax if the non-U.S.&nbsp;Person is present in the
U.S.&nbsp;for 183&nbsp;days or more in the taxable year of the
sale and other conditions are met. Nonresident alien individuals
will not be subject to U.S.&nbsp;estate tax with respect to the
shares. Special rules may apply to certain former
U.S.&nbsp;citizens and long-term residents.
</DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>All Shareholders</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Information reporting to the IRS by paying agents and custodians
located in the United States will be required with respect to
payments of dividends on the shares to U.S.&nbsp;Persons. In
addition, you may be subject to backup withholding with respect
to dividends paid by CRM Holdings unless you (1)&nbsp;are a
corporation, non-U.S.&nbsp;Person or come within certain other
exempt categories and, when required, demonstrate this fact, or
(2)&nbsp;provide a taxpayer identification number, certify that
you have not lost exemption from backup withholding and
otherwise comply with applicable requirements of the backup
withholding rules.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Backup withholding is not an additional tax and may be credited
against your regular U.S.&nbsp;federal income tax liability or
otherwise you may be entitled to a refund for any such tax
withheld.
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<A name='115'></A>
</DIV>

<!-- link1 "DESCRIPTION OF SHARE CAPITAL" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>DESCRIPTION OF SHARE CAPITAL</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following description of the share capital of CRM Holdings
summarizes select provisions of its Memorandum and Articles of
Association and bye-laws.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>General</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have an authorized share capital of $500,000,000 divided into
50,000,000,000&nbsp;shares of par value $0.01&nbsp;per share.
Our board of directors has
designated &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">l</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;as
common shares. Upon the closing of this offering the issued and
outstanding shares of the Company will
be &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">l</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;common
shares of par value $0.01.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Common Shares</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In general, subject to the adjustments regarding voting set
forth in &#147;&#151;&nbsp;Voting Adjustments&#148; below,
holders of our common shares have one vote for each common share
held by them and are entitled to vote, on a non-cumulative
basis, at all meetings of shareholders. Holders of our common
shares are entitled to receive dividends as and if lawfully
declared from time to time by our board of directors. Holders of
our common shares have no preemptive, redemption, conversion or
sinking fund rights. In the event of our liquidation,
dissolution or winding-up, the holders of our common shares are
entitled to share equally and ratably in our assets, if any
remain after the payment of all our debts and liabilities and
the liquidation preference of any outstanding preferred shares.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Voting Adjustments</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our bye-laws generally provide that shareholders have one vote
for each share held by them and are entitled to vote, on a
non-cumulative basis, at all meetings of shareholders. However,
pursuant to a mechanism specified in our bye-laws, the voting
rights exercisable by a shareholder will be limited so that
certain persons or groups are not deemed to hold more than 9.9%
of the total voting power conferred by our shares. In addition,
our board of directors retains certain discretion to make
adjustments to the aggregate number of votes attaching to the
shares of any shareholder that they consider fair and reasonable
in all the circumstances to ensure that no person will hold more
than 9.9% of the total voting power represented by our then
outstanding shares. Our bye-laws provide generally that any
shareholder owning, directly, indirectly or, in the case of any
U.S.&nbsp;person, by attribution, more than 9.9% of our common
shares will have the voting rights attached to such common
shares reduced so that it may not exercise more than 9.9% of the
total voting rights. The reduction in votes is generally to be
applied proportionately among all shareholders who are members
of the first shareholder&#146;s control group. A control group
means, with respect to any person, all shares directly owned by
such person and all shares directly owned by each other
shareholder any of whose shares are included in the controlled
shares of such person. Controlled shares means all common shares
that a person is deemed to own directly, indirectly (within the
meaning of Section&nbsp;958(a) of the Code) or, in the case of a
U.S.&nbsp;person, constructively (within the meaning of
Section&nbsp;958(b) of the Code). A similar limitation is to be
applied to shares held directly by members of a related group. A
related group means a group of shareholders that are investment
vehicles and are under common control and management. Any
reduction in votes will generally be reallocated proportionately
among members of the shareholder&#146;s control group or related
group, as the case may be. The amount of any reduction of votes
that occurs by operation of the above limitations will generally
be reallocated proportionately among all other of our
shareholders who were not members of these groups so long as
such reallocation does not cause any person to hold more than
9.9% of the total voting power of our shares.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For purposes of applying these provisions, shareholders will be
entitled to direct that our board (i)&nbsp;treat them (and
certain affiliates) as U.S.&nbsp;persons, and/or (ii)&nbsp;treat
them (and certain related shareholders) as one person for
purposes of determining a shareholder&#146;s control group.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The amount of any reduction of votes that occurs by operation of
the above limitations will generally be allocated
proportionately among all other shareholders of the Company.
Consequently, under these provisions, certain shareholders may
have their voting rights limited to less than one vote per
share, while other
</DIV>

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<DIV align="left" style="font-size: 10pt;">
shareholders may have voting rights in excess of one vote per
share. Moreover, these provisions could have the effect of
reducing the voting power of certain shareholders who would not
otherwise be subject to the limitation by virtue of their direct
share ownership.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, our board may adjust a shareholder&#146;s voting
rights to the extent that the board reasonably determines in
good faith that it is necessary to do so to avoid adverse tax
consequences or materially adverse legal or regulatory treatment
to us, any subsidiary or any shareholder or its affiliates. This
adjustment may result in a shareholder having voting rights in
excess of one vote per share. Therefore, a shareholder&#146;s
voting rights might increase above 5% of the aggregate voting
power of the outstanding common shares, thereby possibly
resulting in the shareholder becoming a reporting person subject
to Schedule&nbsp;13D or 13G filing requirements under the
Exchange Act. In addition, the reallocation of your votes could
result in you becoming subject to filing requirements under
Section&nbsp;16 of the Exchange Act. Our bye-laws also provide
that shareholders will be notified of their voting interests
prior to any vote to be taken by the shareholders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We also have the authority under our bye-laws to request
information from any shareholder for the purpose of determining
whether a shareholder&#146;s voting rights are to be reallocated
pursuant to the bye-laws. If, after a reasonable cure period, a
shareholder fails to respond to our request for information or
submits incomplete or inaccurate information in response to a
request, by us, the Company, in its reasonable discretion, may
reduce or eliminate the shareholder&#146;s voting rights.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Preferred Shares</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pursuant to our bye-laws and Bermuda law, our board of directors
by resolution may establish one or more series of preferred
shares having a number of shares, designations, relative voting
rights, dividend rates, conversion rights liquidation and other
rights, preferences, limitations and powers as may be fixed by
the board of directors without any further shareholder approval.
If our board of directors issues preferred shares conferring any
voting rights, the limitations on the voting rights discussed
above under &#147;&#151;&nbsp;Voting Adjustments&#148; will
apply to those preferred shares. Any rights, preferences, powers
and limitations as may be established for preferred shares could
also have the effect of discouraging an attempt to obtain
control of CRM Holdings. The issuance of preferred shares could
also adversely affect the voting power of the holders of our
shares, deny such holders the receipt of a premium on their
shares in the event of a tender or other offer for the shares
and depress the market price of the shares. We have no current
plans to issue any preferred shares.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Bye-laws</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our bye-laws provide for our corporate governance, including the
establishment of share rights, modification of those rights,
issuance of share certificates, imposition of a lien over shares
in respect of unpaid amounts on those shares, calls on shares
which are not fully paid, forfeiture of shares, the transfer of
shares, alterations of capital, the calling and conduct of
general meetings, proxies, the appointment and removal of
directors, conduct and power of directors, the payment of
dividends, the appointment of an auditor and our winding-up.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Our Board of Directors and Corporate Action</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our bye-laws provide that the board of directors shall consist
of not less than two nor more than 20&nbsp;directors, as
determined by the shareholders at an annual general meeting of
the shareholders, divided into three approximately equal
classes. Upon the closing of this offering, our board of
directors will be comprised of three Class&nbsp;I directors
whose initial term will expire at our 2006 annual
shareholders&#146; meeting, three Class&nbsp;II directors whose
initial term will expire at our 2007 annual shareholders&#146;
meeting and three Class&nbsp;III directors whose initial term
will expire at our 2008 annual shareholders&#146; meeting. After
the initial terms of these directors, the term of each class of
directors elected shall be three years. Directors may only be
removed prior to the expiration of such director&#146;s term at
a special meeting of shareholders called for that purpose. The
appointment or removal of a director requires the simple
majority of votes cast, in person or by proxy, at the general
meeting at which the proposal is put forth.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A special general meeting of shareholders may be convened by our
board of directors or the Chairman or Deputy Chairman of
CRM&nbsp;Holdings. Pursuant to the Companies Act a special
general meeting of shareholders may also be convened at the
request of shareholders holding at the date of the deposit of
the request not less than 10% of the paid up voting share
capital of CRM Holdings.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Generally, the affirmative vote of a majority of the directors
present at any meeting at which a quorum is present shall be
required to authorize corporate action. Corporate action may
also be taken by a unanimous written resolution of the board of
directors without a meeting. Unless otherwise fixed at a
different number, a majority of the directors in office shall
constitute a quorum, but in no event may a quorum consist of
less than two directors.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Shareholder Action</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
At any general meeting, four or more persons present in person
or by proxy and representing more than 50% of our
shareholders&#146; aggregate voting power shall constitute a
quorum for the transaction of business. In general, any action
that we may take by resolution in a general meeting may, without
a meeting, be taken by a resolution in writing signed by all of
the shareholders entitled to attend such meeting and vote on the
resolution. In general, any question proposed for the
consideration of the shareholders at any general meeting shall
be decided by the affirmative votes of a majority of the votes
cast in accordance with the bye-laws.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Transfer Restrictions</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
CRM Holdings&#146; directors may decline to record the transfer
of any common shares on our share register: if the shares have
not been fully paid for, or the directors are not satisfied that
all required regulatory approvals for such transfer have been
obtained, or the instrument of transfer is in favor of more than
five persons jointly.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Tax Liability Resulting from Acts of Shareholders</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our bye-laws provide certain protections against adverse tax
consequences to us resulting from laws that apply to our
shareholders. If a shareholder&#146;s death or non-payment of
any tax or duty payable by the shareholder, or any other act or
thing involving the shareholder, causes any adverse tax
consequences to us, (i)&nbsp;the shareholder or its executor or
administrator is required to indemnify us against any tax
liability that we incur as a result, (ii)&nbsp;we will have a
lien on any dividends or any other distributions payable to the
shareholder by us to the extent of the tax liability, and
(iii)&nbsp;if any amounts not covered by our lien on dividends
and distributions are owed to us by the shareholder as a result
of our tax liability, we have the right to refuse to register
any transfer of the shareholder&#146;s shares.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Certain Subsidiaries</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
CRM Holdings&#146; bye-laws require that the boards of directors
of CRM Holdings&#146; non-U.S.&nbsp;subsidiaries be comprised of
persons, a majority of whom are directors of CRM Holdings, who
have been elected as director designees by the shareholders of
CRM&nbsp;Holdings.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
CRM&nbsp;Holdings&#146; shareholders will elect director
designees for each of our non-U.S.&nbsp;subsidiaries. Under
CRM&nbsp;Holdings&#146; bye-laws, CRM&nbsp;Holdings must vote
shares it holds in its non-U.S.&nbsp;subsidiaries to elect the
director designees as the directors of these
non-U.S.&nbsp;subsidiaries. Accordingly, the only persons
eligible to be elected as directors of CRM&nbsp;Holdings&#146;
non-U.S.&nbsp;subsidiaries are those persons who first have been
elected by the shareholders of CRM&nbsp;Holdings (including new
shareholders who buy common shares being offered by this
prospectus) as director designees in accordance with our
bye-laws (including after giving effect to any limitation on
voting rights). The bye-law provisions addressing the removal of
directors of CRM Holdings&#146; non-U.S.&nbsp;subsidiaries also
obligate CRM&nbsp;Holdings to vote shares it holds in these
non-U.S.&nbsp;subsidiaries in favor of removal of any director
designees in accordance with a resolution duly adopted by the
shareholders of CRM&nbsp;Holdings.
</DIV>

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<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Amendment of Bye-laws</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our bye-laws provide that the bye-laws may only be revoked or
amended, upon approval by a resolution of our board of directors
and by (a)&nbsp;a simple majority of votes cast by our
shareholders or (b)&nbsp;by resolution of
eighty-five&nbsp;percent (85%) of the total votes cast when the
board proposes to repeal, alter or amend the indemnities set out
in the bye-laws.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Anti-Takeover Provisions</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our bye-laws contain provisions that may entrench directors and
make it more difficult for shareholders to replace directors
even if the shareholders consider it beneficial to do so. In
addition, these provisions could delay or prevent a change of
control that a shareholder might consider favorable. For
example, these provisions may prevent a shareholder from
receiving the benefit from any premium over the market price of
our common shares offered by a bidder in a potential takeover.
Even in the absence of an attempt to effect a change in
management or a takeover attempt, these provisions may adversely
affect the prevailing market price of our common shares if they
are viewed as discouraging changes in management and takeover
attempts in the future.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The anti-takeover provisions in our bye-laws that could have
such an effect are:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    election of our directors is staggered, meaning that the members
    of only one of three classes of our directors are elected each
    year;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the total voting power of any shareholder owning more than 9.9%
    of our common shares will be reduced to 9.9% of the total voting
    power of our common shares;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    our directors may, in their discretion, decline to record the
    transfer of any common shares on our share register if the
    shares have not been fully paid for, if the directors are not
    satisfied that all required regulatory approvals for such
    transfer have been obtained, or if the instrument of transfer is
    in favor of more than five persons jointly.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Transfer Agent</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our registrar and transfer agent for the shares
is&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">l</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Differences in Corporate Law</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
You should be aware that the Companies Act, which applies to us,
differs in certain material respects from laws generally
applicable to United States corporations and their shareholders.
In order to highlight these differences, set forth below is a
summary of certain significant provisions of the Companies Act
(including modifications adopted pursuant to our bye-laws)
applicable to us which differ in certain respects from
provisions of State of Delaware corporate law. Because the
following statements are summaries, they do not address all
aspects of Bermuda law that may be relevant to us and our
shareholders.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Duties of Directors</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under Bermuda law, at common law, members of a board of
directors owe a fiduciary duty to the company to act in good
faith in their dealings with or on behalf of the company, and to
exercise their powers and fulfill the duties of their office
honestly. This duty has the following essential elements:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    a duty to act in good faith in the best interests of the company;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    a duty not to make a personal profit from opportunities that
    arise from the office of director;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    a duty to avoid conflicts of interest;</TD>
</TR>

</TABLE>

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<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    a duty to exercise powers for the purpose for which such powers
    were intended;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the Companies Act imposes a duty on directors and officers of a
    Bermuda company;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    to act honestly and in good faith with a view to the best
    interests of the company;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    to exercise the care, diligence and skill that a reasonably
    prudent person would exercise in comparable circumstances.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, the Companies Act imposes various duties on
officers of a company with respect to certain matters of
management and administration of the company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Companies Act provides that in any proceedings for
negligence, default, breach of duty or breach of trust against
any officer, if it appears to a court that such officer is or
may be liable in respect of the negligence, default, breach of
duty or breach of trust, but that he has acted honestly and
reasonably, and that, having regard to all the circumstances of
the case, including those connected with his appointment, he
ought fairly to be excused for the negligence, default, breach
of duty or breach of trust, that court may relieve him, either
wholly or partly, from any liability on such terms as the court
may think fit. This provision has been interpreted to apply only
to actions brought by or on behalf of the company against such
officers. Our bye-laws, however, provide that shareholders waive
all claims or rights of action that they might have,
individually or in our right against any director or officer for
any act or failure to act in the performance of such
director&#146;s or officer&#146;s duties, except this waiver
does not extend to any claims or rights of action that would
render the waiver void pursuant to the Companies Act, that arise
out of fraud or dishonesty on the part of such director or
officer or with respect to the recovery of any gain, personal
profit or advantage to which the officer or director is not
legally entitled.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under Delaware law, the business and affairs of a corporation
are managed by or under the direction of its board of directors.
In exercising their powers, directors are charged with a
fiduciary duty of care to protect the interests of the
corporation and a fiduciary duty of loyalty to act in the best
interests of its stockholders. The duty of care requires that
directors act in an informed and deliberate manner, and inform
themselves, prior to making a business decision, of all relevant
material information reasonably available to them. The duty of
care also requires that directors exercise care in overseeing
and investigating the conduct of corporate employees. The duty
of loyalty may be summarized as the duty to act in good faith,
not out of self-interest, and in a manner which the director
reasonably believes to be in the best interests of the
stockholders. A party challenging the propriety of a decision of
a board of directors bears the burden of rebutting the
applicability of the presumptions afforded to directors by the
&#147;business judgment rule.&#148; If the presumption is not
rebutted, the business judgment rule attaches to protect the
directors and their decisions. Where, however, the presumption
is rebutted, the directors bear the burden of demonstrating the
fairness of the relevant transaction. Notwithstanding the
foregoing, Delaware courts subject directors&#146; conduct to
enhanced scrutiny in respect of defensive actions taken in
response to a threat to corporate control and approval of a
transaction resulting in a sale of control of the corporation.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Interested Directors</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under Bermuda law and our bye-laws, any transaction entered into
by us in which a director has an interest is not voidable by us
nor can such director be accountable to us for any benefit
realized pursuant to such transaction provided the nature of the
interest is disclosed at the first opportunity at a meeting of
directors, or in writing to the directors. In addition, our
bye-laws allow a director to be taken into account in
determining whether a quorum is present and to vote on a
transaction in which he has an interest, but the resolution will
fail unless it is approved by a majority of the disinterested
directors voting on the resolution. Under Delaware law, such
transaction would not be voidable if (1)&nbsp;the material facts
as to such interested director&#146;s relationship or interests
are disclosed or are known to the board of directors and the
board in good faith authorizes the transaction by the
affirmative vote of a majority of the disinterested directors,
(2)&nbsp;such material facts are disclosed or are known to the
stockholders entitled to vote on such transaction and the
transaction is specifically approved in good faith by vote of
the majority of shares entitled to vote thereon or (3)&nbsp;the
transaction is fair as to the corporation as of the time it is
authorized, approved or ratified. Under
</DIV>

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<DIV align="left" style="font-size: 10pt;">
Delaware law, such interested director could be held liable for
a transaction in which such director derived an improper
personal benefit.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Voting Rights and Quorum Requirements</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under Bermuda law, the voting rights of our shareholders are
regulated by our bye-laws and, in certain circumstances, the
Companies Act. Under our bye-laws, at any general meeting, four
or more persons present in person or by proxy and representing
more than 50% of our shareholders&#146; aggregate voting power
shall constitute a quorum for the transaction of business. In
general, any action that we may take by resolution in a general
meeting may, without a meeting, be taken by a resolution in
writing signed by all of the shareholders entitled to attend
such meeting and vote on the resolution. In general, any
question proposed for the consideration of the shareholders at
any general meeting shall be decided by the affirmative votes of
a majority of the votes cast in accordance with the bye-laws.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Any individual who is a shareholder and who is present at a
meeting may vote in person, as may any corporate shareholder
which is present by a duly authorized representative. Our
bye-laws also permit votes by proxy, provided the instrument
appointing the proxy, together with evidence of its due
execution, is satisfactory to our board of directors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In order to avoid adverse tax consequences to us and our
shareholders, our bye-laws provide generally that any
shareholder owning, directly, indirectly or, in the case of any
U.S.&nbsp;Person by attribution, more than 9.9% of our common
shares will have the voting rights attached to such common
shares reduced so that it may not exercise more than 9.9% of the
total voting rights. The reduction in votes is generally to be
applied proportionately among all shareholders who are members
of the first shareholder&#146;s &#147;control group&#148;. A
&#147;control group&#148; means, with respect to any person, all
shares directly owned by such person and all shares directly
owned by each other shareholder any of whose shares are included
in the controlled shares of such person. &#147;Controlled
shares&#148; means all common shares that a person is deemed to
own directly, indirectly (within the meaning of Section&nbsp;958
(a)&nbsp;of the Code), or, in the case of a U.S.&nbsp;person,
constructively (within the meaning of Section&nbsp;958
(b)&nbsp;of the Code). A similar limitation is to be applied to
shares held directly by members of a &#147;related group&#148;.
A &#147;related group&#148; means a group of shareholders that
are investment vehicles and are under common control and
management. Any reduction in votes is generally allocated
proportionately among members of the shareholder&#146;s
&#147;control group&#148; or &#147;related group&#148;, as the
case may be. The amount of any reduction of votes that occurs by
operation of the above limitations will generally be reallocated
proportionately among all of our other shareholders who were not
members of these groups so long as such reallocation does not
cause any person to become a 9.9% shareholder.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under these provisions, certain shareholders may have their
voting rights limited to less than one vote per share, while
other shareholders may have voting rights in excess of one vote
per share. Moreover, these provisions could have the effect of
reducing the votes of certain shareholders who would not
otherwise be subject to the 9.9% limitation by virtue of their
direct share ownership. Our bye-laws also provide that
shareholders will be notified of their voting interests prior to
any vote to be taken by the shareholders. See
&#147;&#151;&nbsp;Voting Adjustments.&#148;
</DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Dividends</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Bermuda law does not permit payment of dividends, or
distributions out of contributed surplus, by a company if there
are reasonable grounds for believing that the company, after the
payment is made, would be unable to pay its liabilities as they
become due, or the realizable value of the company&#146;s assets
would be less, as a result of the payment, than the aggregate of
its liabilities and its issued share capital and share premium
accounts. The excess of the consideration paid on issue of
shares over the aggregate par value of such shares must (except
in certain limited circumstances) be credited to a share premium
account. Share premium may be distributed in certain limited
circumstances, for example to pay up for unissued shares which
may be distributed to shareholders in proportion to their
holdings, but is otherwise subject to limitation. In addition,
our ability to pay dividends is subject to Bermuda and
U.S.&nbsp;state insurance laws and regulatory constraints.
</DIV>

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<DIV align="left" style="font-size: 10pt;">
See &#147;Regulation&nbsp;&#151; Bermuda Regulation&nbsp;&#151;
Solvency Margin and Restrictions on Dividends and
Distributions.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under Delaware law, subject to any restrictions contained in the
company&#146;s certificate of incorporation, a company may pay
dividends out of surplus or, if there is no surplus, out of net
profits for the fiscal year in which the dividend is declared
and for the preceding fiscal year. Delaware law also provides
that dividends may not be paid out of net profits at any time
when capital is less than the capital represented by the
outstanding stock of all classes having a preference upon the
distribution of assets. There will be restrictions on the
payment of dividends to us by our insurance subsidiaries, which
are described in more detail in &#147;Regulation.&#148;
</DIV>

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    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Amalgamations, Mergers and Similar Arrangements</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We may acquire the business of another Bermuda exempted company
or a company incorporated outside Bermuda when conducting such
business would benefit us and would be conducive to attaining
our objectives contained within our memorandum of association.
We may, with the approval of a majority of votes cast at a
general meeting of our shareholders at which a quorum is
present, amalgamate with another Bermuda company or with an
entity incorporated outside Bermuda. In the case of an
amalgamation, a shareholder may apply to a Bermuda court for a
proper valuation of such shareholder&#146;s shares if such
shareholder is not satisfied that fair value has been paid for
such shares. The court ordinarily would not disapprove the
transaction on that ground absent evidence of fraud or bad
faith. Under Delaware law, a stockholder of a corporation
participating in certain major corporate transactions may, under
certain circumstances, be entitled to appraisal rights pursuant
to which the stockholder may receive cash in the amount of the
fair value of the shares held by that stockholder (as determined
by a court) in lieu of the consideration that stockholder would
otherwise receive in the transaction.
</DIV>

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    <TD width="3%"></TD>
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</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Takeovers</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Bermuda law provides that where an offer is made for shares of a
company and, within four months of the offer, the holders of not
less than 90% of the shares which are the subject of the offer
accept, the offeror may by notice require the non-tendering
shareholders to transfer their shares on the terms of the offer.
Dissenting shareholders may apply to the court within one month
of the notice objecting to the transfer. The burden is on the
dissenting shareholders to show that the court should exercise
its discretion to enjoin the required transfer, which the court
will be unlikely to do unless there is evidence of fraud or bad
faith or collusion between the offeror and the holders of the
shares who have accepted the offer as a means of unfairly
forcing out minority shareholders. Delaware law provides that a
parent corporation, by resolution of its board of directors and
without any shareholder vote, may merge with any subsidiary of
which it owns at least 90% of the outstanding shares of each
class of stock that is entitled to vote on the transaction. Upon
any such merger, dissenting stockholders of the subsidiary would
have appraisal rights.
</DIV>

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    <TD width="3%"></TD>
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</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Shareholders&#146; Suits</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The rights of shareholders under Bermuda law are not as
extensive as the rights of shareholders under legislation or
judicial precedent in many U.S.&nbsp;jurisdictions. Class
actions and derivative actions are generally not available to
shareholders under the laws of Bermuda. However, the Bermuda
courts ordinarily would be expected to follow English case law
precedent, which would permit a shareholder to commence an
action in our name to remedy a wrong done to us where the act
complained of is alleged to be beyond our corporate power or is
illegal or would result in the violation of our memorandum of
association or bye-laws. Furthermore, consideration would be
given by the court to acts that are alleged to constitute a
fraud against the minority shareholders or where an act requires
the approval of a greater percentage of our shareholders than
actually approved it. The winning party in such an action
generally would be able to recover a portion of attorneys&#146;
fees incurred in connection with such action. In comparison,
class actions and derivative actions generally are available to
stockholders under Delaware law for, among other things, breach
of fiduciary duty, corporate waste and actions not taken in
accordance with applicable law. In such actions, the court has
discretion to permit the winning party to recover
attorneys&#146; fees incurred in connection with such action.
</DIV>

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    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Approval of Corporate Matters by Written Consent</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under Bermuda law, the Companies Act provides that shareholders
or the board of directors may take action by written consent in
lieu of a shareholder&#146;s meeting or a meeting of the board
of directors, respectively, so long as the written consent is
signed by all of the shareholders entitled to attend and vote at
that meeting or the directors, respectively. Unless otherwise
provided in a corporation&#146;s certificate of incorporation,
Delaware law permits stockholders to take action by the consent
in writing by the holders of outstanding stock having not less
than the minimum number of votes that would be necessary to
authorize or take such action at a meeting of stockholders at
which all shares entitled to vote thereon were present and
voted. Under Delaware law, the board of directors may take
action by written consent so long as the written consent is
signed by all of the directors.
</DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Indemnification of Directors and Officers</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under Bermuda law and our bye-laws, we indemnify our directors,
officers or any other person appointed to a committee of the
board of directors (and their respective heirs, executors or
administrators) to the full extent permitted by law against all
actions, costs, charges, liabilities, loss, damage or expense
incurred or suffered by such person by reason of any act done,
conceived in or omitted in the conduct of our business or in the
discharge of his/her duties; provided that such indemnification
shall not extend to any matter which would render it void
pursuant to the Companies Act. Under our bye-laws, each of our
shareholders agrees to waive any claim or right of action, other
than those involving fraud or dishonesty, against us or any of
our officers or directors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under Delaware law, a corporation may indemnify a director or
officer of the corporation against expenses (including
attorneys&#146; fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred in defense of an
action, suit or proceeding by reason of such position if
(1)&nbsp;the director or officer acted in good faith and in a
manner he reasonably believed to be in or not opposed to the
best interests of the corporation and (2)&nbsp;with respect to
any criminal action or proceeding, if the director or officer
had no reasonable cause to believe his conduct was unlawful.
</DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Inspection of Corporate Records</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Members of the general public have the right to inspect our
public documents available at the office of the Registrar of
Companies in Bermuda and our registered office in Bermuda, which
will include our memorandum of association (including its
objects and powers) and any alteration to our memorandum of
association and documents relating to any increase or reduction
of authorized capital. Our shareholders have the additional
right to inspect our bye-laws, minutes of general meetings and
financial statements, which must be presented to the annual
general meeting of shareholders. The register of our
shareholders is also open to inspection by shareholders without
charge, and to members of the public for a fee. We are required
to maintain our share register in Bermuda but may establish a
branch register outside of Bermuda. We are required to keep at
our registered office a register of our directors and officers
which is open for inspection by members of the public without
charge. Bermuda law does not, however, provide a general right
for shareholders to inspect or obtain copies of any other
corporate records. Delaware law permits any stockholder to
inspect or obtain copies of a corporation&#146;s stockholder
list and its other books and records for any purpose reasonably
related to such person&#146;s interest as a stockholder.
</DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Shareholder Proposals</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under Bermuda law, the Companies Act provides that shareholders
may, as set forth below and at their own expense (unless a
company otherwise resolves), require a company to give notice of
any resolution that the shareholders can properly propose at the
next annual general meeting and/or to circulate a statement
prepared by the requesting shareholders in respect of any matter
referred to in a proposed resolution or any business to be
conducted at a general meeting. The number of shareholders
necessary for such a requisition is either that number of
shareholders representing at least 5% of the total voting rights
of all shareholders having a right to vote at the meeting to
which the requisition relates or not less than
100&nbsp;shareholders. Delaware law
</DIV>

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<DIV align="left" style="font-size: 10pt;">
does not include a provision restricting the manner in which
nominations for directors may be made by stockholders or the
manner in which business may be brought before a meeting.
</DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Calling of Special Shareholders Meetings</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under our bye-laws, a special general meeting may be called by
the board of directors or by our Chairman of the Board or Deputy
Chairman of the Board. Under Bermuda law, a special meeting may
also be called by the shareholders when requisitioned by the
holders of at least 10% of the paid up voting share capital of
our company as provided by the Companies Act. Delaware law
permits the board of directors or any person who is authorized
under a corporation&#146;s certificate of incorporation or
bye-laws to call a special meeting of stockholders.
</DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Staggered Board of Directors</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Bermuda laws does not contain statutory provisions specifically
mandating staggered board of directors arrangements for a
Bermuda exempted company. Such provisions, however, may validly
be provided for in the bye-laws governing the affairs of such a
company. Delaware law permits corporations to have a staggered
board of directors.
</DIV>

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<TR>
    <TD width="3%"></TD>
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</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Amendment of Memorandum of Association</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Bermuda law provides that the memorandum of association of a
company may be amended by a resolution passed at a general
meeting of shareholders of which due notice has been given. An
amendment to the memorandum of association that alters the
company&#146;s business objects may require approval of the
Bermuda Minister of Finance, who may grant or withhold approval
at his or her discretion.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under Bermuda law, the holders of an aggregate of not less than
20% in par value of a company&#146;s issued share capital have
the right to apply to the Bermuda courts for an annulment of any
amendment of the memorandum of association adopted by
shareholders at any general meeting, other than an amendment
which alters or reduces a company&#146;s share capital as
provided in the Companies Act. Where such an application is
made, the amendment becomes effective only to the extent that it
is confirmed by the Bermuda court. An application for an
annulment of an amendment of the memorandum of association must
be made within 21&nbsp;days after the date on which the
resolution altering the company&#146;s memorandum of association
is passed and may be made on behalf of persons entitled to make
the application by one or more of their designees as such
holders may appoint in writing for such purpose. No application
may be made by the shareholders voting in favor of the amendment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under Delaware law, amendment of the certificate of
incorporation, which is the equivalent of a memorandum of
association, of a company must be made by a resolution of the
board of directors setting forth the amendment, declaring its
advisability, and either calling a special meeting of the
stockholders entitled to vote or directing that the amendment
proposed be considered at the next annual meeting of the
stockholders. Delaware law requires that, unless a different
percentage is provided for in the certificate of incorporation,
a majority of the outstanding shares entitled to vote thereon is
required to approve the amendment of the certificate of
incorporation at the stockholders meeting. If the amendment
would alter the number of authorized shares or par&nbsp;value or
otherwise adversely affect the rights or preference of any class
of a company&#146;s stock, the holders of the outstanding shares
of such affected class, regardless of whether such holders are
entitled to vote by the certificate of incorporation, should be
entitled to vote as a class upon the proposed amendment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
However, the number of authorized shares of any class may be
increased or decreased, to the extent not falling below the
number of shares then outstanding, by the affirmative vote of
the holders of a majority of the stock entitled to vote, if so
provided in the company&#146;s certificate of incorporation or
any amendment that created such class or was adopted prior to
the issuance of such class or that was authorized by the
affirmative vote of the holders of a majority of such class or
classes of stock.
</DIV>

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    <TD width="3%"></TD>
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</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Amendment of Bye-laws</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our bye-laws provide that the bye-laws may only be revoked or
amended upon approval by a resolution of our board of directors
and by (a) a simple majority of votes cast by our shareholders
or (b)&nbsp;by resolution of eighty-five percent (85%) of the
total votes cast when the board proposes to repeal, alter or
amend the indemnities set out in the bye-laws.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under Delaware law, holders of a majority of the voting power of
a corporation and if so provided in the certificate of
incorporation the directors of the corporation, have the power
to adopt, amend and repeal the bylaws of a corporation.
</DIV>

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<TR>
    <TD width="3%"></TD>
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</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Enforcement of Judgments and Other Matters</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
There is no treaty in force between the United States and
Bermuda providing for the reciprocal recognition and enforcement
of judgments in civil and commercial matters. As a result,
whether a United States judgment would be enforceable in Bermuda
against us or our directors and officers depends on whether the
U.S.&nbsp;court that entered the judgment is recognized by the
Bermuda court as having jurisdiction over us or our directors
and officers, as determined by reference to Bermuda conflict of
law rules. A judgment debt from a U.S.&nbsp;court that is final
and for a sum certain based on U.S.&nbsp;federal securities laws
will not be enforceable in Bermuda unless the judgment debtor
had submitted to the jurisdiction of the U.S.&nbsp;court, and
the issue of submission and jurisdiction is a matter of Bermuda
(not United States) law.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, and irrespective of jurisdictional issues, the
Bermuda courts will not enforce a United States federal
securities law that is either penal or contrary to the public
policy of Bermuda. An action brought pursuant to a public or
penal law, the purpose of which is the enforcement of a
sanction, power or right at the instance of the state in its
sovereign capacity, may not be entertained by a Bermuda court to
the extent they are contrary to Bermuda public policy. Certain
remedies available under the laws of U.S.&nbsp;jurisdictions,
including certain remedies under U.S.&nbsp;federal securities
laws, may not be available under Bermuda law or enforceable in a
Bermuda court, to the extent they are contrary to Bermuda public
policy. Further, no claim may be brought in Bermuda against us
or our directors and officers in the first instance for
violations of U.S.&nbsp;federal securities laws because these
laws have no extraterritorial jurisdiction under Bermuda law and
do not have force of law in Bermuda. A Bermuda court may,
however, impose civil liability on us or our directors and
officers if the facts alleged in a complaint constitute or give
rise to a cause of action under Bermuda law.
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<A name='116'></A>
</DIV>

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<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>UNDERWRITING</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We and Sandler O&#146;Neill&nbsp;&#38; Partners,&nbsp;L.P. and
KeyBanc Capital Markets, a division of McDonald Investments
Inc., as representatives of the underwriters for this offering,
have entered into an underwriting agreement with respect to the
shares being offered. Subject to the terms and conditions of the
underwriting agreement, each of the underwriters named below has
agreed to purchase from us the respective number of common
shares shown opposite its name below:
</DIV>

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<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Number</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2" align="left" nowrap><B>Underwriters</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>of Shares</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Sandler O&#146;Neill&nbsp;&#38; Partners, L.P.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    KeyBanc Capital Markets<BR>
    a division of McDonald Investments Inc.</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The underwriting agreement provides that the obligations of the
underwriters are conditional and may be terminated at their
discretion based on their assessment of the financial markets.
The obligations of the underwriters may also be terminated upon
the occurrence of the events specified in the underwriting
agreement. The underwriting agreement provides that the
underwriters are obligated to purchase all of the common shares
in this offering if any are purchased, other than those covered
by the over-allotment option described below.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The selling shareholders have severally granted the underwriters
an option to purchase up
to &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;additional
common shares at the initial price to the public, less the
underwriting discounts and commissions, set forth on the cover
page of this prospectus. This option is exercisable for a period
of 30&nbsp;days. The selling shareholders will be obligated to
sell additional shares to the underwriters to the extent the
option is exercised. The underwriters may exercise this option
only to cover over-allotments made in connection with the sale
of common shares offered by this prospectus, if any.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table shows the per-share and total underwriting
discounts and commissions that we and the selling shareholders
will pay to each underwriter:
</DIV>

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<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

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    <TD width="36%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
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    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>By Selling</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>By Selling</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Shareholders</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Shareholders</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>By us without</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>By us with</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>without</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>with</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Over-allotment</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Over-allotment</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Over-allotment</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Over-allotment</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Per Share</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Total</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

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    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We estimate that the total expenses of the offering, excluding
underwriting discounts and commissions, will be
approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">l</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.
These expenses are payable by us. We have agreed to reimburse
each underwriter for certain actual out-of-pocket expenses
incurred in connection with the offering, including certain fees
and disbursements of underwriters&#146; counsel in an amount not
to exceed $250,000.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The underwriters propose to offer the common shares directly to
the public at the public offering price set forth on the cover
page of this prospectus. The underwriters may offer the shares
to securities dealers at the public offering price less a
concession not in excess of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">l</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share. The underwriters may allow, and the dealers may reallow,
a discount not in excess of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">l</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share on sales to other brokers or dealers. If all of the shares
are not sold at the initial price to the public, the
underwriters may change the offering price and other selling
terms.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The shares are being offered by the underwriters, subject to
prior sale, when, as and if issued to and accepted by them,
subject to approval of certain legal matters by counsel for the
underwriters and other conditions specified in the underwriting
agreement. The underwriters reserve the right to withdraw,
cancel or modify this offer and reject orders in whole or in
part.
</DIV>

<P align="center" style="font-size: 10pt;">103
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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We, and our executive officers, directors and principal
shareholders (greater than 5% shareholders) have agreed, for a
period of 180&nbsp;days after the date of this prospectus, not
to sell, offer, agree to sell, contract to sell, hypothecate,
pledge, grant any option to sell, or otherwise dispose of or
hedge, directly or indirectly, any of our common shares or
securities convertible into, exchangeable or exercisable for any
common shares or warrants or other rights to purchase common
shares or similar securities without, in each case, the prior
written consent of Sandler, O&#146;Neill&nbsp;&#38; Partners,
L.P. These restrictions are expressly agreed to preclude us, and
our executive officers, directors and principal shareholders
from engaging in any hedging or other transaction or arrangement
that is designed to, or which reasonably could be expected to,
lead to or result in a sale, disposition or transfer, in whole
or in part, of any of the economic consequences of ownership of
our common shares, whether such transaction would be settled by
delivery of common shares or other securities, in cash or
otherwise.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The 180-day restricted period described above is subject to
extension such that, in the event that either (1)&nbsp;during
the last 17&nbsp;days of the 180-day restricted period, we issue
an earnings release or material news or material event relating
to us occurs or (2)&nbsp;prior to the expiration of the 180-day
restricted period, we announce that we will release earnings
results during the 16-day period beginning on the last day of
the 180-day period, the &#147;lock up&#148; restrictions
described above will, subject to limited exceptions, continue to
apply until the expiration of the 18-day period beginning on the
earnings release or the occurrence of the material news or
material event.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Prior to this offering, there has been no established public
trading market for our common shares. The initial public
offering price was determined by negotiation between us and the
underwriter. The principal factors that were considered in
determining the initial public offering price were:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    our results of operations;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    expectations regarding our future results of operations,
    including financial estimates by securities analysts and
    investors;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    possible third-party claims against us;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    possible changes in law and regulations;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    future sales of our common shares.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The factors described above were not assigned any particular
weight. Rather, these factors, together with market valuations
and the financial performance of other publicly companies in our
industry, were considered as a totality in our negotiation with
the underwriters over our initial public offering price.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We intend to apply to have our common shares listed for
quotation on the Nasdaq National Market under the
symbol &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with this offering, the underwriters may engage in
stabilizing transactions, over-allotment transactions, syndicate
covering transactions and penalty bids.
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Stabilizing transactions permit bids to purchase common shares
    so long as the stabilizing bids do not exceed a specified
    maximum, and are engaged in for the purpose of preventing or
    retarding a decline in the market price of the common shares
    while the offering is in progress.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Over-allotment transactions involve sales by the underwriters of
    common shares in excess of the number of shares the underwriters
    are obligated to purchase. This creates a syndicate short
    position that may be either a covered short position or a naked
    short position. In a covered short position, the number of
    shares over-allotted by the underwriters is not greater than the
    number of shares that it may purchase in the over-allotment
    option. In a naked short position, the number of shares involved
    is greater than the number of shares in the over-allotment
    option. The underwriters may close out any short position by
    exercising their over-allotment option and/or purchasing shares
    in the open market.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Syndicate covering transactions involve purchases of common
    shares in the open market after the distribution has been
    completed in order to cover syndicate short positions. In
    determining the source of shares to close out the short
    position, the underwriters will consider, among other things,
    the price of</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">104

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<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD align="left">
    shares available for purchase in the open market compared with
    the price at which they may purchase shares through exercise of
    the over-allotment option. If the underwriters sell more shares
    than could be covered by exercise of the over-allotment option
    and, therefore, have a naked short position, the position can be
    closed out only by buying shares in the open market. A naked
    short position is more likely to be created if the underwriters
    are concerned that after pricing there could be a downward
    pressure on the price of the shares in the open market that
    could adversely affect investors who purchase in this offering.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Penalty bids permit the underwriters to reclaim a selling
    concession from a syndicate member when the common shares
    originally sold by that syndicate member are purchased in a
    stabilizing or syndicate covering transaction to cover syndicate
    short positions.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
These stabilizing transactions, syndicate covering transactions
and penalty bids may have the effect of raising or maintaining
the market price of our common shares or preventing or retarding
a decline in the market price of our common shares. As a result,
the price of our common shares in the open market may be higher
than it would otherwise be in the absence of these transactions.
Neither we nor the underwriters make any representation or
prediction as to the effect that the transactions described
above may have on the price of our common shares. These
transactions may be effected on the Nasdaq National Market, in
the over-the-counter market or otherwise and, if commenced, may
be discontinued at any time.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We and the selling shareholders have agreed to indemnify the
underwriters against specified liabilities, including
liabilities under the Securities Act, and to contribute to
payments that the underwriters may be required to make in
respect thereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Affiliates of the underwriters act as lenders to CRM and Twin
Bridges under their credit facilities and letters of credit.
Also, certain of the underwriters and their affiliates have,
from time to time, provided, and may in the future provide,
financial advisory, investment banking and general financing and
banking services to us and our executive officers, for which
they have received, and may receive, customary fees and expenses.
</DIV>

<P align="center" style="font-size: 10pt;">105

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<DIV align="left" style="font-size: 10pt;">
<A name='117'></A>
</DIV>

<!-- link1 "SHARES ELIGIBLE FOR FUTURE SALE" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>SHARES ELIGIBLE FOR FUTURE SALE</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>General</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Prior to this offering, there has been no public market for our
common shares. No prediction can be made as to the effect, if
any, that sales of common shares or the availability of common
shares for sale will have on the market price of our shares. The
market price of our common shares could decline because of the
sale of a large number of shares or the perception that such
sales could occur. These factors could also make it more
difficult for us to raise funds through future offerings of
shares.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
After this
offering, &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of
our common shares will be outstanding,
or &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;common
shares if the underwriters&#146; over-allotment option is
exercised in full. Of these common shares,
the &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;common
shares sold in this offering,
or &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;common
shares if the underwriters&#146; over-allotment option is
exercised in full, will be freely tradable without restriction
under the Securities Act, except that any common shares held by
our &#147;affiliates&#148; as defined in Rule&nbsp;144 under the
Securities Act may be sold only in compliance with the
limitations described below. Our restricted securities generally
may not be sold unless they are registered under the Securities
Act or are sold pursuant to an exemption under the Securities
Act, such as the exemption provided by Rule&nbsp;144 under the
Securities Act.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with this offering, our existing officers,
directors and principal shareholders, who will beneficially own
a total of up
to &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;common
shares after this offering, have entered into lock-up agreements
pursuant to which they have agreed not to sell any common shares
for a period of 180&nbsp;days after the date of this prospectus
without the prior written consent of Sandler
O&#146;Neill&nbsp;&#38; Partners, L.P., which may, in its sole
discretion, at any time and without notice, waive any of the
terms of these lock-up agreements. The underwriters presently
have no intention to allow any common shares held by our
existing officers, directors and principal shareholders to be
sold prior to the expiration of the 180&nbsp;day lock-up period.
Following the lock-up period, these shares will not be eligible
for sale in the public market without registration under the
Securities Act unless such sale meets the conditions and
restrictions of an exemption under the Securities Act such as
Rule&nbsp;144 as described below.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The 180-day restricted period described above is subject to
extension such that, in the event that either (1)&nbsp;during
the last 17&nbsp;days of the 180-day restricted period, we issue
an earnings release or material news or material event relating
to us occurs or (2)&nbsp;prior to the expiration of the 180-day
restricted period, we announce that we will release earnings
results during the 16-day period beginning on the last day of
the 180-day period, the &#147;lock up&#148; restrictions
described above will, subject to limited exceptions, continue to
apply until the expiration of the 18-day period beginning on the
earnings release or the occurrence of the material news or
material event.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In general, under Rule&nbsp;144, as currently in effect, any
person or persons whose shares are aggregated, including an
affiliate of ours, who has beneficially owned restricted shares
for a period of at least one year is entitled to sell, within
any three month period, commencing 90&nbsp;days after the date
of this prospectus, a number of common shares that does not
exceed the greater of:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    1% of the then outstanding common shares;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the average weekly trading volume in the common shares during
    the four calendar weeks immediately preceding the date on which
    the notice of such sale on Form&nbsp;144 is filed with the SEC.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Sales under Rule&nbsp;144 are subject to provisions relating to
notice and manner of sale and the availability of current public
information about us during the 90&nbsp;days immediately
preceding a sale. In addition, a person who is not an affiliate
of ours during the 90&nbsp;days preceding a sale and who has
beneficially owned the common shares proposed to be sold for at
least two years would be entitled to sell such shares under
Rule&nbsp;144(k) without regard to the volume limitation and
other conditions described above.
</DIV>

<P align="center" style="font-size: 10pt;">106

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<DIV align="left" style="font-size: 10pt;">
<A name='118'></A>
</DIV>

<!-- link1 "LEGAL MATTERS" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>LEGAL MATTERS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are being represented by Baker&nbsp;&#38; McKenzie LLP, New
York, New York in connection with this offering. The validity of
the common shares and other legal matters in connection with
this offering with respect to Bermuda law will be passed upon
for us by Appleby Spurling Hunter, Bermuda. Certain legal
matters will be passed upon for the underwriters by Kramer Levin
Naftalis&nbsp;&#38; Frankel LLP, New York, New York and, with
respect to legal matters under Bermuda law, by Conyers
Dill&nbsp;&#38; Pearman, Bermuda.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='119'></A>
</DIV>

<!-- link1 "EXPERTS" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>EXPERTS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The combined financial statements of Compensation Risk Managers,
LLC and Affiliates for each of the years ended December&nbsp;31,
2004, 2003 and 2002 and as of December&nbsp;31, 2004 and 2003
and the balance sheet of CRM Holdings, Ltd. (in&nbsp;formation)
as of September&nbsp;7, 2005 included in this prospectus have
been so included in reliance on the report of Johnson
Lambert&nbsp;&#38; Co., independent accountants, given on their
authority as experts in auditing and accounting.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='120'></A>
</DIV>

<!-- link1 "ENFORCEABILITY OF CIVIL LIABILITIES UNDER U.S. FEDERAL SECURITIES LAWS" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>ENFORCEABILITY OF CIVIL LIABILITIES UNDER U.S.&nbsp;FEDERAL
SECURITIES LAWS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are a Bermuda company and a substantial portion of our assets
are or may be located in jurisdictions outside the United
States. It may therefore be difficult for investors to effect
service of process against us or to enforce against us judgments
of U.S.&nbsp;courts predicated upon civil liability provisions
of the U.S.&nbsp;federal securities laws.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
There is no treaty in force between the United States and
Bermuda providing for the reciprocal recognition and enforcement
of judgments in civil and commercial matters. As a result,
whether a United States judgment would be enforceable in Bermuda
against us or our directors and officers depends on whether the
U.S.&nbsp;court that entered the judgment is recognized by the
Bermuda court as having jurisdiction over us or our directors
and officers, as determined by reference to Bermuda conflict of
law rules. A judgment debt from a U.S.&nbsp;court that is final
and for a sum certain based on U.S.&nbsp;federal securities laws
will not be enforceable in Bermuda unless the judgment debtor
had submitted to the jurisdiction of the U.S.&nbsp;court, and
the issue of submission and jurisdiction is a matter of Bermuda
(not&nbsp;U.S.) law.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, and irrespective of jurisdictional issues, the
Bermuda courts will not enforce a U.S.&nbsp;federal securities
law that is either penal or contrary to the public policy of
Bermuda. An action brought pursuant to a public or penal law,
the purpose of which is the enforcement of a sanction, power or
right at the instance of the state in its sovereign capacity,
may not be entertained by a Bermuda court to the extent they are
contrary to Bermuda public policy. Certain remedies available
under the laws of U.S.&nbsp;jurisdictions, including certain
remedies under U.S.&nbsp;federal securities laws, may not be
available under Bermuda law or enforceable in a Bermuda court,
to the extent they are contrary to Bermuda public policy.
Further, no claim may be brought in Bermuda against us or our
directors and officers in the first instance for violations of
U.S.&nbsp;federal securities laws because these laws have no
extraterritorial jurisdiction under Bermuda law and do not have
force of law in Bermuda. A Bermuda court may, however, impose
civil liability on us or our directors and officers if the facts
alleged in a complaint constitute or give rise to a cause of
action under Bermuda law.
</DIV>

<P align="center" style="font-size: 10pt;">107

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<DIV align="left" style="font-size: 10pt;">
<A name='121'></A>
</DIV>

<!-- link1 "WHERE YOU CAN FIND MORE INFORMATION" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>WHERE YOU CAN FIND MORE INFORMATION</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have filed with the Securities and Exchange Commission, or
SEC, a registration statement on Form&nbsp;S-1 under the
Securities Act of 1933, as amended, with respect to the common
shares that are being offered by this prospectus. This
prospectus, which is a part of the registration statement, does
not contain all of the information set forth in the registration
statement and the exhibits and schedules to the registration
statement. Refer to the registration statement, exhibits and
schedules for further information with respect to the common
shares offered by this prospectus. Statements contained in this
prospectus regarding the contents of any contract or other
documents are only summaries. With respect to any contract or
document filed as an exhibit to the registration statement, you
should refer to the exhibit for a copy of the contract or
document, and each statement in this prospectus regarding that
contract or document is qualified by reference to the exhibit.
The registration statement, including all exhibits, may be
inspected without charge at the SEC&#146;s Public Reference Room
at 100&nbsp;F&nbsp;Street, N.E., Washington,&nbsp;D.C. 20549.
Information on the operation of the Public Reference Room can be
obtained by calling the SEC at 1-800-SEC-0330. Our SEC filings
also are available to the public from the SEC&#146;s website at
www.sec.gov.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Website Access to our Periodic SEC Reports</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Internet address of our corporate website is
www.trustcrm.com. We intend to make our periodic SEC reports (on
Forms&nbsp;10-K and&nbsp;10-Q) and current reports (on
Form&nbsp;8-K), as well as the beneficial ownership reports
filed by our directors, officers and 10% shareholders (on
Forms&nbsp;3, 4 and 5)&nbsp;available free of charge through our
website as soon as reasonably practicable after they are filed
electronically with the SEC. We may from time to time provide
important disclosures to investors by posting them in the
investor relations section of our website, as allowed by SEC
rules. The information on our website is not a part of this
prospectus and will not be part of any of our periodic or
current reports to the SEC.
</DIV>

<P align="center" style="font-size: 10pt;">108

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<DIV align="left" style="font-size: 10pt;">
<A name='122'></A>
</DIV>

<!-- link1 "INDEX TO FINANCIAL STATEMENTS" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>INDEX TO FINANCIAL STATEMENTS</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="90%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Page</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Compensation Risk Managers, LLC and Affiliates</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Interim Unaudited Combined Financial Statements:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Combined Balance Sheets as of June&nbsp;30, 2005 and
    December&nbsp;31, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-2</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Combined Statements of Income for the six months ended
    June&nbsp;30, 2005 and 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-3</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Combined Statement of Changes in Shareholders&#146; and
    Members&#146; Equity for the six months ended June&nbsp;30, 2005
    and 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-4</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Combined Statements of Cash Flows for the six months ended
    June&nbsp;30, 2005 and 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-5</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Notes to Interim Combined Financial Statements</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-6</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Annual Combined Financial Statements:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Report of Johnson Lambert&nbsp;&#38; Co., Independent Registered
    Public Accounting Firm</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-13</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Combined Balance Sheets as of December&nbsp;31, 2004 and 2003</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-14</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Combined Statements of Income for the years ended
    December&nbsp;31, 2004, 2003 and 2002</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-15</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Combined Statements of Changes in Members&#146; and
    Shareholders&#146; Equity for the years ended December 2004,
    2003 and 2002</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-16</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Combined Statements of Cash Flows for the years ended December
    2004, 2003 and 2002</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-17</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Notes to Combined Financial Statements</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-18</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>CRM Holdings Ltd. (in formation):</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Report of Johnson Lambert &#38; Co., Independent Registered
    Public Accounting Firm</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-29</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance Sheet as of September&nbsp;7, 2005</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-30</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Note to Balance Sheet</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-30</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">F-1
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<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Compensation Risk Managers, LLC and Affiliates</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='300'></A>
</DIV>

<!-- link1 "Unaudited Combined Balance Sheets" -->

<DIV align="center" style="font-size: 10pt;">
<B>Unaudited Combined Balance Sheets</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="61%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>June&nbsp;30,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="11" align="center" valign="top">
    <B>ASSETS</B></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,492,564</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,576,479</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents, restricted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,269,678</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,398,342</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Premiums receivable, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,844,845</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,758,139</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts receivable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>925,446</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred policy acquisition costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,340,565</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,413,500</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Property and equipment, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>955,292</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>912,956</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Loans receivable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>414,173</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>431,606</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prepaid expenses and other assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>382,019</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>233,289</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Total assets</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>16,624,582</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>12,724,311</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="11">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="11" align="center" valign="top">
    <B>LIABILITIES AND SHAREHOLDERS&#146; AND MEMBERS&#146;
    EQUITY</B></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Reserve for losses and loss adjustment expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,001,062</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,696,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Unearned reinsurance premiums</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,533,316</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,779,950</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Unearned management fee revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,182,342</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>670,631</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Unearned commission income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,382,976</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,333,940</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Borrowings under credit facilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,109,399</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>158,307</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Fees payable to general agents and brokers</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>740,430</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>565,571</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,733,438</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>631,885</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Total liabilities</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,682,963</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>11,836,284</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Twin Bridges</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Common stock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>120,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>120,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Additional paid-in capital</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>880,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>880,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Retained earnings</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,576,139</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>834,891</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    LLC members&#146; equity (deficit)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,634,520</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(946,864</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Total shareholders&#146; and members&#146; equity
    (deficit)</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(58,381</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>888,027</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Total liabilities and shareholders&#146; and members&#146;
    equity</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>16,624,582</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>12,724,311</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>See Notes to Combined Financial Statements.</I>
</DIV>

<P align="center" style="font-size: 10pt;">F-2

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Compensation Risk Managers, LLC and Affiliates</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='301'></A>
</DIV>

<!-- link1 "Unaudited Combined Statements of Income" -->

<DIV align="center" style="font-size: 10pt;">
<B>Unaudited Combined Statements of Income</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Six Months Ended June&nbsp;30</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Revenues</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Fee-based management services:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Management fees</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>14,384,151</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>12,221,141</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Commission income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,110,292</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,699,041</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2"><FONT style="font-size: 10pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,494,443</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,920,182</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net reinsurance premiums</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,045,146</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,122,925</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Investment income, net of advisory fees</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>53,463</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21,170</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19,593,052</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,064,277</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Expenses</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Losses and loss adjustment expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,305,062</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,165,604</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Fees paid to general agents and brokers</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,627,711</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,125,836</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Policy acquisition costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>900,496</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>627,779</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Selling, general and administrative expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,883,709</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,274,647</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>28,780</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,745,758</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,218,866</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income before taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,847,294</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,845,411</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Provision for income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Net income</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,847,294</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,845,411</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>See Notes to Combined Financial Statements.</I>
</DIV>

<P align="center" style="font-size: 10pt;">F-3

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Compensation Risk Managers, LLC and Affiliates</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='302'></A>
</DIV>

<!-- link1 "Unaudited Combined Statement of Changes in Shareholders&#146; And Members&#146; Equity" -->

<DIV align="center" style="font-size: 10pt;">
<B>Unaudited Combined Statement of Changes in Shareholders&#146;
And Members&#146; Equity</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Six Months Ended June&nbsp;30</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="40%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Twin Bridges</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Total Share-</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>LLC</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>holders&#146; and</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Common</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Paid-in</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Retained</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Members&#146;</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Members&#146;</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Stock</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Capital</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Earnings</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Equity</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Equity</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Balance at January&nbsp;1, 2004</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>120,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>880,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(51,276</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(2,112,661</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1,163,937</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income for the period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>250,320</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,595,091</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,845,411</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Distributions to members</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,060,191</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,060,191</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Balance at June&nbsp;30, 2004</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>120,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>880,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>199,044</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1,577,761</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(378,717</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="21">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Balance at January&nbsp;1, 2005</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>120,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>880,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>834,891</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(946,864</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>888,027</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income for the period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>741,248</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,106,046</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,847,294</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Distributions to members</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,793,702</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,793,702</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Balance at June&nbsp;30, 2005</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>120,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>880,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,576,139</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(2,634,520</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(58,381</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>See Notes to Combined Financial Statements</I>
</DIV>

<P align="center" style="font-size: 10pt;">F-4

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Compensation Risk Managers, LLC and Affiliates</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='303'></A>
</DIV>

<!-- link1 "Unaudited Combined Statements of Cash Flows" -->

<DIV align="center" style="font-size: 10pt;">
<B>Unaudited Combined Statements of Cash Flows</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Six Months Ended June&nbsp;30</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="57%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>CASH FLOWS FROM OPERATING ACTIVITIES</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,847,294</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,845,411</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Adjustments to reconcile net income to net cash provided by
    operating activities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Depreciation and amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>102,281</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>123,533</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Changes in:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents, restricted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,871,336</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,318,282</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Premiums receivable, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(86,706</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(507,297</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts receivable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(884,276</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(115,185</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred policy acquisition costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>72,935</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(138,742</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prepaid expenses and other assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(189,900</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(160,600</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Reserve for losses and loss adjustment expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,305,062</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,165,604</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Unearned reinsurance premiums</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(246,634</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>469,175</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Unearned management fee revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>511,711</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>455,542</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Unearned commission income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,049,036</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(36,024</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Fees payable to general agents and brokers</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>174,859</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>327,898</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,101,553</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>627,765</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash provided by operating activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,885,879</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,738,798</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>CASH FLOWS FROM INVESTING ACTIVITIES</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Property and equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(144,617</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(130,966</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Loans receivable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,433</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(329,330</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash used in investing activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(127,184</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(460,296</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>CASH FLOWS FROM FINANCING ACTIVITIES</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Borrowings under credit facilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>951,092</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>148,761</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Distributions paid to LLC Members</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,793,702</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,060,191</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash used in financing activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,842,610</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,911,430</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net increase in cash</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>916,085</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,367,072</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Beginning</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,576,479</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>659,508</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Ending</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,492,564</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,026,580</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Supplemental Cash Flow Disclosures</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income taxes paid</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest paid</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>29,182</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>25,551</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>See Notes to Combined Financial Statements.</I>
</DIV>

<P align="center" style="font-size: 10pt;">F-5

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Compensation Risk Managers, LLC and Affiliates</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Unaudited Combined Financial Statements</B>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><B>Note&nbsp;1.</B></TD>
    <TD>
    <B>Significant Accounting Policies</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Principles of Consolidation</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
These interim unaudited combined financial statements include
the accounts of Compensation Risk Mangers, LLC, Compensation
Risk Managers of California, LLC, Eimar, LLC and Twin Bridges
(Bermuda) Ltd. (collectively, &#147;the Company&#148;). These
entities, in substance, have identical beneficial ownership.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
These interim unaudited combined financial statements and notes
have been prepared in conformity with the rules and regulations
of the Securities and Exchange Commission (&#147;SEC&#148;) for
interim financial information. Accordingly, they do not include
all of the information and note disclosure required by generally
accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments
considered necessary for a fair presentation of the results for
the interim periods have been included. These interim unaudited
combined financial statements and related notes should be read
in conjunction with the Company&#146;s audited combined
financial statements and related notes. The Company&#146;s
results of operations for interim periods are not necessarily
indicative of the results to be expected for the entire year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Use of Estimates</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The preparation of interim unaudited combined financial
statements in conformity with generally accepted accounting
principles in the United States requires management to make
estimates and assumptions that affect certain reported amounts
and disclosures. Those estimates are inherently subject to
change, and actual results may ultimately differ materially from
those estimates.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><B>Note&nbsp;2.</B></TD>
    <TD>
    <B>Deferred Policy Acquisition Costs</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Changes in deferred policy acquisition costs are as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="69%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2" align="left" nowrap><B>As at June&nbsp;30,</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance at beginning of period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,413,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>823,515</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Policy acquisition costs deferred:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Ceding commissions</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>799,575</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>740,600</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27,986</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,921</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2"><FONT style="font-size: 10pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>827,561</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>766,521</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Amortization of policy acquisition costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(900,496</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(627,779</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net change</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(72,935</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>138,742</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance at end of period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,340,565</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>962,257</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">F-6

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>Compensation Risk Managers, LLC and Affiliates</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Unaudited Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><B>Note&nbsp;3.</B></TD>
    <TD>
    <B>Loans Receivable</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company has extended credit through loan arrangements as
follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="75%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="left" nowrap><B>As at June&nbsp;30,</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    Working capital loan to a general agent and its principals in
    connection with a self-insured group managed by CRM, which
    consisted of monthly advances from November, 2003 through June,
    2004 totalling $468,783, at which time monthly payments of
    $14,261, including principal and interest at 6% per annum over
    36&nbsp;months, commenced</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>371,759</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>468,783</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    Employee loans of varying amounts, with repayment terms
    extending to 2006 and bearing interest up to 6% per annum</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>42,414</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>33,214</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>414,173</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>501,997</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Interest on loans receivable is recorded on the accrual basis
except for loans in default. No interest is accrued on loans in
default.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The general agent and its principals failed to make timely
installment payments due under the working capital loan
commencing March&nbsp;15, 2005 and the Company has declared the
loan in default and immediately due and payable in full and
brought an action for collection. Management has assessed the
likelihood of collecting the working capital loan and believes
all amounts will ultimately be collected. Accordingly, no
provision for uncollectible amounts has been recorded. See
Note&nbsp;6.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><B>Note&nbsp;4.</B></TD>
    <TD>
    <B>Credit Facilities</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
CRM entered into a revolving credit facility with KeyBank
National Association, or KeyBank, under which CRM was entitled
to borrow up to $3&nbsp;million until June&nbsp;30, 2005. The
facility was amended in May 2005 to permit CRM to borrow up to
$5&nbsp;million until December&nbsp;31, 2005. Borrowings under
the facility may be used for general business purposes,
including distributions to members. Loans under the facility are
due on demand and any loan outstanding on December&nbsp;31,
2005, if not sooner demanded, shall be fully amortized in
12&nbsp;equal monthly installments. Interest on the loans
outstanding under the facility is payable monthly at a rate per
annum equal to KeyBank&#146;s prime rate from time to time. All
of CRM&#146;s obligations under the facility are secured by a
lien on substantially all of CRM&#146;s assets and by the
personal guarantees of CRM&#146;s shareholders. The facility
limits CRM&#146;s ability to purchase or sell assets otherwise
than in the ordinary course of business, prohibits CRM from
permitting any liens on its assets, subject to customary
exceptions, prohibits CRM from incurring debt for borrowed
money, including leases, except for trade debt incurred in the
normal course of business and indebtedness or leases for term
loans, leases, vehicles or equipment of up to $400,000, limits
mergers and consolidations of CRM and prohibits investments and
loans by CRM.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The weighted average interest rate on borrowings under this line
of credit was 5.4% and 4.6% for the six months ended
June&nbsp;30, 2005 and 2004, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under Twin Bridges&#146; contract with NY Marine&nbsp;&#38;
General, Twin Bridges is required to post security, which may be
in the form of letters of credit issued by an acceptable bank,
in order to secure any unpaid liabilities under the contract.
Twin Bridges has entered into a letter of credit loan facility
(the &#147;Unsecured Letter of Credit Facility&#148;) with
KeyBank under which Twin Bridges is entitled to draw letters of
credit in the principal amount of up to $3&nbsp;million, for
which Twin Bridges pays a fee of 1.50% of the principal amount
of each letter of credit drawn. Any payments under the letters
of credit must be repaid by Twin Bridges within 90&nbsp;days.
The letter of credit loan facility terminated on June&nbsp;30,
2005 but has been extended until September&nbsp;30, 2005. The
loan agreement contains covenants similar to the covenants in
CRM&#146;s revolving credit facility with KeyBank described
above. The borrowings outstanding under it have been guaranteed
by the shareholders of Twin Bridges. In addition, Twin Bridges
entered into a second letter of credit loan facility
</DIV>

<P align="center" style="font-size: 10pt;">F-7

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>Compensation Risk Managers, LLC and Affiliates</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Unaudited Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
(the &#147;Secured Letter of Credit Facility&#148;) under which
Twin Bridges was entitled to draw letters of credit in the
principal amount of up to $7.5&nbsp;million, for which Twin
Bridges paid a fee of 1.50% of the principal amount of each
letter of credit drawn. Any payments under the letters of credit
were required to be repaid by Twin Bridges within 90&nbsp;days.
Any letter of credit issued under the Secured Letter of Credit
Facility was secured by cash and cash equivalents held in a
carrying value of equal amount and guaranteed by the
shareholders of Twin Bridges. The Secured Letter of Credit
Facility terminated on June&nbsp;30, 2005 and was not renewed or
extended. Twin Bridges also has informal arrangements with
KeyBank and Smith Barney Citigroup pursuant to which Twin
Bridges may obtain cash collateralized letters of credit. See
Note&nbsp;5.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Amounts outstanding under these facilities were as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="70%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>6/30/2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>12/31/2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Amount</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Amount</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Revolving Credit Facility</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Secured Letter of Credit Facility and other cash collateralized
    letters of credit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,269,678</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,390,738</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Unsecured Letter of Credit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,449,781</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,752,609</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>9,719,459</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6,143,347</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The credit facilities collectively require CRM to maintain a
minimum level of members&#146; equity, which was waived at
June&nbsp;30, 2005.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><B>Note&nbsp;5.</B></TD>
    <TD>
    <B>Reinsurance Activity</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pursuant to the reinsurance agreement with NY Marine&nbsp;&#38;
General, Twin Bridges reinsures 50% of liabilities arising from
policies issued by NY Marine&nbsp;&#38; General to self-insured
groups managed by CRM and CRM CA. Under the agreement with NY
Marine&nbsp;&#38; General, Twin Bridges reinsures 50% of all the
coverage it provides and receives 50% of the premiums paid to NY
Marine&nbsp;&#38; General by these groups. Twin Bridges allows
NY Marine &#38; General a ceding commission of 28% of the
premium assumed by Twin Bridges to cover its acquisition,
general and administrative expenses, a further 2% for stop-loss
coverage and 1% to cover the U.S.&nbsp;federal excise tax, or a
total of 31% of the premium assumed by Twin Bridges. The stop
loss coverage limits its losses under its reinsurance agreement
to 181.16% of the premium assumed by Twin Bridges, net of the
ceding commission, and the cost of the stop-loss coverage and
the U.S.&nbsp;federal excise tax. NY Marine &#38; General in
turn pays a 20% commission to CRM for any excess coverage placed
with NY Marine &#38; General by CRM or CRM CA.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A summary of reinsurance premiums assumed consisted of the
following:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="73%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="left" nowrap><B>For the Six Months Ended June&nbsp;30,</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Premiums assumed</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,798,512</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,592,100</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Change in unearned reinsurance premiums</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>246,634</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(469,175</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net reinsurance premiums</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,045,146</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,122,925</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">F-8
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>Compensation Risk Managers, LLC and Affiliates</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Unaudited Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
No losses have been reported through June&nbsp;30, 2005.
Accordingly, no case reserves have been recorded. Changes in
Twin Bridges&#146; liability for incurred but not reported
losses and loss adjustment expenses (&#147;LAE&#148;)&nbsp;were
as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="65%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3" align="left" nowrap><B>As at June&nbsp;30,</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Liability at beginning of period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,696,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>167,917</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Incurred losses and LAE relating to:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,305,062</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,165,604</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prior years</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total incurred losses and LAE</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,305,062</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,165,604</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Paid losses and LAE relating to:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prior years</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total paid losses and LAE</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Liability at end of period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,001,062</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,333,521</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The reinsurance agreements require Twin Bridges to provide
certain collateral to secure its obligations to NY
Marine&nbsp;&#38; General. Letters of credit in the aggregate
principal amount of $8,719,459 and $3,306,046 at June&nbsp;30,
2005 and 2004, respectively, were issued under the letter of
credit facilities described in Note&nbsp;4. Of these letters of
credit, letters of credit in the aggregate principal amount of
$6,269,678 and $2,318,282 at June&nbsp;30, 2005 and 2004,
respectively, were secured by cash and cash equivalents held
with a carrying value in those amounts pursuant to the Secured
Letter of Credit Facility and informal arrangements with KeyBank
and Smith Barney Citigroup. The remaining letters of credit
outstanding on those dates were issued pursuant to the Unsecured
Letter of Credit Facility.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><B>Note&nbsp;6.</B></TD>
    <TD>
    <B>Contingencies</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In April 2005, a former general agent for one of the
self-insured groups in California managed by CRM commenced
litigation against CRM and CRM CA alleging that CRM wrongfully
caused the general agent to be terminated as the general agent
for the group and wrongfully assumed the general agent&#146;s
responsibilities to the group. The general agent also alleges
that CRM had falsely accused the general agent and its
principals of wrongfully diverting money and of other wrongful
conduct. The general agent&#146;s complaint does not seek a
specific amount of damages. CRM intends to defend the litigation
vigorously and has asserted counterclaims against the general
agent for breach of contract, fraud and intentional interference
with economic advantage and alleging that the general agent had
wrongfully used confidential information it had received from
CRM to establish a workers&#146; compensation self-insurance
program for California automobile dealers. CRM has been
collecting from the self-insured group the portion of the fees
that would have been paid to the general agent under the
arrangements that existed prior to its termination as the
general agent. These fees totaled $268,008 as of June&nbsp;30,
2005 and are being held by CRM pending the resolution of the
disputes with the general agent. This amount is included in cash
and cash equivalents, and a corresponding liability is included
in accrued expenses, as of June&nbsp;30, 2005 and this cash may
be available to reduce the loan to the general agent described
in Note&nbsp;3.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On December&nbsp;29, 2004 H.F.C.A. Associates Corp. and
17&nbsp;related companies, all of which were members or former
members of the Healthcare Industry Trust of New York, or HITNY,
sued HITNY and CRM in the Supreme Court of the State of New
York, Ulster County, alleging, among other things, that the
defendants had improperly terminated their membership in HITNY
and failed to process claims on their behalf. The plaintiffs
also alleged that CRM had engaged in self dealing and had
committed a breach of fiduciary duties
</DIV>

<P align="center" style="font-size: 10pt;">F-9

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>Compensation Risk Managers, LLC and Affiliates</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Unaudited Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
owed to them in connection with the placement of reinsurance for
the members of HITNY. The complaint asks for damages of
$1&nbsp;million against both defendants and a judgment that the
plaintiffs did not owe HITNY the outstanding premium for which
they had been invoiced. HITNY answered the complaint, denying
the plaintiffs&#146; material allegations. HITNY alleged that
the plaintiffs&#146; membership had been properly terminated and
asserted a counterclaim against the plaintiffs in the amount of
$107,000 for unpaid premium. HITNY also asserted a claim against
CRM alleging generally that if the plaintiffs suffered any
damages they were caused by CRM&#146;s actions or wrongdoing.
CRM answered the complaint, denying the plaintiffs&#146;
material allegations, including the allegations of self dealing
and breach of fiduciary duty, and asserting a claim based on
breach of contract and contribution against HITNY for whatever
damages the plaintiffs may recover from CRM. This litigation is
in its early stages; the parties have not yet exchanged any
responses to discovery demands.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
No amount has been accrued in these combined financial
statements for either claim as the outcomes are uncertain and a
liability cannot be determined.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><B>Note&nbsp;7.</B></TD>
    <TD>
    <B>Segment Information</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company has two reportable segments: fee-based management
services and reinsurance. The determination of these two
segments was based on the Company&#146;s methodology for
monitoring the performance of the self-insured group business
and reinsurance operations. The Company evaluates each segment
based on management fees and commission income or reinsurance
premiums earned, as applicable, including items of revenue and
expense that are associated with, and directly related to, each
segment. The Company has not developed a methodology to allocate
non-direct items of expense between the segments. Accordingly,
all non-direct expenses are recorded as part of the fee based
management services segment.
</DIV>

<P align="center" style="font-size: 10pt;">F-10

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>Compensation Risk Managers, LLC and Affiliates</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Unaudited Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth the Company&#146;s revenues,
expenses, income before taxes and assets by business segment and
on a combined basis:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="59%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Six Months Ended June&nbsp;30,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Fee Based Management Services Segment</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Revenues:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Management fees</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>14,384,151</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>12,221,141</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Commission income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,110,292</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,699,041</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,390</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,038</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>16,507,833</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>13,937,220</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Expenses</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>28,780</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Depreciation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>102,281</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>123,533</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,270,726</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,193,596</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,401,787</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,342,129</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Income before taxes</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,106,046</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,595,091</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Total Assets (at end of period)</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,093,003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,779,077</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Reinsurance Segment</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Revenues:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net reinsurance premiums</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,045,146</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,122,925</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Investment income, net of advisory fees</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>40,073</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,132</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,085,219</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,127,057</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Expenses</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Underwriting
    expenses<SUP style="font-size: 85%; vertical-align: text-top">1</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,343,971</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,876,737</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Income before taxes</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>741,248</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>250,320</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Total Assets (at end of period)</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>11,531,579</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6,047,210</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Combined</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>19,593,052</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>16,064,277</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,745,758</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,218,866</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Income before taxes</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,847,294</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,845,411</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Total Assets (at end of period)</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>16,624,582</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>9,826,287</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>1.&nbsp;</TD>
    <TD align="left">
    Underwriting expenses include policy acquisition costs,
    professional fees and losses and loss adjustment expenses.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><B>Note&nbsp;8.</B></TD>
    <TD>
    <B>Related Parties</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company conducts business with an insurance broker whose
owners include an individual who is a shareholder and a director
of Twin Bridges, and a member of CRM, CRM CA and Eimar. The
Company pays the broker fees for business placed with several of
the self insurance groups managed by the Company. In addition,
the Company leases office space and purchases various liability,
property and casualty insurance coverage from the broker. The
following table represents amounts paid to the broker for
services rendered:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="75%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="left" nowrap><B>Six Months ended June&nbsp;30</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Fees paid to general agents and brokers</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>116,684</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>121,337</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other operating expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27,948</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>30,410</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>144,632</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>151,747</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">F-11

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>Compensation Risk Managers, LLC and Affiliates</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Unaudited Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Compensation Risk Managers Agency Captive, LLC (&#147;Agency
Captive&#148;) is a licensed insurance broker that shares common
ownership with the Company. Agency Captive was originally formed
to underwrite a business unrelated to the self-insured groups
managed by CRM or CRM CA. Agency Captive currently holds the
brokerage license that CRM and CRM CA use to place the excess
coverage with U.S.&nbsp;admitted insurers and surety bonds on
behalf of the self-insured groups they manage. Agency Captive
receives the brokerage commissions which are then fully remitted
to CRM or CRM CA, as applicable. The brokerage license is owned
by Daniel G. Hickey,&nbsp;Jr., the Company&#146;s Co-Chief
Executive Officer and Chairman of the Board and one of its
principal shareholders and members. Mr.&nbsp;Hickey,&nbsp;Jr.
intends to transfer the license to CRM pursuant to an oral
agreement, following which brokerage commissions will be paid
directly to CRM.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Included in selling, general and administrative expenses are
guaranteed payments and bonuses to the members of the limited
liability companies totaling $1,278,899 and $1,118,764 for the
six month periods ended June&nbsp;30, 2005 and 2004,
respectively.
</DIV>

<P align="center" style="font-size: 10pt;">F-12

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<A name='400'></A>
</DIV>

<!-- link1 "Report of Independent Registered Public Accounting Firm" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Report of Independent Registered Public Accounting Firm</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
To the Members of
</DIV>

<DIV align="left" style="font-size: 10pt;">
Compensation Risk Manager, LLC and Affiliates
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have audited the accompanying combined balance sheets of
Compensation Risk Managers, LLC and Affiliates (the
&#147;Company&#148;) as of December&nbsp;31, 2004 and 2003 and
the related combined statements of income and comprehensive net
income, changes in stockholders&#146; equity and cash flows for
each of the three years in the period ended December&nbsp;31,
2004. These financial statements are the responsibility of the
Company&#146;s management. Our responsibility is to express an
opinion on these financial statements based on our audits.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes consideration
of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the Company&#146;s internal control over
financial reporting. Accordingly, we express no such opinion. An
audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In our opinion, the Company&#146;s financial statements present
fairly, in all material respects, the financial position of the
Company as of December&nbsp;31, 2004 and 2003, and the results
of its operations and its cash flows for the three years in the
period ended December&nbsp;31, 2004 in conformity with
accounting principles generally accepted in the United States.
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    /s/ JOHNSON LAMBERT &#38; CO.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Reston, Virginia
</DIV>

<DIV align="left" style="font-size: 10pt;">
August&nbsp;5, 2005
</DIV>

<P align="center" style="font-size: 10pt;">F-13

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Compensation Risk Managers, LLC and Affiliates</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='401'></A>
</DIV>

<!-- link1 "Combined Balance Sheets" -->

<DIV align="center" style="font-size: 10pt;">
<B>Combined Balance Sheets</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>December&nbsp;31</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="63%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Assets</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,576,479</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>766,697</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents, restricted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,398,342</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,000,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Premiums receivable, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,758,139</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,139,620</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred policy acquisition costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,413,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>823,515</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Property and equipment, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>912,956</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>792,192</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Loans receivable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>431,606</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>172,667</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prepaid expenses and other assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>233,289</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>187,655</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Total assets</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>12,724,311</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,882,346</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="11">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Liabilities and shareholders&#146; and members&#146;
    equity</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Reserve for losses and loss adjustment expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,696,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>167,917</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Unearned reinsurance premiums</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,779,950</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,784,834</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Unearned management fees</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>670,631</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>614,299</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Unearned commission income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,333,940</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,246,828</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Fees payable to general agents and brokers</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>565,571</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>578,349</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>631,885</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>369,025</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Borrowings under credit facilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>158,307</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>285,031</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Total liabilities</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,836,284</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,046,283</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Twin Bridges</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Common stock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>120,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>120,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Additional paid-in capital</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>880,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>880,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Retained earnings</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>834,891</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(51,276</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    LLC members&#146; equity (deficit)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(946,864</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,112,661</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Total shareholders&#146; and members&#146; equity</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>888,027</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,163,937</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Total liabilities and shareholders&#146; and members&#146;
    equity</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>12,724,311</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,882,346</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>See Notes to Combined Financial Statements.</I>
</DIV>

<P align="center" style="font-size: 10pt;">F-14

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Compensation Risk Managers, LLC and Affiliates</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='402'></A>
</DIV>

<!-- link1 "Combined Statements of Income" -->

<DIV align="center" style="font-size: 10pt;">
<B>Combined Statements of Income</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Years Ended December&nbsp;31</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="55%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Revenues</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Fee-based management services:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Management fees</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>23,510,174</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>17,889,315</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>15,084,733</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Commission income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,145,552</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,931,813</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,529,592</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2"><FONT style="font-size: 10pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27,655,726</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20,821,128</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,614,325</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net reinsurance premiums</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,109,883</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>253,167</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Investment income, net of advisory fees</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>54,477</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,789</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>36,999</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32,820,086</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21,090,084</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,651,324</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Expenses</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Losses and loss adjustment expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,528,083</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>167,917</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Fees paid to general agents and brokers</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,507,546</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,829,685</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,650,629</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Policy acquisition costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,511,065</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>74,865</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Selling, general and administrative expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,440,809</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,240,562</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,471,273</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>26,753</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>45,989</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>33,173</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27,014,256</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,359,018</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,155,075</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income before taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,805,830</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,731,066</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,496,249</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Provision for income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Net income</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,805,830</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,731,066</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,496,249</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>See Notes to Combined Financial Statements.</I>
</DIV>

<P align="center" style="font-size: 10pt;">F-15

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Compensation Risk Managers, LLC and Affiliates</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='403'></A>
</DIV>

<!-- link1 "Combined Statements of Changes in Shareholders&#146; and Members&#146; Equity" -->

<DIV align="center" style="font-size: 10pt;">
<B>Combined Statements of Changes in Shareholders&#146; and
Members&#146; Equity</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Years Ended December&nbsp;31</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="41%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Twin Bridges</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Total</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>LLC</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Shareholders&#146;</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Common</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Paid-in</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Retained</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Members&#146;</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>and Members&#146;</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Stock</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Capital</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Earnings</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Equity</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Equity</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Balance at January&nbsp;1, 2002</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>896,636</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>896,636</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,496,249</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,496,249</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Distributions to members</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,498,782</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,498,782</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Balances at December&nbsp;31, 2002</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>894,103</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>894,103</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="21">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income (loss)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(51,276</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,782,342</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,731,066</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Distributions to members</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6,789,106</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6,789,106</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Issuance of common shares</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>120,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>880,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,000,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Balances at December&nbsp;31, 2003</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>120,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>880,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(51,276</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,112,661</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,163,937</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="21">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>886,167</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,919,663</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,805,830</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Distributions to members</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,753,866</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,753,866</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Balances at December&nbsp;31, 2004</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>120,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>880,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>834,891</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(946,864</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>888,027</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>See Notes to Combined Financial Statements.</I>
</DIV>

<P align="center" style="font-size: 10pt;">F-16

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Compensation Risk Managers, LLC and Affiliates</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='404'></A>
</DIV>

<!-- link1 "Combined Statements of Cash Flows" -->

<DIV align="center" style="font-size: 10pt;">
<B>Combined Statements of Cash Flows</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Years Ended December&nbsp;31</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="46%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>CASH FLOWS FROM OPERATING ACTIVITIES</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,805,830</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,731,066</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,496,249</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Adjustments to reconcile net income to net cash provided by
    operating activities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Depreciation and amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>189,474</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>179,336</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>108,035</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Changes in:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents, restricted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,398,342</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,000,000</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Premiums receivable, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,618,519</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,139,620</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>388,146</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred policy acquisition costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(589,985</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(823,515</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prepaid expenses and other assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(45,634</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,103,655</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,228,708</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Reserve for losses and loss adjustment expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,528,083</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>167,917</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Unearned reinsurance premiums</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,995,116</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,784,834</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Unearned management fee revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>56,332</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,174,676</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,447,682</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Unearned commission income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>87,112</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>84,211</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,018,217</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Fees payable to general agents and brokers</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(12,778</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>41,093</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>161,756</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>262,860</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>52,322</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>241,520</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash provided by operating activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,259,549</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,006,623</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,632,897</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>CASH FLOWS FROM INVESTING ACTIVITIES</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Property and equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(310,238</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(175,442</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(694,813</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Loans receivable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(258,939</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(99,667</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(73,000</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash used in investing activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(569,177</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(275,109</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(767,813</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>CASH FLOWS FROM FINANCING ACTIVITIES</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Borrowings under credit facilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(126,724</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(819,786</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>935,631</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Issuance of common stock&nbsp;&#151; Twin Bridges</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Distributions paid to LLC Members</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,753,866</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6,789,106</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,498,782</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash used in financing activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,880,590</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6,608,892</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,563,151</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net increase (decrease) in cash</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>809,282</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,877,378</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,301,933</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Beginning</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>766,697</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,644,075</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,342,142</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Ending</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,576,479</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>766,697</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,644,075</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Supplemental Cash Flow Disclosures</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income taxes paid</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest paid</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>26,351</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>45,438</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>31,494</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>See Notes to Combined Financial Statements.</I>
</DIV>

<P align="center" style="font-size: 10pt;">F-17

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Compensation Risk Managers, LLC and Affiliates</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Combined Financial Statements</B>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><B>Note&nbsp;1.</B></TD>
    <TD>
    <B>Nature of Business and Significant Accounting Policies</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Nature of Business</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
These combined financial statements include the accounts of
Compensation Risk Mangers, LLC (&#147;CRM&#148;), Compensation
Risk Managers of California, LLC (&#147;CRM CA&#148;), Eimar,
LLC (&#147;Eimar&#148;) and Twin Bridges (Bermuda) Ltd.
(&#147;Twin Bridges&#148;) (collectively, &#147;the
Company&#148;). These entities, in substance, have identical
beneficial ownership, as more fully described in Note&nbsp;6.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
CRM and CRM CA provide management and other services to self
insured workers&#146; compensation groups (&#147;self-insured
groups&#148;) in the states of New York and California,
respectively. Eimar provides medical bill review and case
management services to the aforementioned self-insured groups
and other clients. Twin Bridges is registered in Bermuda as a
Class&nbsp;3 insurer and is authorized to carry on business in
the capacity of a reinsurer. Twin Bridges has entered into a
reinsurance arrangement with New York Marine&nbsp;&#38; General
Insurance Company (&#147;NY Marine&nbsp;&#38; General&#148;)
which provides excess workers compensation and employers&#146;
liability insurance coverage to self-insured groups managed by
CRM and CRM CA.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Basis of Accounting and Principles of Combination</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
These combined financial statements have been prepared in
conformity with accounting principles generally accepted in the
United States of America. All significant inter-company
transactions and balances have been eliminated in the combined
financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Use of Estimates</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The preparation of financial statements in conformity with
generally accepted accounting principles in the United States
requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Those estimates
are inherently subject to change, and actual results may
ultimately differ materially from those estimates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Fee-Based Management Services</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Revenues from fee-based management services include management
fees received from self-insured groups for management and other
services. In New York, the fees the Company receives from all
but one of the self-insured groups are based on a percentage of
the manual workers&#146; compensation rates set by the New York
State Workers Compensation Board that are attributable to the
members of the self-insured groups and the Company&#146;s fees
include claims management services. With respect to the
self-insured groups in California and one of the self-insured
groups in New York, the Company&#146;s fees are based on a
percentage of the premiums paid to the self-insured groups by
their members. The self-insured groups in California pay the
fees for claims management services directly to a third party
administrator. The portion of such fees that is equal to related
fees paid to general agents and brokers is recorded as revenue
when payable by the group, which is the same time that fees paid
to general agents and brokers are recorded. The balance of such
fees is earned ratably over the period to which they apply. The
portion of the balance of the management fees that relate to the
remaining period at the balance sheet date is recorded as
unearned management fee revenues. Revenue from medical bill
review and case management services is also included in
management fees, and is recorded as revenue as the services are
rendered.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company also receives commission income for excess coverage
and surety bonds it places for these groups. Such commission
income is earned ratably over the terms of the underlying
insurance coverage and surety bonds. The portion of commission
income that relates to the remaining term of the underlying
insurance coverage at the balance sheet date is recorded as
unearned commission income revenues. Commission income revenues
for the placement of excess coverage represented placements
with&nbsp;7, 7 and 9 U.S.&nbsp;admitted insurers for the years
ended December&nbsp;31, 2004, 2003 and 2002, respectively.
Commission
</DIV>

<P align="center" style="font-size: 10pt;">F-18

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>Compensation Risk Managers, LLC and Affiliates</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
income from NY Marine&nbsp;&#38; General represented 50%, 4% and
0% of such revenues for the years ended December&nbsp;31, 2004,
2003 and 2002, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During the years ended December&nbsp;31, 2004, 2003 and 2002,
the Company provided management and other related services
to&nbsp;12, 9 and 8 self-insured groups, respectively. During
the years ended December&nbsp;31, 2004, 2003 and 2002, 93%, 100%
and 100% of fee-based management services revenues were from
self-insured groups located in New York. The balance of such
revenues earned in the year ended December&nbsp;31, 2004 was
from groups located in California.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
One self-insured group accounted for 38%, 47% and 48% of the
Company&#146;s fee-based management services revenues for the
years ended December&nbsp;31, 2004, 2003 and 2002, respectively.
For the year ended December&nbsp;31, 2004, the three largest
self-insured groups, all located in New York, accounted for 74%
of total fee-based management services revenue. For the year
ended December&nbsp;31, 2003, the four largest self-insured
groups, all located in New York, accounted for 94% of total
fee-based management services revenues. For the year ended
December&nbsp;31, 2002, the three largest self-insured groups,
all located in New York, accounted for 91% of total fee-based
management services revenues.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Reinsurance Premiums</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Management has evaluated its reinsurance arrangement with NY
Marine&nbsp;&#38; General and determined that insurance risk is
transferred to Twin Bridges pursuant to this reinsurance
agreement. Under Statement of Financial Accounting Standards
(&#147;SFAS&#148;) No.&nbsp;113, Accounting and Reporting for
Reinsurance of Short-Duration and Long-Duration Contracts, this
reinsurance agreement has been determined to be a short duration
prospective contract and accordingly, reinsurance premiums are
earned ratably over the term of the underlying excess coverage
policy. The portion of the reinsurance premiums that relate to
the remaining term of the reinsurance policy at the balance
sheet date is recorded as unearned reinsurance premiums. Such
reinsurance premiums are subject to adjustment based upon
modification to the premiums charged on the underlying excess
coverage policy. Such adjustments are reflected in current
operations when estimable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Cash and Cash Equivalents</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company considers all highly liquid debt instruments
purchased with maturities of three months or less to be cash
equivalents. At times, management maintains cash balances in
excess of insured limits and believes they do not represent a
significant credit risk to the Company. Certain cash and cash
equivalent balances have been pledged as security under certain
credit facilities, as more fully described in Note&nbsp;5 and
Note&nbsp;7.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Premiums Receivable</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Premiums receivable pursuant to reinsurance agreements are
carried at face value less any allowance for doubtful accounts.
At December&nbsp;31, 2004, 2003 and 2002, no allowance was
deemed necessary. No receivable balances were written off during
the years ended December&nbsp;31, 2004, 2003 and 2002.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Policy Acquisition Costs</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Policy acquisition costs are comprised of ceding commissions and
U.S. federal excise tax costs incurred pursuant to the
Company&#146;s reinsurance agreement with NY Marine&nbsp;&#38;
General. These costs are deferred and amortized as the related
reinsurance premiums are earned or recorded. The Company
considers estimated investment income in determining the
recoverability of these costs. The Company believes that these
costs are fully recoverable at December&nbsp;31, 2004 and 2003.
</DIV>

<P align="center" style="font-size: 10pt;">F-19

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>Compensation Risk Managers, LLC and Affiliates</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Property and Equipment</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Property and equipment is stated at cost, less accumulated
depreciation and amortization, and is depreciated using
straight-line and other methods that approximate the
straight-line method over the estimated useful lives of the
assets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Reserve for Losses and Loss Adjustment Expenses</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The reserve for losses and loss adjustment expenses represents
an estimate of the ultimate cost of all reported and unreported
losses and loss adjustment expenses assumed pursuant to
reinsurance agreements associated with reported claims and
claims incurred but not reported which are unpaid at the balance
sheet date. This liability is estimated using actuarial studies
of individual case-basis valuations, statistical analyses and
industry data. Management believes that its aggregate liability
for losses and loss adjustment expenses at year-end represent
its best estimate, based on available data, of the amounts
necessary to settle the ultimate cost of expected losses and
loss adjustment expenses. However, Twin Bridges has only been in
existence since December 2003 and thus has limited loss
experience, and due to the relatively small population of
underlying risks, Twin Bridges is exposed to an increased
likelihood that actual results may not conform to the
Company&#146;s estimates. These estimates also are subject to
the effects of trends in loss severity and frequency risks and
other trends such as fluctuations in inflation, prevailing
economic, social and judicial trends, legislative changes and
internal and third party claims handling procedures. There also
may be a significant delay between the occurrence of the insured
event and the time it is actually reported to us. Accordingly,
the ultimate settlement of losses and related loss adjustment
expenses may vary significantly from the estimates included in
the Company&#146;s financial statements. These estimates are
reviewed regularly and are adjusted as experience develops or
new information becomes known. Any such adjustments are included
in income in the period in which they are made.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Advertising Costs</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Advertising costs, including selling and marketing expenses, are
expensed as incurred. Advertising costs totaling $1,065,763,
$509,415 and $289,408 were included in selling, general and
administrative expenses for the years ended December&nbsp;31,
2004, 2003 and 2002, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Income Taxes</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
CRM, CRM CA and Eimar have been organized as limited liability
companies. The members of a limited liability company are taxed
on their proportionate share of the company&#146;s taxable
income. Therefore, no provision or liability for federal and
state income taxes has been included in the financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Twin Bridges has received an undertaking from the Bermuda
Minister of Finance assuring it that if any legislation is
enacted in Bermuda that would impose tax computed on profits or
income, or computed on any capital asset, gain or appreciation,
or any tax in the nature of estate duty or inheritance tax, then
the imposition of any such tax will not be applicable to Twin
Bridges or any of its operations, shares, debentures or other
obligations until March&nbsp;28, 2016.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Segment Reporting</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company manages its operations through two reportable
segments, fee-based management services and reinsurance. Certain
information about segment operations is addressed in
Note&nbsp;14.
</DIV>

<P align="center" style="font-size: 10pt;">F-20

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>Compensation Risk Managers, LLC and Affiliates</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><B>Note&nbsp;2.</B></TD>
    <TD>
    <B>Deferred Policy Acquisition Costs</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Changes in deferred policy acquisition costs are as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="72%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="left" nowrap><B>As of December&nbsp;31,</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance at beginning of year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>823,515</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Policy acquisition costs deferred:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Ceding commissions</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,030,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>868,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>71,050</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>30,380</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,101,050</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>898,380</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Amortization of policy acquisition costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,511,065</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(74,865</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net change</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>589,985</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>823,515</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance at end of year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,413,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>823,515</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><B>Note&nbsp;3.</B></TD>
    <TD>
    <B>Property and Equipment</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Property and equipment is stated at cost and summarized as
follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="60%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="left" nowrap><B>As of December&nbsp;31,</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Furniture&nbsp;&#38; fixtures</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>504,158</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>316,994</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>298,068</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Computer equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>481,716</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>399,410</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>286,193</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Automobiles</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>84,924</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>116,372</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>116,372</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Leasehold improvements</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>281,593</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>281,593</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>243,918</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,352,391</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,114,369</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>944,551</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less accumulated depreciation and amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(439,435</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(322,177</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(148,465</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>912,956</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>792,192</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>796,086</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><B>Note&nbsp;4.</B></TD>
    <TD>
    <B>Loans Receivable</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company has extended credit through loan arrangements as
follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="left" nowrap><B>As of December&nbsp;31,</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    Working capital loan to a general agent and its principals in
    connection with a self-insured group managed by CRM, which
    consisted of monthly advances from November, 2003 through June,
    2004 totalling $468,783, at which time monthly payments of
    $14,261 including principal and interest at 6% per annum over
    36&nbsp;months commenced</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>396,379</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>130,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    Employee loan with an initial principal of $73,000, with
    repayment terms extending to 2006 and bearing interest at 6% per
    annum</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35,227</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>42,667</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>73,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>431,606</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>172,667</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>73,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Interest on loans receivable is recorded on the accrual basis
except for loans in default. No interest is accrued on loans in
default.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Subsequent to December&nbsp;31, 2004, the general agent and its
principals failed to make timely installment payments due under
the working capital loan and the Company has declared the loan
in default and
</DIV>

<P align="center" style="font-size: 10pt;">F-21

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>Compensation Risk Managers, LLC and Affiliates</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
immediately due and payable in full and brought an action
against the borrowers for collection. Management has assessed
the likelihood of collecting the working capital loan and
believes all amounts will ultimately be collected. Accordingly,
no provision for uncollectible amounts has been recorded. See
Note&nbsp;11.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><B>Note&nbsp;5.</B></TD>
    <TD>
    <B>Credit Facilities</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
CRM entered into a revolving credit facility with KeyBank
National Association, or KeyBank, under which CRM was entitled
to borrow up to $3&nbsp;million until June&nbsp;30, 2005. The
facility was subsequently amended in May 2005 to permit CRM to
borrow up to $5&nbsp;million until December&nbsp;31, 2005.
Borrowings under the facility may be used for general business
purposes, including distributions to members. Loans under the
facility are due on demand and any loan outstanding on
December&nbsp;31, 2005, if not sooner demanded, shall be fully
amortized in 12 equal monthly installments. Interest on the
loans outstanding under the facility is payable monthly at a
rate per annum equal to KeyBank&#146;s prime rate from time to
time. All of CRM&#146;s obligations under the facility are
secured by a lien on substantially all of CRM&#146;s assets and
by the personal guarantees of CRM&#146;s shareholders. The
facility limits CRM&#146;s ability to purchase or sell assets
otherwise than in the ordinary course of business, prohibits CRM
from permitting any liens on its assets, subject to customary
exceptions, prohibits CRM from incurring debt for borrowed
money, including leases, except for trade debt incurred in the
normal course of business and indebtedness or leases for term
loans, leases, vehicles or equipment of up to $400,000, limits
mergers and consolidations of CRM and prohibits investments and
loans by CRM.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The weighted average interest rate on borrowings under this line
of credit was 4.4%, 7.2% and 4.2% for the years ended
December&nbsp;31, 2004, 2003 and 2002 respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under Twin Bridges&#146; contract with NY Marine&nbsp;&#38;
General, Twin Bridges is required to post security, which may be
in the form of letters of credit issued by an acceptable bank,
in order to secure any unpaid liabilities under the contract.
Twin Bridges has entered into a letter of credit loan facility
(the &#147;Unsecured Letter of Credit Facility&#148;) with
KeyBank under which Twin Bridges is entitled to draw letters of
credit in the principal amount of up to $3&nbsp;million, for
which Twin Bridges pays a fee of 1.50% of the principal amount
of each letter of credit drawn. Any payments under the letters
of credit must be repaid by Twin Bridges within 90&nbsp;days.
The letter of credit loan facility terminated on June&nbsp;30,
2005 but was subsequently extended until September&nbsp;30,
2005. The loan agreement contains covenants similar to the
covenants in CRM&#146;s revolving credit facility with KeyBank
described above. The borrowings outstanding under it have been
guaranteed by the shareholders of Twin Bridges. In addition,
Twin Bridges entered into a second letter of credit loan
facility (the &#147;Secured Letter of Credit Facility&#148;)
under which Twin Bridges was entitled to draw letters of credit
in the principal amount of up to $7.5&nbsp;million, for which
Twin Bridges paid a fee of 1.50% of the principal amount of each
letter of credit drawn. Any payments under the letters of credit
were required to be repaid by Twin Bridges within 90&nbsp;days.
Any letter of credit issued under the Secured Letter of Credit
Facility was secured by cash and cash equivalents held in a
carrying value in equal amount and guaranteed by the
shareholders of Twin Bridges. The Secured Letter of Credit
Facility terminated on June&nbsp;30, 2005 and was not renewed or
extended. Twin Bridges also has informal arrangements with
KeyBank and Smith Barney Citigroup pursuant to which Twin
Bridges may obtain cash collateralized letters of credit. See
Note&nbsp;7.
</DIV>

<P align="center" style="font-size: 10pt;">F-22

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>Compensation Risk Managers, LLC and Affiliates</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Amounts outstanding under these facilities and the period end
interest rates were as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="69%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>12/31/2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>12/31/2003</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Amount</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Amount</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Revolving Credit Facility</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Secured Letter of Credit Facility and other cash collateralized
    letters of credit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,390,738</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,000,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Unsecured Letter of Credit Facility</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,752,609</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>500,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6,143,347</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,500,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The credit facilities collectively require the Company to
maintain a minimum level of members&#146; equity, which was
waived at December&nbsp;31, 2004.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><B>Note&nbsp;6.</B></TD>
    <TD>
    <B>Shareholders&#146; and Members&#146; Equity</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As limited liability companies, CRM, CRM CA and Eimar do not
have outstanding shares; rather, ownership is evidenced through
membership agreements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Twin Bridges was formed in 2003 and issued 120,000 commons
shares for $120,000 and also received $880,000 as contributed
surplus and not in respect of subscription for shares. The
authorized share capital of Twin Bridges is 120,000 common
shares of the par value $1 each, of which 120,000&nbsp;shares
are issued and outstanding at December&nbsp;31, 2004 and 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The underlying shareholders and ownership interest of Twin
Bridges are substantially equivalent to the members and
ownership percentages of CRM and Eimar. CRM CA is a wholly-owned
subsidiary of CRM.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><B>Note&nbsp;7.</B></TD>
    <TD>
    <B>Reinsurance Activity</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pursuant to the reinsurance agreement with NY Marine&nbsp;&#38;
General, Twin Bridges reinsures 50% of liabilities arising from
policies issued by NY Marine&nbsp;&#38; General to self-insured
groups managed by CRM and CRM CA. Under the agreement with NY
Marine&nbsp;&#38; General, Twin Bridges reinsures 50% of all the
coverage it provides and receives 50% of the premiums paid to NY
Marine&nbsp;&#38; General by these groups. Twin Bridges allows
NY Marine &#38; General a ceding commission of 28% of the
premium assumed by Twin Bridges to cover its acquisition,
general and administrative expenses, a further 2% for stop-loss
coverage and 1% to cover the U.S.&nbsp;federal excise tax, or a
total of 31% of the premium assumed by Twin Bridges. The stop
loss coverage limits its losses under its reinsurance agreement
to 181.16% of the premium assumed by Twin Bridges, net of the
ceding commission, and the cost of the stop-loss coverage and
the U.S.&nbsp;federal excise tax. NY Marine &#38; General in
turn pays a 20% commission to CRM for any excess coverage placed
with NY Marine &#38; General by CRM or CRM CA, as described in
Note&nbsp;1.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A summary of reinsurance premiums assumed consisted of the
following:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="62%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="left" nowrap><B>Years Ended December&nbsp;31,</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2002</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Premiums assumed</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7,105,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,038,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Change in unearned reinsurance premiums</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,995,117</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,784,833</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net reinsurance premiums</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,109,883</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>253,167</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">F-23

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>Compensation Risk Managers, LLC and Affiliates</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
No losses have been reported through December&nbsp;31, 2004.
Accordingly, no case reserves have been recorded. Changes in
Twin Bridges&#146; liability for incurred but not reported
losses and loss adjustment expenses (&#147;LAE&#148;)&nbsp;were
as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="60%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3" align="left" nowrap><B>As of December&nbsp;31,</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2002</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Liability at beginning of year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>167,917</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Incurred losses and LAE relating to:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,528,083</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>167,917</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prior year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total incurred losses and LAE</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,528,083</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>167,917</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Paid losses and LAE relating to:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prior year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total paid losses and LAE</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Liability at end of year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,696,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>167,917</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The reinsurance agreements require Twin Bridges to provide
certain collateral to secure its obligations to NY
Marine&nbsp;&#38; General. Letters of credit in the aggregate
principal amount of $6,143,347 and $1,500,000 at
December&nbsp;31, 2004 and 2003, respectively, were issued under
the letter of credit facilities described in Note&nbsp;5. Of
these letters of credit, letters of credit in the aggregate
principal amount of $4,398,342 and $1,000,000 at
December&nbsp;31, 2004 and 2003, respectively, were secured by
cash and cash equivalents held with a carrying value in those
amounts pursuant to the Secured Letter of Credit Facility and
informal arrangements with KeyBank and Smith Barney Citigroup.
The balance of the letters of credit outstanding on those dates
was issued pursuant to the Unsecured Letter of Credit Facility.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><B>Note&nbsp;8.</B></TD>
    <TD>
    <B>Lease Commitments</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company leases transportation vehicles, office space, and
office equipment under various operating lease agreements. Total
minimum future lease payments under these leases are
approximately as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="84%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="left" nowrap><B>Years ending December&nbsp;31,</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2005</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>493,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2006</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>333,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2007</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>172,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2008</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>128,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2009</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>91,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,217,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Rent expense was approximately $313,000, $216,000 and $156,000
for the years ended December&nbsp;31, 2004, 2003 and 2002,
respectively.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><B>Note&nbsp;9.</B></TD>
    <TD>
    <B>Retirement Plan</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In 2001 the Company established a 401(k) profit sharing plan for
employees meeting certain age and service requirements as
defined by the plan. Eligible employees may contribute up to
statutory limits. The Company makes matching contributions of
50% of an employee&#146;s annual contribution until the employee
has contributed 3% of annual compensation. The Company may also
make a discretionary annual profit sharing
</DIV>

<P align="center" style="font-size: 10pt;">F-24

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>Compensation Risk Managers, LLC and Affiliates</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
contribution to the plan. Employer matching contributions to the
plan were approximately $31,300, $27,300 and $17,300 for the
years ended December&nbsp;31, 2004, 2003 and 2002, respectively.
No discretionary contributions were made for any of those years.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>Note&nbsp;10.</B></TD>
    <TD>
    <B>Related Parties</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company conducts business with an insurance broker whose
owners include an individual who is a shareholder and a director
of Twin Bridges, and a member of CRM, CRM CA and Eimar. The
Company pays the broker fees for business placed with several of
the self insurance groups managed by the Company. In addition,
the Company leases office space and purchases various liability,
property and casualty insurance coverage from the broker. The
following table represents amounts paid to the broker for
services rendered:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="65%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="left" nowrap><B>Years Ended December&nbsp;31,</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Fees paid to general agents and brokers</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>229,124</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>257,355</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>290,442</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other operating expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>39,969</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>44,986</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>29,928</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>269,093</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>302,341</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>320,370</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Compensation Risk Managers Agency Captive, LLC, (&#147;Agency
Captive&#148;), is a licensed insurance broker that shares
common ownership with the Company. Agency Captive was originally
formed to underwrite a business unrelated to the self-insured
groups managed by CRM or CRM CA. Agency Captive currently holds
the brokerage license that CRM and CRM CA use to place the
excess coverage with U.S.&nbsp;admitted insurers and surety
bonds on behalf of the self-insured groups they manage. Agency
Captive receives the brokerage commissions which are then fully
remitted to CRM or CRM CA, as applicable. The brokerage license
is owned by Daniel G. Hickey,&nbsp;Jr., the Company&#146;s
Co-Chief Executive Officer and Chairman of the Board and one of
its principal shareholders and members.
Mr.&nbsp;Hickey,&nbsp;Jr. intends to transfer the license to CRM
pursuant to an oral agreement, following which brokerage
commissions will be paid directly to CRM.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Included in selling, general and administrative expenses are
guaranteed payments and bonuses to the members of the limited
liability companies totaling $2,271,786, $1,775,792 and
$1,877,458 for the years ended December&nbsp;31, 2004, 2003 and
2002, respectively.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>Note&nbsp;11.</B></TD>
    <TD>
    <B>Contingencies</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In April 2005, a former general agent for one of the
self-insured groups in California managed by CRM commenced
litigation against CRM and CRM&nbsp;CA alleging that CRM
wrongfully caused the general agent to be terminated as the
general agent for the group and wrongfully assumed the general
agent&#146;s responsibilities to the group. The general agent
also alleges that CRM had falsely accused the general agent and
its principals of wrongfully diverting money and of other
wrongful conduct. The general agent&#146;s complaint does not
seek a specific amount of damages. CRM intends to defend the
litigation vigorously and has asserted counterclaims against the
general agent for breach of contract, fraud and intentional
interference with economic advantage and alleging that the
general agent had wrongfully used confidential information it
had received from CRM to establish a workers&#146; compensation
self-insurance program for California automobile dealers. CRM
has been collecting from the self-insured group the portion of
the fees that would have been paid to the general agent under
the arrangements that existed prior to its termination as the
general agent. These fees totaled $268,008 as of June&nbsp;30,
2005 and are being held by CRM pending the resolution of the
disputes with the general agent. This amount is included in cash
and cash equivalents, and a corresponding liability is included
in accrued expenses, as of June&nbsp;30, 2005 and this cash may
be available to reduce the loan to the general agent described
in Note&nbsp;4.
</DIV>

<P align="center" style="font-size: 10pt;">F-25

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>Compensation Risk Managers, LLC and Affiliates</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On December&nbsp;29, 2004 H.F.C.A. Associates Corp. and 17
related companies, all of which were members or former members
of the Healthcare Industry Trust of New York, or HITNY, sued
HITNY and CRM in the Supreme Court of the State of New York,
Ulster County, alleging, among other things, that the defendants
had improperly terminated their membership in HITNY and failed
to process claims on their behalf. The plaintiffs also alleged
that CRM had engaged in self dealing and had committed a breach
of fiduciary duties owed to them in connection with the
placement of reinsurance for the members of HITNY. The complaint
asks for damages of $1&nbsp;million against both defendants and
a judgment that the plaintiffs did not owe HITNY the outstanding
premium for which they had been invoiced. HITNY answered the
complaint, denying the plaintiffs&#146; material allegations.
HITNY alleged that the plaintiffs&#146; membership had been
properly terminated and asserted a counterclaim against the
plaintiffs in the amount of $107,000 for unpaid premium. HITNY
also asserted a claim against CRM alleging generally that if the
plaintiffs suffered any damages they were caused by CRM&#146;s
actions or wrongdoing. CRM answered the complaint, denying the
plaintiffs&#146; material allegations, including the allegations
of self dealing and breach of fiduciary duty, and asserting a
claim based on breach of contract and contribution against HITNY
for whatever damages the plaintiffs may recover from CRM. This
litigation is in its early stages; the parties have not yet
exchanged any responses to discovery demands.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
No amount has been accrued in these combined financial
statements for either claim as the outcomes are uncertain and a
liability cannot be determined.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>Note&nbsp;12.</B></TD>
    <TD>
    <B>Fair Value of Financial Instruments</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Statement of Financial Accounting Standards (&#147;SFAS&#148;)
No.&nbsp;107, Disclosures about Fair Value of Financial
Instruments, requires companies to disclose the fair value
information about their financial instruments.
SFAS&nbsp;No.&nbsp;107 excludes certain insurance related
financial assets and liabilities and all non-financial
instruments from its disclosure requirements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Because of the short-term nature of cash and cash equivalents,
premiums and other accounts receivable, and employee loans
receivable, their carrying value approximates their estimated
fair value. Any borrowings under credit facilities bear variable
interest rates, thus their carrying value approximates their
fair value. Due to the nature of the litigation with regard to
the working capital loan receivable described in Note&nbsp;4, it
is not practicable to estimate its fair value.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>Note&nbsp;13.</B></TD>
    <TD>
    <B>Statutory Requirements</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under The Insurance Act 1978 of Bermuda and related regulations
(the &#147;Act&#148;), Twin Bridges is required to prepare
Statutory Financial Statements and to file a Statutory Financial
Return. The Act also requires Twin Bridges to meet certain
minimum capital and surplus requirements. To satisfy these
requirements, Twin Bridges was required to maintain a minimum
level of statutory capital and surplus of $1,821,450 at
December&nbsp;31, 2004. Because Twin Bridges made its first
statutory filing for the 13&nbsp;months ended December&nbsp;31,
2004, no Statutory Financial Statements were filed for 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Statutory capital and surplus as reported under the Act is
different from shareholder&#146;s equity as determined in
conformity with accounting principles generally accepted in the
United States of America (&#147;GAAP&#148;) due to certain items
that are capitalized under GAAP but expensed under the Act.
</DIV>

<P align="center" style="font-size: 10pt;">F-26

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>Compensation Risk Managers, LLC and Affiliates</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
At December&nbsp;31, 2004 and 2003, the reconciling items are as
follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="73%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="left" nowrap><B>As of December&nbsp;31,</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Shareholders&#146; equity, per GAAP</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,834,891</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>948,724</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Reconciling items:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prepaid expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,885</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Statutory capital and surplus, per The Act</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,830,006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>948,724</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Twin Bridges is also required to maintain a minimum
liquidity ratio, whereby the value of its relevant assets must
be not less than 75% of its relevant liabilities. Twin Bridges
met this test at December&nbsp;31, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under the Act, the value of the general business assets of a
Class&nbsp;3 insurer such as Twin Bridges must exceed the amount
of its general business liabilities by an amount greater than
the prescribed solvency margin. Twin Bridges is required, with
respect to its general business, to maintain a minimum solvency
margin equal to the greatest of:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    (A)&nbsp;$1,000,000</TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="47%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="44%">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    (B)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Net Premium Written (&#147;NPW&#148;)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Prescribed Amount</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Up to $6,000,000</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    20% of NPW</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Greater than $6,000,000</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    The aggregate of $1,200,000 and 15% of the amount by which NPW
    exceeds $6,000,000 in that year; and</TD>
</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="4%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(C)&nbsp;</TD>
    <TD align="left">
    15% of the aggregate of the insurer&#146;s loss expense
    provisions and other general business insurance reserves.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Generally, net premium written equals gross premium written
after deduction of any premium added by the insurer for
reinsurance.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Twin Bridges is prohibited from declaring or paying any
dividends during any financial year if it is in breach of its
solvency margin or minimum liquidity ratio or if the declaration
or payment of such dividends would cause it to fail to meet such
margin or ratio. In addition, if it has failed to meet its
minimum solvency margin or minimum liquidity ratio on the last
day of any financial year, Twin Bridges will be prohibited,
without the approval of the Bermuda Monetary Authority, from
declaring or paying any dividends during the next financial
year. Twin Bridges is prohibited, without prior approval from
the Bermuda Monetary Authority, from reducing by 15% or more its
total statutory capital as set out in its previous year&#146;s
financial statements Additionally, under the Act, Twin Bridges
may not declare or pay a dividend out of retained earnings, or
make a distribution from contributed surplus, if there are
reasonable grounds for believing that it is or would be unable
to pay its liabilities as they become due, or the realizable
value of its assets would be less than the aggregate of its
liabilities and its issued share capital and share premium
accounts.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>Note&nbsp;14.</B></TD>
    <TD>
    <B>Segment Information</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company has two reportable segments, fee-based management
services and reinsurance. The determination of these two
segments was based on the Company&#146;s methodology for
monitoring the performance of the self-insured group business
and reinsurance operations. The Company evaluates each segment
based on management fees and commission income or reinsurance
premiums earned, as applicable, including items of revenue and
expense that are associated with, and directly related to, each
segment. The Company has not developed a methodology to allocate
non-direct items of expense between the segments. Accordingly,
all non-direct expenses are recorded as part of the fee based
management services segment. Accounting policies of the segments
are the same as those described in Note&nbsp;1.
</DIV>

<P align="center" style="font-size: 10pt;">F-27
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;">
<B>Compensation Risk Managers, LLC and Affiliates</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Notes to Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth the Company&#146;s revenues,
expenses, income before taxes and total assets by business
segment and on a combined basis:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="43%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Years Ended December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Fee Based Management Services Segment</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Revenues:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Management fees</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>23,510,174</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>17,889,315</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>15,084,733</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Commission income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,145,552</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,931,813</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,529,592</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32,807</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,701</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>36,999</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>27,688,533</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>20,836,829</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>17,651,324</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Expenses</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>26,753</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>45,989</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>33,173</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Depreciation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>189,474</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>179,336</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>108,035</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22,552,643</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,829,162</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,013,867</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22,768,870</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,054,487</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,155,075</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Income before taxes</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,919,663</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,782,342</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,496,249</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Total Assets</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,126,938</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,919,123</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6,804,471</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="17">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Reinsurance Segment</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Revenues:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net reinsurance premiums</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,109,883</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>253,167</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21,670</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>88</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,131,553</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>253,255</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Expenses</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Underwriting expenses(1)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,245,386</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>304,531</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Income before taxes</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>886,167</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(51,276</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Total Assets</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>9,597,373</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,963,223</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Combined</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>32,820,086</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>21,090,084</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>17,651,324</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27,014,256</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,359,018</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,155,075</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Income before taxes</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,805,830</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,731,066</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,496,249</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Total Assets</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>12,724,311</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,882,346</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6,804,471</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>1.&nbsp;</TD>
    <TD align="left">
    Underwriting expenses include policy acquisition costs,
    professional fees and losses and loss adjustment expenses.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">F-28

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
To the Shareholders of
</DIV>

<DIV align="left" style="font-size: 10pt;">
CRM Holdings, Ltd. (in formation)
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have audited the accompanying balance sheet of CRM Holdings,
Ltd. (in formation) (the &#147;Company&#148;) as of
September&nbsp;7, 2005. These financial statements are the
responsibility of the Company&#146;s management. Our
responsibility to express an opinion on these financial
statements based on our audit.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes consideration
of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the Company&#146;s internal control over
financial reporting. Accordingly, we express no such opinion. An
audit also includes examining, on a test basis, evidence
supporting the amount and disclosures in the financial
statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In our opinion, the Company&#146;s financial statements present
fairly, in all material respects, the financial position of the
Company as of September&nbsp;7, 2005 in conformity with
accounting principles generally accepted in the United States.
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    /s/ JOHNSON LAMBERT &#38; CO.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Reston, Virginia
</DIV>

<DIV align="left" style="font-size: 10pt;">
September&nbsp;19, 2005
</DIV>

<P align="center" style="font-size: 10pt;">F-29

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<P><HR noshade><P>
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<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CRM Holdings, Ltd. (In formation)</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Balance Sheet</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>September&nbsp;7, 2005</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="81%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Assets</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>12,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total Assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>12,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Shareholders&#146; Equity</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Common Shares, $0.01 par value; 50,000,000,000&nbsp;shares
    authorized; 1,200,000&nbsp;shares issued and outstanding</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>12,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total Shareholders&#146; Equity</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>12,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Note to Balance Sheet</B>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>1.</B></TD>
    <TD>
    <B>Organization and Purpose</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
CRM Holdings, Ltd. (&#147;CRM Holdings&#148;) was incorporated
in Bermuda on September&nbsp;7, 2005. In connection with its
formation, CRM Holdings issued 1,200,000 common shares for
$12,000 to Reid Finance Ltd., an affiliate of Appleby Spurling
Hunter.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
CRM Holdings was formed in preparation for the restructuring of
certain insurance and related companies and an initial public
offering of its common shares. CRM Holdings will acquire
substantially all of the assets and liabilities of Compensation
Risk Managers, LLC (&#147;CRM&#148;), Compensation Risk Managers
of California, LLC (&#147;CRM&nbsp;CA&#148;), EIMAR, L.L.C.
(&#147;Eimar&#148;), and Twin Bridges (Bermuda) Ltd. (&#147;Twin
Bridges&#148;). These entities, in substance, have identical
beneficial ownership. CRM, CRM&nbsp;CA and Eimar will first be
converted from limited liability companies into corporations.
The shareholders will contribute all of their interests in CRM
and Eimar to CRM USA Holdings Inc. which will be a wholly owned
subsidiary of CRM&nbsp;Holdings and will hold all of the
outstanding shares of the U.S.&nbsp;subsidiaries of
CRM&nbsp;Holdings. In exchange, the shareholders will receive
shares issued by CRM&nbsp;USA Holdings Inc. The shareholders
will then contribute their CRM&nbsp;USA Holdings shares to
CRM&nbsp;Holdings in exchange for common shares of
CRM&nbsp;Holdings. CRM will then distribute its shares in
CRM&nbsp;CA to CRM&nbsp;USA Holdings. In addition, the
shareholders will contribute all of their interests in Twin
Bridges to CRM&nbsp;Holdings in exchange for common shares of
CRM&nbsp;Holdings.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Other than the receipt and deposit of its initial capital, CRM
Holdings has not been active. Initial public offering costs
incurred to date are the obligation of CRM. Upon completion of
the offering, these costs will be transferred to CRM Holdings
and recorded as a reduction of paid-in capital.
</DIV>

<P align="center" style="font-size: 10pt;">F-30

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 18pt; margin-top: 27pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Common
Shares</B>
</DIV>

<DIV align="center" style="font-size: 24pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CRM Holdings, Ltd.</B>
</DIV>

<DIV align="center" style="font-size: 3pt; margin-top: 96pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 30%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 14pt;">
<B>PROSPECTUS</B>
</DIV>

<DIV align="center" style="font-size: 3pt;">
<DIV style="width: 30%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 60pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 18pt;">

<TR>
    <TD width="50%"></TD>
    <TD width="50%"></TD>
</TR>

<TR valign="top">
    <TD align="left">Sandler O&#146;Neill&nbsp;&#38; Partners, L.P.</TD>
    <TD align="right">KeyBanc Capital Markets</TD>
</TR>

</TABLE>

<DIV align="center" style="font-size: 14pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2005</B>
</DIV>


<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>
<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>PART&nbsp;II</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>INFORMATION NOT REQUIRED IN PROSPECTUS</B>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;13.</B></TD>
    <TD>
    <B><I>Other Expenses of Issuance and Distribution.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The expenses in connection with the registration of the common
shares covered by this prospectus are set forth in the following
table. All amounts except the registration and NASD filing fee
are estimated:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="87%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Securities and Exchange Commission registration fee</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    NASD filing fee</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Printing and engraving expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounting fees and expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Legal fees and expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Miscellaneous</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>*&nbsp;</TD>
    <TD align="left">
    To be filed by amendment.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
All expenses in connection with the issuance and distribution of
the securities being offered shall be borne by the registrant,
other than underwriting discounts and selling commissions, if
any.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;14.</B></TD>
    <TD>
    <B><I>Indemnification of Directors and Officers.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The amended and restated bye-laws of the Registrant provide for
the indemnification of the Registrant&#146;s officers and
directors, members of a (duly constituted) committee and any
resident representative (and their respective heirs, executors
or administrators), each referred to as an &#147;Indemnified
Person,&#148; against all actions, costs, charges, liabilities,
loss, damage or expense to the full extent permitted by Bermuda
law, incurred or suffered by such party by reason of any act
done, conceived in or omitted in the conduct of the
Registrant&#146;s business or in the discharge of his/her
duties; provided that such indemnification shall not extend to
any matter which would render it void pursuant to the Companies
Act 1981 (the &#147;Companies Act&#148;) as in effect from time
to time in Bermuda.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Registrant&#146;s amended and restated bye-laws state that
an Indemnified Person shall be indemnified out of the funds of
the Registrant against all liabilities incurred by him or her by
reason of any act done, conceived in or omitted in the conduct
of the Registrant&#146;s business or in the discharge of his or
her duties, in defending any proceedings, whether civil or
criminal, in which judgment is given in his or her favor, or in
which he or she is acquitted, or in connection with the
application under the Companies Act in which relief is granted
to him or her by the court.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, each shareholder and the Registrant agree to waive
any claim or right of action such shareholder or it may have at
any time, whether individually or by or in the right of the
Registrant against any Indemnified Person on account of any
action taken by such person in the performance of his or her
duties with or for the Registrant; provided that such waiver
shall not apply to any claims or rights of action which would
render it void pursuant to the Companies Act as in effect from
time to time in Bermuda, and any claim or rights of action
arising out of fraud or dishonesty on the part of such
Indemnified Person or with respect to the recovery of any gain,
personal profit or advantage to which such Indemnified Person is
not legally entitled.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Companies Act provides that a Bermuda company may indemnify
its directors in respect of any loss arising or liability
attaching to them as a result of any negligence, default, breach
of duty or breach of trust of which they may be guilty. However,
the Companies Act also provides that any provision, whether
contained in the company&#146;s bye-laws or in a contract or
arrangement between the company and the director, indemnifying a
director against any liability which would attach to him in
respect of his fraud or dishonesty will be void.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Reference is made to the form of Underwriting Agreement filed as
Exhibit&nbsp;1.1 hereto for provisions providing that the
Underwriters are obligated, under certain circumstances, to
indemnify the directors, certain officers and the controlling
persons of the Registrant against certain liabilities under the
U.S.&nbsp;Securities Act of 1933, as amended (the
&#147;Securities Act&#148;).
</DIV>

<P align="center" style="font-size: 10pt;">II-1

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;15.</B></TD>
    <TD>
    <B><I>Recent Sales of Unregistered Securities.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Registrant was incorporated in Bermuda on September&nbsp;7,
2005 under the laws of Bermuda. In connection with the
formation, the Registrant issued 1,200,000&nbsp;shares of common
stock for $12,000 to Reid Finance Ltd., an affiliate of Appleby
Spurling Hunter, pursuant to an exemption provided by
Section&nbsp;4(2) of the Securities Act.
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;16.</B></TD>
    <TD>
    <B><I>Exhibits and Financial Statement Schedules.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
(a)&nbsp;Exhibits
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="81%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3" align="center" nowrap><B>Exhibit</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3" align="center" nowrap><B>Number</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Description</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#134;1.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Underwriting Agreement by and between the Company and Sandler
    O&#146;Neill&nbsp;&#38; Partners, L.P. and KeyBank Capital
    Markets,
    dated &nbsp;&nbsp;&nbsp;<FONT face="wingdings">l</FONT>&nbsp;&nbsp;&nbsp;,
    2005</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#134;2.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Reorganization Agreement</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>3.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Memorandum of Association of the Company</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>3.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Bye-Laws of the Company</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#134;4.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Common Share Certificate</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#134;5.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Opinion of Appleby Spurling Hunter</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#134;10.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Employment Agreement of Daniel&nbsp;G. Hickey,&nbsp;Jr.,
    dated &nbsp;&nbsp;&nbsp;<FONT face="wingdings">l</FONT>&nbsp;&nbsp;&nbsp;,
    2005</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#134;10.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Employment Agreement of Martin&nbsp;D. Rakoff,
    dated &nbsp;&nbsp;&nbsp;<FONT face="wingdings">l</FONT>&nbsp;&nbsp;&nbsp;,
    2005</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Interest and Liabilities Contract to Workers&#146; Compensation
    and Employer&#146;s Liability Proportional Reinsurance
    Agreement, between New&nbsp;York Marine&nbsp;&#38; General
    Insurance Company and Twin Bridges (Bermuda) Limited, effective
    December&nbsp;1, 2003</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Lease Agreement between Oakwood Partners L.L.C. and Compensation
    Risk Managers, LLC, dated August&nbsp;5, 2005</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Loan Agreement, dated October&nbsp;28, 2004, between
    Compensation Risk Managers, LLC and KeyBank National Association</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amended and Restated Loan Agreement, dated May&nbsp;5, 2005,
    between Compensation Risk Managers, LLC and KeyBank National
    Association (amending and restating the Loan Agreement, between
    Compensation Risk Managers, LLC and KeyBank National
    Association, dated October&nbsp;28, 2004)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Loan Agreement, between Twin Bridges (Bermuda) Ltd. and KeyBank
    National Association dated October&nbsp;28, 2004
    ($3&nbsp;million loan)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Loan Agreement, between Twin Bridges (Bermuda) Ltd. and KeyBank
    National Association dated October&nbsp;28, 2004
    ($7.5&nbsp;million loan)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#134;21.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    List of subsidiaries of the Company</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>23.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Consent of Johnson Lambert&nbsp;&#38; Co.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&#134;23.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Consent of Appleby Spurling Hunter (included in Exhibit&nbsp;5.1)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>24.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Power of Attorney (included on signature page)</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD>&#134;&nbsp;</TD>
    <TD align="left">
    To be filed by amendment.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
(b)&nbsp;Financial Statement Schedules for Compensation Risk
Managers, LLC and Affiliates
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Report of Independent Registered Public Accounting Firm on
Financial Statement Schedules.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Schedule&nbsp;III&nbsp;&#151; Supplementary insurance
information.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Schedule&nbsp;IV&nbsp;&#151; Reinsurance.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Schedule&nbsp;VI&nbsp;&#151; Supplemental information concerning
property-casualty insurance operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Financial Statement Schedules&nbsp;III, IV and VI for
Compensation Risk Managers, LLC and its affiliates are included
on II-4, II-5 and II-6, respectively. All other schedules for
which provision is made in the applicable accounting regulations
of the Securities and Exchange Commission are omitted because
they are not required, are not applicable or the information is
included in the financial statements or notes thereto.
</DIV>

<P align="center" style="font-size: 10pt;">II-2

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Report of Independent Registered Public Accounting Firm on</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Financial Statement Schedules</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
To the Members of
</DIV>

<DIV align="left" style="font-size: 10pt;">
Compensation Risk Managers, LLC and Affiliates
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The audits referred to in our report dated August&nbsp;5, 2005
include the related financial statement schedules as of
December&nbsp;31, 2004, and for each of the years in the
three-year period ended December&nbsp;31, 2004, included in this
Registration Statement on Form&nbsp;S-1. These financial
statement schedules are the responsibility of Compensation Risk
Managers, LLC&#146;s management. Our responsibility is to
express an opinion on these financial statement schedules based
on our audits. In our opinion, such financial statement
schedules, when considered in relation to the combined financial
statements taken as a whole, present fairly, in all material
respects, the information set forth therein.
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    /s/ JOHNSON LAMBERT &#38; CO.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Reston, Virginia
</DIV>

<DIV align="left" style="font-size: 10pt;">
August&nbsp;5, 2005
</DIV>

<P align="center" style="font-size: 10pt;">II-3

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Compensation Risk Managers, LLC and Affiliates</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Schedule III &#150; Supplementary Insurance Information</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; margin-top: 18pt; ">

<TR style="font-size: 1pt;">
    <TD width="16%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Future policy</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Other</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Investment</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Deferred</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>benefits,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>policy</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>income,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Losses and</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Amortization</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>policy</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>losses and</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Unearned</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>claims and</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Net</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>net of</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>loss</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>of policy</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Other</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>acquisition</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>loss</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>reinsurance</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>benefits</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>reinsurance</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>advisory</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>adjustment</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>acquisition</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>underwriting</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Premiums</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>costs</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>expenses</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>premiums</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>payable</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>premiums</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>fees</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>expenses</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>costs</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>expenses</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>written</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,413,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,696,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,779,950</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,109,883</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>21,670</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,528,083</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,511,065</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>206,238</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7,105,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="41">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2003</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>823,515</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>167,917</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,784,834</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>253,167</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>88</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>167,917</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>74,865</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>61,749</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,038,000</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">II-4

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Compensation Risk Managers,&nbsp;LLC and Affiliates</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Schedule&nbsp;IV&nbsp;&#151;&nbsp;Reinsurance</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="39%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Percentage</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Ceded to</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Assumed</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>of amount</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Direct</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>other</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>from other</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>assumed to</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>amount</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>companies</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>companies</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Net amount</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>net</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Workers&#146; Compensation Insurance:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,109,883</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,109,883</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2003</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>253,167</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>253,167</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">II-5

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Compensation Risk Managers, LLC and Affiliates</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Schedule VI &#150; Supplemental Information Concerning
Insurance Operations</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; margin-top: 18pt; ">

<TR style="font-size: 1pt;">
    <TD width="14%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="-2147483648%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2147483647%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>Incurred losses</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>and loss</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>adjustment</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Reserve for</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Investment</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>expenses</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Paid claims</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Deferred</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>losses and</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>income,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>related to:</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Amortization</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>and</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>policy</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>loss</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Unearned</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Net</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>net of</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>of policy</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>claim</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>acquisition</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>adjustment</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Discount</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>reinsurance</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>reinsurance</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>advisory</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Current</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Prior</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>acquisition</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>adjustment</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Premiums</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>costs</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>expenses</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>reserves</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>premiums</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>premiums</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>fees</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>year</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>year</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>costs</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>expenses</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>written</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,413,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,696,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,779,950</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,109,883</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>21,670</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,528,083</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,511,065</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7,105,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="45">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2003</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>823,515</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>167,917</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,784,834</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>253,167</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>88</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>167,917</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>74,865</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,038,000</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">II-6

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;17.</B></TD>
    <TD>
    <B><I>Undertakings.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The undersigned Registrant hereby undertakes to provide to the
underwriters at the closing specified in the Underwriting
Agreement certificates in such denominations and registered in
such names as required by the underwriters to permit prompt
delivery to each purchaser.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the Registrant pursuant to the
foregoing provisions, or otherwise, the Registrant has been
advised that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as
expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer
or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and
will be governed by the final adjudication of such issue.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Registrant hereby undertakes that:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    (1)&nbsp;For purposes of determining any liability under the
    Securities Act of 1933, the information omitted from the form of
    prospectus filed as part of this Registration Statement in
    reliance upon Rule&nbsp;430A and contained in the form of
    prospectus filed by the Registrant pursuant to
    Rule&nbsp;424(b)(1) or (4) or 497(h) under the Securities Act
    shall be deemed to be part of the Registration Statement as of
    the time it was declared effective.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    (2)&nbsp;For purposes of determining any liability under the
    Securities Act, each post-effective amendment that contains a
    form of prospectus shall be deemed to be a new registration
    statement relating to the securities offered therein, and the
    offering of such securities at that time shall be deemed to be
    the initial bona fide offering thereof.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">II-7

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>SIGNATURES</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, State of New York, on this
19th day of September, 2005.
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    CRM Holdings, Ltd.</TD>
</TR>

<TR>
    <TD style="font-size: 48pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="center">
    /s/ <FONT style="font-variant:SMALL-CAPS">Daniel G.
    Hickey,&nbsp;Jr.
    </FONT></TD>
</TR>

<TR valign="top"  style="font-size: 3pt;">
    <TD>&nbsp;</TD>
    <TD align="left">
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt" align="left">&nbsp;</DIV></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    Daniel G. Hickey,&nbsp;Jr.</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <I>Co-Chief Executive Officer</I></TD>
</TR>

<TR>
    <TD style="font-size: 12pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="center">
    /s/ <FONT style="font-variant:SMALL-CAPS">Martin&nbsp;D. Rakoff.
    </FONT></TD>
</TR>

<TR valign="top"  style="font-size: 3pt;">
    <TD>&nbsp;</TD>
    <TD align="left">
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt" align="left">&nbsp;</DIV></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    Martin&nbsp;D. Rakoff</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <I>Co-Chief Executive Officer</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose
signature appears below does hereby constitute and appoint
Daniel&nbsp;G. Hickey,&nbsp;Jr. and Martin&nbsp;D. Rakoff and
each of them, with full power of substitution and full power to
act, his true and lawful attorney-in-fact and agent to act for
him in his name, place and stead, in any and all capacities, to
sign any and all amendments (including post-effective
amendments) to this registration statement, any and all
registration statements filed pursuant to Rule&nbsp;462(b) of
the Securities Act of 1933 (including post-effective amendments)
to register additional securities and to file the same, with all
exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing
requisite or necessary to be done in order to effectuate the
same as fully, to all intents and purposes, as they or he might
or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents or any of them or their or his
substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following
persons in the capacities and on the dates indicated.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="31%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="37%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="16%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="3" align="center" nowrap><B>Signature</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Title</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Date</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    /s/ <FONT style="font-variant:SMALL-CAPS">Daniel G.
    Hickey,&nbsp;Jr.<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV></FONT>Daniel
    G. Hickey,&nbsp;Jr.</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    Co-Chief Executive Officer and Chairman of the Board</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    September&nbsp;19, 2005</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    /s/ <FONT style="font-variant:SMALL-CAPS">Martin D. Rakoff<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV></FONT>Martin
    D. Rakoff</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    Co-Chief Executive Officer and Deputy Chairman of the Board</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    September&nbsp;19, 2005</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    /s/ <FONT style="font-variant:SMALL-CAPS">James J. Scardino<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV></FONT>James
    J. Scardino</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    Chief Financial Officer</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    September&nbsp;19, 2005</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    /s/ <FONT style="font-variant:SMALL-CAPS">Daniel G.
    Hickey,&nbsp;Sr.<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV></FONT>Daniel
    G. Hickey,&nbsp;Sr.</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    Director</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    September&nbsp;19, 2005</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    /s/ <FONT style="font-variant:SMALL-CAPS">David M. Birsner<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV></FONT>David
    M. Birsner</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    Director</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    September&nbsp;19, 2005</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">II-8

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="31%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="36%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="18%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="3" align="center" nowrap><B>Signature</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Title</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Date</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    /s/ <FONT style="font-variant:SMALL-CAPS">Philip J.
    Magnarella<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV></FONT>Philip
    J. Magnarella</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    Director</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    September 19, 2005</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    /s/ <FONT style="font-variant:SMALL-CAPS">Louis Rosner, Esq.<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV></FONT>Louis
    Rosner</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    Director</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    September 19, 2005</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    /s/ <FONT style="font-variant:SMALL-CAPS">Sal Patafio<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV></FONT>Sal
    Patafio</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    Director</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    September 19, 2005</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    /s/ <FONT style="font-variant:SMALL-CAPS">Daniel G. Hickey,
    Jr.<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV></FONT>Daniel
    G. Hickey, Jr.</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    Authorized Representative in the United States</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    September 19, 2005</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;">II-9

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Exhibit Index</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="81%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3" align="center" nowrap><B>Exhibit</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3" align="center" nowrap><B>Number</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Description</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&#134;</TD>
    <TD align="right" valign="top" nowrap>1.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Underwriting Agreement by and between the Company and Sandler
    O&#146;Neill&nbsp;&#38; Partners, L.P. and KeyBank Capital
    Markets,
    dated &nbsp;&nbsp;&nbsp;<FONT face="wingdings">l</FONT>&nbsp;&nbsp;&nbsp;,
    2005</TD>
</TR>

<TR>
    <TD align="right" valign="top">&#134;</TD>
    <TD align="right" valign="top" nowrap>2.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Reorganization Agreement</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>3.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Memorandum of Association of the Company</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>3.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Bye-Laws of the Company</TD>
</TR>

<TR>
    <TD align="right" valign="top">&#134;</TD>
    <TD align="right" valign="top" nowrap>4.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Common Share Certificate</TD>
</TR>

<TR>
    <TD align="right" valign="top">&#134;</TD>
    <TD align="right" valign="top" nowrap>5.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Opinion of Appleby Spurling Hunter</TD>
</TR>

<TR>
    <TD align="right" valign="top">&#134;</TD>
    <TD align="right" valign="top" nowrap>10.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Employment Agreement of Daniel&nbsp;G. Hickey,&nbsp;Jr.,
    dated &nbsp;&nbsp;&nbsp;<FONT face="wingdings">l</FONT>&nbsp;&nbsp;&nbsp;,
    2005</TD>
</TR>

<TR>
    <TD align="right" valign="top">&#134;</TD>
    <TD align="right" valign="top" nowrap>10.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Employment Agreement of Martin&nbsp;D. Rakoff,
    dated &nbsp;&nbsp;&nbsp;<FONT face="wingdings">l</FONT>&nbsp;&nbsp;&nbsp;,
    2005</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Interest and Liabilities Contract to Workers&#146; Compensation
    and Employer&#146;s Liability Proportional Reinsurance
    Agreement, between New&nbsp;York Marine&nbsp;&#38; General
    Insurance Company and Twin Bridges (Bermuda) Limited, effective
    December&nbsp;1, 2003</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Lease Agreement between Oakwood Partners L.L.C. and Compensation
    Risk Managers, LLC, dated August&nbsp;5, 2005</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Loan Agreement, dated October&nbsp;28, 2004, between
    Compensation Risk Managers, LLC and KeyBank National Association</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amended and Restated Loan Agreement, dated May&nbsp;5, 2005,
    between Compensation Risk Managers, LLC and KeyBank National
    Association (amending and restating the Loan Agreement, between
    Compensation Risk Managers, LLC and KeyBank National
    Association, dated October&nbsp;28, 2004)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Loan Agreement, between Twin Bridges (Bermuda) Ltd. and KeyBank
    National Association dated October&nbsp;28, 2004
    ($3&nbsp;million loan)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Loan Agreement, between Twin Bridges (Bermuda) Ltd. and KeyBank
    National Association dated October&nbsp;28, 2004
    ($7.5&nbsp;million loan)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&#134;</TD>
    <TD align="right" valign="top" nowrap>21.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    List of subsidiaries of the Company</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>23.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Consent of Johnson Lambert&nbsp;&#38; Co.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&#134;</TD>
    <TD align="right" valign="top" nowrap>23.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Consent of Appleby Spurling Hunter (included in Exhibit&nbsp;5.1)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>24.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Power of Attorney (included on signature page)</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD>&#134;&nbsp;</TD>
    <TD align="left">
    To be filed by amendment.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">II-10
</BODY>
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S-1
Table of Contents
As filed with the Securities and Exchange Commission on
September 19, 2005
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
CRM Holdings, Ltd.
(Exact name of registrant as specified in its charter)
Bermuda
6331
N/A
(State or other jurisdiction of
incorporation or organization)
(Primary Standard Industrial
Classification Code Number)
(IRS Employer Identification
Number)
PO Box HM 2062
Hamilton HM HX
Bermuda
(441) 295-2185
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
Agent for Service:
Louis J. Viglotti, Esq.
General Counsel
Compensation Risk Managers, LLC
112 Delafield Street
Poughkeepsie, New York 12601
(845) 452-4100
(Name and address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
Roslyn Tom, Esq.
Baker & McKenzie LLP
805 Third Avenue
New York, New York 10022
(212) 751-5700
Peter S. Kolevzon, Esq.
Kramer Levin Naftalis & Frankel LLP
1177 Avenue of the Americas
New York, New York 10036
(212) 715-9100
Approximate date of commencement of proposed sale of securities
to the public: As soon as practicable after the registration
statement becomes effective.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to
Rule 415 under the Securities Act of 1933, check the
following
box.
o
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act,
please check the following box and list the Securities Act
registration statement number of the earlier effective
registration statement for the same
offering.
o
If this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering.
o
If this Form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering. If delivery of the prospectus is expected to be made
pursuant to Rule 434, please check the following
box.
o
CALCULATION OF REGISTRATION FEE
Proposed Maximum
Amount of
Aggregate
Registration
Title of Each Class of Securities to be Registered
Offering Price(1)
Fee
Common Shares, $0.01 par value
$100,000,000
$11,770
(1)
Estimated solely for the purposes of determining the
    registration fee in accordance with Rule 457(o) under the
    Securities Act of 1933, as amended.
The Registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a)
of the Securities Act of 1933, as amended, or until the
Registration Statement shall become effective on such date as
the Securities and Exchange Commission, acting pursuant to said
Section 8(a), may determine.
Table of Contents
The information
in this prospectus is not complete and may be changed. The
securities may not be sold until the Registration Statement
filed with the Securities and Exchange Commission is effective.
This prospectus is not an offer to sell these securities and it
is not soliciting an offer to buy these securities in any state
where the offer or sale is not
permitted.
SUBJECT TO COMPLETION, DATED
SEPTEMBER 19, 2005
PRELIMINARY PROSPECTUS
CRM Holdings, Ltd.
l
Common
Shares
We
are a leading provider of fee-based management and other
services for workers' compensation self-insured groups in
New York and California. We also reinsure a portion of the
excess workers' compensation coverage these groups obtain.
We
are
offering
l
of
our common shares in this firm commitment underwritten public
offering. In addition, the selling shareholders are
offering
l
of
our common shares. We will not receive any of the proceeds from
the sale of our common shares by the selling shareholders.
We
expect the initial public offering price to be between
$
l
and
$
l
per
share. No public market currently exists for our common shares,
and they are not currently listed on any national exchange or
market system. We intend to apply to the Nasdaq National Market
to list our common shares for quotation under the symbol
"CRMH."
Investing
in our common shares involves certain risks. You should
carefully consider the "Risk Factors" beginning on
page 10 of this prospectus before investing in the common
shares.
Per Share
Total
Price to public
$
$
Underwriting discounts
Net proceeds (before expenses) to us(1)
Net proceeds to selling shareholders
(1)
This amount is the total before deducting legal, accounting,
    printing and other offering expenses payable by us, which are
    estimated
    at
l
.
The underwriters have been granted a 30-day option to purchase
up to
l
additional
common shares at the public offering price, less the
underwriting discounts, solely to cover over-allotments, if any.
None of the Securities and Exchange Commission, any state
securities regulators, the Registrar of Companies in Bermuda or
the Bermuda Monetary Authority has approved or disapproved of
these securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal
offense.
The underwriters expect to deliver our common shares to
purchasers against payment in New York, New York on or
about
l
,
2005, subject to customary closing conditions.
Sandler O'Neill & Partners, L.P.
KeyBanc Capital Markets
The date of this prospectus
is
l
,
2005
TABLE OF CONTENTS
Page
Prospectus Summary
1
Risk Factors
10
Cautionary Note Regarding Forward-Looking
    Statements
30
Use of Proceeds
31
Dividend Policy
31
Capitalization
32
Dilution
33
Selected Combined Financial Information
34
Management's Discussion and Analysis
    of Financial Condition and Results of Operations
36
Business
53
Regulation
67
Management
75
Principal Shareholders
80
Selling Shareholders
80
Certain Relationships and Related
    Transactions
81
Material Tax Considerations
84
Description of Share Capital
93
Underwriting
103
Shares Eligible for Future Sale
106
Legal Matters
107
Experts
107
Enforceability of Civil Liabilities under
    U.S. Federal Securities Laws
107
Where You Can Find More Information
108
Index to Financial Statements
F-1
EX-3.1: MEMORANDUM OF ASSOCIATION
EX-3.2: BYE-LAWS OF THE COMPANY
EX-10.3: INTEREST AND LIABILITIES CONTRACT TO WORKERS' COMPENSATION AND EMPLOYER'S LIABILITY PROPORTIONAL REINSURANCE AGREEMENT
EX-10.4: LEASE AGREEMENT
EX-10.5: LOAN AGREEMENT
EX-10.6: AMENDED AND RESTATED LOAN AGREEMENT
EX-10.7: LOAN AGREEMENT
EX-10.8: LOAN AGREEMENT
EX-23.1: CONSENT OF JOHNSON LAMBERT & CO.
You may only rely on the information contained in this
prospectus. We have not authorized anyone to provide you with
different information. This prospectus does not constitute an
offer to sell or a solicitation of an offer to buy any
securities other than the common shares offered by this
prospectus. This prospectus does not constitute an offer to sell
or a solicitation of an offer to buy any common shares in any
circumstances in which such offer or solicitation is unlawful.
Neither the delivery of this prospectus nor any sale made in
connection with this prospectus shall, under any circumstances,
create any implication that there has not been a change in our
affairs since the date of this prospectus or that the
information contained in this prospectus is correct as of any
time after its date.
Until
l
, 2005, 25 days
after the date of this prospectus, all dealers that buy, sell or
trade our common shares, whether or not participating in this
offering, may be required to deliver a prospectus. This
requirement is in addition to the dealers' obligation to
deliver a prospectus when acting as underwriters and with
respect to unsold allotments or subscriptions.
Shares may be offered or sold in Bermuda only in compliance
with the provisions of the Investment Business Act of 2003, and
the Exchange Control Act 1972, and related regulations of
Bermuda which regulate the sale of securities in Bermuda. In
addition, specific permission is required from the BMA, pursuant
to the provisions of the Exchange Control Act 1972 and related
regulations, for all issuances and transfers of securities of
Bermuda companies, other than in cases where the BMA has granted
a general permission. The BMA in its policy dated June 1,
2005 provides that where any equity securities, including our
common shares, of a Bermuda company are listed on an appointed
stock exchange, general permission is given for the issue and
subsequent transfer of any securities of a company from and/or
to a non-resident, for
i
Table of Contents
as long as any equities securities of such company remain so
listed. The Nasdaq National Market is deemed to be an appointed
stock exchange under Bermuda law. Notwithstanding the above
general permission, the BMA has granted CRM Holdings
permission to, subject to the common shares in CRM Holdings
being listed on an appointed stock exchange, issue, grant,
create, sale and transfer any of CRM Holdings' shares,
stock, bonds, notes (other than promissory notes), debentures,
debenture stock, units under a unit trust scheme, shares in an
oil royalty, options, warrants, coupons, rights and depository
receipts, or collectively, the Securities, to and among persons
who are either resident or non-resident of Bermuda for exchange
control purposes, whether or not the Securities are listed on an
appointed stock exchange. The BMA and the Registrar of Companies
accept no responsibility for the financial soundness of any
proposal or for the correctness of any of the statements made or
opinions expressed in this prospectus.
INFORMATION CONCERNING DEFINITIONS AND FINANCIAL
INFORMATION
CRM Holdings, Ltd. is a Bermuda exempted holding company
incorporated in September 2005, and will acquire Compensation
Risk Managers, LLC, or CRM, Compensation Risk Managers of
California, LLC, or CRM CA, Twin Bridges (Bermuda) Ltd., or Twin
Bridges, and EIMAR, L.L.C., or Eimar, through a share exchange,
as described in this prospectus, which will occur immediately
prior to the closing of this offering. Accordingly, in this
prospectus, references to the "Company,"
"we," "us" or "our" refer to CRM
Holdings, Ltd. and its subsidiaries on a combined basis. These
subsidiaries include CRM, CRM CA, Twin Bridges and Eimar, unless
the context suggests otherwise. These references also include a
U.S. intermediate holding company, CRM USA Holdings, Inc.,
or CRM USA Holdings, which will own all of the outstanding
shares of our U.S. subsidiaries. Prior to the closing of
this offering, CRM, CRM CA and Eimar will be converted into
corporations. References to CRM Holdings refer solely to CRM
Holdings, Ltd., and references to CRM include CRM CA, which is a
subsidiary of CRM, unless the context indicates otherwise.
In this prospectus, amounts are expressed in U.S. dollars
and the financial statements have been prepared in accordance
with generally accepted accounting principles in the United
States of America, or US GAAP, except as otherwise indicated.
ii
Table of Contents
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in
this prospectus. While we have highlighted what we believe is
important information about us and this offering in this
summary, it does not contain all of the information that you
should consider before investing in us. You should read the
entire prospectus carefully, including the sections entitled
"Risk Factors" and "Cautionary Note Regarding
Forward-Looking Statements" and the financial statements
and the related notes contained in this prospectus before making
an investment decision. Except as otherwise noted, all
information in this prospectus assumes that all of the
l
common
shares offered hereby will be sold, but that the underwriters do
not exercise their over-allotment option. As described more
fully below, we will
exchange
l
of
our common shares for all of the outstanding shares of CRM
(including its subsidiary, CRM CA), Eimar and Twin Bridges.
We refer to these transactions as the "restructuring."
The "restructuring" will occur immediately prior to
the closing of this offering. See "Certain Relationships
and Related Transactions — Restructuring."
Our Company
Overview
We are a leading provider of fee-based management and other
services for workers' compensation self-insured groups in
New York and California. We have been in the business of forming
and managing self-insured groups in New York since CRM's
inception in 1999 and expanded this business to California in
2003.
We provide the groups with a broad range of services, including
general management, underwriting, risk assessment, medical bill
review and case management, general recordkeeping and regulatory
compliance. We provide safety and loss control services to group
members to help reduce workers' compensation risks and
expenses. In New York, we provide claims management services. We
also act as a broker by placing excess coverage insurance and
any required surety bonds for the groups, and we provide
reinsurance for a portion of this excess coverage through our
subsidiary, Twin Bridges.
The fees we receive for our management services are based on a
percentage of either the manual workers' compensation rates
set by the New York Workers' Compensation Board or the
actual premiums paid to the groups by their members. The fees
for our medical bill review and case management services are
computed on a fee for service basis, and we receive commission
income for placing the excess coverage insurance and surety
bonds.
A self-insured group is an association of employers which
provides workers' compensation insurance to its members.
Each group we manage is composed of employers in the same
industry, all of which are located in a single state. The
premiums paid by the members of the groups we manage provide
funding for claims and loss adjustment expenses. Each member of
a group is jointly and severally liable for the liabilities
incurred by the group during the period of the member's
participation, even if the member subsequently leaves the group.
We concentrate on industries that we believe have favorable risk
profiles, and regularly screen and monitor the members of each
group we manage.
We have formed and currently manage 14 self-insured groups
in 12 industries. Eight of these groups are in New York and
six are in California. In New York, the groups cover the
following industries: healthcare, contracting, transportation,
wholesale and retail, manufacturing, public entities, real
estate and cemetery management. In California, the groups cover
the healthcare, contracting, new vehicle franchise auto
dealerships, plastic manufacturing, banking and winery
industries.
Our fee-based management services business has increased
substantially for CRM since its inception in 1999 and for CRM CA
since its inception in October, 2003. The chart below shows
for the six months ended June 30, 2005 and the five years
ended December 31, 2004, for our New York groups and
our California
1
Table of Contents
groups, total management fees and commission income earned
during each period and the number of groups we managed and the
number of members in each group at the end of each period.
2005
(to June 30,
2005)
2004
2003
2002
2001
2000
(Dollar amounts in thousands)
New York
Management Fees and Commission Income
$
13,023
$
25,662
$
20,747
$
17,614
$
7,967
$
2,563
Number of Groups (at end of period)
8
8
8
8
5
3
Number of Group Members (at end of period)
1,828
1,781
1,617
1,551
702
359
California
Management Fees and Commission Income
$
3,472
$
1,993
$
74
—
—
—
Number of Groups (at end of period)
5
4
1
—
—
—
Number of Group Members (at end of period)
213
84
8
—
—
—
We anticipate that our California business will continue its
rapid rate of growth in the near term. The aggregate annualized
premiums paid to the groups we manage in California were
$55,352,395, $24,102,728 and $2,163,674 as of June 30,
2005, December 31, 2004 and December 31, 2003,
respectively. These aggregate annualized premiums are the
annualized total of the actual premiums payable to our groups by
their members in California as in effect as of the dates
specified. Our management monitors the period to period changes
in these amounts because we believe that it is a meaningful
indicator of our expected fee-based management services revenues
in the future.
In contrast, the New York market is substantially more mature
than the California market and experienced relatively stable
rates over the last three years. The aggregate annualized
premiums attributable to the groups we manage in New York were
$106,092,118 and $110,011,630 as of June 30, 2005 and
December 31, 2004, respectively. These aggregate annualized
premiums are the annualized total of the actual premiums payable
to one of our groups in New York by its members and the
aggregate manual rates set by the New York Workers'
Compensation Board attributable to the members of the other New
York groups as in effect on the dates specified. Our management
also monitors the period to period changes in these amounts for
the reasons described above. New York has presently in effect a
moratorium on the formation of new groups. However, we believe
that our New York business will grow as a result of recently
approved manual rate increases and, to a lesser extent, as a
result of an increase in the number of members in these groups.
Self-insured groups are required to purchase excess
workers' compensation coverage to cover claims that exceed
a minimum level established by state law or regulation or by
administrative determination. We act as a broker and place this
excess insurance coverage and any required surety bonds for the
groups. Since December 2003, we have provided reinsurance for a
portion of this excess coverage through our subsidiary, Twin
Bridges.
Our net reinsurance premiums for reinsuring a portion of this
excess coverage and the gross premiums for excess coverage for
the groups we manage have increased since Twin Bridges began
business in December 2003. The chart below shows our net
reinsurance premiums for the six months ended June 30, 2005
and the two years ended December 31, 2004 and the gross
premiums for excess coverage placed during each period. Gross
premiums for excess coverage during any period is the aggregate
amount of premiums for excess coverage insurance that the groups
we manage will pay under the excess coverage policies written
during such
2
Table of Contents
period. Our management regards the changes in these amounts as a
meaningful indicator of our expected net reinsurance premiums
and commission income in the future.
2005
(to June 30,
2005)
2004
2003
(Dollar amounts in thousands)
Net Reinsurance Premiums
$
3,045
$
5,110
$
253
Gross Premiums for Excess Coverage
$
16,150
$
24,245
$
17,272
Our reinsurance business represents a significant opportunity to
enhance our profitability. We intend to use a significant
portion of our net proceeds from this offering to provide
additional surplus to Twin Bridges. We believe that this
additional surplus will allow Twin Bridges to provide
reinsurance for an increased amount of the excess coverage
purchased by the groups we manage. We also anticipate that Twin
Bridges will grow as our fee-based management services business
continues to grow.
Further, our ability to provide reinsurance is a significant
element of our plans to grow our fee-based management services
business. We believe that our willingness to reinsure a portion
of the excess coverage our groups obtain and thereby expose our
capital to risk distinguishes us from our competitors and
enhances our ability to:
•
Successfully form new groups;
•
Attract new members to join the groups we manage; and
•
Retain group management contracts.
The Group Self-Insurance Market
The workers' compensation insurance market has historically
fluctuated with periods of low premium rates and excess
underwriting capacity resulting from increased competition,
followed by periods of high premium rates and shortages of
underwriting capacity resulting from decreased competition.
These conditions, along with poor customer service and
substandard loss control and claims management, have motivated
businesses to self-insure against workers' compensation
claims. Large companies generally have the financial strength to
meet the significant statutory requirements to self-insure, or
to create their own captive insurance companies to insure, these
claims. Small and mid-sized companies generally lack the
financial and administrative resources to do this, and in recent
years have resorted to pooling their resources through the
formation of self-insured groups as a means to obtain
workers' compensation insurance at acceptable rates and
terms. CRM was formed in response to this relatively new market
to manage self-insured groups.
We believe that self-insured groups, when managed effectively,
provide lower and more stable premium rates to their members
than other methods of insuring workers' compensation
liabilities for small and mid-sized businesses. For that reason,
we believe that self-insured groups will continue to be an
attractive workers' compensation insurance option for small
and mid-sized companies.
Competitive Strengths
We believe that we have the following competitive strengths:
•
Superior Operational and Financial Track Record.
We have
    a well-established track record in forming, managing and growing
    self-insured workers' compensation groups, with over
    $27 million in management fees and commission income for
    the year ended December 31, 2004. Since we began our group
    management business in 1999, we have formed and currently
    manage 14 self-insured groups.
•
Full Range of Services for Self-Insured Groups.
We
    provide a full range of services to the groups we manage,
    including general management, underwriting, risk assessment and
    loss control, claims management and medical bill review and case
    management services.
3
Table of Contents
•
Managerial Experience and Expertise.
Our senior
    management team includes Daniel G. Hickey, Jr. and
    Martin D. Rakoff, each of whom has more than 10 years
    of experience in forming groups and managing, structuring and
    underwriting workers' compensation coverage for groups and
    has extensive contacts in the insurance and reinsurance
    industries. We believe that the experience of our senior
    management team provides us with a competitive advantage over
    new entrants into the group management market due to the
    significant regulatory and marketing impediments involved in the
    formation and management of self-insured groups. Our managerial
    expertise is in the following areas:
•
Formation of groups;
•
Cultivation and maintenance of relationships with our general
    agents and brokers;
•
Underwriting, loss control and, in New York, claims management
    for the groups; and
•
Relationships with providers of excess coverage.
Strategy
The key elements of our strategy are:
•
Continued Growth of Fee-Based Business.
Our California
    groups have grown rapidly since we began doing business in
    California. We anticipate continued growth in California in the
    near term both through an increase in membership in our existing
    groups and through an increase in the number of groups we
    manage. In New York, we believe growth will result from recently
    approved rate increases that allow our established groups to
    increase the premiums they charge their members and, to a lesser
    extent, from an increase in membership in these groups.
We have identified other states which represent possible new
    market opportunities for our self-insured group model, but we
    have not entered these states in order to focus our resources on
    the growth of our California business. Furthermore, in 2006, we
    intend to offer our medical bill review and case management
    services to large, self insured entities, insurance companies,
    self-insured groups and other parties requiring these services.
•
Growth of Reinsurance Business.
We intend to use a
    significant portion of our net proceeds from this offering to
    provide additional surplus to Twin Bridges. Our reinsurance
    business represents a significant opportunity to enhance our
    profitability. We believe that additional surplus will allow
    Twin Bridges to provide reinsurance for an increased amount of
    the excess coverage obtained by the groups we manage.
    Furthermore, as our aggregate management services fees increase,
    our opportunities to grow our reinsurance business should also
    increase.
We intend to explore increasing our fee-based management
services business by developing and offering non-workers'
compensation property and casualty insurance products to
carefully selected members of the groups we manage. Initially,
we would offer these products as a broker through unrelated
U.S. admitted insurers. We believe that our ability to
offer these additional insurance products to members of our
groups will enable us to compete more effectively with
commercial insurers that provide property and casualty insurance
products together with workers' compensation insurance as a
comprehensive package. If we develop and offer these additional
insurance products, Twin Bridges may consider reinsuring a
portion of the risk that is assumed by the U.S. admitted
insurers.
Organization and Principal Executive Offices
CRM Holdings is a Bermuda exempted holding company incorporated
in September 2005, and will acquire CRM, CRM CA, Eimar and
Twin Bridges through a share exchange, as described below, which
will occur immediately prior to the closing of this offering.
Our principal executive offices are located at Skandia
International House, 16 Church Street, Hamilton, Bermuda
HM 11, and our telephone number is (441) 295-2185. The
headquarters of our U.S. subsidiaries is located at the offices
of CRM at 112 Delafield Street, Poughkeepsie,
NY 12601, and the telephone number is (845) 452-4100.
4
Table of Contents
Prior to the consummation of the restructuring, certain members
of our management team, including Daniel G.
Hickey, Jr., Martin D. Rakoff and Louis J.
Viglotti, as well as certain other persons listed in
"Principal Shareholders" are the beneficial owners of
CRM, CRM CA, Eimar and Twin Bridges. We sometimes refer to
these owners in this prospectus as the "existing
shareholders."
Immediately prior to the closing of this offering, CRM,
CRM CA and Eimar will be converted from limited liability
companies into corporations and the existing shareholders will
contribute all of their interests in CRM and Eimar to
CRM USA Holdings, which will be our wholly owned subsidiary
and will hold all of the outstanding shares of our
U.S. subsidiaries. In exchange, the existing shareholders
will receive shares issued by CRM USA Holdings. The
existing shareholders will then contribute their CRM USA
Holdings shares to us in exchange
for
l
of
our common shares. CRM will then distribute its shares in
CRM CA to CRM USA Holdings. In addition, immediately
prior to the closing of this offering, the existing shareholders
will contribute all of their interests in Twin Bridges to us in
exchange
for
l
of
our common shares. We refer to these transactions in this
prospectus as the "restructuring." The existing
shareholders ultimately will receive a total
of
l
of
our common shares in exchange for their interests in CRM
(including its subsidiary, CRM CA), Eimar and Twin Bridges.
In connection with the restructuring, CRM, Eimar and Twin
Bridges intend to make a distribution to the existing
shareholders of unpaid earnings and profits in an aggregate
amount equal to the net income for U.S. federal income tax
purposes of CRM and Eimar for the nine months ended
September 30, 2005, plus the amount by which the net income
for U.S. federal income taxes purposes of Twin Bridges for
the period from its commencement through September 30, 2005
exceeds distributions Twin Bridges previously made to its
shareholders, such net income to be computed on a cash basis,
which has been the basis on which distributions have been made
to the existing shareholders by each of CRM and Eimar since
their inception. We refer to these distributions in this
prospectus as the "Distributions." We also will
indemnify the existing shareholders for an amount equal to the
amount of U.S. federal income taxes, if any, that would be
payable by them with respect to the combined net income, if any,
for U.S. federal income tax purposes of CRM, Eimar and Twin
Bridges for the period from October 1, 2005 through the
consummation of the restructuring, computed on a cash basis as
if such period were a taxable period.
5
Table of Contents
The following chart summarizes our corporate organization
showing only CRM Holdings and our subsidiaries upon the closing
of this offering. We may change our corporate organization from
time to time in the future.
6
Table of Contents
This Offering
Common shares offered by us
l
shares
Common shares offered by the selling shareholders
l
shares
Common shares to be outstanding immediately after this offering
l
shares
Use of net proceeds
We estimate that we will receive net proceeds from this offering
    of approximately
    $
l
million.
    We intend to use these net proceeds to provide additional
    capital and surplus to expand our operations, including
    providing additional surplus to Twin Bridges. We will not
    receive any of the proceeds from the sale of common shares by
    the selling shareholders.
Dividend Policy
We do not presently intend to declare dividends on our common
    shares. See "Dividend Policy."
Trading
Our common shares are not currently listed on any national
    securities exchange or listed for quotation on the Nasdaq
    National Market. However, we intend to apply to the Nasdaq
    National Market to list our shares for quotation under the
    symbol "CRMH."
Voting limitation
Our bye-laws contain a provision limiting the voting rights of
    any U.S. person, as defined in the U.S. Internal
    Revenue Code of 1986, as amended, or the Code, who owns
    (directly, indirectly or constructively under the Code) shares
    with more than 9.9% of the total voting power of all shares
    entitled to vote generally in an election of directors to 9.9%
    of such voting power.
Risk Factors
Investing in our common shares involves risks. See "Risk
    Factors."
Summary Combined Financial Information
The following table sets forth our summary combined financial
information for the periods ended and as of the dates indicated.
The historical results are not necessarily indicative of results
to be expected in any future period.
The summary unaudited combined income statement information for
the six months ended June 30, 2005 and 2004 and the summary
unaudited combined balance sheet information as of June 30,
2005 are derived from our unaudited combined financial
statements included elsewhere in this prospectus.
The summary combined income statement information for the years
ended December 31, 2004, 2003 and 2002 and the summary
combined balance sheet information as of December 31, 2004
and 2003 are derived from our audited combined financial
statements included elsewhere in this prospectus. The summary
unaudited combined income statement information for the years
ended December 31, 2001 and 2000 and the summary unaudited
combined balance sheet information as of December 31, 2002,
2001 and 2000 are derived from our unaudited combined financial
statements not included in this prospectus.
The summary combined balance sheet information as of
June 30, 2005 was prepared:
•
on an actual basis; and
•
on an as adjusted basis to give effect to our sale
    of
l
common
    shares in this offering, after deducting underwriting discounts
    and commissions and the estimated expenses of this offering, the
    restructuring and the Distributions and the application of our
    net proceeds from this offering.
You should read the following summary combined financial
information in conjunction with the information contained in
this prospectus, including "Management's Discussion
and Analysis of Financial
7
Table of Contents
Condition and Results of Operations," and the combined
financial statements and related notes included elsewhere in
this prospectus. Many factors may cause our future results to
differ materially from the financial information and results
presented below including, but not limited to, the following:
•
We began our group management business in California during
    October 2003;
•
We commenced our reinsurance business during December
    2003; and
•
Those factors discussed in "Risk Factors."
Six Months Ended
June 30,
Years Ended December 31,
Summary Combined
Income Information
2005
2004
2004
2003
2002
2001
2000
(Dollar amounts in thousands except per share amounts)
Revenues
Fee-based management services
$
16,494
$
13,920
$
27,656
$
20,821
$
17,614
$
7,967
$
2,563
Net reinsurance premiums
3,045
2,123
5,110
253
—
—
—
Investment income, net of advisory fees
54
21
54
16
37
13
—
Total revenues
19,593
16,064
32,820
21,090
17,651
7,980
2,563
Expenses
Losses and loss adjustment expenses
1,305
1,165
2,528
168
—
—
—
Fees paid to general agents and brokers
5,628
5,126
9,507
7,830
7,651
3,615
1,046
Selling, general and administrative expenses
8,884
6,275
13,441
9,240
6,471
3,140
1,317
Policy acquisition costs and other expenses
929
653
1,538
121
33
21
21
Total expenses
16,746
13,219
27,014
17,359
14,155
6,776
2,384
Income before taxes
2,847
2,845
5,806
3,731
3,496
1,204
179
Provision for income taxes
—
—
—
—
—
—
—
Net income
$
2,847
$
2,845
$
5,806
$
3,731
$
3,496
$
1,204
$
179
Pro forma net income per common share(1)
Pro forma cash dividends declared per common share(1)
Pro forma common shares outstanding(1)
(1)
Based
    on
l
common
    shares outstanding after giving effect to the restructuring but
    not including shares to be offered by us in this offering.
8
Table of Contents
As of June 30,
As of December 31,
Summary Combined
2005
2005
Balance Sheet Information
(As Adjusted)
(Actual)
2004
2003
2002
2001
2000
(Dollar amounts in thousands)
Assets
Cash and cash equivalents
$
2,493
$
1,576
$
767
4,644
2,342
143
Cash and cash equivalents, restricted
6,270
4,398
1,000
—
—
—
Premiums receivable, net
3,845
3,758
2,140
—
—
—
Accounts receivable
925
41
90
705
388
562
Deferred policy acquisition costs
1,341
1,414
824
—
—
—
Property and equipment, net
955
913
792
796
209
106
Loans receivable
414
432
173
73
—
—
Prepaid expenses and other assets
382
192
96
586
63
7
Total assets
$
16,625
$
12,724
$
5,882
$
6,804
$
3,002
$
818
Liabilities and shareholders' and members'
    equity
Reserve for losses and loss adjustment expenses
$
4,001
$
2,696
$
168
—
—
—
Unearned reinsurance premiums
4,533
4,780
2,785
—
—
—
Unearned management fees
1,182
671
614
1,789
341
—
Unearned commission income
3,383
2,334
2,247
2,163
1,145
—
Borrowings under credit facilities
1,109
158
285
1,104
169
200
Fees payable to general agents and brokers
741
565
578
537
375
172
Accrued expenses
1,733
632
369
317
75
428
Total liabilities
16,683
(2)
11,836
7,046
5,910
2,105
800
Twin Bridges
Common stock
120
120
120
—
—
—
Additional paid-in capital
880
880
880
—
—
—
Retained earnings
1,576
835
(51
)
—
—
—
LLC members' equity (deficit)
(2,634
)
(947
)
(2,113
)
894
897
18
Total shareholders' and members' equity
(58
)
888
(1,164
)
894
897
18
Total liabilities and shareholders' and members' equity
$
16,625
$
12,724
$
5,882
$
6,804
$
3,002
$
818
(2)
Column does not total due to rounding.
9
Table of Contents
RISK FACTORS
An investment in our common shares involves a high degree of
risk. Before making an investment decision, you should carefully
consider all of the risks described in this prospectus. If any
of the risks discussed in this prospectus actually occur, our
business, financial condition and results of operations could be
materially and adversely affected. If this were to happen, the
price of our common shares could decline significantly and you
may lose all or a part of your investment.
Risks Related to Our Business
We are dependent on our reinsurance business for a
    substantial portion of our revenues and profits and may not be
    able to maintain or increase this business.
The groups we manage purchase excess workers' compensation
coverage from U.S. admitted insurers to cover claims that
exceed a minimum level established by state law or regulation or
by administrative determination. Typically, our managed groups
purchase excess coverage for losses and loss adjustment expenses
in excess of $500,000 per occurrence. This "excess
coverage" purchased by the groups provides them with
benefits for losses in excess of the $500,000 per
occurrence liability retained by the groups. Our managed groups
also purchase what is called "catastrophic coverage"
for losses and loss adjustment expenses in excess of
$1 million per occurrence. The catastrophic coverage
purchased by our managed groups is not subject to a per
occurrence limit. In addition, each of our groups also purchases
coverage to insure against the risk that a large number of
claims will occur and result in losses that are each less than
$500,000 and that the aggregate result of such losses could
exhaust their resources. This "frequency coverage" is
triggered in the event that the aggregate amount of losses and
loss adjustment expenses during the coverage period exceeds a
range from 90% to 150% of the premiums paid to the groups by
their members. If the frequency coverage is triggered, the
insurer pays the next $2 million of losses and related loss
adjustment expenses of the group during the coverage period. New
York Marine & General Insurance Company, or NY
Marine & General, provides the excess coverage and the
frequency coverage insurance for 13 of our 14 groups. Under our
reinsurance agreement with NY Marine & General, we reinsure
50% of all of the coverage it provides and receive 50% of the
premiums, which we refer to as our assumed premium, paid to it
by these groups. We allow NY Marine & General a ceding
commission of 28% of our assumed premium to cover its
acquisition, general and administrative expenses, a further 2%
for stop-loss coverage and 1% to cover the U.S. federal excise
tax, or a total of 31% of our assumed premium. The stop loss
coverage limits our losses under our reinsurance agreement to
181.16% of our assumed premiums, net of the ceding commission
and the cost of the stop-loss coverage and the U.S. federal
excise tax. We are required to provide NY Marine &
General with significant security to secure our reinsurance
obligations, which security may consist of a bank-issued letter
of credit, a reinsurance trust fund for the benefit of NY
Marine & General or cash. If we are unable to provide
this security, we may no longer be offered the opportunity to
reinsure any portion of the excess coverage that NY Marine &
General provides to our managed groups.
We derive a significant amount of our income from our
reinsurance business and intend to use a significant portion of
the net proceeds of this offering to seek to assume additional
portions of the excess coverage provided by NY Marine &
General and the other U.S. admitted insurers to our managed
groups. We anticipate that revenues from our reinsurance could
account for an increasing portion of our total revenues and net
income. Neither we nor Twin Bridges is a licensed
U.S. admitted insurer, and we are dependent on NY
Marine & General to offer us a portion of the excess
coverage it insures. In the future, the U.S. admitted
insurers selected by the groups, including NY Marine &
General, may not offer us the opportunity to reinsure a portion
of the excess coverage or may only do so in lower amounts or on
terms and conditions that are not acceptable to us. This may
occur if these insurers are offered a better rate or more
favorable terms from one of our competitors, or if they choose
not to provide excess coverage to our groups at all or not to
offer a portion of the excess coverage to Twin Bridges. We could
lose all or a substantial portion of our reinsurance premium
revenues and this loss would have a material adverse effect on
our business, financial condition and results of operations.
In addition, the groups we manage are and will continue to be
exposed to the credit risk of the insurers that provide excess
coverage. Placing excess coverage with these insurers does and
will not relieve the
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members of our managed groups from liability. Furthermore, if
any of these insurers no longer maintain the required rating
from A.M. Best, they will not be eligible to insure the excess
coverage. Any failure of these insurers to pay covered losses or
to maintain the required ratings could have a material adverse
effect on our reputation, business, financial condition and
results of operations.
We may be deemed to have a conflict of interest in
    concurrently managing groups and placing excess coverage for
    these groups with a U.S. admitted insurer that cedes a part
    of this excess coverage to Twin Bridges.
It is possible that one or more of the groups could conclude
that our acting as manager of the groups and reinsurance broker
for our groups, while also reinsuring NY Marine &
General for a portion of the excess coverage, presents an
unacceptable conflict of interest. If this should occur, we
would lose all or a substantial portion of our reinsurance
business or our brokerage business, either of which would have a
material adverse effect on our business, financial condition and
results of operations. A group of affiliated former members of
one of our groups has filed suit against CRM alleging, among
other things, that CRM had engaged in self dealing and had
committed a breach of fiduciary duties owed to them in
connection with the placement of reinsurance for the members of
the group.
Our business is dependent upon a number of our larger
    managed groups, and we may fail to retain our management
    agreements with these groups.
A significant amount of our existing business is dependent on a
relatively small number of our managed groups. The Healthcare
Insurance Trust of New York provided approximately 27.2% and
38.1% of our revenues from fee-based management services for the
six months ended June 30, 2005 and the year ended
December 31, 2004, respectively. Two other groups, Elite
Contractors Trust of New York and Transportation Industry
Workers' Compensation Trust of New York, provided
approximately 20.3% and 13.8%, respectively, of our revenues
from fee-based management services for the six months ended
June 30, 2005 and approximately 21.9% and 13.7%,
respectively, of our revenues from fee-based management services
for the year ended December 31, 2004. The loss of one or
more of these groups would have a material adverse effect on our
business, financial condition and results of operations.
The failure of any self-insurance group in the state of
    New York could have an adverse effect on our group management
    business.
Each member of a self-insurance group has joint and several
liability for the obligations of the group incurred during the
period of its membership and that group may assess the members
for any short-fall, even after a member leaves a group, if the
loss was incurred during such member's participation in the
group. If a group is not able to pay its liabilities from its
assets or these assessments, the New York State Workers'
Compensation Board may use the security posted by the group and
can also assess all of the other groups in New York State to pay
these liabilities. The failure of a single large self-insurance
group in New York, even if it is a group that we do not manage,
could have an adverse effect on the other groups in the state
and could affect the regulation of groups by the state. Such a
development may seriously hamper our ability to retain existing
members, attract new members to our managed groups and to form
groups which could have a material adverse effect on our
business, financial condition and our results of operations.
Our groups are dependent on obtaining excess coverage for
    the workers' compensation coverage they provide to their
    members.
Our groups are required to purchase excess coverage from
U.S. admitted insurers under state law or regulation or by
administrative determination and thus are dependent on the
availability of this coverage to carry on their business. The
availability and cost of excess coverage for the groups are
subject to market conditions, which are beyond our control.
Currently, there is a high level of demand for excess coverage
and we may experience difficulties in obtaining or renewing this
excess coverage for the groups in future periods. Our managed
groups are dependent on these insurers and may be unable to
provide workers' compensation coverage to their members if,
in future periods, excess coverage becomes unavailable or only
available on
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unacceptable terms and conditions or includes material
sub-limits or exclusions. We cannot assure you that we will be
able to continue to obtain adequate levels of excess coverage
for the groups with U.S. admitted insurers at
cost-effective rates. In such an event, our managed groups may
be unable to retain existing members or attract new members, and
we may not be able to form new groups, which would have a
material adverse effect on our business, financial condition and
results of operations.
Our geographic concentration ties our performance to the
    business, economic and regulatory conditions in New York and
    California.
Our business is conducted entirely in New York and California.
Unfavorable business, economic or regulatory conditions in
either of those two states could negatively impact our business,
and, consequently, we are exposed to economic and regulatory
risks that are greater than the risks faced by insurance
companies that conduct business over a greater geographic area.
Furthermore, the California group self-insurance market is still
developing and remains volatile. This concentration of our
business could have a material adverse effect on our business,
financial condition and results of operations. In addition, the
regulations applicable to our operations in New York and
California are currently undergoing regulatory review and are
subject to change. Any changes in the applicable regulatory
conditions in New York or California could have a material
adverse effect on our business, financial condition or results
of operations.
Our business is heavily dependent upon general agents and
    brokers with whom we do not have an exclusive
    relationship.
All of the members of the groups we manage are introduced by
general agents and brokers, and these groups derive a
significant portion of their members from a limited number of
these general agents and brokers. Currently, approximately 77%
of the aggregate annualized premiums paid or attributable to the
groups we manage is derived from members referred to our groups
by approximately 20% of our general agents and brokers. We do
not have an exclusive relationship with these general agents and
brokers. They are not obligated to promote our groups and may
sell products offered by our competitors. Many of our
competitors have longer relationships with the general agents
and brokers that we use or intend to use. We cannot assure you
that we will successfully maintain these relationships,
cultivate new ones or be able to meet the future requirements of
these general agents and brokers and their customers. In
addition, consolidation in the general agency and insurance
brokerage industry may lead to the loss of one or more of these
relationships. The failure to maintain satisfactory
relationships with general agents and brokers from whom we
obtain or expect to obtain our business or to develop new
relationships would have a material adverse effect on our
business, financial condition and results of operations.
Our reinsurance business and our managed groups in
    California have limited operating histories.
We began our reinsurance operations in December 2003 by
reinsuring a portion of the excess workers' compensation
coverage NY Marine & General provides to groups we
manage. We started providing management services to our first
workers' compensation group in California in October 2003
and we are still developing name recognition and a reputation in
this market. We must hire and retain additional key employees
and other staff, develop and maintain business relations,
continue to establish operating procedures, acquire or lease
additional facilities, implement new systems, obtain approvals
from regulatory agencies or organizations for our new groups and
complete other similar tasks necessary for the conduct of our
group management business in California. If we are unable to
conduct these activities efficiently, it could have a material
adverse effect on our business, financial condition and results
of operation.
We may have difficulty managing our growth, which could
    limit our ability to increase revenues and cash flow.
As we have expanded our fee-based management services business
into California and began reinsuring a portion of the excess
coverage obtained by the groups that we manage, we have
experienced significant growth in the scope of our operations
and the number of our employees. We expect this growth to
continue as we grow our California fee-based management services
business and hire additional administrative staff to assist us
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with meeting the increased compliance obligations of being a
publicly-traded company. In addition, part of our strategy
includes the growth of our medical bill review and case
management services. This growth has and will continue to place
significant demands on our management and our financial and
operational resources. Continued growth will likely increase our
challenges in:
•
hiring, retention and training of new employees;
•
managing a large organization;
•
implementing appropriate operating and financial procedures and
    systems; and
•
acquiring or leasing additional facilities.
If we cannot scale and manage our business appropriately, we may
not be able to timely execute our business strategies, and our
business and results of operations may be adversely affected.
We may underestimate the liabilities incurred by the
    managed groups.
Significant periods of time generally elapse between the
underwriting and pricing of workers' compensation insurance
coverage and the payment of claims by our managed groups. As the
groups recognize liabilities for unpaid losses, we will
establish or adjust reserves for the managed groups, which
represent estimates of amounts needed to pay their reported
losses and unreported losses and the related loss adjustment
expenses. These reserves are only an estimate, involving many
variables and subjective judgments, and do not represent an
exact calculation of potential liability, and actual results are
likely to differ from original estimates and could differ by
material amounts. To the extent the loss reserves for any of our
managed groups is insufficient to cover actual losses and loss
adjustment expenses, we will have to adjust its loss reserves
and the group may incur charges to its earnings, which could
have a material adverse effect on its financial condition and
cash flows and could require the group to assess its members.
This could expose us to liability for our management of the
group, have a negative impact on our future management of the
group, and adversely affect our reputation as a manager.
We may underestimate the liabilities from the risks we
    assume as a reinsurer of a portion of the excess coverage of our
    managed groups.
As with the groups we manage, we establish or adjust reserves
for Twin Bridges as we recognize our liabilities for unpaid
losses, which represent estimates of amounts needed to pay our
reported losses and unreported losses and the related loss
adjustment expenses. Since the period of time that generally
elapses between the underwriting and pricing of our reinsurance
of the excess coverage purchased by the groups we manage and the
payment of a claim pursuant to such reinsurance is even longer
than that for the managed groups, our reserves are more
difficult to estimate and are even less likely to be accurate.
Our reserves are only an estimate, involving many uncertainties
and subjective judgments, and do not represent an exact
calculation of potential liability, and actual results are
likely to differ from original estimates and could differ by
material amounts. These uncertainties include, for example, the
period of time between the occurrence of an insured loss and
actual settlement and the effects of trends in loss severity and
frequency risks, fluctuations in inflation, prevailing economic,
social and judicial trends, legislative changes and internal and
third party claims handling procedures. Furthermore, Twin
Bridges has only been in existence since December 2003, has had
limited loss experience and a relatively small population of
underlying risks, and therefore is exposed to an increased
likelihood that actual results may not conform to our estimates.
Our business strategy includes providing reinsurance for an
increased amount of the excess coverage obtained by the groups
we manage. To the extent we implement this strategy, we will
increase the amount of risk that we assume under the reinsurance
we provide, and the amount of our reserves for losses and loss
adjustment expenses may be required to be increased. To the
extent our loss reserves are insufficient to cover actual losses
and loss adjustment expenses, we will have to adjust our loss
reserves and may incur charges to our earnings, which could have
a material adverse effect on our business, financial condition
and results of operations.
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Our groups employ a third party administrator to manage
    claims for our California managed groups.
Under California law, we are not permitted to manage the claims
of the groups we manage in California. Therefore, our groups in
California contract with an independent third party
administrator, or TPA, to perform this task. As manager of the
groups, we retain claims settlement authority and establish loss
reserves and review the work performed by the TPA on a regular
basis. If the TPA fails to manage the claims of our California
groups effectively, such failure may adversely affect the
operation of these groups and, consequently, may adversely
affect our ability to retain members or attract new members.
Furthermore, all of our California groups are currently managed
by a single TPA, Matrix Absence Management, Inc., or Matrix, a
subsidiary of Delphi Financial Group, Inc. If Matrix were to
fail to continue offering administrative services on competitive
terms to these groups in California, our ability to maintain and
grow our fee-based management services business could be
materially and adversely affected.
We and the groups we manage face intense competition from
    a large number of companies in the workers' compensation
    insurance business and in the reinsurance business.
We and the groups we manage compete with many companies in the
workers' compensation insurance business. These competitors
include:
•
the state funds in New York and California;
•
specialty, regional and major insurers in New York, such as
    American International Group, Inc., Chubb Group of Insurance
    Companies, Zurich Financial Services, Utica National Insurance
    Group, Greater New York Mutual Insurance Company, Travelers
    Insurance Group Holdings Inc., Liberty Mutual Insurance Company
    and Hartford Financial Services Group Inc, and in California,
    such as Employers Direct Insurance Company, Redwood
    Fire & Casualty Insurance Co., Republic Companies
    Group, Inc., Redlands Insurance Co., St. Paul Travelers, Zenith
    National Insurance Corp, National Liability and Fire Insurance
    Company, Preferred Employers, SeaBright Insurance Company,
    CompWest Insurance Company, Employers Compensation Insurance
    Company of California, Everest Insurance Company, American
    International Group, Inc., Chubb Group of Insurance Companies,
    ICW Group and The Hartford Financial Services Group,
    Inc.; and
•
groups managed by other group administrators, such as First
    Cardinal Corporation and New York Compensation Managers, Inc. in
    New York and Bickman Risk Services in California.
Many of the insurance companies listed above have more capital,
better name and brand recognition and greater marketing and
management resources than we or the groups we manage have.
Competition within our industry is often intense and from time
to time results in a significant reduction in premiums for
workers' compensation insurance. Many of our competitors
have offered, and may continue to offer, workers'
compensation insurance combined with other lines of insurance
coverage. Some of our competitors offer workers'
compensation insurance on a multi-state basis. We may be
competitively disadvantaged because key members of our groups
may be obliged or inclined to purchase packaged products or
multi-state workers' compensation coverage from our
competitors in order to receive favorable rates for other types
of liability coverage or because our competitors offer superior
premium rates or policy terms. We cannot assure you that we will
be able to implement our business strategy in a manner that will
allow us to be competitive. Increased competition could reduce
the ability of our groups to attract new members and retain
existing members and would adversely impact the groups we
manage. If we are unable to overcome these competitive
disadvantages, it would have a material adverse effect on our
business, financial condition and results of operations.
We intend to develop a program to offer fee-based services
    to third parties. We may fail to successfully market and provide
    these services to third parties.
Our business strategy includes offering our medical bill review
and case management services to large, self-insured entities and
insurance companies, self-insured groups and other parties
requiring these services. We will need to develop new
relationships with these parties and we will incur expenses in
marketing our services to these third parties. If we are unable
to develop new relationships and successfully market these
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services, we will not be able to implement part of our business
strategy and the failure to do so could have a material adverse
effect on our business, financial condition and results of
operations.
We may pursue opportunities to offer other insurance
    products to the members of our managed groups.
We intend to explore the development and offering of certain
non-workers' compensation property and casualty insurance
products to carefully selected members of the groups we manage.
Initially we would offer these products as a broker through
unrelated U.S. admitted insurers. If we develop and offer these
additional insurance products, Twin Bridges may consider
reinsuring a portion of the risk that is assumed by the
U.S. admitted insurers. Certain risks are inherent in this
strategy. These risks include:
•
greater loss exposure, especially if we fail to successfully
    manage or underwrite this new business;
•
the diversion of management's attention;
•
an increase in our expenses and working capital requirements;
•
the need to hire additional marketing personnel, underwriters,
    claims personnel and other staff dedicated to the new lines of
    business; and
•
the expense of using an unrelated U.S. admitted insurer to
    underwrite this new business.
If we are unable to effectively manage these or other potential
risks inherent in the marketing and sale of additional insurance
products, it could have a material adverse effect on our
business, financial condition and results of operations.
We will require additional capital in the future, which
    may not be available on favorable terms or at all.
As we expand our group management business, we intend to
reinsure additional excess coverage which will require us to
have additional capital. Further, if we offer new insurance
products, we may need additional capital. The amount and timing
of these capital requirements will depend on many factors,
including our ability to grow our group management business, to
successfully reinsure the excess coverage required by our groups
and our ability to offer new insurance products. At this time,
we are not able to estimate the amount of additional capital we
will require in the future or predict the timing of our future
capital needs. Any additional equity or debt financing, if
available at all, may be available only on terms that are not
favorable to us. If we are able to raise capital through equity
financings, your interest in our company would be diluted, and
the securities we issue may have rights, preferences and
privileges that are senior to our common shares. If we raise
capital through the issuance of debt, the incurrence and
repayment of any debt could have a material adverse effect on
our business, financial condition and results of operations.
We depend on our key executives and may not be able to
    hire and retain additional key employees or successfully
    integrate new members of our management team.
Our success will depend largely on our continued reliance on the
experience and expertise of our senior management, which
includes, among others, Daniel G. Hickey, Jr. and
Martin D. Rakoff, our Co-Chief Executive Officers, each of
whom has more than 10 years of experience in forming,
managing and underwriting workers' compensation coverage
for groups. We plan to enter into employment agreements with
Messrs. Hickey and Rakoff upon the closing of this
offering. Notwithstanding these agreements, these key executives
may terminate their employment with us and seek employment with
others who may seek their expertise. The loss of their expertise
through death, disability or termination of employment would
have a material and adverse effect on our business, financial
condition and results of operations. We are not the beneficiary
of life or disability insurance covering any of our executives,
key employees or other personnel.
Our ability to implement our business strategy will depend on
our success in recruiting, retaining and successfully
integrating our management team and other personnel. If we are
unable to retain employees and to attract and integrate new
members of our management team, key employees or other
personnel, we may be unable to successfully implement our
business strategy in a timely manner. If we are unable to do so
or if we
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were to lose the services of our senior executives or key
employees, it could have a material adverse effect on our
business, financial condition and results of operations.
Our fee-based management services business may expose us
    to liability in excess of our current insurance coverage.
The management of our groups exposes us to significant risks. We
may have liability for errors or omissions in the services we
perform. We may also be liable to our groups, third parties and
governmental authorities for, among other things, fines,
penalties and regulatory actions. These liabilities may exceed
our insurance coverage and financial resources. The cost of
obtaining errors and omissions, general liability and
professional liability insurance is rising. We cannot assure you
that our insurance will be sufficient to cover the liabilities
we may incur or that we will be able to maintain insurance at
reasonable rates or at all. If our policies are terminated and
do not contain retroactive coverage, we will not be insured for
claims made after the termination of coverage even if these
claims are based on events or acts that occurred during the term
of the policy. In such an event, we may be exposed to liability
which could have a material adverse effect on our business,
financial condition and results of operations.
A significant amount of our invested assets will be
    subject to changes in interest rates and market
    volatility.
We currently invest the premiums we receive from our reinsurance
in short-term U.S. Treasury bills, cash and money market
equivalents. Upon the closing of this offering, our board of
directors will establish our investment policies, and management
will implement our investment strategy with the assistance of
independent investment managers. We expect that our investment
portfolio will include a significant amount of interest
rate-sensitive instruments, such as bonds, which may be
adversely affected by changes in interest rates. Interest rates
are highly sensitive to many factors, including governmental
monetary policies, domestic and international economic and
political conditions and other factors beyond our control.
Because of the unpredictable nature of losses that may arise
under reinsurance policies, our liquidity needs could be
substantial and may increase at any time. Increases in interest
rates will decrease the value of our investments in fixed-income
securities. If increases in interest rates occur during periods
when we sell investments to satisfy liquidity needs, we may
experience investment losses. If interest rates decline,
reinvested funds will earn less than expected.
Our investment results may also be adversely affected by changes
in the business, financial condition or results of operations of
the entities in which we invest, as well as changes in
government monetary policies, general economic and overall
market conditions. Furthermore, general economic conditions may
be adversely affected by U.S. involvement in hostilities
with other countries and large-scale acts of terrorism, or the
threat of hostilities or terrorist acts.
If we do not structure our investment portfolio so that it is
appropriately matched with our insurance and reinsurance
liabilities, we may be forced to liquidate investments prior to
maturity at a significant loss to cover such liabilities. For
this or any of the other reasons discussed above, investment
losses could significantly decrease our asset base, which will
adversely affect our ability to conduct business.
Any of these events or changes could have a material adverse
effect on our business, financial condition and results of
operations.
Our profitability may be adversely impacted by
    inflation.
The effects of inflation could cause the amount of each claim to
rise in the future. Our reserves for losses and loss adjustment
expenses include assumptions about future payments for
settlement of claims and claims handling costs, such as medical
treatments and litigation costs. To the extent inflation causes
these costs to increase above reserves established for these
costs, we would be required to increase our loss reserves with a
corresponding reduction in our net income in the period in which
the deficiency is identified, which could have a material
adverse effect on our business, financial condition and results
of operations.
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Our holding company structure and certain regulatory, tax
    and other constraints affect our ability to pay dividends, make
    other payments and redeploy capital among our
    subsidiaries.
CRM Holdings is a holding company and, as such, has no
substantial operations. Dividends and other permitted
distributions from our subsidiaries are expected to be our
primary source of funds to meet our ongoing cash requirements
and other expenses, and to pay dividends, if any, to
shareholders. Bermuda law and regulations, including Bermuda
insurance regulations, restrict the declaration and payment of
dividends out of retained earnings, and the making of
distributions out of contributed surplus, by Twin Bridges unless
certain regulatory requirements are met. The inability of Twin
Bridges to pay dividends in an amount sufficient to enable us to
meet our cash requirements could have a material adverse effect
on our business. Any dividends paid from our
U.S. subsidiaries to us would be subject to a
U.S. federal withholding tax of 30%. We therefore do not
expect to receive dividends from our U.S. subsidiaries for
the foreseeable future. This will also restrict our ability to
redeploy capital from our U.S. subsidiaries to our Bermuda
operations. If Twin Bridges requires capital because of
unanticipated losses or for other reasons, and we are unable to
provide the required capital from the profits and cash flow of
our U.S. operations, it could have a material adverse
effect on our business, financial condition and results of
operations.
We and the groups we manage are subject to extensive
    regulation in the United States and Bermuda that may adversely
    affect our ability to achieve our business objectives. If we and
    these groups do not comply with these regulations, we and they
    may be subject to penalties, including fines, suspensions and
    withdrawals of licenses.
We and the groups we manage are subject to extensive
governmental regulation and supervision. Most insurance
regulations are designed to protect the interests of
policyholders or members of the groups, rather than shareholders
and other investors.
These regulations, generally administered by a department of
insurance or the workers' compensation or similar board in
each jurisdiction in which we do business, relate to, among
other things:
•
approval of premium, contribution and funding rates;
•
ratios of assets to liabilities, credit and risk reserves, net
    worth levels and standards of solvency, including risk-based
    capital standards;
•
formation of groups and licensing as a third-party claims
    administrator in New York;
•
limits on the size and nature of risks assumed and retained,
    including requiring the purchase of excess coverage for loss
    above levels established by the applicable state regulatory
    agency;
•
mandatory guidelines for the investment of funds;
•
reserves for unearned premium, losses and other purposes;
•
periodic audits and other regulatory reviews of the financial
    statements of the groups and Twin Bridges;
•
deposits or security for the benefit of reinsureds or
    policyholders;
•
statutory methods of accounting; and
•
annual reporting and disclosure agreements.
Insurance departments and state workers' compensation or
similar boards also conduct periodic examinations of the affairs
of the insurance companies and groups they regulate and require
the filing of periodic, annual and other reports relating to
financial condition, approval of new members, groups and other
matters. Moreover, the National Association of Insurance
Commissioners, or NAIC, which is an association of the senior
insurance regulatory officials of all 50 states and the
District of Columbia, and the state insurance regulators
regularly reexamine existing laws and regulations,
interpretations of existing laws and proposals for new laws,
regulations and interpretations which may be more restrictive or
result in higher costs to us and the groups we manage. In
addition, the laws and regulations applicable to workers'
compensation self-insured groups are undergoing review and
probable change in both New York and California. These
regulatory
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requirements may materially and adversely affect or inhibit our
ability to achieve some or all of our business objectives.
In addition, regulatory authorities have relatively broad
discretion to deny or revoke licenses or suspend underwriting of
business for various reasons, including the violation of
regulations. We intend to base some of our practices on our
interpretations of regulations or practices that we believe are
generally accepted by the insurance industry. These practices
may turn out to be different from the interpretations of
regulatory authorities. If we, or the groups we manage, do not
have the requisite licenses and approvals or do not comply with
applicable regulatory requirements, insurance regulatory
authorities could preclude or temporarily suspend us or the
groups we manage from carrying on some or all of our or their
activities or otherwise impose penalties. In such an event, our
reputation as well as our ability to operate our business would
be materially and adversely affected. Further, changes in the
level of regulation of the insurance or reinsurance industry or
changes in the laws or regulations or their interpretations by
regulatory authorities could materially and adversely affect our
ability to manage our groups or operate our business.
The offshore insurance and reinsurance regulatory framework also
has recently become subject to increased scrutiny in many
jurisdictions, including in the United States. This increased
scrutiny has spawned a number of legislative initiatives,
including a proposal to supervise and regulate reinsurers
domiciled outside the United States. If Twin Bridges were
to become subject to any United States federal or state law or
regulation, Twin Bridges may be required to post deposits or
maintain minimum surplus and may be prohibited from engaging in
lines of business or from writing specified types of policies or
contracts. Compliance with these laws and regulations could have
a material adverse effect on our business, financial condition
and results of operations.
Twin Bridges is subject to regulation and supervision in
Bermuda. Among other matters, Bermuda statutes, regulations and
policies of Bermuda Monetary Authority, or BMA, require Twin
Bridges to maintain minimum levels of statutory capital,
statutory capital and surplus, and liquidity, to meet solvency
standards, to obtain prior approval of certain issuances and
transfers of shares as well as to submit to certain periodic
examinations of its financial condition. These statutes and
regulations may, in effect, restrict Twin Bridges' ability
to write reinsurance policies, to make certain investments and
to distribute funds. We cannot predict whether any change to
these regulations will materially and adversely affect our
business.
Our business could be adversely affected by Bermuda
    employment restrictions.
Under Bermuda law, non-Bermudians (other than spouses of
Bermudians) may not engage in any gainful occupation in Bermuda
without an appropriate governmental work permit. Work permits
may be granted or extended by the Bermuda government upon
showing that, after proper public advertisement in most cases,
no Bermudian (or spouse of a Bermudian) is available who meets
the minimum standard requirements for the advertised position.
In 2001, the Bermuda government announced a new policy limiting
the duration of work permits to six years, with certain
exemptions for key employees. We may not be able to use the
services of one or more of our key employees in Bermuda if we
are not able to obtain work permits for them, which could have a
material adverse effect on our business.
CRM Holdings could be considered a U.S. corporation
    for U.S. federal income tax purposes, and thus subject to
    U.S. tax on its worldwide income (including current income
    of Twin Bridges), under recently enacted U.S. legislation,
    if the value of Twin Bridges does not exceed 20% of the total
    value of CRM, CRM CA, Eimar and Twin Bridges.
The American Jobs Creation Act of 2004 provides that, if a
foreign corporation acquires substantially all of the assets of
a U.S. corporation, and 80% or more of the stock of the
foreign corporation (excluding new stock issued in a public
offering related to the acquisition) is owned by former
shareholders of the U.S. corporation by reason of their
ownership of the U.S. corporation, the foreign corporation
will be considered a U.S. corporation for U.S. federal
income tax purposes. The existing shareholders of CRM and Eimar
will contribute their shares to CRM USA Holdings in return for
common shares in CRM USA Holdings. The existing shareholders
will then contribute their CRM USA Holdings shares to us in
exchange
18
Table of Contents
for our common shares. CRM will then distribute its shares in
CRM CA to CRM USA Holdings. In addition, immediately prior to
the closing of this offering, the existing shareholders will
contribute all of their interests in Twin Bridges to us in
exchange for our common shares. We do not expect the current
shareholders of CRM and Eimar to obtain 80% or more of the stock
of CRM Holdings (excluding the stock sold in this offering) by
reason of their ownership of CRM and Eimar (i.e., we
believe that Twin Bridges is worth more than 20% of the combined
value of CRM, CRM CA, Eimar and Twin Bridges).
Nevertheless, the U.S. Internal Revenue Service, or IRS,
may not agree with this valuation. If the IRS successfully
challenges this valuation, we would be subject to United States
federal income tax liability. This tax liability could have a
material adverse effect on our business, financial condition and
results of operations.
We may be deemed to be engaged in a U.S. trade or
    business or considered to be a personal holding company subject
    to U.S. tax.
CRM Holdings and Twin Bridges are both Bermuda exempted
companies. We intend to manage our business so that each of
these companies will not be treated as engaged in a trade or
business within the United States and, as a result, will not be
subject to U.S. tax (other than U.S. excise tax on
insurance and reinsurance premium income attributable to
insuring or reinsuring U.S. risks and U.S. withholding
tax on certain U.S. source investment income). However,
because there is considerable uncertainty as to what activities
constitute being engaged in a trade or business within the
United States, we cannot be certain that the IRS will not
successfully contend that CRM Holdings or Twin Bridges is
engaged in a trade or business within the United States. In the
event that CRM Holdings or Twin Bridges is deemed to be
engaged in a business within the United States, we would be
subject to U.S. corporate income and branch profits taxes
on the portion of our earnings effectively connected to such
U.S. business, which could have a material adverse effect
on our business, financial condition and results of operations.
Any of CRM Holdings' U.S. subsidiaries might be
subject to additional U.S. tax on a portion of its income
if it is considered a personal holding company, or PHC, for
U.S. federal income tax purposes. This status will depend
on whether more than 50% of our shares by value could be deemed
to be owned (taking into account indirect and constructive
ownership) by five or fewer individuals and whether 60% or more
of such subsidiary's adjusted ordinary gross income
consists of "personal holding company income," which
is, in general, certain forms of passive and investment income.
We believe that none of CRM Holdings' subsidiaries should
be considered a PHC. Additionally, we intend to manage our
business to minimize the possibility that we will meet the 60%
income threshold. However, because of the lack of complete
information regarding our ultimate share ownership (i.e., as
determined by the constructive ownership rules for PHCs), we
cannot assure you that none of CRM Holdings' subsidiaries
will be considered a PHC or that the amount of U.S. tax
that would be imposed would be immaterial.
We may become subject to taxes in Bermuda after
    March 28, 2016.
The Bermuda Minister of Finance, under the Exempted Undertakings
Tax Protection Act 1966, as amended, of Bermuda has given each
of CRM Holdings and Twin Bridges an assurance that if any
legislation is enacted in Bermuda that would impose tax computed
on profits or income, or computed on any capital asset, gain or
appreciation, or any tax in the nature of estate duty or
inheritance tax, then the imposition of any such tax will not be
applicable to CRM Holdings or Twin Bridges or any of their
operations, shares, debentures or other obligations until
March 28, 2016. Given the limited duration of the Minister
of Finance's assurance, we cannot be certain that we will
not be subject to any Bermuda tax after March 28, 2016. In
the event that we become subject to any Bermuda tax after such
date, it would have a material adverse effect on our financial
condition and results of operations.
19
Table of Contents
Risks Related to the Industry
The insurance and reinsurance business is historically
    cyclical, and we expect to experience periods with excess
    underwriting capacity and unfavorable premium rates.
Historically, insurers and reinsurers have experienced
significant fluctuations in operating results due to
competition, frequency of occurrence or severity of catastrophic
and other loss events, levels of capacity, general economic and
social conditions and other factors. The supply of insurance and
reinsurance is related to prevailing prices, the level of
insured losses and the level of industry surplus which, in turn,
may fluctuate in response to changes in rates of return on
investments being earned in the insurance and reinsurance
industry. As a result, the insurance and reinsurance business
historically has been a cyclical industry characterized by
periods of intense price competition due to excessive
underwriting capacity as well as periods when shortages of
capacity permitted favorable premium levels. The supply of
insurance and reinsurance may increase, either due to capital
provided by new entrants or by the commitment of additional
capital by existing insurers or reinsurers, which may cause
prices to decrease. Any of these factors could lead to a
significant reduction in premium rates and additional
competition for business.
In addition to these considerations, changes in the frequency
and severity of losses suffered by insureds and insurers may
affect the cycles of the insurance and reinsurance business
significantly. In the event that negative market conditions
develop in the workers' compensation industry or the
insurance industry as a whole, our groups may experience
difficulties in providing workers' compensation insurance
at competitive rates. Because our groups do not have capital and
surplus, they do not have the ability to provide coverage over
any period of time at rates that produce a loss after
considering investment income and available reinsurance. As a
result, our groups may lose members and experience a reduction
in their premium revenues. We would then experience a reduction
in our fee-based management services revenues and could be
unable to reinsure a portion of the excess coverage at rates
that we consider appropriate relative to the risks assumed. This
could have a material adverse effect on our business, financial
condition and results of operations.
Negative developments in the workers' compensation
    insurance industry could have a material adverse effect on our
    business, financial condition and results of operations.
We principally offer management and other services for
workers' compensation self-insured groups and reinsure a
portion of the excess workers' compensation coverage for
the risks assumed by these groups. Although we are exploring the
possibility of offering to carefully selected members of our
groups property and casualty insurance products through an
unrelated U.S. admitted insurer, we currently do not do so.
As a result, negative developments in the economic, competitive
or regulatory conditions affecting the workers'
compensation insurance industry could have a material adverse
effect on our business, financial condition and results of
operations. Negative developments in the workers'
compensation insurance industry could have a greater effect on
us than on more diversified insurance companies that also sell
other types of insurance.
Our groups may have exposure to losses from terrorism for
    which they are required by law to provide coverage.
Our managed groups are required by law to provide workers'
compensation benefits for losses arising from acts of terrorism.
The impact of any terrorist act is unpredictable, and the
ultimate impact on our groups would depend upon the nature,
extent, location and timing of such an act. Currently, the
excess coverage for our groups does not include any sub-limits
or exclusions limiting their excess insurers' obligation to
cover losses caused by acts of terrorism, although we cannot
assure you that sub-limits or exclusions will not be included in
future years, particularly if the Terrorism Risk Insurance Act
of 2002 is not renewed. This Act is set to expire on
December 31, 2005 and the U.S. Department of the
Treasury has recommended that Congress not extend the law in its
current form. If this law is not extended or is extended in a
scaled-back form, which is currently proposed by the
U.S. Department of the Treasury, excess coverage for losses
arising from terrorism may be unavailable or prohibitively
expensive, and our managed groups may be further exposed to
losses
20
Table of Contents
arising from acts of terrorism. This could make membership in
our managed groups less attractive, which could have a material
adverse effect on our business, financial condition and results
of operations.
The effects of emerging claim and coverage issues on our
    business are uncertain.
As industry practices and legal, judicial, social, regulatory
and other conditions change, unexpected issues related to claims
and coverage may emerge. In some instances, as has been the case
with asbestos-related injuries, these issues may not become
apparent until some time after the insurance coverage has been
provided. Such issues may adversely affect the coverage provided
by our managed groups and thus our business of reinsuring a
portion of the excess coverage obtained by the groups, by either
expanding the scope of the coverage provided or by increasing
the number or size of claims. As a result, the full extent of
liability under a group's coverage or under our reinsurance
may not be known until after coverage is provided.
Recent examples of emerging claims and coverage issues include
post traumatic stress disorder and whether recent legislation
can effectively reduce the incidence of work-related injury
medical treatments (e.g., chiropractor services).
The effects of these and other unforeseen emerging claim and
coverage issues are extremely hard to predict and could have a
material adverse effect on our business, financial condition and
results of operations.
Recent insurance industry investigations and regulatory
    proposals could result in increased regulation.
The insurance industry has recently become the focus of
increased scrutiny by regulatory and law enforcement
authorities, as well as class action attorneys and the general
public, relating to allegations of improper special payments,
price-fixing, bid-rigging, improper accounting practices and
other alleged misconduct, including payments made by insurers to
brokers and the practices surrounding the placement of insurance
business. Formal and informal inquiries have been made of a
large segment of the industry, and a number of companies in the
insurance industry have received or may receive subpoenas,
requests for information from regulatory agencies or other
inquiries relating to these and similar matters. These efforts
are expected to result in both enforcement actions and proposals
for new state and federal regulation. It is difficult to predict
the outcome of these investigations, whether they will expand
into other areas not yet contemplated, whether activities and
practices currently thought to be lawful will be characterized
as unlawful, what form new regulations will have when finally
adopted and the impact, if any, of increased regulatory and law
enforcement action and litigation on our business and financial
condition.
Additionally, proposed legislation or new regulatory
requirements are expected to be imposed on the insurance
industry and may impact our business and the manner in which we
compensate our brokers, particularly if we acquire a U.S.
admitted insurer. In November 2004, the NAIC's newly formed
Executive Task Force on Broker Activities released draft model
legislation that would implement new disclosure requirements for
brokers. As proposed, the draft model legislation would amend
the current Producer Licensing Model Act of the NAIC. Among the
provisions contained in the draft model legislation, brokers
would be required to first obtain the insured's written
consent before receiving compensation from the insurer for a
specific transaction. In addition, brokers would be required to
disclose the amount of compensation from the insurer and the
method for calculating the compensation, including any
contingent compensation. As proposed, the draft model
legislation would require brokers to provide a reasonable
estimate of the amount and method for calculating such
compensation. The NAIC held a public hearing on the proposal
during the NAIC's December meeting and discussed its goal
to adopt model broker disclosure language in the near future.
The draft model language would require all insurance brokers to
disclose to customers:
•
that the broker will receive compensation from the insurer for
    the sale;
•
that the compensation received by the broker may differ
    depending upon the product and insurer; and
•
that the broker may receive additional compensation from the
    insurer based upon other factors, such as premium volume placed
    with a particular insurer and loss or claims experience.
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Table of Contents
Any of the foregoing could increase our cost of doing business
and otherwise adversely affect the way we conduct business,
which could have a material adverse effect on our business,
financial condition and results of operations.
The California Department of Insurance also has proposed new
regulations concerning brokers. If adopted as currently written,
the regulations would apply to all lines of insurance and all
brokers and general agents and would require brokers to disclose
to clients the receipt or potential receipt of any income from a
third party if that income derives from the broker's
transaction with the client. Under the proposed regulations,
among other provisions, a misrepresentation or unfair act occurs
if the broker does not advise a client whether the broker will
seek a quote from one or more carriers. Also, the broker is
subject to additional disclosure obligations if the broker makes
a recommendation regarding such quotes. We may be subject to
these regulations with respect to the brokerage services we
provide to our groups.
Risks Related to Our Shares Sold in this Offering
An active trading market for our common shares may not
    develop.
Our common shares have no established trading market and are not
currently listed on any securities exchange. We intend to apply
to the Nasdaq National Market to list our common shares for
quotation under the symbol "CRMH." However, an active
trading market for our common shares may not develop. If an
active trading market does not develop or is not maintained,
holders of our common shares may experience difficulty in
reselling, or an inability to sell, their common shares and the
price of our shares may decline significantly.
The price of our common shares after this offering may be
    volatile and might decline.
The initial public offering price per common share will be
determined by agreement among us and the representatives of the
underwriters and may not be indicative of the trading price of
our common shares after this offering. The trading price of our
common shares may be volatile and decline for many reasons, some
of which are beyond our control, including among others:
•
quarterly variations in our results of operations;
•
results of operations that vary from those expected by
    securities analysts and investors;
•
changes in expectations regarding our future results of
    operations, including financial estimates by securities analysts
    and investors;
•
announcements by third parties of claims against us;
•
changes in law and regulations;
•
future sales of our common shares;
•
changes in the overall market for our common shares; and
•
the performance or prospects for companies in our industry.
In addition, the stock market in recent years has experienced
price and volume fluctuations that often have been unrelated or
disproportionate to a company's operating performance. As a
result, the trading price of our common shares may fall below
the initial public offering price.
Future sales of common shares by our affiliates and other
    shareholders or by us may adversely affect the price, and the
    future exercise of options may lower the price, of our common
    shares.
We cannot predict what effect, if any, future sales of our
common shares, or the availability of shares for future sale,
will have on the trading price of our common shares. Future
sales of common shares by our existing shareholders and other
shareholders or by us, or the perception that such sales may
occur, could adversely affect the market price of our common
shares and may make it more difficult for you to sell your
common shares at a time and price that you determine
appropriate. Upon closing of this offering, there will be
22
Table of Contents
l
of
our common shares outstanding. This includes
the
l
common
shares we and the selling shareholders are selling in this
offering, which may be resold in the public market immediately
after this offering. The
remaining
l
common
shares, representing
approximately
l
% of
our total outstanding common shares following this offering,
will become available for resale in the public market as shown
in the chart below. Any sales of our shares could reduce the
market price of our common shares and our ability to raise
additional capital in the equity markets may be adversely
affected. Moreover, additional common shares may be issuable
pursuant to any management incentive plan, stock option plan or
similar plan we may adopt. If we adopt any such plans, we may
reserve an aggregate of up
to
l
common
shares for issuance under the plan. We and our current
directors, our officers and the selling shareholders have
entered into 180-day lock-up agreements and an aggregate
of
l
shares
are subject to these lock-up agreements.
Number of common shares/
Percentage of total outstanding
Date of availability for resale into the public market
l
Upon the effectiveness of this prospectus.
l
180 days after the date of this prospectus, of
    which
l
common
    shares, or
l
%, are
    subject to volume limitations under Rule 144 under the
    U.S. Securities Act of 1933.
Public investors will suffer immediate and substantial
    dilution as a result of this offering.
The initial price to the public per share is significantly
higher than the pro forma net tangible book value per share of
our common shares as of June 30, 2005. Accordingly, if you
purchase shares in this offering, you will suffer immediate and
substantial dilution of your investment. Based upon the issuance
and sale of
l
common
shares at an assumed initial price to the public of
$
l
per share,
which is the midpoint of the price range set forth on the cover
page of this prospectus, you will incur immediate dilution of
approximately $
l
in the
net tangible book value per share of the common shares you
purchase in this offering. In addition, if you purchase shares
in this offering, you will:
•
pay a price per share that substantially exceeds the book value
    per share of our assets after subtracting liabilities; and
•
contribute
l
% of the
    total amount invested in us to date, based on an assumed initial
    price to the public of
    $
l
per share,
    which is the midpoint of the price range set forth on the cover
    page of this prospectus, but will own
    only
l
% of our common
    shares outstanding after closing of this offering.
We do not intend to pay dividends on our shares.
We currently do not intend to pay dividends on our shares and
even if our board determined to pay dividends, we are subject to
Bermuda regulatory constraints that will affect our ability to
pay dividends on our common shares. Under the Bermuda Companies
Act 1981, as amended, or the Companies Act, we may declare or
pay a dividend out of retained earnings, or make a distribution
out of contributed surplus, only if we have reasonable grounds
for believing that we are, or would after the payment be, able
to pay our liabilities as they become due and if the realizable
value of our assets would thereby not be less than the aggregate
of our liabilities and issued share capital and share premium
accounts.
As a public company, our expenses and administrative
    workload will increase.
As a public company, we will need to comply with additional laws
and regulations, including the Sarbanes-Oxley Act of 2002 and
related rules of the Securities and Exchange Commission, or the
SEC, and requirements of the Nasdaq National Market, or Nasdaq.
We were not required to comply with these laws and requirements
as a private company. Complying with these laws and regulations
will require the time and
23
Table of Contents
attention of our board of directors and management and will
increase our general and administrative expenses significantly.
Among other things, we will need to hire additional personnel in
order to:
•
design, establish, evaluate and maintain a system of internal
    controls over financial reporting in compliance with the
    requirements of Section 404 of the Sarbanes-Oxley Act and
    the related rules and regulations of the SEC, Nasdaq and the
    Public Company Accounting Oversight Board;
•
prepare and file with the SEC periodic reports in compliance
    with our obligations under U.S. securities laws;
•
establish and maintain new internal policies, principally those
    relating to disclosure controls and procedures and corporate
    governance;
•
institute a more comprehensive compliance function; and
•
involve to a greater degree our outside legal counsel and
    accountants in the above activities.
In addition, we also expect that as a public company, director
and officer liability insurance will be more expensive. We may
be required to accept reduced coverage or incur substantially
higher costs to obtain this coverage. These factors could also
make it more difficult for us to attract and retain qualified
executives and members of our board of directors, particularly
directors willing to serve on the audit committee of our board
of directors. We continue to evaluate and monitor developments
with respect to compliance with public company requirements, and
we cannot predict or estimate the amount or timing of additional
costs we may incur.
We will be exposed to risks relating to evaluations of our
    internal controls over financial reporting required by
    Section 404 of the Sarbanes-Oxley Act of 2002.
We are in the process of evaluating our internal control systems
to allow management to report on, and our independent auditors
to assess, our internal controls over financial reporting. We
will be performing the system and process evaluation and testing
(and any necessary remediation) required to comply with the
management certification and auditor attestation requirements of
Section 404 of the Sarbanes-Oxley Act. We are required to
comply with Section 404 by no later than December 31,
2006. However, we cannot be certain as to the timing of
completion of our evaluation, testing and remediation actions or
the impact of these actions on our operations. Furthermore, upon
completion of this process, we may identify control deficiencies
of varying degrees of severity under applicable SEC and Public
Company Accounting Oversight Board rules and regulations. As a
public company, we will be required to report, among other
things, control deficiencies that constitute a "material
weakness" or changes in internal controls that materially
affect, or are reasonably likely to materially affect, internal
controls over financial reporting. A "material
weakness" is a significant deficiency, or combination of
significant deficiencies, that results in more than a remote
likelihood that a material misstatement of the annual or interim
financial statements will not be prevented or detected. If we
fail to implement the requirements of Section 404 in a
timely manner, we might be subject to sanctions or investigation
by regulatory agencies such as the SEC or Nasdaq. In addition,
failure to comply with Section 404 or the report by us of a
material weakness may cause investors to lose confidence in our
financial statements and the trading price of our common shares
may decline as a result. If we fail to remedy any material
weakness, our financial statements may be inaccurate, our access
to the capital markets may be restricted and the trading price
of our common shares may decline.
Provisions in our charter documents may reduce or increase
    the voting power associated with our common shares.
Our bye-laws generally provide that shareholders have one vote
for each share held by them and are entitled to vote, on a
non-cumulative basis, at all meetings of shareholders. However,
pursuant to a mechanism specified in our bye-laws, the voting
rights exercisable by a shareholder will be limited so that
certain persons or groups are not deemed to hold more than 9.9%
of the total voting power conferred by our shares. In addition,
our board of directors retains certain discretion to make
adjustments to the aggregate number of votes attaching to the
shares of any shareholder that they consider fair and reasonable
in all the circumstances
24
Table of Contents
to ensure that no person will hold more than 9.9% of the total
voting power represented by our then outstanding shares. Our
bye-laws provide generally that any shareholder owning,
directly, indirectly or, in the case of any U.S. person, by
attribution, more than 9.9% of our common shares will have the
voting rights attached to such common shares reduced so that it
may not exercise more than 9.9% of the total voting rights. The
reduction in votes is generally to be applied proportionately
among all shareholders who are members of the first
shareholder's control group. A control group means, with
respect to any person, all shares directly owned by such person
and all shares directly owned by each other shareholder any of
whose shares are included in the controlled shares of such
person. Controlled shares means all common shares that a person
is deemed to own directly, indirectly (within the meaning of
Section 958(a) of the Code) or, in the case of a
U.S. person, constructively (within the meaning of
Section 958(b) of the Code). A similar limitation is to be
applied to shares held directly by members of a related group. A
related group means a group of shareholders that are investment
vehicles and are under common control and management. Any
reduction in votes will generally be reallocated proportionately
among members of the shareholder's control group or related
group, as the case may be. The amount of any reduction of votes
that occurs by operation of the above limitations will generally
be reallocated proportionately among all of our other
shareholders who were not members of these groups so long as
such reallocation does not cause any person to hold more than
9.9% of the total voting power of our shares.
Under these provisions, some shareholders may have the right to
exercise their voting rights limited to less than one vote per
share. Moreover, these provisions could have the effect of
reducing the voting power of certain shareholders who would not
otherwise be subject to the limitation by virtue of their direct
share ownership.
As a result of any reduction in the votes of other shareholders,
your voting power might increase above 5% of the aggregate
voting power of the outstanding shares, which may result in your
becoming a reporting person subject to Schedule 13D or 13G
filing requirements under the U.S. Securities Exchange Act of
1934, as amended, or the Exchange Act.
We also have the authority to request information from any
shareholder for the purpose of determining whether a
shareholder's voting rights are to be reallocated pursuant
to the bye-laws. If a shareholder fails to respond to a request
for information from us or submits incomplete or inaccurate
information (after a reasonable cure period) in response to a
request, we, in our reasonable discretion, may reduce or
eliminate the shareholder's voting rights.
Anti-takeover provisions in our bye-laws could impede an
    attempt to replace or remove our directors, which could diminish
    the value of our common shares.
Our bye-laws contain provisions that may entrench directors and
make it more difficult for shareholders to replace directors
even if the shareholders consider it beneficial to do so. In
addition, these provisions could delay or prevent a change of
control that a shareholder might consider favorable. For
example, these provisions may prevent a shareholder from
receiving the benefit from any premium over the market price of
our common shares offered by a bidder in a potential takeover.
Even in the absence of an attempt to effect a change in
management or a takeover attempt, these provisions may adversely
affect the prevailing market price of our common shares if they
are viewed as discouraging changes in management and takeover
attempts in the future.
Examples of provisions in our bye-laws that could have such an
effect include the following:
•
election of our directors is staggered, meaning that the members
    of only one of three classes of our directors are elected each
    year;
•
the total voting power of any shareholder owning more than 9.9%
    of our common shares will be reduced to 9.9% of the total voting
    power of our common shares; and
•
our directors may, in their discretion, decline to record the
    transfer of any common shares on our share register if the
    shares have not been fully paid for, if the directors are not
    satisfied that all required
25
Table of Contents
regulatory approvals for such transfer have been obtained, or if
    the instrument of transfer is in favor of more than five persons
    jointly.
Upon closing of this offering, our principal shareholders
    will still have the ability to significantly influence our
    business, which may be disadvantageous to other shareholders and
    adversely affect the price of our common shares.
Upon closing of this offering Daniel G. Hickey, Sr., Daniel G.
Hickey, Jr., Martin D. Rakoff and Louis J. Viglotti,
collectively, will beneficially own
approximately
l
%
of our outstanding common shares and will possess
approximately
l
%
of the total voting power of our outstanding shares. As a
result, these shareholders, if they act together, will have the
ability to exert substantial influence over all matters
requiring approval by our shareholders, including the election
and removal of directors, any proposed merger, consolidation or
sale of all or substantially all of our assets and other
corporate transactions. These shareholders may have interests
that are different from ours or other investors.
Our officers, directors and principal shareholders could delay
or prevent an acquisition or merger of our company even if the
transaction would benefit other shareholders. Moreover, this
concentration of share ownership may make it difficult for
shareholders to replace management. This concentration could be
disadvantageous to other shareholders with interests different
from those of our officers, directors and principal shareholders
and the price of our common shares could be adversely affected.
U.S. persons who own our common shares may have more
    difficulty protecting their interests than U.S. persons who
    are shareholders of a U.S. corporation.
The Companies Act, which applies to us, differs in certain
material respects from laws generally applicable to
U.S. corporations and their shareholders. In order to
highlight those differences, we have set forth below a summary
of certain significant provisions of the Companies Act,
including, where relevant, information on the Company's
bye-laws, which differ in certain respects from the provisions
of Delaware corporate law. Further, under certain circumstances,
our bye-laws impose greater restrictions on us than required by
the Companies Act. Because the following statements are
summaries, they do not discuss all aspects of Bermuda law that
may be relevant to us and our shareholders.
Shareholders' Suits.
The rights of shareholders
under Bermuda law are not as extensive as the rights of
shareholders in many United States jurisdictions. Class actions
and derivative actions are generally not available to
shareholders under Bermuda law. However, the Bermuda courts
ordinarily would be expected to follow English case law
precedent, which would permit a shareholder to commence a
derivative action in the name of a company where the act
complained of is alleged to be beyond the corporate power of the
company, is illegal or would result in the violation of such
company's memorandum of association or bye-laws.
Furthermore, consideration would be given by the court to acts
that are alleged to constitute a fraud against the minority
shareholders or where an act requires the approval of a greater
percentage of our shareholders than actually approved it. The
successful party in such an action generally would be able to
recover a portion of the attorney's fees incurred in
connection with such action. Our bye-laws provide that
shareholders waive all claims or rights of action that they
might have, individually or in our right, against any director
or officer or any person appointed to any committee by the board
of directors or resident representative for any action or
failure to act in the performance of his duties, except such
waiver shall not extend to any claims or rights of action that
would render the waiver void pursuant to the Companies Act and
arise out of fraud or dishonesty on the part of such person or
with respect to the recovery of any gain, personal profit or
advantage to which such person is not legally entitled. Class
actions and derivative actions generally are available to
shareholders under Delaware corporate law, for, among other
things, breach of fiduciary duty, corporate waste and actions
not taken in accordance with applicable law. In such actions
under Delaware law, the court has discretion to permit the
winning party to recover attorney's fees in connection with
such action.
Indemnification of Directors and Officers.
Under Bermuda
law and our bye-laws, we will indemnify our directors or
officers or any person appointed to any committee by the board
of directors and any resident representative (and their
respective heirs, executors or administrators) against all
actions, costs, charges,
26
Table of Contents
liabilities, loss, damage or expense, to the fullest extent
permitted by law, incurred or suffered by such officer, director
or other person by reason of any act done, conceived in or
omitted in the conduct of our business or in the discharge of
his duties; provided that such indemnification shall not extend
to any matter involving any fraud or dishonesty on the part of
such director, officer or other person. In general,
U.S. companies may limit the personal liability of their
directors as long as they acted in good faith and reasonably
believed their actions were not opposed to the best interests of
the company and, with regard to criminal actions or proceedings,
without knowing violation of law.
We are a Bermuda company and it may be difficult for you
    to enforce judgments against us.
We are a Bermuda company and a substantial portion of our assets
are or may be located in jurisdictions outside the United
States. It may therefore be difficult for investors to effect
service of process against us or to enforce against us judgments
of U.S. courts predicated upon civil liability provisions
of the U.S. federal securities laws.
There is no treaty in force between the United States and
Bermuda providing for the reciprocal recognition and enforcement
of judgments in civil and commercial matters. As a result,
whether a United States judgment would be enforceable in Bermuda
against us or our directors and officers depends on whether the
U.S. court that entered the judgment is recognized by the
Bermuda court as having jurisdiction over us or our directors
and officers, as determined by reference to Bermuda conflict of
law rules. A judgment debt from a U.S. court that is final
and for a sum certain based on U.S. federal securities laws
will not be enforceable in Bermuda unless the judgment debtor
had submitted to the jurisdiction of the U.S. court, and
the issue of submission and jurisdiction is a matter of Bermuda
(not United States) law.
In addition to and irrespective of jurisdictional issues, the
Bermuda courts will not enforce a United States federal
securities law that is either penal or contrary to the public
policy of Bermuda. An action brought pursuant to a public or
penal law, the purpose of which is the enforcement of a
sanction, power or right at the instance of the state in its
sovereign capacity, may not be entertained by a Bermuda court.
Certain remedies available under the laws of
U.S. jurisdictions, including certain remedies under
U.S. federal securities laws, will not be available under
Bermuda law or enforceable in a Bermuda court, as they may be
contrary to Bermuda public policy. Further, no claim may be
brought in Bermuda against us or our directors and officers in
the first instance for violations of U.S. federal
securities laws because these laws have no extraterritorial
jurisdiction under Bermuda law and do not have force of law in
Bermuda. A Bermuda court may, however, impose civil liability on
us or our directors and officers if the facts alleged in a
complaint constitute or give rise to a cause of action under
Bermuda law.
If you acquire 10% or more of our shares, you may be
    subject to taxation under the "controlled foreign
    corporation," or CFC, rules.
Each "10% U.S. Shareholder" of a foreign
corporation that is a CFC for an uninterrupted period of
30 days or more during a taxable year, and that owns shares
in the CFC directly or indirectly through foreign entities on
the last day of the corporation's taxable year on which
such corporation was a CFC, must include in its gross income for
U.S. federal income tax purposes its pro rata share of the
CFC's "subpart F income," even if the
subpart F income is not distributed. Subpart F income
generally includes, among other things, investment income such
as dividends, interest and capital gains, and income from
insuring risks located outside the insurer's country of
incorporation. A foreign corporation is considered a CFC if
"10% U.S. Shareholders" own more than 50% of the
total combined voting power of all classes of voting stock of
the foreign corporation, or the total value of all stock of the
corporation. A 10% U.S. Shareholder is a U.S. person,
as defined in the Code, that owns at least 10% of the total
combined voting power of all classes of stock of the foreign
corporation entitled to vote. For purposes of taking into
account subpart F income consisting of insurance income, a
CFC also includes a foreign corporation of which more than 25%
of the total combined voting power of all classes of stock (or
more than 25% of the total value of the stock) is owned by 10%
U.S. Shareholders, on any day during the taxable year of
such corporation, if the gross amount of premiums or other
consideration for the reinsurance or the issuing of insurance or
annuity contracts generating subpart F income exceeds 75% of the
gross amount of premiums or other consideration in respect of
all risks. It is
27
Table of Contents
expected that all of Twin Bridges' income will be
considered subpart F insurance income. For purposes of
determining whether the more-than-50% (or more-than-25%, in the
case of insurance income) and 10% ownership tests have been
satisfied, and therefore whether a corporation is a CFC, shares
owned includes shares owned directly or indirectly through
foreign entities or shares considered owned under constructive
ownership rules. The attribution rules are complicated and
depend on the particular facts relating to each investor.
CRM Holdings' bye-laws contain provisions that impose
limitations on the concentration of voting power of its shares.
Accordingly, based upon these provisions and the anticipated
dispersion of our share ownership, we do not believe that we
have any 10% U.S. Shareholders. It is possible, however
that the IRS could challenge the effectiveness of these
provisions and that a court could sustain such a challenge.
U.S. persons who hold shares could be subject to
    adverse tax consequences if we are considered a "passive
    foreign investment company," or PFIC, for U.S. federal
    income tax purposes.
We do not intend to conduct our activities in a manner that
would cause us to become a PFIC. However, it is possible that we
could be deemed a PFIC by the IRS for 2005 or any future year.
If we were considered a PFIC it could have material adverse tax
consequences for an investor that is subject to
U.S. federal income taxation, including subjecting the
investor to a greater tax liability than might otherwise apply
or subjecting the investor to tax on amounts in advance of when
tax would otherwise be imposed. There are currently no
regulations regarding the application of the PFIC provisions to
an insurance company. New regulations or pronouncements
interpreting or clarifying these rules may be issued in the
future. We cannot predict what impact, if any, this guidance
would have on a shareholder that is subject to U.S. federal
income taxation. We have not sought and do not intend to seek an
opinion of legal counsel as to whether or not we were a PFIC for
the year ending December 31, 2005.
U.S. persons who hold shares may be subject to
    U.S. income taxation on their pro rata share of our
    "related party insurance income," or RPII.
In the event that:
•
Twin Bridges' gross RPII equals or exceeds 20% of its gross
    insurance income in any taxable year,
•
direct or indirect insureds (and persons related to such
    insureds) own (or are treated as owning directly or indirectly)
    20% or more of the voting power or value of the shares of Twin
    Bridges, and
•
U.S. persons are considered to own in the aggregate 25% or
    more of the stock of Twin Bridges by vote or value,
then a U.S. person who owns any of our shares directly or
indirectly through foreign entities on the last day of Twin
Bridges' taxable year on which it is a CFC would be
required to include in its income for U.S. federal income
tax purposes the shareholder's pro rata share of Twin
Bridges' RPII for the U.S. person's taxable year
that includes the end of Twin Bridges' taxable year
determined as if such RPII were distributed proportionately to
such U.S. shareholders at that date regardless of whether
such income is distributed. In addition any RPII that is
includible in the income of a U.S. tax-exempt organization
will be treated as unrelated business taxable income. The amount
of RPII earned by Twin Bridges (generally, premium and related
investment income from the direct or indirect insurance or
reinsurance of any direct or indirect U.S. shareholder of
Twin Bridges or any person related to such shareholder) will
depend on a number of factors, including the identity of persons
directly or indirectly insured or reinsured by Twin Bridges.
Although we do not expect our gross RPII to equal or exceed 20%
of our gross insurance income in the foreseeable future, some of
the factors which determine the extent of RPII in any period may
be beyond Twin Bridges' control. Consequently, Twin
Bridges' gross RPII could equal or exceed 20% of its gross
insurance income in any taxable year and ownership of its shares
by direct or indirect insureds and related persons could equal
or exceed the 20% threshold described above.
The RPII rules provide that if a shareholder that is a
U.S. person disposes of shares in a foreign insurance
corporation that has RPII (even if the amount of RPII is less
than 20% of the corporation's gross insurance
28
Table of Contents
income or the ownership of its shares by direct or indirect
insureds and related persons is less than the 20% threshold) and
in which U.S. persons own 25% or more of the shares, any
gain from the disposition will generally be treated as ordinary
income to the extent of the shareholder's share of the
corporation's undistributed earnings and profits that were
accumulated during the period that the shareholder owned the
shares (whether or not such earnings and profits are
attributable to RPII). In addition, such a shareholder will be
required to comply with reporting requirements, regardless of
the amount of shares owned by the shareholder. We believe that
these rules should not apply to dispositions of our shares
because CRM Holdings will not itself be directly engaged in the
insurance business and because proposed U.S. Treasury
regulations appear to apply only in the case of shares of
corporations that are directly engaged in the insurance
business. However, the IRS might interpret the proposed
regulations in a different manner and the applicable proposed
regulations may be promulgated in final form in a manner that
would cause these rules to apply to dispositions of our shares.
Changes in U.S. federal income tax law could
    materially adversely affect an investment in our shares.
The U.S. federal income tax laws and interpretations
regarding whether a company is engaged in a trade or business
within the United States, or is a PFIC or whether
U.S. persons would be required to include in their gross
income the subpart F income or the RPII of a CFC are
subject to change, possibly on a retroactive basis. There are
currently no regulations regarding the application of the PFIC
rules to insurance companies and the regulations regarding RPII
are still in proposed form. New regulations or pronouncements
interpreting or clarifying such rules may be issued in the
future. We cannot be certain if, when or in what form such
regulations or pronouncements may be provided and whether such
regulations or guidance will have a retroactive effect.
29
Table of Contents
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward looking statements. These
forward looking statements include, in particular, statements
about our plans, strategies and prospects under the headings
"Prospectus Summary," "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" and "Business." These statements are
based on our current expectations and projections about future
events and are identified by terminology such as
"may," "will," "should,"
"expect," "scheduled," "plan,"
"seek," "intend," "anticipate,"
"believe," "estimate," "aim,"
"potential," or "continue" or the negative
of those terms or other comparable terminology. Although we
believe that our plans, intentions and expectations are
reasonable, we may not achieve our plans, intentions or
expectations.
These forward-looking statements involve risks and
uncertainties. Important factors that could cause actual results
to differ materially from the forward looking statements we make
in this prospectus are set forth in "Risk Factors." We
undertake no obligation to update any of the forward looking
statements after the date of this prospectus to conform those
statements to reflect the occurrence of unanticipated events,
except as required by applicable law.
You should read this prospectus and the documents that we
reference in this prospectus and have filed as exhibits to the
registration statement on Form S-1, of which this
prospectus is a part, that we have filed with the SEC,
completely and with the understanding that our actual future
results, levels of activity, performance and achievements may be
different from what we expect and that these differences may be
material. We qualify all of our forward looking statements by
these cautionary statements. The forward looking statements
contained in this prospectus are excluded from the safe harbor
protection provided by the Private Securities Litigation Reform
Act of 1995 and Section 27A of the Securities Act of 1933,
as amended.
30
Table of Contents
USE OF PROCEEDS
We estimate that we will receive net proceeds from this offering
of approximately
$
l
million
after the payment of the underwriters' discounts and
commissions and our payment of the expenses of this offering
estimated to
be
l
.
We intend to use our proceeds from this offering to provide
additional capital and surplus to expand our operations,
including providing additional surplus to Twin Bridges. We will
not receive any of the proceeds from the sale of common shares
by the selling shareholders.
DIVIDEND POLICY
Our board of directors currently does not intend to declare
dividends or make any other distributions to our shareholders.
Any determination to pay dividends in the future will be at the
board's discretion and will depend upon our results of
operations, financial condition and prospects as well as other
factors deemed relevant by our board of directors. Under the
Companies Act, we may declare or pay a dividend out of retained
earnings, or make a distribution out of contributed surplus,
only if we have reasonable grounds for believing that we are
and, after the payment of such dividends, will be able to pay
our liabilities as they become due and if the realizable value
of our assets would thereby not be less than the aggregate of
our liabilities and issued share capital and share premium
accounts. As a holding company, we depend on future dividends
and other permitted payments from our subsidiaries to pay
dividends to our shareholders. Our subsidiaries' ability to
pay dividends to us, as well as our ability to pay dividends to
our shareholders, is subject to regulatory, contractual, rating
agency, tax and other constraints. Risks relating to our holding
company structure and its effect on our ability to receive and
pay dividends are described under "Risk Factors —
Risks Related to Our Business — Our holding company
structure and certain regulatory, tax and other constraints
affect our ability to pay dividends, make other payments and
redeploy capital among our subsidiaries" and
"— Risks Related to Our Shares Sold in this
Offering — We do not intend to pay dividends on our
shares."
In connection with the restructuring, CRM, Eimar and Twin
Bridges intend to make a distribution to the existing
shareholders of unpaid earnings and profits in an aggregate
amount equal to the net income for U.S. federal income tax
purposes of CRM and Eimar for the nine months ended
September 30, 2005, plus the amount by which the net income
for U.S. federal income taxes purposes of Twin Bridges for
the period from its commencement through September 30, 2005
exceeds distributions Twin Bridges previously made to its
shareholders, such net income to be computed on a cash basis,
which has been the basis on which distributions have been made
to the existing shareholders by each of CRM and Eimar since
their inception. We refer to these distributions in this
prospectus as the "Distributions." We also will
indemnify the existing shareholders for an amount equal to the
amount of U.S. federal income taxes, if any, that would be
payable by them with respect to the combined net income, if any,
for U.S. federal income tax purposes of CRM, Eimar and Twin
Bridges for the period from October 1, 2005 through the
consummation of the restructuring, computed on a cash basis as
if such period were a taxable period.
31
Table of Contents
CAPITALIZATION
The following table sets forth our combined capitalization as of
June 30, 2005 on an actual basis and on an as adjusted
basis giving effect to:
•
the sale
    of
l
common
    shares in this offering at an assumed initial price to the
    public of
    $
l
per
    share, which is the mid-point of the price range set forth on
    the cover page of this prospectus, and after deducting
    underwriting discounts and commissions and our estimated
    offering expenses;
•
the restructuring;
•
the Distributions; and
•
the application of the net proceeds of this offering.
As of June 30, 2005
Actual
As Adjusted
(Unaudited)
(Dollar amounts in
thousands except for
per share amounts)
Debt outstanding:
$
1,109
$
Shareholders' and LLC members' equity (deficit):
Twin Bridges
Common stock, $1.00 par value per share, 120,000 shares
    authorized, 120,000 shares issued and outstanding
$
120
$
Additional paid-in capital
880
Retained earnings
1,576
LLC members' equity (deficit)
(2,635
)
As adjusted (CRM Holdings, Ltd.):
Common stock, $0.01 par value per share,
    50,000,000,000 shares
    authorized,
l
shares
    issued and outstanding
—
Additional paid-in capital
—
Retained earnings
—
Total capitalization
$
1,050
$
You should read this table in conjunction with "Selected
Combined Financial Information," "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" and the combined financial statements and
related notes included elsewhere in this prospectus.
32
Table of Contents
DILUTION
If you invest in our common shares in this offering, your
ownership interest in us will be diluted to the extent of the
differences between the initial public offering price per share
and pro forma net tangible book value per share after this
offering. Our net tangible book value as of June 30, 2005
is presented on a pro forma basis, assuming the consummation of
the restructuring and the Distributions. Our pro forma net
tangible book value as of June 30, 2005 is determined by
subtracting the total amount of our liabilities as of
June 30, 2005 from the total amount of our tangible assets
as of June 30, 2005. Our pro forma net tangible book value
per share as of June 30, 2005 is determined by dividing our
pro forma net tangible book value as of June 30, 2005 by
the number of common shares outstanding as of June 30,
2005, after giving effect to the restructuring. Our pro forma
net tangible book value as of June 30, 2005 was
$
l
,
or
$
l
per
share, calculated as described above.
After giving effect to the issuance in this offering
of
l
common
shares at an assumed initial price to the public of
$
l
per
share, which is the mid-point of the price range set forth on
the cover page of this prospectus, and the application of our
estimated net proceeds therefrom, and after deducting
underwriting discounts and commissions and our estimated
offering expenses, our pro forma net tangible book value as of
June 30, 2005 would have been an aggregate of
$
l
million,
or
$
l
per
common share. This amount represents an immediate increase of
$
l
per
share to our existing shareholders and an immediate dilution of
$
l
per
share from the assumed initial price to the public of
$
l
per
share to new investors purchasing shares in this offering. The
table below illustrates this per share dilution:
Assumed initial price to the public per share
$
Pro forma net tangible book value per share as of June 30,
    2005
$
Increase in pro forma net tangible book value per share
    attributable to this offering
$
Pro forma net tangible book value per share after this offering
$
Dilution per share to new investors
$
The table below sets forth, as of June 30, 2005, the number
of our common shares issued, the total consideration paid and
the average price per share paid by our existing shareholders
and our new investors, after giving effect to the consummation
of the restructuring and the Distributions and the issuance
of                      common
shares in this offering at an assumed initial price to the
public of
$           per
share, which is the mid-point of the price range set forth on
the cover page of this prospectus:
Shares Issued
Total Consideration
Average Price
Number
Percent
Amount
Percent
Per Share
Existing shareholders
New investors
Total
33
Table of Contents
SELECTED COMBINED FINANCIAL INFORMATION
The following table sets forth our selected combined financial
information for the periods ended and as of the dates indicated.
The historical results are not necessarily indicative of results
to be expected in any future period.
The selected unaudited combined income statement information for
the six months ended June 30, 2005 and 2004 and the
selected unaudited combined balance sheet information as of
June 30, 2005 are derived from our unaudited combined
financial statements included elsewhere in this prospectus.
The selected combined income statement information for the years
ended December 31, 2004, 2003 and 2002 and the selected
combined balance sheet information as of December 31, 2004
and 2003 are derived from our audited combined financial
statements included elsewhere in this prospectus. The selected
unaudited combined income statement information for the years
ended December 31, 2001 and 2000 and the selected unaudited
combined balance sheet information as of December 31, 2002,
2001 and 2000 are derived from our unaudited combined financial
statements not included in this prospectus.
The selected combined balance sheet information as of
June 30, 2005 was prepared:
•
on an actual basis; and
•
on an as adjusted basis to give effect to our sale
    of
l
common
    shares in this offering, after deducting underwriting discounts
    and commissions and the estimated expenses of this offering, the
    restructuring and the Distributions and the application of our
    net proceeds from this offering.
You should read the following selected combined financial
information in conjunction with the information contained in
this prospectus, including "Management's Discussion
and Analysis of Financial Condition and Results of
Operations," and the combined financial statements and
related notes included elsewhere in this prospectus. Many
factors may cause our actual results to differ materially from
the financial information and results presented below including,
but not limited to, the following:
•
We began our group administration business in California during
    October 2003;
•
We commenced our reinsurance business during December
    2003; and
•
Those factors discussed in "Risk Factors."
Six Months Ended
June 30,
Years Ended December 31,
Selected Combined
Income Information
2005
2004
2004
2003
2002
2001
2000
(Dollars amounts in thousands except per share amounts)
Revenues
Fee-based management services
$
16,494
$
13,920
$
27,656
$
20,821
$
17,614
$
7,967
$
2,563
Net reinsurance premiums
3,045
2,123
5,110
253
—
—
—
Investment income, net of advisory fees
54
21
54
16
37
13
—
Total revenues
19,593
16,064
32,820
21,090
17,651
7,980
2,563
Expenses
Losses and loss adjustment expenses
1,305
1,165
2,528
168
—
—
—
Fees paid to general agents and brokers
5,628
5,126
9,507
7,830
7,651
3,615
1,046
Selling, general and administrative expenses
8,884
6,275
13,441
9,240
6,471
3,140
1,317
Policy acquisition costs and other expenses
929
653
1,538
121
33
21
21
Total expenses
16,746
13,219
27,014
17,359
14,155
6,776
2,384
Income before taxes
2,847
2,845
5,806
3,731
3,496
1,204
179
Provision for income taxes
—
—
—
—
—
—
—
Net income
$
2,847
$
2,845
$
5,806
$
3,731
$
3,496
$
1,204
$
179
Pro forma net income per common share(1)
Pro forma cash dividends declared per common share(1)
Pro forma common shares outstanding(1)
(1)
Based
    on
l
common
    shares outstanding after giving effect to the restructuring but
    not including shares to be offered by us in this offering.
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Table of Contents
As of June 30,
As of December 31,
Selected Combined
2005
2005
Balance Sheet Information
(As Adjusted)
(Actual)
2004
2003
2002
2001
2000
(Dollar amounts in thousands)
Assets
Cash and cash equivalents
$
2,493
$
1,576
$
767
4,644
2,342
143
Cash and cash equivalents, restricted
6,270
4,398
1,000
—
—
—
Premiums receivable, net
3,845
3,758
2,140
—
Accounts receivable
925
41
90
705
388
562
Deferred policy acquisition costs
1,341
1,414
824
—
—
—
Property and equipment, net
955
913
792
796
209
106
Loans receivable
414
432
173
73
—
—
Prepaid expenses and other assets
382
192
96
586
63
7
Total assets
$
16,625
$
12,724
$
5,882
$
6,804
$
3,002
$
818
Liabilities and shareholders' and members'
    equity
Reserve for losses and loss adjustment expenses
$
4,001
$
2,696
$
168
—
—
—
Unearned reinsurance premiums
4,533
4,780
2,785
—
—
—
Unearned management fees
1,182
671
614
1,789
341
—
Unearned commission income
3,383
2,334
2,247
2,163
1,145
—
Borrowings under credit facilities
1,109
158
285
1,104
169
200
Fees payable to general agents and brokers
741
565
578
537
375
172
Accrued expenses
1,733
632
369
317
75
428
Total liabilities
16,683
(2)
11,836
7,046
5,910
2,105
800
Twin Bridges
Common stock
120
120
120
—
—
—
Additional paid-in capital
880
880
880
—
—
—
Retained earnings
1,576
835
(51
)
—
—
—
LLC members' equity (deficit)
(2,634
)
(947
)
(2,113
)
894
897
18
Total shareholders' and members' equity
(58
)
888
(1,164
)
894
897
18
Total liabilities and shareholders' and members' equity
$
16,625
$
12,724
$
5,882
$
6,804
$
3,002
$
818
(2)
Column does not total due to rounding.
35
Table of Contents
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial
condition and results of operations should be read in
conjunction with our audited and unaudited financial statements
and related notes included in this prospectus on pages F-1
through F-30. We caution you that our results of operations for
prior periods are not indicative of the actual results that may
be achieved in future periods. In addition, some of the
information contained in this discussion and analysis includes
forward-looking statements that involve risks and uncertainties.
Many factors may cause our actual results to differ materially
from those anticipated or implied by these forward-looking
statements including, but not limited to, those discussed in
"Risk Factors." You should read the information under
"Risk Factors" beginning on page 10 for
information about material risks and uncertainties that affect
us, our business and our common shares and "Cautionary Note
Regarding Forward-Looking Statements" on page 30.
Overview
Our Business and Operating Segments
We are a leading provider of fee-based management and other
services for workers' compensation self-insured groups in
New York and California. We also provide reinsurance of a
portion of the excess workers' compensation coverage for
these groups, subject to certain limits, through our subsidiary
Twin Bridges. We have two operating segments: fee-based
management services and reinsurance.
•
Fee-based Management Services.
We provide fee-based
    management services for workers' compensation self-insured
    groups in New York and California. We began conducting our
    business of providing management and other services to
    self-insured workers' compensation groups in New York
    through CRM in 1999 and expanded this business to California
    through CRM CA in October 2003. We form the groups and
    provide them with a broad range of services, including general
    management, underwriting, risk assessment, medical bill review
    and case management, general recordkeeping and regulatory
    compliance. We also provide safety and loss control services to
    group members to help reduce workers' compensation risks
    and expenses. In New York, we provide claims management
    services. In addition, we act as a broker and place excess
    insurance coverage and any required surety bonds for the groups.
    Each group we manage is composed of participants from the same
    industry, all of which are located in a single state. We
    currently manage 14 self-insured groups in
    12 industries, with eight groups in New York and six in
    California (the sixth California group, which provides
    workers' compensation insurance to wineries, was formed
    after June 30, 2005). Investment management services are
    provided for our larger groups by one or more independent
    investment management firms.
•
Reinsurance.
The groups we manage purchase excess
    workers' compensation coverage from U.S. admitted
    insurers to cover claims that exceed a minimum level established
    by state law or regulation or by administrative determination.
    We began reinsuring a portion of this coverage through our
    subsidiary Twin Bridges in December 2003. The U.S. admitted
    insurers issue policies to the groups that we manage. We write
    our reinsurance on a quota share basis also known as
    proportional or pro rata. Under quota share reinsurance, we
    share the premiums as well as the losses and expenses in an
    agreed proportion with the U.S. admitted insurer, subject
    to certain limits.
The determination of these two segments was based on our
methodology for monitoring the performance of our group
management business and reinsurance business. We evaluate each
segment based on management fees and commission income or
reinsurance premiums earned, as applicable, including items of
revenue and expense that are associated with, and directly
related to, each segment.
Our Restructuring
CRM Holdings is a Bermuda exempted holding company incorporated
in September 2005 and will acquire CRM, CRM CA, Eimar and Twin
Bridges through a share exchange, as described in
"Business — Organization and Restructuring,"
which will occur immediately prior to the closing of this
offering.
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Table of Contents
Prior to the consummation of the restructuring, certain members
of our management team, including Daniel G. Hickey, Jr., Martin
D. Rakoff and Louis J. Viglotti, as well as certain other
persons listed in "Principal Shareholders" are the
beneficial owners of CRM, CRM CA, Eimar and Twin Bridges.
We sometimes refer to these owners in this prospectus as the
"existing shareholders."
Immediately prior to the closing of this offering, CRM,
CRM CA and Eimar will be converted from limited liability
companies into corporations and the existing shareholders will
contribute all of their interests in CRM and Eimar to
CRM USA Holdings, which will be our wholly owned subsidiary
and will hold all of the outstanding shares of our
U.S. subsidiaries. In exchange, the existing shareholders
will receive shares issued by CRM USA Holdings. The
existing shareholders will then contribute their CRM USA
Holdings shares to us in exchange
for
l
of
our common shares. CRM will then distribute its shares in
CRM CA to CRM USA Holdings. In addition, immediately
prior to the closing of this offering, the existing shareholders
will contribute all of their interests in Twin Bridges to us in
exchange
for
l
of
our common shares. We refer to these transactions in this
prospectus as the "restructuring." The existing
shareholders ultimately will receive a total
of
l
of
our common shares in exchange for their interests in CRM
(including its subsidiary, CRM CA), Eimar and Twin Bridges.
In connection with the restructuring, CRM, Eimar and Twin
Bridges intend to make a distribution to the existing
shareholders of unpaid earnings and profits in an aggregate
amount equal to the net income for U.S. federal income tax
purposes of CRM and Eimar for the nine months ended
September 30, 2005, plus the amount by which the net income
for U.S. federal income taxes purposes of Twin Bridges for
the period from its commencement through September 30, 2005
exceeds distributions Twin Bridges previously made to its
shareholders, such net income to be computed on a cash basis,
which has been the basis on which distributions have been made
to the existing shareholders by each of CRM and Eimar since
their inception. We refer to these distributions in this
prospectus as the "Distributions." We also will
indemnify the existing shareholders for an amount equal to the
amount of U.S. federal income taxes, if any, that would be
payable by them with respect to the combined net income, if any,
for U.S. federal income tax purposes of CRM, Eimar and Twin
Bridges for the period from October 1, 2005 through the
consummation of the restructuring, computed on a cash basis as
if such period were a taxable period.
Our Combined Financial Information
Our combined financial statements include the results of CRM
(and its wholly-owned subsidiary, CRM CA), Eimar and Twin
Bridges.
Revenue
Our revenues consist primarily of the following:
Fee-based Management Services Revenue.
In New York, the
fees we receive from all but one of our groups are based on a
percentage of the manual workers' compensation rates set by
the New York State Workers' Compensation Board that are
attributable to the members of the groups we manage, and our
fees include claims management services. With respect to our
groups in California and one of our groups in New York, our fees
are based on a percentage of the premiums paid to the groups we
manage by their members. Our groups in California pay the fees
for claims management services directly to a third party
administrator. In addition, our fees for medical bill review and
case management services are paid fees based on the specific
services rendered. We also receive commission income from:
(1) U.S. admitted insurers for placing the excess
coverage which the groups are required to obtain and
(2) insurers for placing the required surety bonds for the
groups we manage.
A significant amount of our existing business is dependent on a
relatively small number of our managed groups. The Healthcare
Insurance Trust of New York provided approximately 27.2% and
38.1% of our revenues from fee-based management services for the
six months ended June 30, 2005 and the year ended
December 31, 2004, respectively. Two other groups, Elite
Contractors Trust of New York and Transportation Industry
Workers' Compensation Trust of New York, provided
approximately 20.3% and 13.8%, respectively, of our revenues
from fee-based management services for the six months ended
June 30, 2005 and
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Table of Contents
approximately 21.9% and 13.7%, respectively, of our revenues
from fee-based management services for the year ended
December 31, 2004. Commission income for the placement of
excess coverage represented placements with 7, 7 and 9
U.S. admitted insurers for the years ended
December 31, 2004, 2003 and 2002, respectively. Commission
income from NY Marine & General represented 50%, 4% and
0% of such revenues for the years ended December 31, 2004,
2003 and 2002, respectively.
Reinsurance Premiums.
We reinsure a portion of the excess
coverage obtained by the self-insured groups that we manage.
NY Marine & General provides the excess coverage
for 13 of our 14 groups. Under our reinsurance agreement
with NY Marine & General, we reinsure 50% of the
risks it undertakes and receive 50% of the premiums, which we
refer to as our assumed premium, paid to it by these groups. We
allow NY Marine & General a ceding commission of
28% of our assumed premium to cover its acquisition, general and
administrative expenses, a further 2% for stop-loss coverage and
1% to cover the U.S. federal excise tax, or a total of 31%
of our assumed premium. The stop loss coverage limits our losses
under our reinsurance agreement to 181.16% of our assumed
premium, net of the ceding commission and the cost of the
stop-loss coverage and the U.S. federal excise tax. Our net
reinsurance premiums are comprised of our assumed premium, net
of the 2% fee for the stop-loss coverage. The ceding commission
of 28% of our assumed premium and the 1% cost to cover the U.S.
federal excise tax are recorded as part of policy acquisition
costs. NY Marine & General in turn pays a 20%
commission to CRM and CRM CA for any excess coverage placed
with NY Marine & General by CRM or CRM CA.
Investment Income Relating to Our Reinsurance Business.
To date, our entire investment portfolio is comprised of
short-term U.S. treasury bills, cash and money market
equivalents. We anticipate that after the closing of this
offering our investment portfolio will be invested principally
in fixed income securities, short-term liquid funds, cash and
cash equivalents. Our investment income relating to our
reinsurance business will depend on the average invested assets
in our investment portfolio and the yield that we earn on those
invested assets. Our investment yield depends on market interest
rates and the credit quality and maturity period of our invested
assets. In addition, we expect to realize capital gains or
losses on sales of investments as a result of changing market
conditions, including changes in market interest rates and
changes in the credit quality of our invested assets. See
"Risk Factors — Risks Related to Our
Business — A significant amount of our invested assets
will be subject to changes in interest rates and market
volatility."
Expenses
Fee-based Management Services.
The expenses of our
fee-based management services segment primarily consist of fees
paid to general agents and brokers for placing business with the
self-insured groups that we manage, and selling, general and
administrative expenses.
Reinsurance.
The expenses of our reinsurance segment
primarily consist of loss and loss adjustment expenses, policy
acquisition costs and professional fees.
Losses and Loss Adjustment Expenses.
Losses and loss
adjustment expenses reflect our best estimate of ultimate losses
and loss adjustment expenses that we expect to incur on each
reinsurance contract written using various actuarial analyses.
Consistent with Bermuda statutory requirements, we do not
discount our estimates to present value. Actual losses and loss
adjustment expenses will depend on actual costs to settle
reinsurance claims. Our ability to accurately estimate ultimate
losses and loss adjustment expenses at the time of pricing each
reinsurance contract will be a critical factor in determining
our profitability. See "Risk Factors — Risks
Related to Our Business — we may underestimate the
liabilities from the risks we assume as a reinsurer of a portion
of the excess coverage of our managed groups."
Fees Paid to General Agents and Brokers.
Fees paid to
general agents and brokers consist primarily of commissions paid
to general agents and brokers for introducing members to the
self insured groups we manage.
Policy Acquisition Costs.
Policy acquisition costs
consist principally of ceding commissions paid to NY
Marine & General and the U.S. federal excise tax.
These costs are based on a fixed percentage of the premiums
written on reinsurance contracts.
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Table of Contents
Selling, General and Administrative Expenses.
Selling,
general and administrative expenses consist primarily of
personnel expenses, professional fees and other operating costs.
We anticipate that in the future, selling, general and
administrative expenses will increase in relation to our growth.
In addition, we believe that additional regulatory and
compliance costs will increase significantly once we become a
publicly traded company. All non-direct operating expenses are
included in our fee-based management services segment because
our reinsurance segment to date has been small relative to our
fee-based management services segment and our reinsurance
segment has no direct employees. In the future, we intend to
develop a methodology to allocate non-direct items of expenses
between our segments.
Income Taxes.
Prior to the consummation of the
restructuring, CRM, CRM CA and Eimar have been organized as
limited liability companies. The members of a limited liability
company are taxed on their proportionate share of the limited
liability company's taxable income. Therefore, no provision
or liability for federal and state income taxes has been
included in the financial statements. Upon the consummation of
the restructuring, CRM, CRM CA and Eimar will be converted
into corporations and will be subject to U.S. federal and
state income taxes, which will reduce our net income.
CRM Holdings and Twin Bridges have each received an undertaking
from the Bermuda government exempting each company from all tax
computed on profits or income, or computed on any capital asset,
gain or appreciation, or any tax in the nature of estate duty or
inheritance tax until March 28, 2016. See "Material
Tax Considerations — Certain Bermuda Tax
Considerations."
Business Trends and Conditions
The workers' compensation insurance market has historically
fluctuated with periods of low premium rates and excess
underwriting capacity resulting from increased competition,
followed by periods of high premium rates and shortages of
underwriting capacity resulting from decreased competition.
These conditions, along with poor customer service and
substandard loss control and claims management, have motivated
businesses to self-insure against workers' compensation
claims. Large companies generally have the financial strength to
meet the significant statutory requirements to self-insure, or
to create their own captive insurance companies to insure these
claims. Small and mid-sized companies generally lack the
financial and administrative resources to do this, and in recent
years have resorted to pooling their resources through the
formation of self insurance groups as a means to obtain
workers' compensation insurance at acceptable rates and
terms. CRM was formed in response to this relatively new market
to manage self-insured groups.
California has undergone a period of rapid growth in the
formation of new self-insured groups. From 1999 until 2005,
average workers' compensation rates increased by nearly 50%
after taking into account significant average rate decreases
during the last two years. As a result of this overall increase,
26 private self-insured groups have been formed in California
since 2001 when California authorized the formation of private
self-insured groups. California Bill 899 was passed in
April 2004 with the goal of reducing over time the medical and
indemnity benefits paid to injured workers. This legislation has
allowed insurers to reduce rates. Even though average rates in
California have decreased significantly during the last two
years, California workers' compensation insurance rates
remain substantially higher than those charged for similar risks
in New York.
In contrast to the California market, self-insured groups have
existed in New York since the mid-1990s and the market is
substantially more mature, with approximately 64 groups in
existence. New York is in the process of reevaluating its
regulations relating to the formation of new groups. This has
led to a temporary moratorium on the formation of new groups.
This moratorium should not affect our ability to grow in New
York as we believe we have formed groups in all desired industry
classes that we have targeted. We believe growth in our New York
business will occur as a result of rate increases and, to a
lesser extent, increases in the number of members of our
existing groups. Following three years of relatively stable
rates, the New York Workers' Compensation Board passed a
rate increase in August 2005 averaging five percent across all
industry groups. This increase will become effective in October
2005, and manual rates across the industries in which we have
formed self-insured groups will increase by approximately eight
percent on average.
39
Table of Contents
Critical Accounting Policies and Estimates
Our significant accounting policies are described in the notes
to our audited combined financial statements included elsewhere
in this prospectus.
Our combined financial statements contain certain amounts that
are inherently subjective in nature and require management to
make certain judgments and assumptions in the application of
accounting policies used to determine those amounts reported in
the combined financial statements. The use of different
assumptions could produce materially different estimates of the
reported amounts. In addition, if factors such as those
described in "Risk Factors" cause actual events to
differ materially from management's assumptions used in
applying the relevant accounting policy, there could be a
material adverse effect on our financial condition and results
of operations.
We believe that the following are the critical accounting
policies used in the preparation of our combined financial
statements.
Combination Accounting
Our historical combined financial information and statements
include the accounts of CRM, CRM CA, Eimar and Twin
Bridges. These entities, in substance, have common ownership and
common management. These combined financial statements have been
prepared in conformity with U.S. generally accepted
accounting principles. For Twin Bridges, this presentation
differs from the basis of accounting followed in reporting to
insurance regulatory authorities. All significant intercompany
transactions and balances have been eliminated in the combined
financial statements.
Revenue Recognition
Fee-based Management Services.
Our fee-based management
services revenues include management fees received from our
groups for management and other services. In New York, the fees
we receive from all but one of our groups are based on a
percentage of the aggregate manual workers' compensation
rates set by the New York State Workers' Compensation Board
that are attributable to the members of the groups we manage.
With respect to our groups in California and one of our groups
in New York, our fees are based upon a percentage of the
premiums paid to the groups we manage by their members. The
portion of our fees that is equal to the related fees we pay to
general agents and brokers is recorded as revenue when payable
by the groups, which is the same time that fees paid to general
agents and brokers are recorded. The balance of our management
fees is earned ratably over the period to which such fees apply.
The portion of the balance of management fees that relate to the
remaining period at the balance sheet date is recorded as
unearned management fee revenues. Revenue from medical bill
review and case management services also is included in fee
based management services revenues, and is recorded as revenue
as the services are rendered.
We audit our groups on an annual basis to determine whether the
groups' premiums have been properly calculated. Any
adjustments to these premiums resulting from these audits are
recorded as revenues (or as a reduction of revenues) in the
period in which the audits occur.
We also receive commission income for excess coverage and surety
bonds we place for these groups. Such commission income is
earned ratably over the terms of the underlying excess coverage
and surety bonds. The portion of commission income that relates
to the remaining term of the underlying excess coverage or
surety bond at the balance sheet date is recorded as unearned
commission income revenues.
Reinsurance Revenue.
Pursuant to SFAS No. 113,
Accounting and Reporting for Reinsurance of Short Duration and
Long-Duration Contracts, we have evaluated our reinsurance
agreement with NY Marine & General and have
determined that the reinsurance agreement is a short duration
prospective contract. Accordingly, reinsurance premiums are
earned ratably over the term of the excess coverage that we have
reinsured through our agreement with NY Marine &
General. The portion of the reinsurance premiums that relate to
the remaining term of the underlying excess coverage policy that
we have reinsured at the balance sheet date is recorded as
unearned reinsurance premiums. These reinsurance premiums are
subject to adjustment based upon modification to the premiums
charged on the underlying workers' compensation
40
Table of Contents
coverage. Any adjustments which can be reasonably estimated are
included in income in the period to which they apply. If such
adjustments cannot be reasonably estimated, they are included in
the period in which the adjustment is made. Our net reinsurance
premiums are our assumed premium, net of the 2% fee we pay for
stop-loss coverage.
Policy Acquisition Costs
Policy acquisition costs are comprised of ceding commissions and
U.S. federal excise tax costs incurred pursuant to our
reinsurance agreement with NY Marine & General.
These costs are deferred and amortized as the related
reinsurance premiums are earned or recorded. We consider
estimated investment income in determining the recoverability of
these costs.
Reserve for Losses and Loss Adjustment Expenses
The reserve for losses and loss adjustment expenses represents
an estimate of the ultimate cost of all reported and unreported
losses and loss adjustment expenses insured pursuant to
reinsurance agreements associated with reported claims and
claims incurred but not reported which are unpaid at the balance
sheet date. The liability is estimated using actuarial studies
of individual case-basis validations, statistical analyses and
industry data. We believe that our aggregate liability for
losses and loss adjustment expenses at year-end represent our
best estimate, based upon available data, of the amounts
necessary to settle the ultimate cost of expected losses and
loss adjustment expenses. Twin Bridges has only been in
existence since December 2003, has had limited loss experience
and a relatively small population of underlying risks, and
therefore is exposed to an increased likelihood that actual
results may not conform to our estimates. These estimates are
also subject to the effects of trends in loss severity and
frequency risks, fluctuations in inflation, prevailing economic,
social and judicial trends, legislative changes and internal and
third party claims handling procedures. There also may be a
significant delay between the occurrence of the insured event
and the time it is actually reported to us. Accordingly, the
ultimate settlement of losses and related loss adjustment
expenses may vary significantly from the estimates included in
our financial statements.
Since we have very limited loss development experience, the
independent external actuarial specialists that estimate our
loss reserves and loss adjustment expenses combine several
methods to calculate reserves for unpaid reported losses as well
as losses incurred-but-not-reported, or IBNR, reserves. The
actuarial methods employed include (i) the paid and
incurred loss development method, (ii) the loss ratio
method, and (iii) the Bornhuetter-Ferguson method. The
Bornhuetter-Ferguson method is a generally accepted actuarial
technique that produces expected loss ratios that are implied by
actual loss experience and developments. The combination of
these three methods has led to a range of estimated total
reserves. We believe that the assumptions by the independent
external actuarial specialists represent a realistic and
appropriate basis for currently estimating our reserves for
losses and loss adjustment expenses.
Reserve estimates and reserving methodologies are reviewed
regularly, taking into account all currently known information
and updated assumptions related to unknown information. Reserves
for losses and loss adjustment expenses established in prior
periods are adjusted as claim experience develops and new
information becomes available. Any such adjustments are included
in income in the period in which they are made. Any adjustments
to previously established reserves may significantly impact
current period net income by reducing net income if previous
period reserve estimates prove to be inadequate and are required
to be increased or increasing net income if prior period
reserves become overstated and are required to be reduced. We
also review the estimate of losses and loss adjustment expenses
provided to us by NY Marine & General.
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Table of Contents
The table below shows the reconciliation of reserves for the six
months ended June 30, 2005 and the years ended
December 31, 2004 and 2003, reflecting changes in losses
incurred and paid losses for such periods.
December 31,
June 30,
2005
2004
2003
(Dollar amounts in
thousands)
Balance at January 1
$
2,696
$
168
$
—
Incurred related to:
Current period end
1,305
2,528
168
Prior period end
—
—
—
Total incurred
1,305
2,528
168
Paid related to:
Current period end
—
—
—
Prior period end
—
—
—
Total paid
—
—
—
Net increase
1,305
2,528
168
Balance at period end
$
4,001
$
2,696
$
168
Our claims reserving practices are intended to establish
reserves that in the aggregate are adequate to pay all losses
and loss adjustment expenses at their ultimate settlement value.
Thus, our reserves are not discounted for inflation or other
factors.
Through June 30, 2005, there have been no changes in
subsequent years from prior years' loss estimates. As
actual history develops, there may be adjustments to these
estimates in the future. At December 31, 2004, there are no
outstanding case loss reserves. The entire amount of reserves
for losses and loss adjustment expenses is comprised of IBNR and
development.
While we believe that we will be able to make a reasonable
estimate of our ultimate losses and loss adjustment expenses, we
may not be able to predict our ultimate claims experience as
reliably as other companies that have had reinsurance operations
for a substantial period of time, and we cannot assure you that
our actual losses and loss adjustment expenses will not exceed
our total reserves.
Loans receivable
A significant portion of our loans receivable comprise amounts
due from a general agent and its principals which were advanced
as a working capital loan in connection with a self-insured
group managed by CRM. CRM is currently engaged in litigation
with this agent as described in "Business — Legal
Proceedings." The general agent and its principals failed
to make timely installment payments due under the working
capital loan commencing March 15, 2005, and CRM has
declared the loan in default and immediately due and payable in
full and brought an action against the borrowers for collection.
Although we believe that the loan receivable balance will be
collectible, and accordingly, we have not established any
reserves with respect to the loan receivable, we cannot predict
the outcome of the litigation. If the loan receivable balance is
not collected, the write-off of this receivable could have a
material adverse impact on our results of operations, and will
be recorded when determinable.
Investments
Currently, our investment portfolio is comprised of short-term
U.S. Treasury bills, cash and money market equivalents.
Upon the closing of this offering, our board of directors will
establish our investment policies and management will implement
our investment strategy with the assistance of independent
investment managers. We expect that as our investment portfolio
changes from money market funds to other
42
Table of Contents
investments, such as publicly traded and non-publicly traded
fixed maturity, short-term investments and equity securities, we
will classify such securities as "available-for-sale"
and, accordingly, they will be recorded at estimated fair value
and the difference between cost or amortized cost and fair
value, net of the effect of taxes, will be included as a
separate component of accumulated other comprehensive income in
the combined balance sheet.
Stock-based compensation
In the event we adopt stock-based compensation plans, we intend
to account for stock-based compensation in accordance with the
revised statement SFAS No. 123-R, an amendment to
SFAS No. 123, "Accounting for Stock-Based
Compensation," which requires that the cost of share-based
payment transactions be recognized in the financial statements.
Accordingly, our net income will be reduced by the stock
compensation expense required to be recognized by
SFAS No. 123-R.
Combined Results of Operations
The following is a discussion of our combined results of
operations for the six months ended June 30, 2005 and 2004
and for the three years ended December 31, 2004.
Six Months Ended June 30, 2005 Compared to Six Months
    Ended June 30, 2004
Total Revenues.
Total revenues increased 22%, or
$3,528,775, to $19,593,052 for the six months ended
June 30, 2005 from $16,064,277 for the comparable period in
2004. Of this increase, 74% was attributable to growth in our
fee-based management services segment, particularly in
California, and 26% of this increase was attributable to the
increase in our reinsurance segment. Of the revenues from our
fee-based management services segment for the six months ended
June 30, 2005, 79% and 21% were attributable to revenues
from our groups in New York and in California, respectively,
compared to 96% and 4%, respectively, of these revenues for the
six months ended June 30, 2004. Of the revenues from our
reinsurance segment for the six months ended June 30, 2005,
82% and 18% were attributable to our groups in New York and in
California, respectively, compared to 93% and 7%, respectively,
of these revenues for the six months ended June 30, 2004.
Revenues from Fee-based Management Services.
Revenues
from fee-based management services for the six months ended
June 30, 2005 increased 18%, or $2,574,261, to $16,494,443
from $13,920,182 for the comparable period in 2004. Of this
increase, 72% was attributable to the growth in our self-insured
groups covering the contracting industry. All of this growth in
revenues is attributable to our groups in California as our
relatively new market presence gained momentum. Revenues from
fee-based management services attributable to our groups in New
York decreased by 2% to $13,022,910 for the six months ended
June 30, 2005 from $13,306,468 for the comparable period in
2004. This decrease is primarily due to lower fees received from
the Healthcare Industry Trust of New York, or HITNY, as a result
of modification to our agreement with HITNY. The increase to New
York manual premium rates passed by the New York Workers'
Compensation Board in August 2005 are effective for new and
renewal business after October 1, 2005 and should
positively impact management fee revenue that we receive from
most of the New York groups we manage. Over the next year, we
expect moderate growth in New York and relatively more rapid
growth in California. The table below provides information about
our revenues from our fee-based management services segment
attributable to the groups we manage in New York and California:
Six Months Ended June 30,
2005
2004
NY
CA
NY
CA
Total revenues from fee-based management services
$
13,022,910
$
3,471,533
$
13,306,468
$
613,714
Revenues from Reinsurance.
Net reinsurance premiums
increased 43%, or $922,221, to $3,045,146 for the
six months ended June 30, 2005 from $2,122,925 for the
comparable period in 2004. This increase was attributable to the
increase in the number of the self-insured groups that we manage
for which Twin Bridges
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reinsures a portion of the excess coverage these groups obtain.
During the first half of 2005, Twin Bridges reinsured a portion
of the excess coverage obtained by 12 of the 13 groups that
we managed at that time. During the first half of 2004, Twin
Bridges reinsured a portion of the excess coverage obtained by
only 7 of the 11 groups we then managed. As reinsurance
policies were renewed during the second half of 2004 and into
2005, groups that we managed which previously had obtained
excess coverage from other insurers began to obtain their excess
coverage from NY Marine & General. In turn,
NY Marine & General ceded a portion of these
coverages to Twin Bridges. Management expects that as we form
new groups in California, these groups will obtain excess
coverage from NY Marine & General and
NY Marine & General will cede a portion of this
coverage to Twin Bridges, however, we can provide no assurance
that the groups we manage will continue to obtain excess
coverage from NY Marine & General or that Twin
Bridges will continue to have the opportunity to reinsure a
portion of this coverage. Geographically, 42% of the growth in
net reinsurance premiums in the first half of 2005 was
attributable to the groups we manage in California. Over the
next year, we expect rapid growth in our reinsurance business in
California. The table below provides information about our
revenues from our reinsurance segment attributable to the groups
we manage in New York and California:
Six Months Ended June 30,
2005
2004
NY
CA
NY
CA
Total net reinsurance premiums
$
2,507,371
$
537,775
$
1,975,925
$
147,000
Investment Income, net of Advisory Fees.
Investment
income, net of advisory fees, for the six months ended
June 30, 2005 increased to $53,463 from $21,170 for the
comparable period in 2004. This increase was due to an increased
level of investments held by our reinsurance segment.
Total Expenses.
Total expenses increased 27%, or
$3,526,892, to $16,745,758 for the six months ended
June 30, 2005 from $13,218,866 for the comparable period in
2004. Of the total expenses for the six months ended
June 30, 2005, $14,401,787, or 86%, was attributable to our
fee-based management services segment, and $2,343,971, or 14%,
was attributable to our reinsurance segment.
Losses and loss adjustment expenses.
Losses and loss
adjustment expenses increased 12%, or $139,458, to $1,305,062
for the six months ended June 30, 2005 from $1,165,604 for
the comparable period in 2004. This increase was much less than
the 43% increase in net reinsurance premiums during the same
period because of the refinement of estimated loss reserves.
During the start up phase of Twin Bridges in 2004, we estimated
ultimate losses and loss adjustment expenses to be 55% of net
reinsurance premiums. For the six months ended June 30,
2005, we estimated losses and loss adjustment expenses to be 42%
of net reinsurance premiums. These loss reserve estimates are
reviewed regularly and are adjusted as experience develops or
new information becomes known; such adjustments are included in
income in the period in which they are made.
Fees paid to general agents and brokers.
Fees paid to
general agents and brokers increased 10%, or $501,875, to
$5,627,711 for the six months ended June 30, 2005 from
$5,125,836 for the comparable period in 2004. The entire
increase is attributable to the growth of our California groups.
Policy Acquisition Costs.
Policy acquisition costs
increased 43%, or $272,717, to $900,496 for the six months ended
June 30, 2005 from $627,779 for the comparable period in
2004. These costs are a fixed percentage (approximately 29%) of
our assumed reinsurance premiums and grew in proportion to the
43% increase in net reinsurance premiums discussed above.
Selling, general and administrative expenses.
Selling,
general and administrative expenses increased 42%, or
$2,609,062, to $8,883,709 for the six months ended
June 30, 2005 from $6,274,647 for the comparable period in
2004. Approximately $1,190,000, or 46%, of this increase is
attributable to increased payrolls and related employee expenses
for our fee-based management services segment. The total number
of employees in our fee-based management services segment
increased from 117 at June 30, 2004 to 133 at
January 1, 2005 and to 146 at June 30, 2005. During
this period, we added 13 employees in New York for CRM, 11
employees in California for CRM CA and 5 employees in New
York for Eimar. We will need to add additional employees to
complete our anticipated staffing needs to operate as a public
company, and as our fee-based
44
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management services business continues to grow, we will need to
hire additional staff. Approximately $1,143,000, or 47%, of the
increase in selling, general and administrative expenses for the
six months ended June 30, 2005 is attributable to increases
in other components of selling, general and administrative
expenses, including professional fees, advertising and marketing
expenses, claims review expenses and occupancy costs. These
expenses rose significantly as we expanded in California. All
non-direct operating expenses are included in our fee-based
management services segment because our reinsurance segment to
date has been small relative to our fee-based management
services segment and our reinsurance segment has no direct
employees. Direct selling, general and administrative expenses
of our reinsurance segment amounted to $138,413 for the six
months ended 2005 compared with $83,354 for the six months ended
2004. We contract with Quest Management Services Limited, an
independent management firm based in Bermuda, to perform general
and administrative functions for Twin Bridges.
Net Income.
Net income increased less than 1%, or $1,883,
to $2,847,294 for the six months ended June 30, 2005 from
$2,845,411 for the comparable period in 2004. The increase in
our total revenues was offset to a significant extent by the
increase in selling, general and administrative expenses
described above. Net income as a percentage of revenues was 15%
for the six months ended June 30, 2005 compared to 18% for
the comparable period in 2004.
Net Income from Fee-based Management Services.
Net income
from our fee-based management services segment for the six
months ended June 30, 2005 decreased 19%, or $489,045, to
$2,106,046, or 13% of our fee-based management services revenues
for that period, from $2,595,091, or 19% of our fee-based
management services revenues, for the comparable period in 2004.
Net Income from Reinsurance.
Net income from our
reinsurance segment for the six months ended June 30, 2005
increased 196%, or $490,908, to $741,248, or 24% of our net
reinsurance premiums for that period, from $250,320, or 12% of
our net insurance premiums, for the comparable period in 2004.
Year Ended December 31, 2004 Compared to Year Ended
    December 31, 2003
Total Revenues.
Total revenues increased 56%, or
$11,730,002, to $32,820,086 for the year ended December 31,
2004 from $21,090,084 for the year ended December 31, 2003.
Of this increase, 58% was attributable to growth in our
fee-based management services segment, particularly in
California, and 42% of this increase was attributable to the
increase in our reinsurance segment. Of the revenues from our
fee-based management services segment for the year ended
December 31, 2004, 93% and 7% were attributable to revenues
in New York and in California, respectively, compared to nearly
100% and less than 1%, respectively, of these revenues for the
year ended December 31, 2003. Of the revenues from our
reinsurance segment for the year ended December 31, 2004,
87% and 13% were attributable to our groups in New York and in
California, respectively, compared to 100% and 0%, respectively,
of these revenues for the year ended December 31, 2003.
Revenues from Fee-based Management Services.
Revenues
from fee-based management services for the year ended
December 31, 2004 increased 33%, or $6,834,598, to
$27,655,726 from $20,821,128 for the year ended
December 31, 2003. Approximately 64% of this growth was
attributable to our self-insured groups in the following
industries: healthcare, contracting, transportation and auto
dealerships. Geographically, revenues from groups in New York
grew 24%, or $4,914,988, to $25,662,420 for the year ended
December 31, 2004 from $20,747,432 for the year ended
December 31, 2003, while revenues from groups in California
grew by $1,919,611 to $1,993,307 for the year ended
December 31, 2004 from $73,696 for the year ended
December 31, 2003 primarily because we formed three new
groups in California. California commenced operations in October
2003 and recorded only minimal revenues for that year.
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The table below provides information about our revenues from
fee-based management services to each of the groups we manage in
New York and California:
Years Ended December 31,
2004
2003
NY
CA
NY
CA
Total revenues from fee-based management services
$
25,662,420
$
1,993,307
$
20,747,432
$
73,696
Revenues from Reinsurance.
Our reinsurance segment
commenced operations in December 2003 and we had recorded
minimal revenue for that year. Net reinsurance premiums
increased to $5,109,883 for the year ended December 31,
2004 from $253,167 for the year ended December 31, 2003. As
reinsurance policies were renewed during December 2003 and into
2004, five of the New York groups that we manage which
previously had obtained excess coverage from other insurers
began to obtain their excess coverage from
NY Marine & General. We also formed two groups in
California which purchased their excess coverage from
NY Marine & General. In turn, Twin Bridges
reinsured a 50% portion of these excess coverages. The table
below provides information about our net reinsurance premiums
attributable to the groups we manage in New York and California:
Years Ended December 31,
2004
2003
NY
CA
NY
CA
Total net reinsurance premiums
$
4,458,183
$
651,700
$
253,167
—
Investment Income, net of Advisory Fees.
Investment
income, net of advisory fees, increased to $54,477 for the year
ended December 31, 2004 from $15,789 for the year ended
December 31, 2003 as a result of an increased level of
investments held by our reinsurance segment.
Total Expenses.
Total expenses increased 56%, or
$9,655,238, to $27,014,256 for the year ended December 31,
2004 from $17,359,018 for the year ended December 31, 2003.
Of the total expenses for the year ended December 31, 2004,
84%, or $22,768,870, was attributable to our fee-based
management services segment and 16%, or $4,245,386, was
attributable to our reinsurance segment.
Losses and loss adjustment expenses.
Losses and loss
adjustment expenses increased to $2,528,083 for the year ended
December 31, 2004 from $167,917 for the comparable period
in 2003 and grew as our reinsurance segment grew. Management
estimated losses and loss adjustment expenses for the year ended
December 31, 2004 to be 49% of net reinsurance premiums.
Fees paid to general agents and brokers.
Fees paid to
general agents and brokers increased 21%, or $1,677,861, to
$9,507,546 for the year ended December 31, 2004 from
$7,829,685 for the year ended December 31, 2003. The
increase was attributable to our managed groups in New York and
was consistent with the 24% increase in fee-based management
services revenues from these groups.
Policy Acquisition Costs.
Policy acquisition costs
increased to $1,511,065 for the year ended December 31,
2004 from $74,865 for the comparable period in 2003. These costs
are a fixed percentage (approximately 29%) of our assumed
reinsurance premiums and grew in proportion to the increase in
net reinsurance premiums discussed above.
Selling, general and administrative expenses.
Selling,
general and administrative expenses increased 45%, or
$4,200,247, to $13,440,809 for the year ended December 31,
2004 from $9,240,562 for the year ended December 31, 2003.
Approximately $2,266,131, or 54%, of this increase was
attributable to increased payrolls and related employee expenses
for our fee-based management services segment. The total number
of employees in our fee-based management services segment
increased from 80 at January 1, 2003 to 110 at
January 1, 2004 and to 133 at December 31, 2004.
During 2004, we added 9 employees in New York for CRM,
4 employees in California for CRM CA and 10 employees
in New York for Eimar. Approximately $1,934,116, or 46%, of the
increase in selling, general and administrative expenses for the
year ended
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December 31, 2004 is attributable to increases in other
components of selling, general and administrative expenses,
predominately advertising, marketing, claims review expenses and
occupancy costs. During 2004 we began implementing a new
marketing campaign. Also, claims review expenses relating to our
medical bill review and case management services grew
significantly as the corresponding fee-based revenues from these
services grew. Occupancy costs grew as we opened offices in
California and leased additional space in New York. All
non-direct operating expenses are included in our fee-based
management services segment because our reinsurance segment to
date has been small relative to our fee-based services segment
and our reinsurance segment has no direct employees. Direct
selling, general and administrative expenses of our reinsurance
segment amounted to $206,238 for the year ended
December 31, 2004 compared with $61,749 for the year ended
December 31, 2003. We contract with Quest Management
Services Limited, an independent management firm based in
Bermuda, to perform general and administrative functions for
Twin Bridges.
Net Income.
Net income increased 56%, or $2,074,764, to
$5,805,830 for the year ended December 31, 2004 from
$3,731,066 in the year ended December 31, 2003. Net income
was 18% of total revenues in both periods.
Net Income from Fee-based Management Services.
Net income
from our fee-based management services segment for the year
ended December 31, 2004 increased 30%, or $1,137,321, to
$4,919,663, or 18% of our fee-based management services revenues
for that year, from $3,782,342, or 18% of our fee-based
management services revenues, for the year ended
December 31, 2003.
Net Income from Reinsurance.
Net income from our
reinsurance segment for the year ended December 31, 2004
increased to $886,167, or 17% of our net reinsurance premiums
for that year, from a net loss of $51,276, or (20%) of our net
reinsurance premiums, for the year ended December 31, 2003.
Our reinsurance business commenced in December 2003.
Year Ended December 31, 2003 Compared to Year Ended
    December 31, 2002
Total Revenues.
Total revenues increased 19%, or
$3,438,760, to $21,090,084 for the year ended December 31,
2003, from $17,651,324 for the year ended December 31,
2002. All of our revenues were attributable to our fee-based
management services segment since our reinsurance segment did
not commence operations until December 2003.
Revenues from Fee-based Management Services.
Revenues
from fee-based management services increased 18%, or $3,206,803,
to $20,821,128 for the year ended December 31, 2003, from
$17,614,325 for the year ended December 31, 2002.
Approximately 88% of this growth was attributable to the growth
in fees from three of our self-insured groups covering the
following industries: healthcare, transportation and
wholesale & retail. Geographically, nearly all of our
revenues were attributable to our managed groups in New York
since our California fee-based management services business
commenced operations in October 2003. In 2003, we formed one
self-insured group in California which generated revenues from
fee-based management services in the amount of $73,696.
Revenues from Reinsurance.
Net reinsurance premiums were
only $253,167 for the year ended December 31, 2003. Our
reinsurance segment commenced operations in December 2003.
Investment Income, net of Advisory Fees.
Investment
income, net of advisory fees, for the year ended
December 31, 2003 decreased to $15,789 from $36,999 for the
comparable period in 2002, resulting largely from a decline in
overall market interest rates during those periods.
Total Expenses.
Total expenses increased 23%, or
$3,203,943, to $17,359,018 for the year ended December 31,
2003 from $14,155,075 for the comparable period in 2002. All of
our expenses were attributable to our fee-based management
services segment since our reinsurance segment did not commence
operations until December 2003.
Losses and loss adjustment expense.
Losses and loss
adjustment expenses for the year ended December 31, 2003
were $167,917. There were no such costs in the prior year
because our reinsurance segment did not commence operations
until December 2003.
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Fees paid to general agents and brokers.
These expenses
increased 2%, or $179,056, to $7,829,685 for the year ended
December 31, 2003 from $7,650,629 for the year ended
December 31, 2002. Geographically, all of our fees paid to
general agents and brokers were attributable to our fee-based
management services business in New York. No fees were paid to
general agents and brokers in California in 2003 or 2002.
Policy Acquisition Costs.
Policy acquisition costs were
$74,865 for the year ended December 31, 2003. There were no
such costs in the prior year because our reinsurance segment did
not commence operations until December 2003. These costs are a
fixed percentage (approximately 29%) of our assumed reinsurance
premiums and grew in proportion to the increase in net
reinsurance premiums discussed above.
Selling, general and administrative expenses.
Selling,
general and administrative expenses increased 43%, or
$2,769,289, to $9,240,562 for the year ended December 31,
2003 from $6,471,273 for the year ended December 31, 2002.
Approximately $1,037,871, or 37%, of this increase is
attributable to increased payrolls and related employee
expenses. The total number of employees in our fee-based
management services segment increased from 65 at January 1,
2002 to 80 at January 1, 2003 and to 110 at
December 31, 2003. During 2003, we added 14 employees
in New York for CRM, 3 employees in California for CRM CA and
13 employees in New York for Eimar. Approximately
$1,328,060, or 48%, of the increase is attributable to increases
in other components of selling, general and administrative
expenses including professional fees, advertising and marketing
expenses and medical bill review expenses of Eimar, which
commenced operations in 2003. Non-payroll costs associated with
the services provided by Eimar, primarily software costs, added
approximately $818,327 to selling, general and administrative
expenses for the year ended December 31, 2003.
Net Income.
Net income increased 7%, or $234,817, to
$3,731,066 for the year ended December 31, 2003 from
$3,496,249 for the year ended December 31, 2002. Net income
was 18% of total revenues in the year ended December 31,
2003 and 20% in the prior year.
Net Income from Fee-based Management Services.
Net income
from our fee-based management services segment for the year
ended December 31, 2003 increased 8%, or $286,093, to
$3,782,342, or 18% of our fee-based management services revenues
for that year, from $3,496,249, or 20% of our fee-based
management services revenues, for the year ended
December 31, 2002.
Net Loss from Reinsurance.
Net loss from our reinsurance
business for the year ended December 31, 2003 was $51,276.
Our reinsurance business commenced in December 2003.
Liquidity and Capital Resources
We are organized as a Bermuda exempted holding company, and as
such, have no direct operations. Our assets consist of
investments in our subsidiaries through which we conduct
substantially all of our management and other services for the
self-insured groups that we manage and our reinsurance
operations. Upon the closing of this offering, we will have
subsidiary operations in Bermuda and the United States. Funds to
meet any obligations we may have will come primarily from
dividends, interest and other statutorily permissible payments
from our subsidiaries. The ability of our subsidiaries to make
these payments will be limited by the applicable laws and
regulations of the domiciles in which the subsidiaries operate.
In addition, we are subject to a U.S. federal withholding
tax of 30% on any dividends paid to us from our
U.S. subsidiaries. Accordingly, we do not expect to receive
dividends from our U.S. subsidiaries for the foreseeable
future. In addition, Bermuda law and regulations will restrict
the payment of dividends from retained earnings, or
distributions out of contributed surplus, by Twin Bridges unless
certain regulatory requirements are met. See "Risk
Factors — Our holding company structure and certain
regulatory, tax and other constraints affect our ability to pay
dividends, make other payments and redeploy capital among our
subsidiaries."
Cash Flows
Net cash provided by operating activities amounted to $3,885,879
for the six months ended June 30, 2005, compared to
$3,738,798 for the same period in 2004. For the first six months
of 2005, major components of cash provided by operating
activities were net income of $2,847,294, and the increases in
reserves for losses
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and loss adjustment expenses of $1,305,062 and accrued expenses
of $1,101,553 offset by the increase of $1,871,336 in restricted
cash and cash equivalents. Major components of cash provided by
operating activities in the first six months of 2004 were
net income of $2,845,411 and the increases in reserves for
losses and loss adjustment expenses of $1,165,604 and accrued
expenses of $627,765 offset by the increase of $1,318,282 in
restricted cash and cash equivalents.
Net cash provided by operating activities was $5,259,549 for the
year ended December 31, 2004, $3,006,623 for the year ended
December 31, 2003, and $5,632,897 for the year ended
December 31, 2002. Major components of cash provided by
operating activities for the year ended December 31, 2004
were net income of $5,805,830, the increase in unearned
reinsurance premiums of $1,995,116 and the increase in reserves
for losses and loss adjustment expenses of $2,528,083 offset by
the increase of $3,398,342 in restricted cash and cash
equivalents. Major components of cash provided by operating
activities for the year ended December 31, 2003 were net
income of $3,731,066 and the increase in reserves for losses and
loss adjustment expenses of $167,917 offset by the increase of
$1,000,000 in restricted cash and cash equivalents. Major
components of cash provided by operating activities for the year
ended December 31, 2002 were net income of $3,496,249 and
the increase in deferred management fees of $1,447,682 and
deferred commissions of $1,018,217.
Net cash used in investing activities amounted to $127,184 for
the six months ended June 30, 2005 as compared to
$460,296 for the same period in 2004. For the first
six months of 2005, investing activities were primarily
capital expenditures. For the first six months of 2004,
capital expenditures totaled $130,966 and net advances of notes
receivable were $329,330.
Net cash used in investing activities was $569,177 for the year
ended December 31, 2004, $275,109 for the year ended
December 31, 2003 and $767,813 for the year ended
December 31, 2002. In 2004, capital expenditures totaled
$310,238 and net advances of notes receivable totaled $258,939.
In 2003, capital expenditures totaled $175,442 and net advances
of notes receivable totaled $99,667. In 2002, capital
expenditures totaled $694,813 and net advances of notes
receivable totaled $73,000.
Net cash used in financing activities for the six months ended
June 30, 2005 totaled $2,842,610 as compared to $1,911,430
for the six months ended June 30, 2004. Major components of
cash used in financing activities for the first six months
of 2005 were proceeds from the bank line of credit of $1,000,000
offset by member distributions of $3,793,702. Major components
of cash used in financing activities for the first
six months of 2004 were proceeds from the bank line of
credit of $350,000 offset by member distributions of $2,060,191
and net payments of notes payable of $201,239.
Net cash used in financing activities was $3,880,590 for the
year ended December 31, 2004, $6,608,892 for the year ended
December 31, 2003, and $2,563,151 for the year ended
December 31, 2002. Major components of cash used in
financing activities for the year ended December 31, 2004
were member distributions of $3,753,866 and reductions of net
borrowings under credit facilities of $126,724. In 2003, Twin
Bridges was capitalized with proceeds of capital stock of
$120,000 and additional paid-in capital of $880,000. This
additional paid-in capital was offset by repayment of short term
borrowings of $704,482, member distributions of $6,789,106 and
borrowings under credit facilities of $115,304. Major components
of cash used in financing activities for the year ended
December 31, 2002 were member distributions of $3,498,782
offset by net proceeds from borrowings under credit facilities
of $935,631.
Liquidity and Capital requirements
Our principal cash requirements are expected to be the expenses
to develop and implement our business strategy, as well as
capital expenditures, losses and loss adjustment expenses, fees
paid to general agents and brokers, the servicing of future
borrowing arrangements, taxes and other operating expenses. In
addition, we may be required to increase the amount of security
we provide to NY Marine & Magic as we increase the
amount of excess coverage we reinsure. This security may be in
the form of letters of credit or a pledge of cash. The potential
for a large claim under one of our reinsurance contracts means
that we may need to make substantial and unpredictable payments
within relatively short periods of time. While our board of
directors currently does not intend to declare dividends or make
any other distributions to the shareholders of
49
Table of Contents
CRM Holdings, our cash requirements will also include the
payment of any future dividends to our shareholders if and when,
our board of directors determines to change our dividend policy.
We have an option to purchase a building, which is currently
under construction, with parking space and office space on
approximately three acres in Poughkeepsie, New York. The option
is exercisable 120 days prior to the anticipated occupancy
of the building under our lease. The term of the lease will
commence March 1, 2007 or such later date on which the
construction is substantially complete and the building is
available for occupancy. The option price is approximately
$3,500,000 plus all documented out-of-pocket construction costs
after May 1, 2005. If we fail to exercise this initial
option, we have an additional option to purchase the building
during the first two years of our lease for the fair market
value of the property, which will not be less than $3,500,000
plus the costs incurred by the landlord in developing and
constructing the building. If we do exercise the option, we
intend to finance the acquisition of the property with proceeds
from a commercial mortgage.
Other than the possible exercise of the option to purchase the
property in Poughkeepsie, capital expenditures for the next
12 months are expected to be approximately $400,000 for
furniture, equipment and technology systems.
Sources of cash
We expect our future sources of funds will consist of fees and
commissions earned from our fee-based management services
business, premiums written in connection with our reinsurance
business, investment income and proceeds from sales and
redemptions of investment assets. CRM has entered into a
revolving credit facility with KeyBank National Association, or
KeyBank, under which CRM is entitled to borrow up to
$5 million until December 31, 2005. Borrowings under
the facility may be used for general business purposes,
including distributions to members. Loans under the facility are
due on demand, and any loan outstanding on December 31,
2005, if not sooner demanded, shall be fully amortized in 12
equal monthly installments. Interest on the loans outstanding
under the facility is payable monthly at a rate per annum equal
to KeyBank's prime rate from time to time. All of
CRM's obligations under the facility are secured by a lien
on substantially all of CRM's assets and by the personal
guarantees of the existing shareholders. It is anticipated that
these guarantees will be released upon the closing of this
offering. The facility limits CRM's ability to purchase or
sell assets otherwise than in the ordinary course of business,
prohibits CRM from permitting any liens on its assets, subject
to customary exceptions, prohibits CRM from incurring debt for
borrowed money, including leases, except for trade debt incurred
in the normal course of business and indebtedness or leases for
term loans, leases, vehicles or equipment of up to $400,000,
limits mergers and consolidations of CRM and prohibits
investments and loans by CRM. The facility also requires CRM to
maintain a minimum level of members' equity, which
requirement was waived at December 31, 2004 and
June 30, 2005. At June 30, 2005, $1,000,000 was
outstanding under the facility, and the weighted average
interest rate for the six months ended June 30, 2005 was
5.4%.
We believe that our cash from operations and, if needed,
borrowings under our credit facility will be sufficient to meet
our working capital and other operating requirements over the
next 12 months.
Adequacy of Capital
While insurance regulations differ by location, each
jurisdiction requires that minimum levels of capital be
maintained in order to write new insurance business. Factors
that affect capital requirements generally include premium
volume, the extent and nature of loss and loss expense reserves,
the type and form of insurance and reinsurance business
underwritten and the availability of reinsurance protection on
terms that are acceptable to us.
The proceeds from this offering will be used to provide
additional capital and surplus to expand our operations,
including providing additional surplus to Twin Bridges.
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Table of Contents
In Bermuda and the United States, insurers and reinsurers are
required to maintain certain minimum levels of capital and
risk-based capital, the calculation of which includes numerous
factors specified by the respective insurance regulatory
authorities and the related insurance regulations.
We may need to raise additional funds to expand our business and
manage our growth. The amount and timing of these capital
requirements will depend on many factors. At this time, we are
not able to quantify the amount of additional capital we will
require in the future or predict the timing of our future
capital needs. If we cannot maintain or obtain adequate capital
to manage our business strategy and expected growth targets, our
business, results of operations and financial condition may be
adversely affected.
Posting of Security by Twin Bridges
Under Twin Bridges' contract with NY Marine &
General, Twin Bridges is required to post security, which may be
in the form of letters of credit issued by an acceptable bank,
in order to cover any unpaid liabilities under the contract.
Twin Bridges has entered into a loan agreement with KeyBank
under which Twin Bridges is entitled to draw letters of credit
in the principal amount of up to $3 million, for which Twin
Bridges pays a fee of 1.50% of the principal amount of each
letter of credit drawn. Any payments under the letters of credit
must be repaid by Twin Bridges within 90 days. The loan
agreement terminated on June 30, 2005 but has been extended
until September 30, 2005. The loan agreement contains
covenants similar to the covenants in CRM's revolving
credit facility with KeyBank described elsewhere in this
prospectus and borrowings outstanding under it have been
guaranteed by the existing shareholders. We intend to renew this
loan agreement when it expires on September 30, 2005, but
do not intend to renew it after the completion of this offering.
Rather, to the extent that Twin Bridges is required to post
security with NY Marine & General, we intend to obtain cash
collateralized letters of credit under informal arrangements
with KeyBank and Smith Barney Citigroup. At June 30, 2005,
letters of credit in the principal amount of $2,449,781 were
outstanding under the Unsecured Letter of Credit Facility.
Contractual Obligations
The following table summarizes information about our contractual
obligations as of December 31, 2004.
Payment due by period
Less than
More than
Total
1 Year
1-3 Years
3-5 Years
5 Years
Contractual Obligations
Long-Term Debt Obligations
—
—
—
—
—
Capital Lease Obligations
—
—
—
—
—
Operating Lease Obligations
$
1,217,000
$
493,000
$
633,000
$
91,000
—
Purchase Obligations
—
—
—
—
—
Other Long-Term Liabilities Reflected on our Balance Sheet under
    GAAP
—
—
—
—
—
Total
$
1,217,000
$
493,000
$
633,000
$
91,000
—
Off-Balance Sheet Transactions
We have no off-balance sheet arrangements or transactions with
unconsolidated, special purpose entities.
Quantitative and Qualitative Disclosures about Market Risk
Market risk can be described as the risk of change in fair value
of a financial instrument due to changes in interest rates,
creditworthiness, foreign exchange rates or other factors. We
will seek to mitigate that risk by a number of actions, as
described below.
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Interest Rate Risk
Our exposure to market risk for changes in interest rates is
concentrated in our investment portfolio. We expect that changes
in investment values attributable to interest rate changes will
be mitigated, however, through careful monitoring of portfolio
maturities. See "Risk Factors — A significant
amount of our invested assets will be subject to changes in
interest rates and market volatility."
Credit Risk
As we broaden our array of invested assets, we expect our
portfolio will primarily include fixed income securities and
short-term investments, which will be subject to credit risk.
This risk is defined as default or the potential loss in market
value resulting from adverse changes in the borrower's
ability to repay the debt. Our risk management strategy and
investment policy will be to earn competitive relative returns
while investing in a diversified portfolio of securities of high
credit quality issuers, and to limit the amount of credit
exposure to any one issuer.
Effects of Inflation
We do not believe that inflation has had a material affect on
our combined results of operations. The effects of inflation
could cause the severity of claims to increase in the future.
Our estimates for losses and loss adjustment expenses include
assumptions, including those relating to inflation, about future
payments for settlement of claims and claims handling expenses.
To the extent inflation causes these costs to increase above our
estimated reserves that are established for these claims, we
will be required to increase reserves for losses and loss
adjustment expenses with a corresponding reduction in our
earnings in the period in which the deficiency is identified.
The actual effects of inflation on our results cannot be
accurately determined until claims are ultimately settled.
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BUSINESS
While we intend to operate our business as described in this
prospectus, we are a company with a new structure and limited
operating history for significant portions of our business. Our
experience and changes in market conditions and other factors
outside our control may require us to alter our methods of
conducting our business.
Overview
We are a leading provider of fee-based management and other
services for workers' compensation self-insured groups in
New York and California. We have been in the business of forming
and managing self-insured groups in New York since CRM's
inception in 1999 and expanded this business to California in
2003.
We provide the groups with a broad range of services, including
general management, underwriting, risk assessment, medical bill
review and case management, general recordkeeping and regulatory
compliance. We provide safety and loss control services to group
members to help reduce workers' compensation risks and
expenses. In New York, we provide claims management services. We
also act as a broker by placing excess coverage insurance and
any required surety bonds for the groups, and we provide
reinsurance for a portion of this excess coverage through our
subsidiary, Twin Bridges.
The fees we receive for our management services are based on a
percentage of either the manual workers' compensation rates
set by the New York Workers' Compensation Board or the
actual premiums paid to the groups by their members. The fees
for our medical bill review and case management services are
computed on a fee for service basis, and we receive commission
income for placing the excess coverage insurance and surety
bonds.
A self-insured group is an association of employers which
provides workers' compensation insurance to its members.
Statutory workers' compensation insurance provides coverage
for employees' medical expenses and lost wages arising from
work-related injuries and coverage for employers' liability
to injured employees and others arising from the circumstances
that resulted in the injury.
Each group we manage is composed of employers in the same
industry, all of which are located in a single state. The
premiums paid by the members of the groups we manage provide
funding for claims and loss adjustment expenses. Each member of
a group is jointly and severally liable for the liabilities
incurred by the group during the period of the member's
participation, even if the member subsequently leaves the group.
We concentrate on industries that we believe have favorable risk
profiles, and regularly screen and monitor the members of each
group we manage.
We have formed and currently manage 14 self-insured groups
in 12 industries. Eight of these groups are in New York and
six are in California. In New York, the groups cover the
following industries: healthcare, contracting, transportation,
wholesale and retail, manufacturing, public entities, real
estate and cemetery management. In California, the groups cover
the healthcare, contracting, new vehicle franchise auto
dealerships, plastic manufacturing, banking and winery
industries.
Self-insured groups are required to purchase excess
workers' compensation coverage to cover claims that exceed
a minimum level established by state law or regulation or by
administrative determination. Since December 2003, we have
provided reinsurance for a portion of this excess coverage
through our subsidiary, Twin Bridges.
Our net reinsurance premiums for reinsuring a portion of this
excess coverage have increased significantly since Twin Bridges
began business. Our reinsurance business represents a
significant opportunity to enhance our profitability. We intend
to use a significant portion of our net proceeds from this
offering to provide additional surplus to Twin Bridges. We
believe that this additional surplus will allow Twin Bridges to
provide reinsurance for an increased amount of the excess
coverage purchased by the groups we manage. We also anticipate
that Twin Bridges will grow as our fee-based management services
business continues to grow. Our ability to provide reinsurance
is a significant element of our plans to grow our fee-based
management services
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business. We believe that our willingness to reinsure a portion
of the excess coverage our groups obtain and thereby expose our
capital to risk distinguishes us from our competitors.
The Group Self-Insurance Market
The workers' compensation insurance market has historically
fluctuated with periods of low premium rates and excess
underwriting capacity resulting from increased competition,
followed by periods of high premium rates and shortages of
underwriting capacity resulting from decreased competition.
These conditions, along with poor customer service and
substandard loss control and claims management, have motivated
businesses to self-insure against workers' compensation
claims. Large companies generally have the financial strength to
meet the significant statutory requirements to self-insure, or
to create their own captive insurance companies to insure, these
claims. Small and mid-sized companies generally lack the
financial and administrative resources to do this, and in recent
years have resorted to pooling their resources through the
formation of self-insured groups as a means to obtain
workers' compensation insurance at acceptable rates and
terms. CRM was formed in response to this relatively new market
to manage self-insured groups.
California has undergone a period of rapid growth in the
formation of new self-insured groups. From 1999 until 2005,
average workers' compensation rates increased by nearly 50%
after taking into account significant average rate decreases
during the last two years. As a result of this overall increase,
26 private self-insured groups have been formed in California
since 2001 when California authorized the formation of private
self-insured groups. California Senate Bill 899 was passed
in April of 2004 with the goal of reducing the medical and
indemnity benefits paid to injured workers over time. This bill
has allowed insurers to reduce rates. Even though average rates
in California have decreased significantly, as compared to 2003
and 2004, California workers' compensation rates remain
substantially higher than those charged for similar risks in New
York.
In contrast to the California market, self-insured groups have
existed in New York since the mid-1990s and the market is
substantially more mature than the California market, with
approximately 64 groups in existence. New York is in the
process of reevaluating its regulations relating to the
formation of new groups. This has led to a temporary moratorium
on the formation of new groups. This moratorium should not
affect our ability to grow in New York as we believe we have
formed groups in all desired industry classes that we have
targeted. We believe growth in our New York business will occur
as a result of rate increases and, to a lesser extent, increases
in the number of members of our existing groups. Following three
years of relatively stable rates, the New York Workers'
Compensation Board passed a rate increase in August 2005
averaging five percent across all industry groups. This increase
will become effective in October 2005, and manual rates across
the industries in which we have formed self-insured groups will
increase by approximately eight percent on average.
We believe that self-insured groups, when managed effectively,
provide lower and more stable premium rates to their members
than other methods of insuring workers' compensation
liabilities for small and mid-sized businesses. For that reason,
we believe that self-insured groups will continue to be an
attractive workers' compensation insurance option for small
and mid-sized companies.
Competitive Strengths
We believe that we have the following competitive strengths:
•
Superior Operational and Financial Track Record.
We have
    a well-established track record in forming, managing and growing
    self-insured workers' compensation groups, with over
    $27 million in management fees and commission income for
    the year ended December 31, 2004. Since we began our group
    management business in 1999, we have formed and currently
    manage 14 self-insured groups.
•
Full Range of Services for Self-Insured Groups.
We
    provide a full range of services to the groups we manage,
    including general management, underwriting, risk assessment and
    loss control, claims management and medical bill review and case
    management services.
•
Managerial Experience and Expertise.
Our senior
    management team includes Daniel G. Hickey, Jr. and
    Martin D. Rakoff, each of whom has more than 10 years
    of experience in forming groups and
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managing and underwriting workers' compensation coverage
    for groups and has extensive contacts in the insurance and
    reinsurance industries. We believe that the experience of our
    senior management team provides us with a competitive advantage
    over new entrants into the group management market due to the
    significant regulatory and marketing impediments involved in the
    formation and management of self-insured groups. Our managerial
    expertise is in the following areas:
•
Formation of groups.
We have significant experience
    assembling the critical number of initial group members,
    producing required documentation and obtaining regulatory
    approvals. We have effective working relationships with the
    regulatory agencies in New York and California, and serve on a
    number of advisory bodies that evaluate and recommend regulatory
    reform.
•
Cultivation and maintenance of relationships with our general
    agents and brokers.
Our business heavily relies on our
    relationships with general agents and brokers and our executives
    have established excellent relationships with well-screened
    general agents and brokers. We also work closely with our
    general agents and brokers in order to develop new groups,
    maintain our established groups and attract additional members
    to our groups. We offer general agents and brokers competitive
    commissions for coverage placed by our groups and we provide
    training programs to general agents and brokers in order to
    educate them regarding the benefits of workers compensation
    self-insured groups. We believe that these strong relationships
    enhance our ability to attract and retain members of our groups
    and provide us with an advantage over many of our competitors.
    Currently, approximately 77% of the aggregate annualized
    premiums paid or attributable to the groups we manage is derived
    from members introduced to our groups by approximately 20% of
    our general agents and brokers.
•
General management, underwriting, loss control and claims
    management for the groups.
We have a skilled management
    team, that is experienced in structuring workers'
    compensation insurance and reinsurance of excess coverage, a
    group of underwriters experienced in writing group workers'
    compensation insurance, an effective risk assessment and loss
    control group and, in New York, a skilled and effective
    claims management team.
•
Relationships with providers of excess coverage.
New
    self-insured groups often experience difficulty in obtaining
    excess coverage because they have few members during their
    start-up phase. We use our significant premium volume and
    established relationships with providers of excess coverage to
    obtain for our managed groups the full excess coverage required
    by statute. This provides us with a significant advantage in
    forming new groups and penetrating new markets.
Strategy
The key elements of our strategy are:
•
Continued Growth of Fee-Based Business.
Our California
    groups have grown rapidly since we began doing business in
    California. We anticipate continued growth in California in the
    near term both through an increase in membership in our existing
    groups and through an increase in the number of groups we
    manage. In New York, we believe growth will result from recently
    approved rate increases that allow our established groups to
    increase the premiums they charge their members and, to a lesser
    extent, from an increase in membership in these groups.
We have identified other states which represent possible new
    market opportunities for our self-insured group model, but we
    have not entered these states in order to focus our resources on
    the growth of our California business. Furthermore, in 2006, we
    intend to offer our medical bill review and case management
    services to large, self insured entities, insurance companies,
    self-insured groups and other parties requiring these services.
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•
Growth of Reinsurance Business.
We intend to use a
    significant portion of our net proceeds from this offering to
    provide additional surplus to Twin Bridges. Our reinsurance
    business represents a significant opportunity to enhance our
    profitability. We believe that additional surplus will allow
    Twin Bridges to provide reinsurance for an increased amount of
    the excess coverage obtained by the groups we manage.
    Furthermore, as our aggregate management services fees increase,
    our opportunities to grow our reinsurance business should also
    increase.
We intend to explore increasing our fee-based management
services business by developing and offering non-workers'
compensation property and casualty insurance products to
carefully selected members of the groups we manage. Initially,
we would offer these products as a broker through unrelated U.S.
admitted insurers. We believe that our ability to offer these
additional insurance products to members of our groups will
enable us to compete more effectively with commercial insurers
that provide property and casualty insurance products together
with workers' compensation insurance as a comprehensive
package. If we develop and offer these additional insurance
products, Twin Bridges may consider reinsuring a portion of the
risk that is assumed by the U.S. admitted insurers.
Organization and Restructuring
CRM Holdings is a Bermuda exempted holding company incorporated
in September 2005, and will acquire CRM, CRM CA, Eimar and
Twin Bridges through a share exchange, as described below, which
will occur immediately prior to the closing of this offering.
Our principal executive offices are located at Skandia
International House, 16 Church Street, Hamilton, Bermuda
HM 11, and our telephone number is (441) 295-2185. The
headquarters of our U.S. subsidiaries is located at the offices
of CRM at 112 Delafield Street, Poughkeepsie,
NY 12601, and the telephone number is (845) 452-4100.
We conduct our operations principally through the following
subsidiaries domiciled in Bermuda and the United States:
•
Compensation Risk Managers, LLC, or CRM, is a limited liability
    company organized under the laws of New York that is based
    in New York. Since 1999, CRM has provided management and
    other services to groups in New York and since October 2003
    has assisted CRM CA in providing its management services;
•
Compensation Risk Managers of California, LLC, or CRM CA,
    is a limited liability company organized under the laws of
    California that is based in California. Since October 2003,
    CRM CA has provided management services to groups in
    California;
•
Twin Bridges (Bermuda) Ltd., or Twin Bridges, is a Bermuda
    exempted insurance company, incorporated in 2003, that reinsures
    a portion of the excess coverage that NY Marine &
    General provides to the groups that CRM and CRM CA
    manage; and
•
EIMAR, L.L.C., or Eimar, is a limited liability company
    organized under the laws of New York that is based in New
    York. Since 2002, Eimar has provided medical bill review and
    case management services to our groups in New York and
    California.
Prior to the consummation of the restructuring, certain members
of our management team, including Daniel G.
Hickey, Jr., Martin D. Rakoff and Louis J.
Viglotti, as well as certain other persons listed in
"Principal Shareholders" are the beneficial owners of
CRM, CRM CA, Eimar and Twin Bridges. We sometimes refer to these
owners in this prospectus as the "existing
shareholders."
Immediately prior to the closing of this offering, CRM,
CRM CA and Eimar will be converted from limited liability
companies into corporations and the existing shareholders will
contribute all of their interests in CRM and Eimar to CRM USA
Holdings, which will be our wholly owned subsidiary and will
hold all of the outstanding shares of our
U.S. subsidiaries. In exchange, the existing shareholders
will receive shares issued by CRM USA Holdings. The existing
shareholders will then contribute their CRM USA Holdings shares
to us in exchange
for
l
of
our common shares. CRM will then distribute its shares in
CRM CA to CRM USA Holdings. In addition, immediately
prior the closing of this offering, the existing shareholders
will
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contribute all of their interests in Twin Bridges to us in
exchange
for
l
of
our common shares. We refer to these transactions in this
prospectus as the "restructuring." The existing
shareholders ultimately will receive a total
of
l
of
our common shares in exchange for their interests in CRM
(including its subsidiary, CRM CA), Eimar and Twin Bridges.
We expect the restructuring to be tax free to CRM, CRM CA,
Eimar, CRM USA Holdings, Twin Bridges and us.
After completion of the restructuring and this offering, the
existing shareholders will
own
l
of
our common shares,
representing
l
%
of the total voting power of our shares then outstanding.
In connection with the restructuring, CRM, Eimar and Twin
Bridges intend to make a distribution to the existing
shareholders of unpaid earnings and profits in an aggregate
amount equal to the net income for U.S. federal income tax
purposes of CRM and Eimar for the nine months ended
September 30, 2005, plus the amount by which the net income
for U.S. federal income taxes purposes of Twin Bridges for
the period from its commencement through September 30, 2005
exceeds distributions Twin Bridges previously made to its
shareholders, such net income to be computed on a cash basis,
which has been the basis on which distributions have been made
to the existing shareholders by each of CRM and Eimar since
their inception. We refer to these distributions in this
prospectus as the "Distributions." We also will
indemnify the existing shareholders for an amount equal to the
amount of U.S. federal income taxes, if any, that would be
payable by them with respect to the combined net income, if any,
for U.S. federal income tax purposes of CRM, Eimar and Twin
Bridges for the period from October 1, 2005 through the
consummation of the restructuring, computed on a cash basis as
if such period were a taxable period.
Our Business Segments
We operate two business segments: fee-based management services
and reinsurance. Through CRM, CRM CA and Eimar, we provide
management and other services to workers' compensation
self-insured groups in New York and California. Through
Twin Bridges, we reinsure a portion of the excess coverage
obtained by the self-insured groups that we manage. The
revenues, net income and assets of each of our segments for the
six months ended June 30, 2005 and 2004 and the three
years ended December 31, 2004 are set forth in the notes to
our combined financial statements included elsewhere in this
prospectus.
Our Fee-Based Management Services Business
In 1999, we began our business in New York of forming, managing
and operating workers' compensation self-insured groups and
presently manage eight groups in New York. We expanded our
business to California in 2003 and presently manage six groups
there. In the aggregate, the members of our groups are engaged
in a broad range of businesses. While we expect to form
additional managed groups, particularly in California, we intend
to focus on the following industries:
•
Healthcare
— We manage groups in New York
    and California that provide workers' compensation insurance
    to nursing homes, hospitals and physician groups. We believe the
    New York group is one of the largest workers'
    compensation self-insured groups in New York.
•
Contractors
— We manage groups in New York
    and California that provide workers' compensation insurance
    to artisan contractors, including carpenters, masons, plumbers,
    electricians and those in other skilled trades.
•
Transportation
— We manage a group in
    New York that provides workers' compensation insurance
    to companies engaged in highway-borne transportation, including
    local package delivery, bulk hauling of industrial commodities,
    milk hauling and for-hire limousine services.
•
Wholesale/Retail
— We manage a group in
    New York that provides workers' compensation insurance
    to companies engaged in local and regional retail grocery sales
    and entities involved primarily in the distribution of food
    products.
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•
Auto Dealers
— We manage a group in California
    that provides workers' compensation insurance to new
    vehicle franchise auto dealerships.
•
Banks
— In the six months ended June 30,
    2005, we formed a group in California that provides
    workers' compensation insurance to banks.
•
Wineries
— Since June 30, 2005, we formed
    a group in California that provides workers' compensation
    insurance to wineries.
We have formed other self-insured groups with smaller operations
in New York to provide workers' compensation insurance
to the following industries:
•
real estate management, including janitorial, building
    maintenance and management services;
•
cemeteries;
•
public entities, including cities, towns, villages and school
    districts; and
•
manufacturing companies, which includes machine shops, injection
    molding and metal fabrication establishments.
We have also established a small group with operations in
California, which provides workers' compensation insurance
to injection and blow molding establishments.
We provide the groups with a broad range of services, including
general management, underwriting, risk assessment, medical bill
review and case management, general recordkeeping and regulatory
compliance. We provide safety and loss control services to group
members to help reduce workers' compensation risks and
expenses. In New York, the fees we receive from all but one of
our groups are based on a percentage of the manual workers'
compensation rates set by the New York Workers'
Compensation Board that are attributable to the members of the
groups we manage, and our fees include claims management
services. With respect to our groups in California and one of
our groups in New York, our fees are based on a percentage of
the premiums paid to the groups we manage by their members. Our
groups in California pay the fees for claims management services
directly to a third party administrator. In addition, we receive
fees on a fee-for-service basis for medical bill review and case
management services. We also receive commission income from:
(1) U.S. admitted insurers for placing the excess
coverages which the groups are required to obtain and
(2) insurers for placing the required surety bonds for the
groups we manage.
A significant amount of our existing business is dependent on a
relatively small number of our managed groups. The Healthcare
Insurance Trust of New York provided approximately 27.2% and
38.1% of our revenues from fee-based management services for the
six months ended June 30, 2005 and the year ended
December 31, 2004, respectively. Two other groups, Elite
Contractors Trust of New York and Transportation Industry
Workers' Compensation Trust of New York, provided
approximately 20.3% and 13.8%, respectively, of our revenues
from fee-based management services for the six months ended
June 30, 2005 and approximately 21.9% and 13.7%,
respectively, of our revenues from fee-based management services
for the year ended December 31, 2004.
Production of Business
All of our group management business is generated by general
agents and brokers, who receive a commission usually equal to a
percentage of gross premiums the groups charge their members.
These commissions are generally uniform based on the industry
and group involved. We currently have relationships with
approximately 160 general agents and brokers in New York and
approximately 40 general agents and brokers in California.
Currently, approximately 77% of the aggregate annualized
premiums paid or attributable to the groups we manage is derived
from members referred to our groups by approximately 20% of our
general agents and brokers. We carefully screen the general
agents and brokers with whom we do business. No general agent or
broker produces more than 10% of the business underwritten by
the groups that we manage based on our aggregate annualized
premiums paid or attributable to the groups we manage. Our
management and underwriting officers generally have excellent
relationships with these general agents and brokers and both
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value and place a strong emphasis on maintaining these
relationships. We offer brokers and general agents competitive
commissions for coverage placed by our groups and we provide
training programs to brokers and general agents in order to
educate them regarding the benefits of workers'
compensation self-insured groups. We believe that these strong
relationships enhance our ability to attract and retain members
of our groups and provide us with an advantage over many of our
competitors.
Underwriting
Our management services include a determination of the
appropriate level of premium for each member of a group. Our
underwriting department achieves this by adjusting base premium
rates based on:
•
the historical modification factor applicable to the member;
•
the member's loss history for the past three years; and
•
our loss control and risk assessment of the member.
By individually analyzing the appropriate premium for each
member of a group, we distinguish ourselves from other
self-insurance services that typically maintain common pricing
among group members. Our underwriting department attempts to
determine premiums that are sufficient to cover the expected
losses and loss adjustment expenses and fixed costs of the
groups we manage.
Risk Assessment and Loss Control Services
We have structured our risk assessment and loss control services
to provide high level, customized service to the members of each
group. Our services include on-site assessments of safety issues
for all members, annual service plans, compliance reviews and
safety score card and training programs to assess development.
Our model focuses on employee training and behavior modification
in an effort to minimize losses on a prospective basis. We
believe that the industry practice involves inspection-based
loss control on a reactive basis.
Unlike many of our competitors in the insurance industry, all
risk assessment and loss control services are performed by our
employees and no independent contractors are used. Nearly all of
our loss control employees have met our minimum educational
requirement of a bachelors degree or better, and each possesses
one or more of three nationally recognized professional
accreditations and has a minimum of five years of multi-line
carrier loss control experience. We provide each group with a
dedicated service consultant, which gives us greater control of
the work product. We do not provide risk assessment and loss
control services based on premium size, and we do not bill any
members of a group separately for these services. Instead, we
allocate our service resources based on need for improvement,
not premium size. By targeting the accounts that need
professional assistance the most, our loss control function
improves the overall quality of the business by reducing the
aggregate number of workers' compensation claims made by
the members of our managed groups. The loss control personnel
also address workplace safety issues by identifying and
correcting the behavior or condition that resulted in a claim.
Our risk assessment and loss control services are
training-intensive and personal and seek to ensure
accountability for workplace safety among all levels of the
member's management structure.
Claims Management and Group Reserving
Our claims management services involve the administration and
management of a claim from the time it is brought to our
attention until the claim is finally settled. We perform these
services for our New York groups, but do not perform claims
services for our California groups because California law
prohibits self-insured group managers from providing claims
management services. We have established procedures to record
reported insurance claims, regardless of size, in a claims
database upon receipt of notice of the claim. We attempt to make
contact with the injured worker, treating physician and employer
within 24 hours after receiving a claim. This focus on
timely reporting and follow up allows us to mitigate claims and
loss adjustment expenses and identify potential fraud. We
periodically update our database for any developments affecting
a claim.
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Our claims personnel divide claims into three categories: claims
involving only medical expenses, claims involving medical
expenses and up to an estimated 16 weeks of disability and
claims involving medical expenses and longer periods of
disability. The more serious claims are allocated to more senior
employees who typically have a lighter case load. These teams
investigate, evaluate and monitor the claims and each claim is
reviewed at least once every 30 days. We employ a number of
resolution adjustors whose sole job is to resolve these claims
and obtain any approval required by the workers'
compensation group board. As a potential insurance claim
develops, the claims teams will draw on all available resources
to manage and settle the claim.
As required by California law, our California groups retain an
independent claims handling company. All of our California
groups currently retain Matrix Absence Management, Inc., or
Matrix, a subsidiary of Delphi Financial Group, Inc., to perform
these services under a contract negotiated between Matrix and
the group. However, we retain claims settlement authority,
establish loss reserves and review the work performed by Matrix
on a regular basis. With the agreement of each group, we also
have required Matrix to utilize the same independent claims
management software that we use.
We use our claims database as an electronic workflow management
tool for loss adjustment, coverage issues and litigation and to
provide each group and its board with claims and loss
information and to establish claims reserves for each group.
These reserves are reviewed each year in the course of the
independent audit performed for each group. In addition, the New
York groups are subject to review by the New York Workers'
Compensation Board and the groups in California are subject to
review by the California Department of Industrial Relations.
Medical Bill Review and Case Management
In 2002, we expanded our fee-based management services to
include medical bill review and case management services.
The services include:
•
Medical Bill Review.
This service reviews medical bills,
    reconciles them to the appropriate state fee schedule and
    subsequently reduces them to the allowable amount of payment. We
    attempt to be competitive by providing superior turn-around time
    and a quality review process which produces relatively few
    errors.
•
Independent Medical Examinations.
This service provides
    for the scheduling of independent medical examinations for
    verification of the medical diagnosis and treatment plan for
    injured workers. We believe that this service is very
    competitive because we have assembled a high-quality physician
    network to provide the members of our groups with objective
    medical opinions.
•
Medical Case Management/ Utilization Review.
Through this
    service we supplement our claims management services by hiring
    registered nurses to coordinate communication among claims
    adjusters, treating physicians and injured workers.
Currently, nearly all of the income we receive for these
services is attributable to our self-insured groups. We have
recently hired a vice president of sales and marketing to help
to sell these medical bill review and case management services
to third parties. Our business strategy includes offering these
services to large self-insured entities, insurance companies,
self-insured groups and others that require these services.
Brokerage Services for the Groups
Self-insured groups are required to purchase excess
workers' compensation coverage above certain levels
established by state law or regulation or by administrative
determination. We act as a broker and place this excess
insurance coverage and any required surety bonds for the groups
for which we earn commissions. The gross premiums for excess
coverage for the groups we manage and our net reinsurance
premiums for reinsuring a portion of this excess coverage have
increased since Twin Bridges began business in December 2003.
Gross premiums for excess coverage placed during any period is
the aggregate amount of premiums for excess coverage insurance
that the groups we manage will pay under the excess coverage
policies written
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during that period. Our management regards the changes in these
amounts as a meaningful indicator of our expected net
reinsurance premiums and commission income in the future.
Our Reinsurance Business
The groups we manage purchase excess workers' compensation
coverage from U.S. admitted insurers to cover claims that
exceed a minimum level established by state law or regulation or
by administrative determination. Typically, our managed groups
purchase excess coverage for losses and loss adjustment expenses
in excess of $500,000 per occurrence. This "excess
coverage" purchased by the groups provides them with
benefits for losses in excess of the $500,000 per
occurrence liability retained by the groups. Our managed groups
also purchase what is called "catastrophic coverage"
for losses and loss adjustment expenses in excess of
$1 million per occurrence. The catastrophic coverage
purchased by our managed groups is not subject to a per
occurrence limit. In addition, each of our groups also purchases
coverage to insure against the risk that a large number of
claims will occur and result in losses that are each less than
$500,000 and that the aggregate result of such losses could
exhaust their resources. This "frequency coverage" is
triggered in the event that the aggregate amount of losses and
loss adjustment expenses during the coverage period exceeds a
range from 90% to 150% of the premiums paid to the groups by
their members. If the frequency coverage is triggered, the
insurer pays the next $2 million of losses and related loss
adjustment expenses of the group during the coverage period. NY
Marine & General provides the excess coverage and the
frequency coverage insurance for 13 of our 14 groups. Under our
reinsurance agreement with NY Marine & General, we
reinsure 50% of all of the coverage it provides and receive 50%
of the premiums (or our assumed premium) paid to it by these
groups. We allow NY Marine & General a ceding
commission of 28% of our assumed premium to cover its
acquisition, general and administrative expenses, a further 2%
for stop-loss coverage and 1% to cover the U.S. federal
excise tax, or a total of 31% of our assumed premium. The stop
loss coverage limits our losses under our reinsurance agreement
to 181.16% of our assumed premium, net of the ceding commission
and the cost of the stop-loss coverage and the U.S. federal
excise tax. Our net reinsurance premiums are comprised of our
assumed premiums, net of the 2% fee for the stop-loss coverage.
The ceding commission of 28% of our assumed premium and the 1%
cost to cover the U.S. federal excise tax are recorded as part
of policy acquisition costs. NY Marine & General in turn
pays a 20% commission to CRM for any excess coverage placed with
NY Marine & General by CRM or CRM CA. We are required
to provide NY Marine & General with significant security to
secure our reinsurance obligations, which security may consist
of a bank-issued letter of credit, a reinsurance trust fund for
the benefit of NY Marine & General or cash. The groups
purchase the catastrophic coverage for losses above these levels
from other insurers. The groups place this excess coverage on
different dates during the year, generally on
January 1st and April 1st.
Our agreement with NY Marine & General automatically
renews each year unless previously cancelled with
120 days' notice prior to the anniversary of the
effective date of the agreement. This agreement covers the
reinsurance of each group which purchases excess coverage from
NY Marine & General. If NY Marine & General
were to increase the amount of the excess coverage it provides
for the groups in the future, we would seek to reinsure NY
Marine & General for a 50% pro rata share of the
increased level of coverage. In addition, we intend to seek the
opportunity to increase the percentage of excess coverage that
we reinsure.
Our Bermuda-based reinsurance operations are managed by Quest
Management Services Limited, an independent Bermuda manager.
Quest provides certain general and administrative services to
Twin Bridges on an hourly time and expense fee basis.
Reserves
Twin Bridges, our reinsurance subsidiary, is required to
establish reserves for losses and loss adjustment expenses under
applicable insurance laws and regulations and U.S. GAAP.
These reserves are balance sheet liabilities representing
estimates of future amounts required to pay losses and loss
adjustment expenses for reinsured claims that have occurred at
or before the balance sheet date, reported to us or incurred but
not yet reported to us. Our policy is to establish these losses
and loss adjustment reserves prudently after considering all
information known to us as of the date they are recorded.
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Loss reserves fall into two categories: case reserves for
reported losses and loss adjustment expenses associated with a
specific reported insured claim, and reserves for
incurred-but-not-reported, or IBNR, losses and loss adjustment
expenses. We have established these two categories of loss
reserves as follows:
•
Case reserves — Following the receipt and analysis of
    a notice of claim, Twin Bridges establishes a case reserve for
    the estimated amount of its ultimate settlement and its
    estimated loss adjustment expenses. Twin Bridges establishes
    case reserves based upon the amount of claims reported and may
    subsequently supplement or reduce the reserves as our claims
    department deems necessary.
•
IBNR reserves — An independent actuary estimates and
    establishes reserves for loss amounts incurred but not yet
    reported, including expected development of reported claims.
    These IBNR reserves include estimated loss adjustment expenses.
    The actuary calculates IBNR reserves by using generally accepted
    actuarial techniques, relying on the most recent information
    available, including pricing information, industry information
    and our historical losses and expenses and revises these
    reserves for losses and loss adjustment expenses as additional
    information becomes available and as claims are reported and
    paid.
The reserve for losses and loss adjustment expenses represents
an estimate of the ultimate cost of all reported and unreported
losses and loss adjustment expenses insured pursuant to
reinsurance agreements associated with reported claims and
claims incurred but not reported which are unpaid at the balance
sheet date. The liability is estimated using actuarial studies
of individual case-basis validations, statistical analyses and
industry data. We believe that our aggregate liability for
losses and loss adjustment expenses at year-end represent our
best estimate, based upon available data, of the amounts
necessary to settle the ultimate cost of expected losses and
loss adjustment expenses. Twin Bridges has only been in
existence since December 2003, has had limited loss experience
and relatively small population of underlying risks, and
therefore is exposed to an increased likelihood that actual
results may not conform to our estimates. These estimates are
also subject to the effects of trends in loss severity and
frequency risks, fluctuations in inflation, prevailing economic,
social and judicial trends, legislative changes and internal and
third party claims handling procedures. There also may be a
significant delay between the occurrence of the insured event
and the time it is actually reported to us. Accordingly, the
ultimate settlement of losses and related loss adjustment
expenses may vary significantly from the estimates included in
our financial statements.
Since we have very limited loss development experience, the
independent external actuarial specialists that estimate our
loss reserves and loss adjustment expenses combine several
methods to calculate reserves for unpaid reported losses as well
as losses incurred-but-not-reported, or IBNR, reserves. The
actuarial methods employed include (i) the paid and
incurred loss development method, (ii) the loss ratio
method, and (iii) the Bornhuetter-Ferguson method. The
Bornhuetter-Ferguson method is a generally accepted actuarial
technique that produces expected loss ratios that are implied by
actual loss experience and developments. The combination of
these three methods has led to a range of estimated total
reserves. We believe that the assumptions by the independent
external actuarial specialists represent a realistic and
appropriate basis for currently estimating our reserves for
losses and loss adjustment expenses.
Reserve estimates and reserving methodologies are reviewed
regularly, taking into account all currently known information
and updated assumptions related to unknown information. Reserves
for losses and loss adjustment expenses established in prior
periods are adjusted as claim experience develops and new
information becomes available. Any such adjustments are included
in income in the period in which they are made. Any adjustments
to previously established reserves may significantly impact
current period net income by reducing net income if previous
period reserve estimates prove to be inadequate and are required
to be increased or increasing net income if prior period
reserves become overstated and are required to be reduced. We
also review the estimate of losses and loss adjustment expenses
provided to us by NY Marine & General.
While we believe that we will be able to make a reasonable
estimate of our ultimate losses, we may not be able to predict
our ultimate claims experience as reliably as other companies
that have had reinsurance operations for a substantial period of
time, and we cannot assure you that our actual losses and loss
adjustment expenses will not exceed our total reserves.
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Investments
Currently, our investment portfolio is comprised of short-term
U.S. Treasury bills, cash and money market equivalents.
Upon the completion of the offering, our board of directors will
establish our investment policies and management will implement
our investment strategy with the assistance of independent
investment managers. We currently intend to retain KeyBank,
Smith Barney Citigroup and Wachovia Securities LLC to act
as our external investment managers. Our investment guidelines
will specify minimum criteria on the overall credit quality,
liquidity and risk-return characteristics of our investment
portfolio and include limitations on the size of particular
holdings, as well as restrictions on investments in different
asset classes. The board of directors will monitor our overall
investment returns and review compliance with our investment
guidelines.
Our investment strategy seeks to preserve principal and maintain
liquidity while trying to maximize total return through a high
quality, diversified portfolio. Investment decision making will
be guided primarily by the nature and timing of our expected
losses and loss adjustment expenses payouts, management's
forecast of our cash flows and the possibility that we will have
unexpected cash demands, for example, to satisfy claims due to
catastrophic losses. We expect our investment portfolio will
consist primarily of highly rated and liquid fixed income
securities.
If we do not structure our investment portfolio so that it is
appropriately matched with any of our insurance and reinsurance
liabilities, we may be forced to liquidate investments prior to
maturity at a significant loss to cover such liabilities.
Investment losses could significantly decrease our asset base,
which will adversely affect our ability to conduct business.
Possible Insurance Products
We intend to explore increasing our fee-based management
services business by developing and offering certain
non-workers' compensation property and casualty insurance
products to carefully selected members of the groups we manage.
Initially, we would offer these products as a broker through
unrelated U.S. admitted insurers. We will carefully select
the members of our groups to which we offer these additional
insurance products by analyzing the workers' compensation
loss experiences of these members as well as other relevant
factors. We believe that our ability to offer these additional
insurance products to members of our groups will enable us to
compete more effectively with commercial insurers that provide
property and casualty insurance products together with
workers' compensation insurance as a comprehensive package.
The experience of our management team includes significant
expertise in underwriting and marketing these additional
insurance products, and we believe that there is a demand for
these products by members of our groups. If we develop and offer
these additional insurance products, Twin Bridges may consider
reinsuring a portion of the risk assumed by the
U.S. admitted insurers that underwrite the products.
Our assessment of these insurance products is in the early
stages, and there can be no assurance that we will successfully
develop or market any of these insurance products or that Twin
Bridges will be offered the opportunity to reinsure any of the
risks of the U.S. admitted insurers that may provide this
insurance. Nevertheless, we anticipate that we will need to
devote management time and working capital resources to complete
our assessment of these opportunities and to implement the
strategy, if any, that we adopt. Furthermore, in the event we
develop and offer these insurance products, and Twin Bridges
reinsures a portion of the resulting risk, Twin Bridges will be
subject to potential additional losses and loss adjustment
expenses.
Competition
We and the groups we manage compete with many companies in the
workers' compensation insurance business. These competitors
include:
•
the state funds in New York and California;
•
specialty, regional and major insurers in New York, such as
    American International Group, Inc., Chubb Group of Insurance
    Companies, Zurich Financial Services, Utica National Insurance
    Group,
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Greater New York Mutual Insurance Company, Travelers Insurance
    Group Holdings Inc., Liberty Mutual Insurance Company and
    Hartford Financial Services Group Inc, and in California, such
    as Employers Direct Insurance Company, Redwood Fire &
    Casualty Insurance Co., Republic Companies Group, Inc., Redlands
    Insurance Co., St. Paul Travelers, Zenith National Insurance
    Corp, National Liability and Fire Insurance Company, Preferred
    Employers, SeaBright Insurance Company, CompWest Insurance
    Company, Employers Compensation Insurance Company of California,
    Everest Insurance Company, American International Group, Inc.,
    Chubb Group of Insurance Companies, ICW Group and The Hartford
    Financial Services Group, Inc., and
•
groups managed by other group administrators, such as First
    Cardinal Corporation and New York Compensation Managers, Inc. in
    New York and Bickman Risk Services in California.
Many of the insurance companies listed above have more capital,
name and brand recognition, marketing and management resources
than we or the groups we manage have. Many of our competitors
have offered, and may continue to offer, workers'
compensation insurance combined with other insurance coverage.
Some of our competitors offer workers' compensation
insurance on a multi-state basis. Competition in our industry is
very intense and from time to time results in a significant
reduction in premiums for workers' compensation insurance,
and we may be competitively disadvantaged because key group
members may be obliged or inclined to purchase packaged products
or multi-state workers' compensation coverage from our
competitors in order to receive favorable rates for other types
of liability coverage or because our competitors offer superior
premium rates or policy terms. We cannot assure you that we will
be able to implement our business strategy in a manner that will
allow us to be competitive. Increased competition could reduce
the ability of our groups to attract new members and retain
existing members and would adversely impact the groups we manage
and our business, financial condition and results of operations.
Ratings
Ratings by independent agencies are an important factor in
establishing the competitive position of commercial insurance
and reinsurance companies. Rating organizations continually
review the financial positions of insurers. Standard &
Poors, or S&P, maintains a letter scale rating system
ranging from "AAA" (Extremely Strong) to "R"
(under regulatory supervision). A.M. Best maintains a
letter scale rating system ranging from "A++"
(Superior) to "F" (in liquidation). The objective of
S&P and A.M. Best's ratings systems is to provide an
opinion of an insurer's or reinsurer's financial
strength and ability to meet ongoing obligations to its
policyholders. Unlike commercial insurers and reinsurers,
workers' compensation groups do not generally obtain
ratings from S&P or A.M. Best. We do not believe that
the small to mid-sized companies buying workers'
compensation from self-insured groups, such as the ones we
manage, give any material consideration to the lack of ratings
of these groups. Rather they rely on the management and boards
of directors of these groups, the excess coverage obtained by
the groups and the joint and several liability of the members of
the groups as security for their coverage. Twin Bridges has not
been affected by its lack of a rating with respect to its
reinsurance with NY Marine & General, which is
currently rated "A" by A.M. Best, the insurer
that provides excess coverage insurance to 13 of the
14 groups we manage, since we believe that NY
Marine & General relies primarily on the security
provided by Twin Bridges in the form of letters of credit.
Employees
As of September 14, 2005, we employed approximately
154 full-time employees and 7 part-time employees. The
number of employees in each of our subsidiaries as of
September 14, 2005 was as follows:
CRM
117
CRM CA
16
Eimar
28
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We have the following number of employees performing the
following functions as of September 14, 2005:
Employees
Administrative
52
Managers
13
Claims Management
40
Risk Assessment and Loss Control Services
10
Sales and Marketing
5
Underwriting
16
Medical Bill Review and Case Management
25
Total
161
We expect that we will continue to hire additional employees as
we expand our business. We believe that our relations with our
employees are good. None of our employees is subject to a
collective bargaining agreement.
Properties
Our U.S. operations are currently headquartered in
Poughkeepsie, New York at one location, which contains
approximately 8,000 square feet. The initial term of the
lease for these premises expires around March, 2007, with an
option to extend the lease term for two additional five-year
terms. The annual lease payments for these offices are
approximately $155,000.
Eimar maintains office space in Poughkeepsie, New York. The
offices consist of approximately 1,400 square feet and the
term of the lease expires on December 31, 2005. The annual
lease payments for these premises are approximately $21,000. One
of the lessors under this lease is Daniel G. Hickey, Sr.,
who is a director and one of our shareholders and is the father
of Daniel G. Hickey, Jr., who is a Co-Chief Executive
Officer and the Chairman of our Board of Directors. See
"Certain Relationships and Related Transactions."
CRM currently leases office space in Hyde Park, New York,
consisting of approximately 7,000 square feet with
additional parking space. The lease expires on October 1,
2009. The annual lease payments for these premises are
approximately $120,000.
We have executed a lease for approximately 26,400 rentable
square feet with parking space located in Poughkeepsie, New York
for a building that is currently under construction. The term of
the lease will commence March 1, 2007 or such later date on
which the construction is substantially complete and the
building is available for occupancy. The lease term is fifteen
years with options to renew for two additional 5 year
terms. Annual lease payments are $924,000 in the first five
years, $1,016,400 in years five through ten, $1,118,040 in years
ten through fifteen, $1,257,696 in the first renewal term and
$1,415,040 in the second. The lease also provides for an option
to purchase the building. The option is exercisable
120 days prior to the anticipated occupancy of the building
under the lease. The option price is approximately $3,500,000
plus all documented out-of-pocket construction costs after
May 1, 2005. If we fail to exercise this initial option, we
have an additional option to purchase the building during the
first two years of our lease for the fair market value of the
property, which will not be less than $3,500,000 plus the costs
incurred by the landlord in developing and constructing the
building.
CRM CA has executed leases for office space in Roseville and
Irvine, California. The annual lease payments for these office
spaces are approximately $87,000 in the aggregate.
We believe that the premises under construction in Poughkeepsie
facilities and our space in California are sufficient for our
foreseeable needs.
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Legal Proceedings
In April, 2005, Cornerstone Program Management &
Insurance Services, Inc., or Cornerstone, one of its affiliates
and their principals sued CRM, CRM CA and Contractors Access
Group of California, Inc., or CAP in the Superior Court of
California, Orange County, Case No. 05CC04720. In May 2005,
the plaintiffs dropped Cornerstone's affiliate as a
plaintiff and CAP as a defendant. The amended complaint alleges
that in November 2004, CRM wrongfully caused Cornerstone to be
terminated as general agent for a workers' compensation
self-insured group for California contractors, and wrongfully
assumed Cornerstone's responsibilities under that program.
Cornerstone also alleges that CRM had falsely accused
Cornerstone and its principals of wrongfully diverting money and
of other wrongful conduct. The amended complaint alleges six
claims. None of the claims seeks a specific amount of damages.
CRM intends to defend the litigation vigorously and has asserted
counterclaims against Cornerstone and others for breach of
contract, fraud and intentional interference with economic
advantage and alleging that Cornerstone had wrongfully used
confidential information it had received from CRM to establish a
workers' compensation self-insurance program for California
automobile dealers. No trial date has been scheduled as yet.
CRM loaned Cornerstone and its principals $468,782.82, to be
used by them as working capital, of which $371,758.55 remains
outstanding. The borrowers failed to make timely installment
payments due under the working capital loan commencing
March 15, 2005 and CRM has declared the loan in default and
immediately due and payable in full and brought an action
against the borrowers for collection. On July 15, 2005, CRM
sued to recover the debt in the federal court in the Central
District of California. CRM is currently awaiting the
defendants' answer to its amended complaint.
On December 29, 2004 H.F.C.A. Associates Corp. and
17 related companies, all of which were members or former
members of the Healthcare Industry Trust of New York or HITNY,
sued HITNY and CRM in the Supreme Court of the State of New
York, Ulster County, Case No. 4133/04, alleging, among
other things, that the defendants had improperly terminated
their membership in HITNY and failed to process claims on their
behalf. The plaintiffs also alleged that CRM had engaged in self
dealing and had committed a breach of fiduciary duties owed to
them in connection with the placement of reinsurance for the
members of HITNY. The complaint asks for damages of
$1 million against both defendants, and a judgment that the
plaintiffs did not owe HITNY the outstanding premium for which
they had been invoiced.
HITNY answered the complaint, denying the plaintiffs'
material allegations. HITNY alleged that the plaintiffs'
membership had been properly terminated and asserted a
counterclaim against the plaintiffs in the amount of $107,000
for unpaid premium. HITNY also asserted a claim against CRM
alleging generally that if the plaintiffs suffered any damages
they were caused by CRM's actions or wrongdoing.
CRM answered the complaint, denying the plaintiffs'
material allegations, including the allegations of self dealing
and breach of fiduciary duty, and asserting a claim based on
breach of contract and contribution against HITNY for whatever
damages the plaintiffs may recover from CRM.
This litigation is in its early stages; the parties have not yet
exchanged any responses to discovery demands.
Other than the foregoing, we are not a party to any material
litigation.
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REGULATION
General
The business of insurance and reinsurance is regulated in most
countries, although the degree and type of regulation varies
significantly from one jurisdiction to another. Our reinsurance
business is subject to direct regulation in Bermuda, although
this regulation is less pervasive than regulations applicable to
primary insurers. The groups we manage in New York and
California are subject to extensive financial regulation under
applicable statutes in those jurisdiction.
Bermuda Regulation
As a holding company, CRM Holdings is not subject to insurance
regulations in Bermuda.
Twin Bridges is subject to regulation under the Insurance Act
1978 and its related regulations, or the Bermuda Insurance Act,
which provides that no person may carry on any insurance
business in or from or within Bermuda unless registered as an
insurer under the Bermuda Insurance Act by the BMA, which is the
regulatory body responsible for the day-to-day supervision of
insurers. Under the Bermuda Insurance Act, insurance business
includes reinsurance business. The BMA, in deciding whether to
register a company as an insurer, has broad discretion to act as
the BMA thinks fit in the public interest. The BMA is required
by the Bermuda Insurance Act to determine whether the applicant
is a fit and proper body to be engaged in the insurance business
and, in particular, whether it has, or has available to it,
adequate knowledge and expertise. The registration of an
applicant as an insurer is subject to its complying with the
terms of its registration and such other conditions as the BMA
may impose from time to time. The BMA issues four types of
general business insurance licenses (Class 1, Class 2,
Class 3 and Class 4). A Class 3 license allows a
company to underwrite third party risks. Twin Bridges was
registered under the Bermuda Insurance Act as a Class 3
insurer in December 2003.
A Bermuda insurance advisory committee appointed by the Bermuda
Minister of Finance advises the BMA on matters connected with
the discharge of the BMA's functions and sub-committees
thereof supervise and review the law and practice of insurance
in Bermuda, including reviews of accounting and administrative
procedures.
The Bermuda Insurance Act imposes on Bermuda insurance companies
solvency and liquidity standards and auditing and reporting
requirements and grants to the BMA powers to supervise,
investigate and intervene in the affairs of insurance companies.
Certain significant aspects of the Bermuda insurance regulatory
framework are set forth below.
The BMA has recently moved to a risk based approach when it
comes to licensing and supervising insurance companies in
Bermuda. As part of the BMA's risk based system, an
assessment of the inherit risks within each particular class of
insurer is utilized in the first instance to determine the
limitations and specific requirements which may be imposed.
Thereafter the BMA keeps its analysis of relative risk within
individual institutions under review on an ongoing basis,
including through scrutiny of regular audited statutory
financial statements, and, as appropriate, meeting with senior
management during onsite visits. The initial meetings with
senior management and any proposed onsite visit will primarily
focus, upon companies that are licensed as Class 3 and
Class 4 insurers. The BMA has also recently adopted
guidance notes, or the Bermuda Guidance Notes, in order to
ensure those operating in Bermuda have a good understanding of
the nature of the requirements of, and the BMA's approach
in implementing, the Bermuda Insurance Act.
Classification of Insurers
The Bermuda Insurance Act distinguishes between insurers
carrying on long-term business and insurers carrying on general
business. There are four classifications of insurers carrying on
general business; with Class 4 insurers are subject to the
strictest regulation. Twin Bridges is registered as a
Class 3 insurer. We do not intend, at this time, to obtain
a license for Twin Bridges to carry on long-term business.
Long-term business includes life insurance and disability
insurance with terms in excess of five years. General business
broadly includes all types of insurance that is not long-term
business.
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Cancellation of Insurer's Registration
An insurer's registration may be canceled by the BMA on
certain grounds specified in the Bermuda Insurance Act,
including failure of the insurer to comply with its obligations
under the Bermuda Insurance Act or if, in the opinion of the
BMA, the insurer has not been carrying on business in accordance
with sound insurance principles.
Principal Representative
An insurer is required to maintain a principal office in Bermuda
and to appoint and maintain a principal representative in
Bermuda. For the purpose of the Bermuda Insurance Act, the
principal office of Twin Bridges is at our principal executive
offices in Bermuda, and Twin Bridges' principal
representative is Quest Management Services Limited. Without a
reason acceptable to the BMA, an insurer may not terminate the
appointment of its principal representative, and the principal
representative may not cease to act as such, unless
30 days' notice in writing to the BMA is given of the
intention to do so. It is the duty of the principal
representative to notify the BMA forthwith of his reaching the
view that there is a likelihood of the insurer for which the
principal representative acts becoming insolvent or that a
reportable "event" has, to the principal
representative's knowledge, occurred or is believed to have
occurred, and within fourteen days of such notification, to make
a report in writing to the BMA setting out all the particulars
of the case that are available to the principal representative.
Examples of such a reportable "event" include failure
by the insurer to comply substantially with a condition imposed
upon the insurer by the BMA relating to a solvency margin or
liquidity or other ratio.
Independent Approved Auditor
Every registered insurer must appoint an independent auditor
approved by the BMA which we refer to as an approved auditor who
will annually audit and report on the statutory financial
statements, solvency certificate and declaration of statutory
ratios. The statutory financial statements and the statutory
financial return of the insurer, in the case of Twin Bridges,
will be required to be filed annually with the BMA. The approved
auditor of Twin Bridges may be the same person or firm which
audits Twin Bridges' statutory financial statements and
statutory financial returns. Twin Bridges' approved auditor
is currently PriceWaterhouseCoopers.
Loss Reserve Specialist
As a registered Class 3 insurer, Twin Bridges will be
required to submit annually an opinion of a loss reserve
specialist, who must be approved by the BMA, with its statutory
financial return and statutory financial statement in respect of
its loss and loss adjustment expense provisions. We have
appointed Simon Lambert, FIA, MAA, as our qualified loss reserve
specialist.
Statutory Financial Statements
Twin Bridges is required to file with the BMA statutory
financial statements no later than four months after its
financial year end (unless specifically extended). The Bermuda
Insurance Act prescribes rules for the preparation and form of
such statutory financial statements (which include, in statutory
form, a balance sheet, an income statement, a statement of
capital and surplus and notes thereto). The insurer is required
to give detailed information and analyses regarding premiums,
claims, reinsurance and investments. The statutory financial
statements are not prepared in accordance with U.S. generally
accepted accounting principles and are distinct from the
financial statements prepared for presentation to the
insurer's shareholders under the Companies Act, which
financial statements will be prepared in accordance with U.S.
generally accepted accounting principles. Twin Bridges, as a
general business insurer, is required to submit the annual
statutory financial statements as part of the annual statutory
financial return. The statutory financial statements and the
statutory financial return are retained by the BMA and do not
form part of the public records.
Annual Statutory Financial Return
Twin Bridges is required to file with the BMA a statutory
financial return no later than four months after its financial
year end (unless specifically extended). The statutory financial
return for a Class 3 insurer
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includes, among other matters, a report of the approved auditor
on the statutory financial statements of such insurer, the
solvency certificates, the declaration of statutory ratios, the
statutory financial statements and the opinion of the approved
loss reserve specialist. The solvency certificates must be
signed by the principal representative and at least two
directors of the insurer who are required to certify, among
other matters, whether the minimum solvency margin has been met
and whether the insurer complied with the conditions attached to
its certificate of registration. The approved auditor is
required to state whether in its opinion it was reasonable for
the directors to so certify. Where an insurer's accounts
have been audited for any purpose other than compliance with the
Bermuda Insurance Act, a statement to that effect must be filed
with the statutory financial return.
Solvency Margin and Restrictions on Dividends and
    Distributions
Under the Bermuda Insurance Act, the value of the general
business assets of a Class 3 insurer must exceed the amount
of its general business liabilities by an amount greater than
the prescribed solvency margin. Twin Bridges is required, with
respect to its general business, to maintain a minimum solvency
margin equal to the greatest of:
(A)
$1,000,000
(B)
Net Premium Written ("NPW")
Prescribed Amount
Up to $6,000,000
20% of NPW
Greater than $6,000,000
The aggregate of $1,200,000 and 15% of the amount by which NPW
    exceeds $6,000,000 in that year; and
(C)
15% of the aggregate of the insurer's loss expense
    provisions and other general business insurance reserves.
Generally, net premium written equals gross premium written
after deduction of any premium ceded by the insurer for
reinsurance.
Twin Bridges is prohibited from declaring or paying any
dividends during any financial year if it is in breach of its
solvency margin or minimum liquidity ratio or if the declaration
or payment of such dividends would cause it to fail to meet such
margin or ratio. In addition, if it has failed to meet its
minimum solvency margin or minimum liquidity ratio on the last
day of any financial year, Twin Bridges will be prohibited,
without the approval of the BMA, from declaring or paying any
dividends during the next financial year. Twin Bridges is
prohibited, without the approval of the BMA, from reducing by
15% or more its total statutory capital as set out in its
previous year's financial statements, and any application
for such approval shall provide such information as the BMA may
require. In addition, if Twin Bridges at any time fails to meet
its solvency margin, it will be required, within 30 days
after becoming aware of such failure or having reason to believe
that such failure has occurred, to file with the BMA a written
report containing certain information as outlined in the Bermuda
Insurance Act.
Additionally, under the Companies Act, Twin Bridges may not
declare or pay a dividend, or make a distribution from
contributed surplus, if there are reasonable grounds for
believing that it is, or would after the payment be, unable to
pay its liabilities as they become due, or if the realizable
value of its assets would be less than the aggregate of its
liabilities and its issued share capital and share premium
accounts.
Minimum Liquidity Ratio
The Bermuda Insurance Act provides a minimum liquidity ratio for
general business insurers. An insurer engaged in general
business is required to maintain the value of its relevant
assets at not less than 75% of the amount of its relevant
liabilities. Relevant assets include cash and time deposits,
quoted investments, unquoted bonds and debentures, first liens
on mortgage loans on real estate, investment income due and
accrued, accounts and premiums receivable, reinsurance balances
receivable and funds held by ceding reinsurers. There are
certain categories of assets which, unless specifically
permitted by the BMA, do not automatically qualify
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as relevant assets, such as unquoted equity securities,
investments in and advances to affiliates and real estate and
collateral loans. The relevant liabilities are total general
business insurance reserves and total other liabilities less
deferred income tax and sundry liabilities and letters of
credit, guarantees and other instruments (by interpretation,
those not specifically defined).
Supervision, Investigation and Intervention
The BMA may appoint an inspector with extensive powers to
investigate the affairs of an insurer if the BMA believes that
an investigation is required in the interest of the
insurer's policyholders or persons who may become
policyholders. In order to verify or supplement information
otherwise provided to the BMA, the BMA may direct an insurer to
produce documents or information relating to matters connected
with the insurer's business.
If it appears to the BMA that there is a risk of the insurer
becoming insolvent, or that it is in breach of the Bermuda
Insurance Act or any conditions imposed upon its registration,
the BMA may, among other things, direct the insurer:
•
not to take on any new insurance business;
•
not to vary any insurance contract if the effect would be to
    increase the insurer's liabilities;
•
not to make certain investments;
•
to realize certain investments;
•
to maintain in, or transfer to the custody of, a specified bank,
    certain assets;
•
not to declare or pay any dividends or other distributions or to
    restrict the making of such payments; and/or
•
to limit its premium income.
Disclosure of Information
In addition to powers under the Bermuda Insurance Act to
investigate the affairs of an insurer, the BMA may require the
insurer (or certain other persons) to produce certain
information to it. Further, the BMA has been given powers to
assist other regulatory authorities, including foreign insurance
regulatory authorities, with their investigations involving
insurance and reinsurance companies in Bermuda but subject to
restrictions. For example, the BMA must be satisfied that the
assistance being requested is in connection with the discharge
of regulatory responsibilities of the foreign regulatory
authority. Further, the BMA must consider whether cooperation is
in the public interest. The grounds for disclosure are limited
and the Bermuda Insurance Act provides sanctions for breach of
the statutory duty of confidentiality.
Bermuda Guidance Notes
The Insurance Amendment Act 2004, or the Amendment Act,
authorized the BMA to issue guidance notes, which we refer to as
the Bermuda Guidance Notes, on the application of the Insurance
Act in respect of the duties, requirements and standards to be
complied with by persons registered under the Bermuda Insurance
Act or otherwise regulated under it and the procedures and sound
principles to be observed by such persons and by auditors,
principal representatives and loss reserve specialists. In March
2005, the BMA issued the Bermuda Guidance Notes through its web
site at www.bma.bm, which provides guidance on, among other
things, the roles of the principal representative, approved
auditor, and approved actuary and corporate governance for
Bermuda insurers. The BMA has stated that the Bermuda Guidance
Notes should be understood as reflecting the minimum standard
that the BMA expects insurers such as Twin Bridges and other
relevant parties to observe at all times. With respect to the
regulatory changes brought about by the Amendment Act and which
are referenced in the Bermuda Guidance Notes, parties must take
immediate steps to ensure they are in compliance with the same.
In relation to other matters contained in the Bermuda Guidance
Notes, the BMA encourages insurers and other relevant parties to
come into compliance as soon as
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possible and, in any event, no later than 31st December
2005 or a later date as may be agreed with the BMA in a
particular case.
Certain other Considerations
Although CRM Holdings is incorporated in Bermuda, we are
classified by the BMA as a non-resident of Bermuda for exchange
control purposes. As a result, we may engage in transactions in
currencies other than Bermuda dollars and there are no
restrictions on its ability to transfer funds (other than funds
denominated in Bermuda dollars) in and out of Bermuda or to pay
dividends to U.S. residents who are holders of its common
shares.
Under Bermuda law, exempted companies are companies formed with
the ability to conduct business outside Bermuda from a principal
place of business in Bermuda. As "exempted" companies,
neither we, nor our subsidiary Twin Bridges may, without the
express authorization of the Bermuda legislature or under a
license or consent granted by the Minister of Finance,
participate in certain business transactions, including:
•
the acquisition or holding of land in Bermuda (except land held
    by way of lease or tenancy agreement which is required for its
    business and held for a term not exceeding 50 years, or
    which is used to provide accommodation or recreational
    facilities for its officers and employees and held with the
    consent of the Bermuda Minister of Finance, for a term not
    exceeding 21 years);
•
(subject to certain provisos) the taking of mortgages on land in
    Bermuda to secure an amount in excess of $50,000 (or whereby any
    such mortgage shall together with any other principal sum or
    sums received by any other mortgage or mortgages held by such
    company from the same mortgagor or mortgagors exceed the sum of
    $50,000);
•
to acquire any bonds, or debentures secured on any land in
    Bermuda, except bonds or debentures issued by the Government of
    Bermuda or a public authority of Bermuda; or
•
the carrying on of business of any kind or type for which it is
    not licensed in Bermuda, except in certain limited circumstances
    such as doing business with another exempted undertaking in
    furtherance of CRM Holdings' or Twin Bridges'
    business carried on outside Bermuda.
Twin Bridges is a licensed insurer in Bermuda, and it is
expected that it will be able to carry on activities from
Bermuda that are related to and in support of its insurance
business in accordance with its license.
Shares may be offered or sold in Bermuda only in compliance with
the provisions of the Investment Business Act of 2003, and the
Exchange Control Act 1972, and related regulations of Bermuda
which regulate the sale of securities in Bermuda. In addition,
specific permission is required from the BMA, pursuant to the
provisions of the Exchange Control Act 1972 and related
regulations, for all issuances and transfers of securities of
Bermuda companies, other than in cases where the BMA has granted
a general permission. The BMA in its policy dated June 1,
2005 provides that where any equity securities, including our
common shares, of a Bermuda company are listed on an appointed
stock exchange, general permission is given for the issue and
subsequent transfer of any securities of a company from and/or
to a non-resident, for as long as any equities securities of
such company remain so listed. The Nasdaq National Market is
deemed to be an appointed stock exchange under Bermuda law.
Notwithstanding the above general permission, the BMA has
granted CRM Holdings permission to, subject to the common shares
in CRM Holdings being listed on an appointed stock exchange,
issue, grant, create, sale and transfer any of CRM
Holdings' shares, stock, bonds, notes (other than
promissory notes), debentures, debenture stock, units under a
unit trust scheme, shares in an oil royalty, options, warrants,
coupons, rights and depository receipts, or collectively the
Securities, to and among persons who are either resident or
non-resident of Bermuda for exchange control purposes, whether
or not the Securities are listed on an appointed stock exchange.
The BMA and the Registrar of Companies accept no responsibility
for the financial soundness of any proposal or for the
correctness of any of the statements made or opinions expressed
in this prospectus.
Under Bermuda law, there are no restrictions on the degree of
foreign ownership, neither we nor our subsidiary Twin Bridges
are currently subject to taxes computed on profits or income or
computed on any
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capital asset, gain or appreciation, or any tax in the nature of
estate duty or inheritance tax or to any foreign exchange
controls in Bermuda. See "Material Tax
Considerations — Certain Bermuda Tax
Considerations."
Under Bermuda law, non-Bermudians (other than spouses of
Bermudians and permanent residents) may not engage in any
gainful occupation in Bermuda without a work permit issued by
the Bermuda Department of Immigration. Such work permits may be
granted or extended upon showing that, after proper public
advertisement, no Bermudian, or spouse of a Bermudian or
individual holding a permanent resident certificate is available
who meets the minimum standards for the advertised position.
None of our executive officers is a Bermudian, and all such
officers will be working in Bermuda under work permits. In April
2001, the Bermuda government announced a policy that places a
six-year term limit on individuals with work permits, subject to
certain exceptions for key employees. We expect to employ
primarily non-Bermudians.
U.S. State and Federal Regulation
Credit for Reinsurance
Self-insured groups are required to purchase excess
workers' compensation coverage from an admitted insurer to
cover claims that exceed a minimum level established by state
law or regulation or by administrative determination. NY
Marine & General and other insurers provide this
coverage and we provide reinsurance to NY Marine &
General for a portion of its coverage, through our subsidiary
Twin Bridges.
Admitted insurers, such as NY Marine & General,
ordinarily will enter into a reinsurance agreement only if it
can obtain credit for the reinsurance ceded on its statutory
financial statements. In general, credit for reinsurance is
allowed in the following circumstances:
•
if the reinsurer is licensed in the state in which the primary
    insurer is domiciled or, in some instances, in certain states in
    which the primary insurer is licensed;
•
if the reinsurer is an "accredited" or otherwise
    approved reinsurer in the state in which the primary insurer is
    domiciled or, in some instances, in certain states in which the
    primary insurer is licensed;
•
in some instances, if the reinsurer (a) is domiciled in a
    state that is deemed to have substantially similar credit for
    reinsurance standards as the state in which the primary insurer
    is domiciled and (b) meets financial requirements; or
•
if none of the above apply, to the extent that the reinsurance
    obligations of the reinsurer are secured appropriately,
    typically through the posting of a letter of credit for the
    benefit of the primary insurer or the deposit of assets into a
    trust fund established for the benefit of the primary insurer.
Because Twin Bridges is not licensed, accredited or otherwise
approved by or domiciled in any state in the United States, a
U.S. admitted insurer, such as NY Marine &
General, is generally only willing to cede business to us if we
provide adequate security to allow it to take credit on its
balance sheet for the reinsurance it purchases. We are only able
to provide adequate security, typically through the posting of a
letter of credit or deposit of assets into a security fund for
the benefit of the U.S. admitted insurer, if we have in
place a letter of credit facility or are otherwise able to
provide necessary security. We currently have a facility with
KeyBank National Association and informal arrangements with
KeyBank and Smith Barney Citigroup, and through these
arrangements we provide NY Marine & General with
letters of credit as security for our aggregate liability under
our reinsurance agreement with NY Marine & General. If we
fail to maintain an adequate letter of credit facility on terms
acceptable to us and are unable to otherwise provide the
necessary security, insurance companies, such as
NY Marine & General, may be unwilling to reinsure
with us.
Operations of Twin Bridges
Twin Bridges is not licensed or admitted to do business in the
United States. The insurance laws of each state of the United
States and of many other countries regulate or prohibit the sale
of insurance and reinsurance within their jurisdictions by
non-domestic insurers and reinsurers that are not admitted to do
business within such jurisdictions. We do not intend to allow
Twin Bridges to maintain an office or solicit, advertise, settle
claims or conduct other insurance activities in any jurisdiction
without a license, unless it can
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do so subject to an exemption from the licensing requirement or
as an approved or accredited surplus lines insurer. We intend to
operate Twin Bridges in compliance with the U.S. state
and federal laws, however, it is possible that a
U.S. regulatory agency may raise inquiries or challenges to
this subsidiary's insurance and reinsurance activities in
the future. If Twin Bridges fails to respond to such inquiries
or challenges in a manner that satisfies the regulatory agency,
they may take legal or administrative action against Twin
Bridges. Such action may have a material adverse effect on our
reputation, business and financial condition.
Federal Regulation
Gramm Leach Bailey Act
The Gramm Leach Bailey Act, or GLBA, which made fundamental
changes in the regulation of the financial services industry in
the United States was enacted on November 12, 1999. The
GLBA permits the transformation of the already converging
banking, insurance and securities industries by permitting
mergers that combine commercial banks, insurers and securities
firms under one holding company, a "financial holding
company." Bank holding companies and other entities that
qualify and elect to be treated as financial holding companies
may engage in activities, and acquire companies engaged in
activities, that are "financial" in nature or
"incidental" or "complementary" to such
financial activities. Such financial activities include acting
as principal, agent or broker in the underwriting and sale of
life, property, casualty and other forms of insurance and
annuities.
Until the passage of the GLBA, the Glass-Steagall Act of 1933
had limited the ability of banks to engage in securities-related
businesses, and the Bank Holding Company Act of 1956, as
amended had restricted banks from being affiliated with
insurers. With the passage of the GLBA, among other things, bank
holding companies may acquire insurers, and insurance holding
companies may acquire banks. The ability of banks to affiliate
with insurers may materially and adversely affect our
U.S. subsidiaries' business and financial condition by
substantially increasing the number, size and financial strength
of potential competitors.
New York and California Regulation
The groups we manage in New York and California are subject to
state law and regulation by workers' compensation boards or
similar authorities in the states in which they operate. As part
of our fee-based management services, we assist the groups we
manage in complying with these laws and regulations. In
addition, we become subject to these same laws and regulations
arising from our activities in forming and marketing these
self-insured groups.
Although such requirements vary from state to state, each
self-insured group must generally meet certain minimum
requirements including:
•
each group must be composed of employers in the same industry,
    all of which must be located in a single state;
•
the members of a group must have and maintain a minimum
    aggregate net worth; and
•
the members of a group must have and maintain a minimum
    aggregate annual payroll.
As we form new groups, we must submit a comprehensive
application to the state regulatory agencies. These applications
must include, among other things, the following information:
•
current payroll reports for each member of the proposed group;
•
a description of the proposed safety program for the proposed
    group;
•
an actuarial feasibility study directed and certified by an
    independent qualified actuary; and
•
a report identifying the projected rate of contribution and
    assessments to be paid by each member for the first year of the
    proposed group's operations.
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In addition, in connection with the formation of a new
self-insured group, each new group will be required to deposit
with the applicable regulatory agency securities, surety bonds
or irrevocable letters of credit which may be liquidated by the
regulatory agency in the event that the group is unable to pay
its liabilities.
After a group is formed, it is subject to a number of
regulations with respect to its operations. Pursuant to these
regulations, each group:
•
must receive prior approval from the applicable state regulatory
    agency prior to admitting a new member;
•
is required to purchase excess workers' compensation
    coverage to cover loss above levels established by the
    applicable state regulatory agency;
•
must follow mandatory guidelines with respect to the investment
    of the funds collected by the group and must follow additional
    guidelines with respect to the use of the funds;
•
is subject to periodic audit and review of the group's
    financial statements and contribution rates by the applicable
    regulatory agency; and
•
must maintain assets in an amount which exceeds its liabilities.
In the event that a group is unable to maintain assets in an
amount which exceeds its liabilities, the group may be limited
in the amount of new members that it may add, may be required to
assess its members in order to remedy such deficiency, deposit
additional security with the applicable regulatory agency or, in
certain circumstances, be dissolved.
Each group is also subject to periodic reporting and disclosure
requirements and must file with the applicable regulatory agency
audited financial statements, actuarial reports and payroll
reports. In California, the self-insured groups are required to
periodically submit audited or reviewed financial statements of
their members.
Both we and the groups we manage are subject to certain
disclosure requirements and other regulations with respect to
the solicitation of new members and the preparation of marketing
material with respect to the groups.
We are licensed by the New York Workers' Compensation Board
as a third party claims administrator in New York. Under
California law, we are not permitted to manage the claims of the
groups we manage in California. Therefore, our groups in
California contract with an independent third party
administrator to perform this task.
These regulations are undergoing review and we believe that
these regulations will likely change in both New York and
California.
Legislative and Regulatory Proposals
From time to time, various regulatory and legislative changes
have been proposed in the insurance and reinsurance industry.
These proposals have included the possible introduction of
federal regulation in addition to, or in lieu of, the current
system of state regulation of insurers. Federal legislation is
also being discussed that would require all states to adopt
uniform standards relating to the regulation of products,
licensing, rates and market conduct. We are unable to predict
whether any of these or other proposed laws and regulations will
be adopted, the form in which any such laws and regulations
would be adopted, or the effect, if any, these developments
would have on our operations and financial condition.
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MANAGEMENT
The following table sets forth certain information regarding our
executive officers and directors.
Name
Age
Title
Daniel G. Hickey, Jr.
38
Co-Chief Executive Officer and Chairman of the Board
Martin D. Rakoff
41
Co-Chief Executive Officer and Deputy Chairman of the Board
Louis J. Viglotti, Esq.
49
General Counsel
Chester J. Walczyk
50
Chief Operating Officer
James J. Scardino
52
Chief Financial Officer
Daniel G. Hickey, Sr.
61
Director
David M. Birsner
38
Director
Philip J. Magnarella
68
Director
Louis Rosner, Esq.
57
Director
Sal Patafio
61
Director
Daniel G. Hickey, Jr. — Co-Chief Executive
Officer and Chairman of the Board.
Mr. Hickey has served as
our Co-Chief Executive Officer and Chairman of the Board since
September 2005, and has served as President of CRM since its
formation in 1999. He also has served as President of Eimar and
CRM CA, since 2001 and 2003, respectively, and as Chairman of
the Board of Twin Bridges since 2003. Mr. Hickey has over
10 years of experience with workers' compensation
insurance as well as experience with the broker community and
property and casualty insurance. Mr. Hickey graduated from
Northeastern University with a B.A. in Finance (with
concentrations in insurance and investments). Daniel G.
Hickey, Jr. is the son of Daniel G. Hickey, Sr., who
is a director of the Company.
Martin D. Rakoff — Co-Chief Executive Officer and
Deputy Chairman of the Board.
Mr. Rakoff has served as
our Co-Chief Executive Officer and Deputy Chairman of the Board
since September 2005, and has served as Chief Executive Officer
of CRM since its formation in 1999. He also has served as Chief
Executive Officer of Eimar and CRM CA since 2000 and 2003,
respectively, and as Deputy Chairman of the Board of Twin
Bridges since 2003. He began his career in 1984, as a national
administrator and has since developed significant experience
working in claims administration. Mr. Rakoff graduated from
Temple University with a B.A. in Journalism.
Louis J. Viglotti, Esq. — General Counsel.
Mr. Viglotti has served as our General Counsel since
September, 2005 and has served as General Counsel of CRM since
2001, and has served as General Counsel of Eimar and CRM CA
since 2001 and 2003, respectively. He also has served as a
Director of Twin Bridges since 2003. Mr. Viglotti has over
20 years of legal experience. Prior to 2001, he was a
partner in the law firm of Vergilis, Stenger, Roberts,
Pergament & Viglotti in Poughkeepsie, New York, and he
continues to be associated with such firm as a contract
attorney. Mr. Viglotti graduated from Marist College, with
a B.A. in Pre-Law and holds a J.D. from Pace University School
of Law.
Chester J. Walczyk — Chief Operating Officer.
Mr. Walczyk has served as our Chief Operating Officer since
September 2005 and has served as Vice President of Loss Control
of CRM from 2000 to January 2003, when he was promoted to Senior
Vice President of Loss Control and Risk Management, which
position he also held with regard to CRM CA from October
2003. In November 2004, he became Chief Operating Officer of
CRM CA. In July 2005, he became Chief Operating Officer of
CRM. Mr. Walczyk began his career in the industry in 1980
as a Loss Control Consultant. Mr. Walczyk holds the
professional designation of Associate in Risk Management
(ARM) and has significant experience in the areas of risk
management, underwriting, product development and marketing,
which he has used to develop and present training seminars
throughout the country. Mr. Walczyk graduated from the
State University of New York at Buffalo with a B.S. in
Industrial Technology.
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James J. Scardino — Chief Financial Officer.
Mr. Scardino has served as our Chief Financial Officer
since September 2005 and has served as Senior Vice President and
Chief Financial Officer of CRM since August 2005. From 2003 to
2005, Mr. Scardino held the position of Senior Vice
President, Finance with RSC Insurance Brokerage, Inc., where his
responsibilities included financial management. From March 2000
until May 2003, Mr. Scardino was Executive Vice President
of Allied American Insurance Agency, Inc., where he was
responsible for program management. Mr. Scardino graduated
from the University of California, Berkeley with a B.A. in
Anthropology and holds an M.B.A. from the Tuck School of
Business at Dartmouth College.
Daniel G. Hickey, Sr. — Director.
Mr. Hickey has served as a member of our board of directors
since September 2005. He also has served as a Director of Twin
Bridges since 2003. Mr. Hickey has served as President of
Hickey-Finn and Company, Inc., an insurance brokerage firm,
since 1980, where his responsibilities have involved sales and
management functions. Mr. Hickey graduated from Marist
College with a B.A. in Psychology. Daniel G. Hickey, Sr. is
the father of Daniel G. Hickey, Jr., who is our Co-Chief
Executive Officer and Chairman of the Board.
David M. Birsner — Director.
Mr. Birsner
has served as a member of our board of directors since September
2005. Since 1996, Mr. Birsner has served as an insurance
broker for and a member of the board of directors of Hickey-Finn
and Company, Inc., where his responsibilities have involved
insurance sales and service. Mr. Birsner graduated from
Siena College with a B.A. in Marketing.
Philip J. Magnarella — Director.
Mr. Magnarella has served as a member of our board of
directors since September 2005. Mr. Magnarella has
significant experience working in various areas of education.
From 1994 until 2004, Mr. Magnarella held various
administrative and consulting positions with the Moore County
Schools in Carthage North Carolina. From 2000 until 2004,
Mr. Magnarella was also a program evaluator for Sandhills
Community College and Hoke County Schools, both in North
Carolina. Mr. Magnarella graduated from the State
University College at Buffalo with a B.S. degree in Industrial
Arts Education and holds an M.Ed from the State University New
York at Buffalo in Counseling and Guidance, a CAS from the State
University College, New Paltz, a N.Y. in Education
Administration, and an Ed.D from Columbia University, New York,
N.Y. in Education Administration.
Louis Rosner, Esq. — Director.
Mr. Rosner
has served as a member of our board of directors since September
2005. Mr. Rosner has been involved in the private practice
of law, concentrating in employment, labor relations and related
business matters, since 1981. Prior to such time he was a Board
Attorney and Litigation Specialist with the National Labor
Relations Board. Mr. Rosner graduated from Cornell
University with a B.S. degree and holds a J.D. from Antioch
School of Law.
Sal Patafio — Director.
Mr. Patafio has
served as a member of our board of directors since September
2005. Mr. Patafio has extensive experience in various
aspects of human resources. Mr. Patafio has served as Human
Resources Manager, Commercial Alliances at IBM Corporation since
July 2004. From 2002 until 2004, Mr. Patafio held the
position of Manager of Human Resources at Micron Technology. For
more than five years prior to 2002, Mr. Patafio was a
Human Resources Consultant at Dominion Semiconductor L.L.C.
Mr. Patafio graduated from the University of Bridgeport
with a B.S. in Industrial and Labor Relations.
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Executive Compensation
The following table sets forth certain information concerning
the compensation of our co-chief executive officers and each of
our other executive officers who earned over $100,000 for the
year ended December 31, 2004. These individuals are
collectively referred to as the "Named Executive
Officers". The compensation set forth below reflects their
compensation as executives of CRM.
Annual Compensation
Long Term Compensation
Awards
Payouts
Restricted
Securities
Other Annual
Stock
Underlying
LTIP
All Other
Name and
Salary
Bonus
Compensation
Awards(s)
Options/
Payouts
Compensation
Principal Position
Year
($)
($)
($)
($)
SARs (#)
($)
($)(1)
Daniel G. Hickey, Jr.
2004
250,000
692,383
—
—
—
—
4,650
Co-chief Executive Officer
Martin D. Rakoff
2004
250,000
692,383
—
—
—
—
325
Co-chief Executive Officer
Louis J. Viglotti
2004
250,000
—
—
—
—
—
4,016
General Counsel
Chester J. Walczyk
2004
112,306
9,500
—
—
—
—
1,513
Chief Operating Officer
(1)
These amounts are composed of life insurance policies for the
    benefit of the officers, and 401(k) matching contributions.
Our Board of Directors and Corporate Action
Our bye-laws provide that the board of directors shall consist
of not less than two nor more than twenty directors, as
determined by the shareholders at an annual general meeting of
the shareholders, divided into three approximately equal
classes. Upon the closing of this offering, our board of
directors will be comprised of three Class I directors
whose initial term will expire at our 2006 annual
shareholders' meeting and three Class II directors
whose initial term will expire at our 2007 annual
shareholders' meeting and three Class III directors
whose initial term will expire at our 2008 annual
shareholders' meeting. After the initial terms of these
directors, the term of each class of directors elected shall be
three years. Directors may only be removed prior to the
expiration of such director's term at a special meeting of
shareholders called for that purpose. The appointment or removal
of a director requires the simple majority of votes cast, in
person or by proxy, at the meeting at which the proposal is put
forth.
Board Committees
Our board of directors has established a compensation committee
comprised entirely of independent members. Upon the closing of
this offering, our board of directors will establish an audit
committee and a governance and nominating committee.
Audit Committee
The audit committee will assist our board of directors in
monitoring the integrity of our financial statements, the
independent auditor's qualifications and independence,
performance of our independent auditors and our compliance with
legal and regulatory requirements. The audit committee's
responsibilities will also include appointing, reviewing,
determining funding for and overseeing our independent auditors
and their services. Further, the audit committee, to the extent
it deems necessary or appropriate among other responsibilities,
shall:
•
review and discuss with appropriate members of our management
    and the independent auditors our audited financial statements,
    related accounting and auditing principles, practices and
    disclosures;
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•
review and discuss our audited annual and unaudited quarterly
    financial statements prior to the filing of such statements;
•
establish procedures for the receipt, retention and treatment of
    complaints we receive regarding accounting, internal accounting
    controls or auditing matters, and the confidential, anonymous
    submission by employees of concerns regarding our financial
    statements or accounting policies;
•
review reports from the independent auditors on all critical
    accounting policies and practices to be used for our financial
    statements and review the results of those audits; and
•
monitor the adequacy of our operating and internal controls as
    reported by management and the independent or internal auditors.
Under the listing requirements of the Nasdaq National Market, we
are required to maintain an audit committee consisting of at
least three directors, all whom must be independent under Nasdaq
listing requirements. Prior to the closing of this offering, we
intend to establish an audit committee that satisfies these
criteria.
Compensation Committee
The compensation committee's responsibilities include:
•
reviewing and approving corporate and individual goals and
    objectives relevant to the compensation of our Co-Chief
    Executive Officers and other executive officers;
•
evaluating the performance of our Co-Chief Executive Officers
    and other executive officers in light of such corporate and
    individual goals and objectives and, based on that evaluation,
    together with the other independent directors if directed by the
    board of directors, determining the base salary and bonus of the
    Co-Chief Executive Officers and other executives officers;
•
administering any management incentive plan, stock option plan
    or other similar plan we may adopt and approving all grants made
    pursuant to such plan; and
•
making recommendations to our board of directors regarding
    director compensation and any equity-based compensation plans.
Sal Patafio is the chairman of our compensation committee, and
the other member of our compensation committee is Philip J.
Magnarella. We believe that each of these members qualifies as
an independent director under the Nasdaq listing standards.
Governance and Nominating Committee
The governance and nominating committee will be responsible for
assisting our board of directors by:
•
identifying individuals qualified to become directors for
    recommendation to our board of directors;
•
identifying and recommending for appointment to our board of
    directors, directors qualified to fill vacancies on any
    committee of our board of directors;
•
having sole authority to select, retain and terminate any
    consultant or search firm to identify director candidates and
    having sole authority to approve the consultant or search
    firm's fees and other retention terms;
•
developing and recommending to the board a set of corporate
    governance principles and code of business conduct and ethics
    applicable; and
•
exercising oversight of the evaluation of the board and
    management.
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Prior to the closing of this offering, we intend to form a
governance and nominating committee composed entirely of
directors who qualify as independent under the Nasdaq listing
standards.
Non-Employee Director Compensation
We will reimburse our non-employee directors for any
out-of-pocket expenses incurred by them in connection with
services provided in such capacity. In addition, we may
compensate directors for services provided in such capacity in
the form of cash payments and/or option grants.
Employment Agreements
We intend to enter into employment agreements with
Daniel G. Hickey, Jr. and Martin D. Rakoff, our
Co-Chief Executive Officers, upon the closing of this offering.
We do not currently maintain key man life insurance policies
with respect to any of our employees.
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PRINCIPAL SHAREHOLDERS
The following table sets forth the total number and percentage
of our common shares beneficially owned on the date of this
prospectus after giving effect to the restructuring and the
closing of this offering by: (1) each person known to us to
be the beneficial owner of more than 5% of any class of our
outstanding voting shares; (2) each director; (3) each
of our Named Executive Officers; and (4) all executive
officers and directors as a group. Except as otherwise noted
below, the address of each of the persons in the table is
c/o CRM Holdings Ltd., P.O. Box HM 2062, Hamilton HM
HX, Bermuda.
Shares Beneficially Owned
Beneficial Owner
Number
Percent
Daniel G. Hickey, Sr.
Daniel G. Hickey, Jr.
Martin D. Rakoff
Louis J. Viglotti
Chester J. Walczyk
David M. Birsner
Philip J. Magnarella
Louis Rosner
Sal Patafio
Executive officers and directors as a group
SELLING SHAREHOLDERS
The table below sets forth the name of each selling shareholder
and the number of common shares that each selling shareholder is
offering pursuant to this prospectus. Except as noted in
"Management" and in "Certain Relationships and
Related Transactions," none of the selling shareholders
has, or within the past three years has had, any material
relationship with us or any of our predecessors or affiliates,
except as officers and directors.
Beneficial ownership and percentage ownership are determined in
accordance with the rules of the SEC. To our knowledge, except
as indicated in the footnotes to the following table and subject
to community property laws where applicable, the persons named
in this table have sole voting and investment power with respect
to all of our common shares shown as beneficially owned by them.
Shares Beneficially Owned
Shares Beneficially Owned
Prior to this Offering
After this Offering
Shares to be
Shares to be
Percentage
Percentage
Sold Before
Sold Upon Full
Before
After Full
Exercise of
Exercise of
Exercise of
Exercise of
Underwriters'
Underwriters'
Underwriters'
Underwriters'
Name and Address of
Common
Percentage
Over-allotment
Over-allotment
Over-allotment
Over-allotment
Beneficial Owner
Shares
of Class
Option
Option
Option
Option
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Restructuring
Prior to the consummation of the restructuring, certain members
of our management team, including Daniel G.
Hickey, Jr., Martin D. Rakoff and Louis J.
Viglotti, as well as certain other persons listed in
"Principal Shareholders" are the beneficial owners of
CRM, CRM CA, Eimar and Twin Bridges. We sometimes refer to
these owners in this prospectus as the "existing
shareholders."
Immediately prior to the closing of this offering, CRM,
CRM CA and Eimar will be converted from limited liability
companies into corporations and the existing shareholders will
contribute all of their interests in CRM and Eimar to
CRM USA Holdings, which will be our wholly owned subsidiary
and will hold all of the outstanding shares of our
U.S. subsidiaries. In exchange, the existing shareholders
will receive shares issued by CRM USA Holdings. The
existing shareholders will then contribute their CRM USA
Holdings shares to us in exchange
for
l
of
our common shares. CRM will then distribute its shares in
CRM CA to CRM USA Holdings. In addition, immediately
prior to the closing of this offering, the existing shareholders
will contribute all of their interests in Twin Bridges to us in
exchange
for
l
of
our common shares. The existing shareholders ultimately will
receive a total
of
l
of
our common shares in exchange for their interests in CRM
(including its subsidiary, CRM CA), Eimar and Twin Bridges.
We expect the restructuring to be tax free to CRM, CRM CA,
Eimar, CRM USA Holdings, Twin Bridges and us.
After completion of the restructuring and this offering, the
existing shareholders will
own
l
of
our common shares,
representing
l
%
of the total voting power of our shares.
In connection with the restructuring, CRM, Eimar and Twin
Bridges intend to make a distribution to the existing
shareholders of unpaid earnings and profits in an aggregate
amount equal to the net income for U.S. federal income tax
purposes of CRM and Eimar for the nine months ended
September 30, 2005, plus the amount by which the net income
for U.S. federal income taxes purposes of Twin Bridges for
the period from its commencement through September 30, 2005
exceeds distributions Twin Bridges previously made to its
shareholders, such net income to be computed on a cash basis,
which has been the basis on which distributions have been made
to the existing shareholders by each of CRM and Eimar since
their inception. We refer to these distributions in this
prospectus as the "Distributions." We also will
indemnify the existing shareholders for an amount equal to the
amount of U.S. federal income taxes, if any, that would be
payable by them with respect to the combined net income, if any,
for U.S. federal income tax purposes of CRM, Eimar and Twin
Bridges for the period from October 1, 2005 through the
consummation of the restructuring, computed on a cash basis as
if such period were a taxable period.
Compensation Risk Managers Agency, Captive, LLC, or the Agency
Captive, is a licensed insurance broker that is owned by the
existing shareholders. It was originally formed to underwrite a
business unrelated to the self-insured groups managed by CRM.
The Agency Captive currently holds the brokerage license that
CRM and CRM CA use to place the excess coverage with
U.S. admitted insurers and surety bonds, and receives the
commission income which are then remitted in full to CRM or
CRM CA, as applicable. The brokerage license is owned by
Daniel G. Hickey, Jr., one of our Co-Chief Executive
Officers and Chairman of the Board. Upon the closing of this
offering, the license will be transferred to CRM and commission
income will be paid directly to CRM.
Relationship between Twin Bridges and our Managed Groups
The groups we manage purchase excess workers' compensation
coverage from U.S. admitted insurers to cover claims that
exceed a minimum level established by state law or regulation or
by administrative determination. Typically, our managed groups
purchase excess coverage for losses and loss adjustment
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expenses in excess of $500,000 per occurrence. This
"excess coverage" purchased by the groups provides
them with benefits for losses in excess of the $500,000 per
occurrence liability retained by the groups. Our managed groups
also purchase what is called "catastrophic coverage"
for losses and loss adjustment expenses in excess of
$1 million per occurrence. The catastrophic coverage
purchased by our managed groups is not subject to a per
occurrence limit. In addition, each of our groups also purchases
coverage to insure against the risk that a large number of
claims will occur and result in losses that are each less than
$500,000 and that the aggregate result of such losses could
exhaust their resources. This "frequency coverage" is
triggered in the event that the aggregate amount of losses and
loss adjustment expenses during the coverage period exceeds a
range from 90% to 150% of the premiums paid to the groups by
their members. If the frequency coverage is triggered, the
insurer pays the next $2 million of losses and related loss
adjustment expenses of the group during the coverage period.
NY Marine & General provides the excess coverage
and the frequency coverage insurance for 13 of our 14 groups.
Under our reinsurance agreement with NY Marine &
General, we reinsure 50% of all of the coverage it provides and
receive 50% of the premiums, subject to certain liability limits
and premium retentions by NY Marine & General for
certain expenses and services. We therefore act as manager of
the groups and reinsurance broker for the groups, while also
reinsuring NY Marine & General for a portion of
the excess coverage, through our subsidiary Twin Bridges, and
therefore may be deemed to have a conflict of interest. See
"Risk Factors — We may be deemed to have a
conflict of interest in concurrently managing groups and placing
excess coverage for these groups with a U.S. admitted insurer
that cedes a part of this excess coverage to Twin Bridges."
Other Agreements
We conduct business with Hickey-Finn and Company, Inc., or
Hickey-Finn, an insurance broker whose owners include Daniel G.
Hickey, Sr., one of our directors and an existing
shareholder and the father of Daniel G. Hickey, Jr.,
our Co-Chief Executive Officer and Chairman of the Board. We pay
broker commissions to Hickey-Finn for business placed with
several of the self-insured groups that we manage. In addition,
we lease office space and purchase various liability, property
and casualty insurance coverage from Hickey-Finn. For the six
months ended June 30, 2005 and the years ended
December 31, 2004, 2003 and 2002, we paid Hickey-Finn for
its services and operating expenses $144,632, $269,093, $302,341
and $320,370, respectively. David M. Birsner, one of our
directors and an existing shareholder, is also a director of
Hickey-Finn.
Eimar maintains office space in Poughkeepsie, New York. The
offices consist of approximately 1,400 square feet and the
term of the lease expires on December 31, 2005. The annual
lease payments for these premises are approximately $21,000. One
of the lessors under this lease is Daniel G.
Hickey, Sr.
CRM has entered into a revolving credit facility with KeyBank,
under which CRM is entitled to borrow up to $5 million
until December 31, 2005. All of CRM's obligations
under the facility are secured by a lien on substantially all of
CRM's assets and by the personal guarantees of the existing
shareholders, including (i) Daniel G. Hickey, Jr., our
Co-Chief Executive Officer and Chairman of the Board,
(ii) Martin D. Rakoff, our Co-Chief Executive Officer
and Deputy Chairman of the Board, (iii) Daniel G.
Hickey, Sr., one of our directors and the father of
Daniel G. Hickey, Jr. (iv) Village Holdings, LLC,
of which Louis D. Viglotti, our General Counsel, is a
member and (v) David M. Birsner, one of our directors.
In addition, Twin Bridges has entered into a loan agreement with
KeyBank under which Twin Bridges is entitled to draw letters of
credit in the principal amount of up to $3 million, which
agreement expires on September 30, 2005, and had entered
into a second letter of credit loan facility under which it was
entitled to draw letters of credit in the principal amount of up
to $7.5 million. This second letter of credit loan facility
terminated on June 30, 2005. Borrowings under both letter
of credit facilities is or had been guaranteed by the same
existing shareholders mentioned above. It is anticipated that
these personal guarantees will be released upon the closing of
this offering.
In August 2004, we advanced to Martin D. Rakoff, our Co-Chief
Executive Officer and Deputy Chairman of the Board, $200,000
against his bonus earned and payable in December 2004. Mr.
Rakoff paid us $1,825 in interest with respect to such advance.
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Prior to the completion of this offering, our non-management
existing shareholders have been entitled to distributions made
by CRM in certain guaranteed amounts that were paid as part of
selling, general and administrative expenses. Two of our
non-management existing shareholders have been entitled to
annual guaranteed payments of $80,000, and one of our
non-management existing shareholders has been entitled to annual
guaranteed payments of $20,000, in addition to any distributions
that generally were made to all existing shareholders from net
income. For the year ended December 31, 2004, Daniel G.
Hickey, Sr., one of our directors and the father of Daniel
G. Hickey, Jr., our Co-Chief Executive Officer and Chairman
of the Board, and Village Holdings LLC, of which Louis J.
Viglotti, our General Counsel, is a member, each received
guaranteed payments of $80,000 from CRM. In addition,
David M. Birsner, one of our Directors, received a
guaranteed payment of $20,000 from CRM for the year ended
December 31, 2004. These guaranteed payments will cease
upon the completion of this offering.
Louis Rosner, one of our directors, has provided legal services
to CRM from time to time.
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MATERIAL TAX CONSIDERATIONS
The following summary of our taxation and the taxation of our
shareholders is based upon current law and does not purport to
be a comprehensive discussion of all the tax considerations that
may be relevant to a decision to purchase shares. Legislative,
judicial or administrative changes may be forthcoming that could
affect this summary.
The following legal discussion (including and subject to the
matters and qualifications set forth in such summary) of the
material tax considerations under (1) "Certain Bermuda
Tax Considerations" is based upon the advice of Appleby
Spurling Hunter, Bermuda legal counsel and
(2) "Certain U.S. Federal Income Tax
Considerations" is based upon the advice of
Baker & McKenzie LLP. Each of these firms has reviewed
the relevant portion of this discussion (as set forth above) and
believes that such portion of the discussion constitutes, in all
material respects, a fair and accurate summary of the relevant
income tax considerations relating to CRM Holdings and its
subsidiaries and the ownership of CRM Holdings shares by
investors that are U.S. Persons (as defined below). The
advice of such firms does not include any factual or accounting
matters, determinations or conclusions such as insurance
accounting determinations or determinations pertaining to RPII,
amounts and computations and amounts or components thereof (for
example, amounts or computations of income or expense items or
reserves entering into RPII computations) or facts relating to
the business, income, reserves or activities of CRM Holdings and
its subsidiaries. The advice of these firms relies upon and is
premised on the accuracy of factual statements and
representations made by CRM Holdings concerning the business and
properties, ownership, organization, source of income and manner
of operation of CRM Holdings and its subsidiaries. The
discussion is based upon current law. Legislative, judicial or
administrative changes or interpretations may be forthcoming
that could be retroactive and could affect the tax consequences
to holders of shares. The tax treatment of a holder of shares,
or of a person treated as a holder of shares for
U.S. federal income, state, local or non-U.S. tax
purposes, may vary depending on the holder's particular tax
situation. Statements contained in this prospectus as to the
beliefs, expectations and conditions of CRM Holdings and its
subsidiaries as to the application of such tax laws or facts
represent the view of management as to the application of such
laws and do not represent the opinions of counsel.
Prospective investors should consult their own tax
    advisors concerning the U.S. federal, state, local and
    non-U.S. tax consequences to them of owning shares.
Certain Bermuda Tax Considerations
Bermuda does not currently impose any income, corporation or
profits tax, withholding tax, capital gains tax, capital
transfer tax, estate duty or inheritance tax on us or our
shareholders, other than shareholders ordinarily resident in
Bermuda, if any. There is currently no Bermuda withholding or
other tax on principal, interest or dividends paid to holders of
the shares, other than holders ordinarily resident in Bermuda,
if any. We cannot assure you that we or our shareholders will
not be subject to any such tax in the future.
CRM Holdings and Twin Bridges have received written assurance
dated September 15, 2005 and December 29, 2003,
respectively, from the Bermuda Minister of Finance under the
Exempted Undertakings Tax Protection Act 1966 of Bermuda, as
amended, that, if any legislation is enacted in Bermuda imposing
tax computed on profits or income, or computed on any capital
asset, gain or appreciation, or any tax in the nature of estate
duty or inheritance tax, then the imposition of that tax would
not be applicable to CRM Holdings or Twin Bridges or to any of
their respective operations, shares, debentures or obligations
until March 28, 2016; provided, that the assurance is
subject to the condition that it will not be construed to
prevent the application of such tax to people ordinarily
resident in Bermuda, or to prevent the application of any taxes
payable by CRM Holdings or Twin Bridges in respect of real
property or leasehold interests in Bermuda held by them. We
cannot assure you that we will not be subject to any such tax
after March 28, 2016.
Certain U.S. Federal Income Tax Considerations
The following discussion is a summary of certain
U.S. federal income tax considerations relating to CRM
Holdings, Twin Bridges, and CRM USA Holdings and its
subsidiaries, and the ownership of our shares by investors who
acquire such shares in the offering. As discussed further in
this prospectus and based on our
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expected business, properties, ownership, organization, source
of income and manner of operation, we believe that (1) no
U.S. Person that owns shares in CRM Holdings directly or
indirectly through foreign entities subsequent to the offering
should be subject to treatment as a 10% U.S. Shareholder of
a controlled foreign corporation, or CFC, and (2) CRM
Holdings should not be considered a passive foreign investment
company, or PFIC, for the year ended December 31, 2005. We
have not sought and do not intend to seek an opinion of legal
counsel as to whether or not we were a PFIC for the year ended
December 31, 2005, or with respect to any other tax issues.
This summary is based upon the Internal Revenue Code, the
Treasury Regulations promulgated under the Internal Revenue
Code, rulings and other administrative pronouncements issued by
the IRS, judicial decisions, and the tax treaty between the
United States and Bermuda (the "Bermuda Treaty") all
as currently in effect, and all of which are subject to
differing interpretations or to change, possibly with
retroactive effect. No assurance can be given that the IRS would
not assert, or that a court would not sustain, a position
contrary to any of the tax consequences described below. No
advance ruling has been or will be sought from the IRS regarding
any matter discussed in this prospectus. This summary is for
general information only, and does not purport to discuss all
aspects of U.S. federal income taxation that may be
important to a particular investor in light of such
investor's investment or tax circumstances, or to investors
subject to special tax rules, such as shareholders who own
directly, or indirectly through certain foreign entities or
through the constructive ownership rules of the Internal Revenue
Code, 10% or more of the voting power or value of CRM Holdings
(or how those ownership rules may apply in certain
circumstances), tax-exempt organizations, dealers in securities,
banks, insurance companies, persons that hold shares that are a
hedge or that are hedged against interest rate or insurance
risks or that are part of a straddle or conversion transaction,
or persons whose functional currency is not the
U.S. dollar. This summary generally does not discuss
federal taxes other than income tax or other U.S. taxes
such as state or local income taxes. This summary assumes that
an investor will acquire our shares in this offering and hold
our shares as capital assets, which generally means as property
held for investment. Prospective investors should consult their
tax advisors concerning the consequences, in their particular
circumstances, of the ownership of shares under
U.S. federal, state, local and other tax laws.
For U.S. federal income tax purposes and purposes of the
following discussion, a "U.S. Person" means
(1) a citizen or resident of the United States for
U.S. tax purposes, (2) a corporation, partnership or
other entity taxable as a corporation or partnership created or
organized in the United States or under the laws of the United
States or of any of its political subdivisions, (3) an
estate the income of which is subject to U.S. federal
income tax without regard to its source or (4) a trust if a
court within the United States is able to exercise primary
supervision over the administration of the trust and one or more
U.S. Persons have the authority to control all substantial
decisions of the trust, as well as certain electing trusts.
U.S. Taxation of CRM Holdings, Twin Bridges and CRM
    USA Holdings
U.S. Income and Branch Profits Tax.
A foreign
corporation deemed to be engaged in the conduct of a trade or
business in the U.S. will generally be subject to
U.S. federal income tax (at a current maximum rate of 35%),
as well as a 30% branch profits tax in certain circumstances, on
its income which is treated as effectively connected with the
conduct of that trade or business unless the corporation is
entitled to relief under an applicable income tax treaty, as
discussed below. Such tax, if imposed, would be based on
effectively connected income computed in a manner generally
analogous to that applied to the income of a
U.S. corporation, except that a foreign corporation is
entitled to deductions and credits only if it timely files a
U.S. federal income tax return (which requirement may be
waived if the foreign corporation establishes that it acted
reasonably and in good faith in its failure to timely file such
return). CRM Holdings and Twin Bridges intend to operate in such
a manner that they will not be considered to be conducting a
trade or business within the United States for purposes of
U.S. federal income taxation. Whether a trade or business
is being conducted in the United States is an inherently factual
determination. Because the Internal Revenue Code, Treasury
Regulations and court decisions fail to identify definitively
activities that constitute being engaged in a trade or business
in the United States, we cannot assure you that the IRS will not
contend successfully that CRM Holdings and/or Twin Bridges are
or will be engaged in a trade or business in the United States.
CRM Holdings and Twin Bridges intend to file protective
U.S. federal income tax returns on a timely basis in order
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to preserve the right to claim income tax deductions and credits
if it is ever determined that they are subject to
U.S. federal income tax.
An insurance enterprise resident in Bermuda generally will be
entitled to the benefits of the Bermuda Treaty if (1) more
than 50% of its shares are owned beneficially, directly or
indirectly, by individual residents of the United States or
Bermuda or U.S. citizens and (2) its income is not
used in substantial part, directly or indirectly, to make
disproportionate distributions to, or to meet certain
liabilities to, persons who are neither residents of either the
United States or Bermuda nor U.S. citizens. Twin Bridges
expects to be entitled to the benefits of the Bermuda Treaty.
Assuming Twin Bridges is entitled to the benefits under the
Bermuda Treaty, it will not be subject to U.S. federal
income tax on any insurance income found to be effectively
connected with a U.S. trade or business unless that trade
or business is conducted through a permanent establishment in
the United States. Whether business is being conducted in the
United States through a permanent establishment is an inherently
factual determination. Twin Bridges intends to conduct its
activities so as not to have a permanent establishment in the
United States, although we cannot assure you that it will
achieve this result.
Foreign corporations also are subject to U.S. withholding
tax at a rate of 30% of the gross amount of certain "fixed
or determinable annual or periodical gains, profits and
income" derived from sources within the United States (such
as dividends and certain interest on investments), to the extent
such amounts are not effectively connected with the foreign
corporation's conduct of a trade or business in the United
States. The tax rate is subject to reduction by applicable
treaties. Dividends, if any, paid by CRM USA Holdings to CRM
Holdings will be subject to U.S. withholding tax at a rate
of 30%.
The United States also imposes an excise tax on insurance and
reinsurance premiums paid to foreign insurers or reinsurers with
respect to risks located in the United States. The rate of tax
applicable to premiums paid to Twin Bridges is 4% for insurance
premiums and 1% for reinsurance premiums.
CRM USA Holdings, CRM, CRM CA and Eimar will be Delaware
corporations prior to closing of this offering. Each of them
will be subject to taxation in the United States on its
worldwide income at regular corporate rates (of which the
maximum rate is currently 35%).
Personal Holding Companies.
CRM Holdings'
U.S. subsidiaries could be subject to additional
U.S. tax on a portion of their income if any of them is
considered to be a personal holding company, or PHC, for
U.S. federal income tax purposes. A corporation generally
will be classified as a PHC for U.S. federal income tax
purposes in a given taxable year if (1) at any time during
the last half of such taxable year, five or fewer individuals
(without regard to their citizenship or residency) own or are
deemed to own (pursuant to certain constructive ownership rules)
more than 50% of the stock of the corporation by value and
(2) at least 60% of the corporation's adjusted
ordinary gross income, as determined for U.S. federal
income tax purposes, for such taxable year consists of "PHC
income." PHC income includes, among other things,
dividends, certain interest, certain royalties, annuities and,
under certain circumstances, rents. The PHC rules contain an
exception for foreign corporations.
If any of CRM Holdings' subsidiaries were a PHC in a given
taxable year, such corporation would be subject to PHC tax on
its "undistributed PHC income" at a rate of 15%. For
taxable years beginning after December 31, 2008, the PHC
tax rate would be the highest marginal rate on ordinary income
applicable to individuals, which is currently 35%.
Although CRM Holdings believes that none of its subsidiaries is
a PHC, we cannot provide assurance that this will be the case
because of factors including legal and factual uncertainties
regarding the application of the constructive ownership rules,
the makeup of CRM Holdings' shareholder base, the gross
income of CRM Holdings or any of its subsidiaries and other
circumstances that could change the application of the PHC rules
to CRM Holdings' subsidiaries. In addition, if any of CRM
Holdings' subsidiaries were to become PHCs we cannot be
certain that the amount of PHC income would be immaterial.
Anti-Inversion Legislation.
The American Jobs Creation
Act of 2004 provides that, if a foreign corporation acquires
substantially all of the assets of a U.S. corporation, and
80% or more of the stock of the foreign corporation (excluding
new stock issued in a public offering related to the
acquisition) is owned by
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former shareholders of the U.S. corporation by reason of
their ownership of the U.S. corporation, the foreign
corporation will be considered a U.S. corporation for
U.S. federal income tax purposes. The existing shareholders
of CRM and Eimar will contribute their shares to CRM USA
Holdings in return for common shares in CRM USA Holdings. The
existing shareholders will then contribute their CRM USA
Holdings shares for shares to us in exchange for our common
shares. CRM will then distribute its shares in CRM CA to CRM USA
Holdings. In addition, immediately prior to the closing of this
offering, the existing shareholders will contribute all of their
interests in Twin Bridges to us in exchange for our common
shares. We do not expect the current shareholders of CRM and
Eimar to obtain 80% or more of the stock of CRM Holdings
(excluding the stock sold in this offering) by reason of their
ownership of CRM and Eimar, (i.e., we believe that Twin Bridges
is worth more than 20% of the combined value of CRM, Eimar and
Twin Bridges). Accordingly, we do not expect to be adversely
affected by the legislation. Nevertheless, the IRS may not agree
with this valuation. If the IRS successfully challenges this
valuation, we would be subject to United States federal income
tax liability. This liability could have a material adverse
effect on our business, financial condition and results of
operations.
U.S. Taxation of Holders of Shares
Shareholders Who Are U.S. Persons:
Dividends.
Subject to the discussion below relating to
the potential application of the "controlled foreign
corporation," "related person insurance income,"
and "passive foreign investment company" rules,
distributions, if any, made with respect to common shares will
constitute dividends for U.S. federal income tax purposes
to the extent paid out of current or accumulated earnings and
profits of CRM Holdings (as computed under U.S. tax
principles). Certain dividends paid before 2009 to
U.S. individuals, entities or trusts may be eligible for
reduced rates of tax. We do not expect dividends paid by CRM
Holdings to be eligible for the reduced rate of tax unless
shares of CRM Holdings become readily tradable on an established
securities market in the United States. Even in such case,
dividends paid by CRM Holdings would not be eligible for the
reduced rate of tax if CRM Holdings were to be a PFIC in the
year in which the dividends are paid, or in the prior year, or
if certain holding period and other requirements were not met by
the shareholder receiving the dividend. Legislation was recently
introduced in the U.S. Senate, which, if enacted, would
provide that dividends received from CRM Holdings after the date
of enactment would not be eligible for the reduced rate of tax.
Dividends paid by CRM Holdings generally will be foreign source
income for U.S. federal income tax purposes and will not be
eligible for the dividends-received deduction allowed to
U.S. corporations under the Internal Revenue Code. The
amount of any distribution in excess of the current and
accumulated earnings and profits of CRM Holdings will first be
applied to reduce a holder's tax basis in the shares, and
any amount in excess of tax basis will be treated as gain from
the sale or exchange of such holder's shares.
Classification of CRM Holdings or Twin Bridges as a
Controlled Foreign Corporation.
In general, a foreign
corporation is considered a controlled foreign corporation, or
CFC, if "10% U.S. Shareholders" own more than 50%
of the total combined voting power of all classes of voting
stock of such foreign corporation, or the total value of all
stock of such corporation. A 10% U.S. Shareholder is a
U.S. Person who owns at least 10% of the total combined
voting power of all classes of stock entitled to vote of the
foreign corporation. Each 10% U.S. Shareholder of a foreign
corporation that is a CFC for an uninterrupted period of
30 days or more during a taxable year, and that owns shares
in the CFC directly or indirectly through foreign entities on
the last day of the foreign corporation's taxable year on
which it is a CFC must include in its gross income for
U.S. federal income tax purposes its pro rata share (based
on its actual direct and indirect, through foreign entities,
ownership) of the CFC's "subpart F income," even
if the subpart F income is not distributed. Subpart F income
generally includes, among other things, investment income such
as dividends, interest and capital gains, and income from
insuring risks located outside the insurer's country of
incorporation. For purposes of taking into account subpart F
insurance income, a CFC also includes a foreign corporation in
which more than 25% of the total combined voting power of all
classes of stock (or more than 25% of the total value of the
stock) is owned by 10% U.S. Shareholders on any day during
the taxable year of such corporation, if the gross amount of
premiums or other consideration for the reinsurance or the
issuing of insurance contracts generating subpart F income
exceeds 75% of the gross amount of all premiums or other
consideration in respect of all
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risks. It is expected that all of Twin Bridges' income will
be considered subpart F insurance income. In addition, Twin
Bridges may be considered a CFC under the RPII rules discussed
below.
For purposes of determining whether the more-than-50% (or
more-than-25%, in the case of insurance income) and 10%
ownership tests have been satisfied, and therefore whether a
corporation is a CFC, shares owned includes shares owned
directly, indirectly through foreign entities or shares
considered as owned by application of certain constructive
ownership rules. Pursuant to those constructive ownership rules:
•
an individual is treated as owning stock owned by certain
    members of his or her family;
•
a corporation is treated as owning stock owned by a 50% or
    greater shareholder;
•
a partnership is treated as owning stock owned by its partners
    (regardless of their percentage ownership of the
    partnership); and
•
stock owned by a partnership or a corporation is treated as
    owned proportionately by the owners of the entity (in the case
    of corporations, only if the shareholder owns 10% or more of the
    stock of the corporation).
Additional rules apply to trusts and estates. Operating rules
apply to prevent reattribution of ownership in certain
circumstances, as well as attribution that would cause stock to
be treated as not owned by a U.S. person.
Because the
attribution rules are complicated and depend on the particular
facts relating to each investor, you are urged to consult your
own tax advisors regarding the application of the rules to your
ownership of our shares.
Due to the anticipated dispersion of CRM Holdings' share
ownership among holders and its bye-law provisions that impose
limitations on the concentration of voting power of its voting
shares and other factors, CRM Holdings believes that no
U.S. Person that owns shares in CRM Holdings directly
or indirectly through foreign entities should be subject to
treatment as a 10% U.S. Shareholder of a CFC after the
offering. These bye-law provisions are described in "Risk
Factors — Risks Related to Our Shares Sold in this
Offering" and "Description of Share
Capital — Voting Adjustments." We cannot assure
you, however, that the IRS will not challenge the effectiveness
of these provisions for purposes of preventing CFC and 10%
U.S. Shareholder status and that a court will not sustain
such challenge.
RPII Companies:
Generally.
The CFC rules described above also apply (with
certain modifications) to certain insurance companies that earn
related person insurance income, or RPII. For purposes of
applying the CFC rules to foreign corporations that earn RPII, a
foreign corporation will be treated as a CFC if RPII
Shareholders collectively own directly, indirectly through
foreign entities or by application of the constructive ownership
rules 25% or more of the stock of the corporation by vote or
value. The term "RPII Shareholder" means any
U.S. Person who owns, directly or indirectly through
foreign entities, any amount (rather than stock possessing 10%
or more of the total combined voting power) of the foreign
corporation's stock.
RPII is defined as any "insurance income" attributable
to policies of insurance or reinsurance with respect to which
the person (directly or indirectly) insured is a "RPII
Shareholder" of the foreign corporation or a "related
person" to such RPII Shareholder. In general, and subject
to certain limitations, "insurance income" is income
(including premium and investment income) attributable to the
issuing of any insurance or reinsurance contract which would be
taxed under the provisions of the Internal Revenue Code relating
to insurance companies if the income were the income of a
domestic insurance company.
For purposes of the RPII rules, "related person" means
someone who controls or is controlled by the RPII Shareholder or
someone who is controlled by the same person or persons that
control the RPII Shareholder. "Control" is measured by
either more than 50% in value or more than 50% in voting power
of stock, applying constructive ownership principles. A
corporation's pension plan is ordinarily not a
"related person" with respect to the corporation
unless the pension plan owns, directly or indirectly through the
application of constructive ownership rules, more than 50%,
measured by vote or value, of the stock of the
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corporation. In the case of a partnership, trust or estate,
control means the ownership, directly or indirectly, of more
than 50 percent (by value) of the beneficial interests
in such partnership, estate or trust.
If none of the exceptions described below applies, each
U.S. Person who owns shares in CRM Holdings (and
therefore, indirectly in Twin Bridges) on the last day of the
tax year in which Twin Bridges is a CFC, will be required to
include in its gross income for U.S. federal income tax
purposes its share of RPII of Twin Bridges for the
U.S. Person's taxable year that includes the end of
Twin Bridges' taxable year. This inclusion generally will
be determined as if such RPII were distributed proportionately
only to such U.S. Persons holding shares at that date. The
inclusion will be limited to the current-year earnings and
profits of Twin Bridges reduced by the shareholder's pro
rata share, if any, of certain prior-year deficits in earnings
and profits. Even if one or more of the exceptions to the RPII
rules applies, the general CFC rules described earlier may still
apply to require 10% U.S. Shareholders to include in income
their pro rata share of RPII, among other things.
RPII Exceptions.
The special RPII rules described above
will not apply to Twin Bridges if (1) direct or indirect
insureds and persons related to such insureds, whether or not
U.S. Persons, own, at all times during Twin Bridges'
taxable year directly or indirectly, less than 20% of the voting
power and less than 20% of the value of the stock of Twin
Bridges (the "20% Ownership Exception"),
(2) RPII, determined on a gross basis, is less than 20% of
Twin Bridges' gross insurance income for the taxable year
(the "20% Gross Income Exception"), (3) Twin
Bridges elects to be taxed on its RPII as if the RPII were
effectively connected with the conduct of a U.S. trade or
business and to waive all treaty benefits with respect to RPII
and meets certain other requirements or (4) Twin Bridges
elects to be treated as a U.S. corporation for
U.S. tax purposes. Twin Bridges intends to monitor its
share ownership in order to operate in a manner that is designed
to ensure that it qualifies for either the first or second
exception to the RPII rules.
Computation of RPII.
In order to determine how much RPII
Twin Bridges has earned in each taxable year, CRM Holdings
intends to obtain and rely upon information from Twin
Bridges' insureds and reinsureds to determine whether any
of the insureds, reinsureds or other persons related to such
insureds or reinsureds own shares of CRM Holdings and are
U.S. Persons. CRM Holdings may not be able to determine
whether any of the underlying insureds of the insurance
companies to which Twin Bridges provides insurance or
reinsurance are RPII shareholders or related persons to such
shareholders. Consequently, CRM Holdings may not be able to
determine accurately the gross amount of RPII earned by Twin
Bridges in a given taxable year. For any taxable year in which
Twin Bridges' gross RPII may be 20% or more of its gross
insurance income for the year, CRM Holdings may also seek
information from its shareholders to determine whether direct or
indirect owners of CRM Holdings shares at the end of the
year are U.S. Persons so that the RPII may be determined
and apportioned among such persons. To the extent CRM Holdings
is unable to determine whether a direct or indirect owner of
shares is a U.S. Person, CRM Holdings may assume that such
owner is not a U.S. Person, thereby increasing the per
share RPII amount for all shareholders identified as
U.S. Persons.
Uncertainty as to Application of RPII.
Regulations
interpreting the RPII provisions of the Internal Revenue Code
exist only in proposed form. It is not certain whether these
Regulations will be adopted in their proposed form or what
changes might ultimately be made or whether any such changes, as
well as any interpretation or application of the RPII rules by
the IRS, the courts or otherwise, might have retroactive effect.
Accordingly, the meaning of the RPII provisions and their
application to Twin Bridges is uncertain. These provisions
include the grant of authority to the U.S. Treasury to
prescribe "such regulations as may be necessary to carry
out the purposes of this subsection, including . . .
regulations preventing the avoidance of this subsection through
cross insurance arrangements or otherwise." In addition we
cannot assure you that the IRS will not challenge any
determinations by Twin Bridges as to the amount, if any, of RPII
that should be includible in income or that the amounts of the
RPII inclusions will not be subject to adjustment based upon
subsequent IRS examination. Prospective investors should consult
their tax advisors as to the effects of these uncertainties.
Apportionment of RPII to U.S. Shareholders.
If Twin
Bridges' RPII for a year equals or exceeds 20% of its gross
insurance income and the 20% Ownership Exception does not apply
then every RPII Shareholder
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who owns shares in CRM Holdings on the last day of the tax year
on which Twin Bridges is a CFC will be required to include in
gross income its share of Twin Bridges' RPII for the
portion of the taxable year during which Twin Bridges was a CFC
under the RPII provisions, even if such RPII Shareholder did not
own the shares throughout such period. A RPII Shareholder who
owns shares of CRM Holdings during the taxable year of Twin
Bridges during which it was a CFC, but not on the last day in
such taxable year on which it is a CFC, will not be required to
include any RPII into income, whether or not distributed.
Basis Adjustments.
A U.S. shareholder's tax basis in its CRM Holdings
shares will be increased by the amount of any subpart F income
that the shareholder includes in income, including any RPII
included in income by an RPII shareholder. Any distributions
made by CRM Holdings out of previously taxed subpart F
income, including RPII income will be exempt from further
U.S. income tax in the hands of the U.S. shareholder.
The U.S. shareholder's tax basis in its CRM Holdings
shares will be reduced by the amount of any distributions that
are excluded from income under this rule.
Information Reporting.
Under certain circumstances, U.S. Persons owning stock in a
foreign corporation are required to file IRS Form 5471 with
their U.S. federal income tax returns. Generally,
information reporting on IRS Form 5471 is required with
respect to (1) a person who is treated as a RPII
Shareholder, (2) a 10% U.S. Shareholder of a foreign
corporation that is a CFC for an uninterrupted period of
30 days or more during any tax year of the foreign
corporation, and who owned the stock on the last day of that
year and (3) under certain circumstances, a
U.S. Person who acquires stock in a foreign corporation,
and as a result thereof owns 10% or more of the voting power or
value of such foreign corporation, whether or not such foreign
corporation is a CFC. For any taxable year in which CRM Holdings
determines that gross RPII constitutes 20% or more of Twin
Bridges' gross insurance income and the 20% Ownership
Exception does not apply, CRM Holdings intends to mail to all
U.S. Persons registered as holders of its shares IRS
Form 5471, completed with information from
CRM Holdings, for attachment to the U.S. federal
income tax returns of such shareholders. A tax-exempt
organization that is treated as a 10% U.S. Shareholder or a
RPII Shareholder also must file IRS Form 5471 in the
circumstances described above. Failure to file IRS
Form 5471 may result in penalties.
Tax-Exempt Shareholders.
Tax-exempt entities will be required to treat certain subpart F
insurance income, including RPII, that is includible in income
by the tax-exempt entity as unrelated business taxable income.
Dispositions of Shares.
Subject to the discussion below relating to the potential
application of Internal Revenue Code section 1248 or the
"PFIC" rules, any gain or loss realized by a
U.S. Person on the sale or other disposition of shares in
CRM Holdings will be subject to U.S. federal income
taxation as capital gain or loss in an amount equal to the
difference between the amount realized upon such sale or
exchange and such person's tax basis in the shares. Capital
gains received by individuals from the disposition of shares
held for more than one year are subject to tax at preferential
rates; the use of capital losses is subject to limitations.
Moreover, gain, if any, generally will be U.S. source gain
and generally will constitute "passive income" for
foreign tax credit limitation purposes.
Internal Revenue Code section 1248 provides that if a
U.S. Person sells or exchanges stock in a foreign
corporation and such person owned directly, indirectly through
certain foreign entities or constructively 10% or more of the
voting power of the corporation at any time during the five-year
period ending on the date of disposition when the corporation
was a CFC, any gain from the sale or exchange of the shares will
be treated as a dividend to the extent of the CFC's
earnings and profits (determined under U.S. federal income
tax principles) during the period that the shareholder held the
shares and while the corporation was a CFC (with certain
adjustments). A 10% U.S. Shareholder may in certain
circumstances be required to report a
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disposition of shares of a CFC by attaching IRS Form 5471
to the U.S. federal income tax or information return that
it would normally file for the taxable year in which the
disposition occurs. Section 1248 also applies to the sale
or exchange of shares in a foreign corporation if the foreign
corporation would be treated as a CFC for RPII purposes and
would be taxed as an insurance company if it were a domestic
corporation, regardless of whether the shareholder is a 10%
U.S. Shareholder or whether RPII constitutes 20% or more of
the corporation's gross insurance income or the 20%
Ownership Exception applies. Existing Treasury Regulations do
not address whether section 1248 would apply if a foreign
corporation is not a CFC but the foreign corporation has a
subsidiary that is a CFC or that would be taxed as an insurance
company if it were a domestic corporation. Prospective investors
should consult their tax advisors regarding the effects of these
rules on a disposition of shares.
Passive Foreign Investment Companies.
In general, a foreign corporation will be a PFIC during a given
year if (1) 75% or more of its gross income constitutes
"passive income" or (2) 50% or more of its assets
produce passive income or are held for the production of passive
income. For these purposes, passive income generally includes
interest, dividends, annuities and other investment income. The
PFIC statutory provisions contain an express exception for
income derived in the active conduct of an insurance business by
a corporation that is predominantly engaged in an insurance
business. This exception is intended to ensure that income
derived by a bona fide insurance company is not treated as
passive income, except to the extent such income is attributable
to capital in excess of the reasonable needs of the insurance
business. CRM Holdings expects for purposes of the PFIC rules
that Twin Bridges will be considered to be predominantly engaged
in an insurance business and that it is unlikely to have capital
in excess of the reasonable needs of its insurance business.
The PFIC statutory provisions also contain a look-through rule
stating that, for purposes of determining whether a foreign
corporation is a PFIC, such foreign corporation shall be treated
as if it received "directly its proportionate share of the
income ..." and as if it "held its proportionate share
of the assets ..." of any other corporation in which it
owns at least 25% by value of the shares. While no explicit
guidance is provided by the statutory language, under this
look-through rule, we believe that CRM Holdings should be deemed
to own the assets and to have received the income (characterized
as non-passive income) of Twin Bridges directly for purposes of
determining whether it qualifies for the insurance exception
and, consequently, that CRM Holdings should not be treated as a
PFIC for U.S. federal income tax purposes for the year
ended December 31, 2005. This interpretation of the
look-through rule is consistent with the legislative intention
generally to exclude bona fide insurance companies from the
application of the PFIC provision. No assurance can be given
that the IRS would not challenge this position or that a court
would not sustain such challenge. Prospective investors should
consult their tax advisor as to the effects of the PFIC rules to
them. We have not sought and do not intend to seek an opinion of
legal counsel as to whether or not we were a PFIC for the year
ended December 31, 2005. In addition, there can be no
assurance that we will not become a PFIC in a later year.
If CRM Holdings were characterized as a PFIC during a given
year, a U.S. Person owning shares would be subject to a
penalty tax at the time of the sale of such shares at a gain
(including gain deemed recognized if the shares are used as
security for a loan), or upon receipt of an "excess
distribution" with respect to its shares, unless such
shareholder made a "qualified electing fund election"
or "mark-to-market" election. In general, a
shareholder receives an "excess distribution" if the
amount of the distribution is more than 125% of the average
distribution with respect to the shares during the three
preceding taxable years (or shorter period during which the
taxpayer held the shares). In general, the gain or excess
distribution received in a year must be allocated ratably to
each day that the U.S. Person held our shares. A
U.S. Person must include amounts allocated to the year of
receipt, as well as amounts allocated to taxable years prior to
the first year in which we were a PFIC, in its gross income as
ordinary income for that year. All amounts allocated to prior
years of the U.S. Person during which we were a PFIC would
be taxed at the highest tax rate for each such prior year
applicable to ordinary income. The U.S. Person also would
be liable for interest on the deferred tax liability for each
such prior year calculated as if such liability had been due
with respect to each such prior year.
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Other
Except as discussed below with respect to backup withholding,
dividends paid by CRM Holdings will not be subject to
U.S. withholding tax.
Shareholders Who Are Non-U.S. Persons
Subject to certain exceptions, non-U.S. Persons will be
subject to U.S. federal income tax (including potential
branch profits tax in the case of shareholders that are
corporations) on dividend distributions with respect to, and
gain realized from the sale or exchange of, shares only if such
dividends or gains are effectively connected with the conduct of
a trade or business within the United States. Gain recognized by
an individual non-U.S. Person will be subject to
U.S. tax if the non-U.S. Person is present in the
U.S. for 183 days or more in the taxable year of the
sale and other conditions are met. Nonresident alien individuals
will not be subject to U.S. estate tax with respect to the
shares. Special rules may apply to certain former
U.S. citizens and long-term residents.
All Shareholders
Information reporting to the IRS by paying agents and custodians
located in the United States will be required with respect to
payments of dividends on the shares to U.S. Persons. In
addition, you may be subject to backup withholding with respect
to dividends paid by CRM Holdings unless you (1) are a
corporation, non-U.S. Person or come within certain other
exempt categories and, when required, demonstrate this fact, or
(2) provide a taxpayer identification number, certify that
you have not lost exemption from backup withholding and
otherwise comply with applicable requirements of the backup
withholding rules.
Backup withholding is not an additional tax and may be credited
against your regular U.S. federal income tax liability or
otherwise you may be entitled to a refund for any such tax
withheld.
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DESCRIPTION OF SHARE CAPITAL
The following description of the share capital of CRM Holdings
summarizes select provisions of its Memorandum and Articles of
Association and bye-laws.
General
We have an authorized share capital of $500,000,000 divided into
50,000,000,000 shares of par value $0.01 per share.
Our board of directors has
designated
l
as
common shares. Upon the closing of this offering the issued and
outstanding shares of the Company will
be
l
common
shares of par value $0.01.
Common Shares
In general, subject to the adjustments regarding voting set
forth in "— Voting Adjustments" below,
holders of our common shares have one vote for each common share
held by them and are entitled to vote, on a non-cumulative
basis, at all meetings of shareholders. Holders of our common
shares are entitled to receive dividends as and if lawfully
declared from time to time by our board of directors. Holders of
our common shares have no preemptive, redemption, conversion or
sinking fund rights. In the event of our liquidation,
dissolution or winding-up, the holders of our common shares are
entitled to share equally and ratably in our assets, if any
remain after the payment of all our debts and liabilities and
the liquidation preference of any outstanding preferred shares.
Voting Adjustments
Our bye-laws generally provide that shareholders have one vote
for each share held by them and are entitled to vote, on a
non-cumulative basis, at all meetings of shareholders. However,
pursuant to a mechanism specified in our bye-laws, the voting
rights exercisable by a shareholder will be limited so that
certain persons or groups are not deemed to hold more than 9.9%
of the total voting power conferred by our shares. In addition,
our board of directors retains certain discretion to make
adjustments to the aggregate number of votes attaching to the
shares of any shareholder that they consider fair and reasonable
in all the circumstances to ensure that no person will hold more
than 9.9% of the total voting power represented by our then
outstanding shares. Our bye-laws provide generally that any
shareholder owning, directly, indirectly or, in the case of any
U.S. person, by attribution, more than 9.9% of our common
shares will have the voting rights attached to such common
shares reduced so that it may not exercise more than 9.9% of the
total voting rights. The reduction in votes is generally to be
applied proportionately among all shareholders who are members
of the first shareholder's control group. A control group
means, with respect to any person, all shares directly owned by
such person and all shares directly owned by each other
shareholder any of whose shares are included in the controlled
shares of such person. Controlled shares means all common shares
that a person is deemed to own directly, indirectly (within the
meaning of Section 958(a) of the Code) or, in the case of a
U.S. person, constructively (within the meaning of
Section 958(b) of the Code). A similar limitation is to be
applied to shares held directly by members of a related group. A
related group means a group of shareholders that are investment
vehicles and are under common control and management. Any
reduction in votes will generally be reallocated proportionately
among members of the shareholder's control group or related
group, as the case may be. The amount of any reduction of votes
that occurs by operation of the above limitations will generally
be reallocated proportionately among all other of our
shareholders who were not members of these groups so long as
such reallocation does not cause any person to hold more than
9.9% of the total voting power of our shares.
For purposes of applying these provisions, shareholders will be
entitled to direct that our board (i) treat them (and
certain affiliates) as U.S. persons, and/or (ii) treat
them (and certain related shareholders) as one person for
purposes of determining a shareholder's control group.
The amount of any reduction of votes that occurs by operation of
the above limitations will generally be allocated
proportionately among all other shareholders of the Company.
Consequently, under these provisions, certain shareholders may
have their voting rights limited to less than one vote per
share, while other
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shareholders may have voting rights in excess of one vote per
share. Moreover, these provisions could have the effect of
reducing the voting power of certain shareholders who would not
otherwise be subject to the limitation by virtue of their direct
share ownership.
In addition, our board may adjust a shareholder's voting
rights to the extent that the board reasonably determines in
good faith that it is necessary to do so to avoid adverse tax
consequences or materially adverse legal or regulatory treatment
to us, any subsidiary or any shareholder or its affiliates. This
adjustment may result in a shareholder having voting rights in
excess of one vote per share. Therefore, a shareholder's
voting rights might increase above 5% of the aggregate voting
power of the outstanding common shares, thereby possibly
resulting in the shareholder becoming a reporting person subject
to Schedule 13D or 13G filing requirements under the
Exchange Act. In addition, the reallocation of your votes could
result in you becoming subject to filing requirements under
Section 16 of the Exchange Act. Our bye-laws also provide
that shareholders will be notified of their voting interests
prior to any vote to be taken by the shareholders.
We also have the authority under our bye-laws to request
information from any shareholder for the purpose of determining
whether a shareholder's voting rights are to be reallocated
pursuant to the bye-laws. If, after a reasonable cure period, a
shareholder fails to respond to our request for information or
submits incomplete or inaccurate information in response to a
request, by us, the Company, in its reasonable discretion, may
reduce or eliminate the shareholder's voting rights.
Preferred Shares
Pursuant to our bye-laws and Bermuda law, our board of directors
by resolution may establish one or more series of preferred
shares having a number of shares, designations, relative voting
rights, dividend rates, conversion rights liquidation and other
rights, preferences, limitations and powers as may be fixed by
the board of directors without any further shareholder approval.
If our board of directors issues preferred shares conferring any
voting rights, the limitations on the voting rights discussed
above under "— Voting Adjustments" will
apply to those preferred shares. Any rights, preferences, powers
and limitations as may be established for preferred shares could
also have the effect of discouraging an attempt to obtain
control of CRM Holdings. The issuance of preferred shares could
also adversely affect the voting power of the holders of our
shares, deny such holders the receipt of a premium on their
shares in the event of a tender or other offer for the shares
and depress the market price of the shares. We have no current
plans to issue any preferred shares.
Bye-laws
Our bye-laws provide for our corporate governance, including the
establishment of share rights, modification of those rights,
issuance of share certificates, imposition of a lien over shares
in respect of unpaid amounts on those shares, calls on shares
which are not fully paid, forfeiture of shares, the transfer of
shares, alterations of capital, the calling and conduct of
general meetings, proxies, the appointment and removal of
directors, conduct and power of directors, the payment of
dividends, the appointment of an auditor and our winding-up.
Our Board of Directors and Corporate Action
Our bye-laws provide that the board of directors shall consist
of not less than two nor more than 20 directors, as
determined by the shareholders at an annual general meeting of
the shareholders, divided into three approximately equal
classes. Upon the closing of this offering, our board of
directors will be comprised of three Class I directors
whose initial term will expire at our 2006 annual
shareholders' meeting, three Class II directors whose
initial term will expire at our 2007 annual shareholders'
meeting and three Class III directors whose initial term
will expire at our 2008 annual shareholders' meeting. After
the initial terms of these directors, the term of each class of
directors elected shall be three years. Directors may only be
removed prior to the expiration of such director's term at
a special meeting of shareholders called for that purpose. The
appointment or removal of a director requires the simple
majority of votes cast, in person or by proxy, at the general
meeting at which the proposal is put forth.
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A special general meeting of shareholders may be convened by our
board of directors or the Chairman or Deputy Chairman of
CRM Holdings. Pursuant to the Companies Act a special
general meeting of shareholders may also be convened at the
request of shareholders holding at the date of the deposit of
the request not less than 10% of the paid up voting share
capital of CRM Holdings.
Generally, the affirmative vote of a majority of the directors
present at any meeting at which a quorum is present shall be
required to authorize corporate action. Corporate action may
also be taken by a unanimous written resolution of the board of
directors without a meeting. Unless otherwise fixed at a
different number, a majority of the directors in office shall
constitute a quorum, but in no event may a quorum consist of
less than two directors.
Shareholder Action
At any general meeting, four or more persons present in person
or by proxy and representing more than 50% of our
shareholders' aggregate voting power shall constitute a
quorum for the transaction of business. In general, any action
that we may take by resolution in a general meeting may, without
a meeting, be taken by a resolution in writing signed by all of
the shareholders entitled to attend such meeting and vote on the
resolution. In general, any question proposed for the
consideration of the shareholders at any general meeting shall
be decided by the affirmative votes of a majority of the votes
cast in accordance with the bye-laws.
Transfer Restrictions
CRM Holdings' directors may decline to record the transfer
of any common shares on our share register: if the shares have
not been fully paid for, or the directors are not satisfied that
all required regulatory approvals for such transfer have been
obtained, or the instrument of transfer is in favor of more than
five persons jointly.
Tax Liability Resulting from Acts of Shareholders
Our bye-laws provide certain protections against adverse tax
consequences to us resulting from laws that apply to our
shareholders. If a shareholder's death or non-payment of
any tax or duty payable by the shareholder, or any other act or
thing involving the shareholder, causes any adverse tax
consequences to us, (i) the shareholder or its executor or
administrator is required to indemnify us against any tax
liability that we incur as a result, (ii) we will have a
lien on any dividends or any other distributions payable to the
shareholder by us to the extent of the tax liability, and
(iii) if any amounts not covered by our lien on dividends
and distributions are owed to us by the shareholder as a result
of our tax liability, we have the right to refuse to register
any transfer of the shareholder's shares.
Certain Subsidiaries
CRM Holdings' bye-laws require that the boards of directors
of CRM Holdings' non-U.S. subsidiaries be comprised of
persons, a majority of whom are directors of CRM Holdings, who
have been elected as director designees by the shareholders of
CRM Holdings.
CRM Holdings' shareholders will elect director
designees for each of our non-U.S. subsidiaries. Under
CRM Holdings' bye-laws, CRM Holdings must vote
shares it holds in its non-U.S. subsidiaries to elect the
director designees as the directors of these
non-U.S. subsidiaries. Accordingly, the only persons
eligible to be elected as directors of CRM Holdings'
non-U.S. subsidiaries are those persons who first have been
elected by the shareholders of CRM Holdings (including new
shareholders who buy common shares being offered by this
prospectus) as director designees in accordance with our
bye-laws (including after giving effect to any limitation on
voting rights). The bye-law provisions addressing the removal of
directors of CRM Holdings' non-U.S. subsidiaries also
obligate CRM Holdings to vote shares it holds in these
non-U.S. subsidiaries in favor of removal of any director
designees in accordance with a resolution duly adopted by the
shareholders of CRM Holdings.
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Amendment of Bye-laws
Our bye-laws provide that the bye-laws may only be revoked or
amended, upon approval by a resolution of our board of directors
and by (a) a simple majority of votes cast by our
shareholders or (b) by resolution of
eighty-five percent (85%) of the total votes cast when the
board proposes to repeal, alter or amend the indemnities set out
in the bye-laws.
Anti-Takeover Provisions
Our bye-laws contain provisions that may entrench directors and
make it more difficult for shareholders to replace directors
even if the shareholders consider it beneficial to do so. In
addition, these provisions could delay or prevent a change of
control that a shareholder might consider favorable. For
example, these provisions may prevent a shareholder from
receiving the benefit from any premium over the market price of
our common shares offered by a bidder in a potential takeover.
Even in the absence of an attempt to effect a change in
management or a takeover attempt, these provisions may adversely
affect the prevailing market price of our common shares if they
are viewed as discouraging changes in management and takeover
attempts in the future.
The anti-takeover provisions in our bye-laws that could have
such an effect are:
•
election of our directors is staggered, meaning that the members
    of only one of three classes of our directors are elected each
    year;
•
the total voting power of any shareholder owning more than 9.9%
    of our common shares will be reduced to 9.9% of the total voting
    power of our common shares; and
•
our directors may, in their discretion, decline to record the
    transfer of any common shares on our share register if the
    shares have not been fully paid for, if the directors are not
    satisfied that all required regulatory approvals for such
    transfer have been obtained, or if the instrument of transfer is
    in favor of more than five persons jointly.
Transfer Agent
Our registrar and transfer agent for the shares
is
l
.
Differences in Corporate Law
You should be aware that the Companies Act, which applies to us,
differs in certain material respects from laws generally
applicable to United States corporations and their shareholders.
In order to highlight these differences, set forth below is a
summary of certain significant provisions of the Companies Act
(including modifications adopted pursuant to our bye-laws)
applicable to us which differ in certain respects from
provisions of State of Delaware corporate law. Because the
following statements are summaries, they do not address all
aspects of Bermuda law that may be relevant to us and our
shareholders.
Duties of Directors
Under Bermuda law, at common law, members of a board of
directors owe a fiduciary duty to the company to act in good
faith in their dealings with or on behalf of the company, and to
exercise their powers and fulfill the duties of their office
honestly. This duty has the following essential elements:
•
a duty to act in good faith in the best interests of the company;
•
a duty not to make a personal profit from opportunities that
    arise from the office of director;
•
a duty to avoid conflicts of interest;
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•
a duty to exercise powers for the purpose for which such powers
    were intended;
•
the Companies Act imposes a duty on directors and officers of a
    Bermuda company;
•
to act honestly and in good faith with a view to the best
    interests of the company; and
•
to exercise the care, diligence and skill that a reasonably
    prudent person would exercise in comparable circumstances.
In addition, the Companies Act imposes various duties on
officers of a company with respect to certain matters of
management and administration of the company.
The Companies Act provides that in any proceedings for
negligence, default, breach of duty or breach of trust against
any officer, if it appears to a court that such officer is or
may be liable in respect of the negligence, default, breach of
duty or breach of trust, but that he has acted honestly and
reasonably, and that, having regard to all the circumstances of
the case, including those connected with his appointment, he
ought fairly to be excused for the negligence, default, breach
of duty or breach of trust, that court may relieve him, either
wholly or partly, from any liability on such terms as the court
may think fit. This provision has been interpreted to apply only
to actions brought by or on behalf of the company against such
officers. Our bye-laws, however, provide that shareholders waive
all claims or rights of action that they might have,
individually or in our right against any director or officer for
any act or failure to act in the performance of such
director's or officer's duties, except this waiver
does not extend to any claims or rights of action that would
render the waiver void pursuant to the Companies Act, that arise
out of fraud or dishonesty on the part of such director or
officer or with respect to the recovery of any gain, personal
profit or advantage to which the officer or director is not
legally entitled.
Under Delaware law, the business and affairs of a corporation
are managed by or under the direction of its board of directors.
In exercising their powers, directors are charged with a
fiduciary duty of care to protect the interests of the
corporation and a fiduciary duty of loyalty to act in the best
interests of its stockholders. The duty of care requires that
directors act in an informed and deliberate manner, and inform
themselves, prior to making a business decision, of all relevant
material information reasonably available to them. The duty of
care also requires that directors exercise care in overseeing
and investigating the conduct of corporate employees. The duty
of loyalty may be summarized as the duty to act in good faith,
not out of self-interest, and in a manner which the director
reasonably believes to be in the best interests of the
stockholders. A party challenging the propriety of a decision of
a board of directors bears the burden of rebutting the
applicability of the presumptions afforded to directors by the
"business judgment rule." If the presumption is not
rebutted, the business judgment rule attaches to protect the
directors and their decisions. Where, however, the presumption
is rebutted, the directors bear the burden of demonstrating the
fairness of the relevant transaction. Notwithstanding the
foregoing, Delaware courts subject directors' conduct to
enhanced scrutiny in respect of defensive actions taken in
response to a threat to corporate control and approval of a
transaction resulting in a sale of control of the corporation.
Interested Directors
Under Bermuda law and our bye-laws, any transaction entered into
by us in which a director has an interest is not voidable by us
nor can such director be accountable to us for any benefit
realized pursuant to such transaction provided the nature of the
interest is disclosed at the first opportunity at a meeting of
directors, or in writing to the directors. In addition, our
bye-laws allow a director to be taken into account in
determining whether a quorum is present and to vote on a
transaction in which he has an interest, but the resolution will
fail unless it is approved by a majority of the disinterested
directors voting on the resolution. Under Delaware law, such
transaction would not be voidable if (1) the material facts
as to such interested director's relationship or interests
are disclosed or are known to the board of directors and the
board in good faith authorizes the transaction by the
affirmative vote of a majority of the disinterested directors,
(2) such material facts are disclosed or are known to the
stockholders entitled to vote on such transaction and the
transaction is specifically approved in good faith by vote of
the majority of shares entitled to vote thereon or (3) the
transaction is fair as to the corporation as of the time it is
authorized, approved or ratified. Under
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Delaware law, such interested director could be held liable for
a transaction in which such director derived an improper
personal benefit.
Voting Rights and Quorum Requirements
Under Bermuda law, the voting rights of our shareholders are
regulated by our bye-laws and, in certain circumstances, the
Companies Act. Under our bye-laws, at any general meeting, four
or more persons present in person or by proxy and representing
more than 50% of our shareholders' aggregate voting power
shall constitute a quorum for the transaction of business. In
general, any action that we may take by resolution in a general
meeting may, without a meeting, be taken by a resolution in
writing signed by all of the shareholders entitled to attend
such meeting and vote on the resolution. In general, any
question proposed for the consideration of the shareholders at
any general meeting shall be decided by the affirmative votes of
a majority of the votes cast in accordance with the bye-laws.
Any individual who is a shareholder and who is present at a
meeting may vote in person, as may any corporate shareholder
which is present by a duly authorized representative. Our
bye-laws also permit votes by proxy, provided the instrument
appointing the proxy, together with evidence of its due
execution, is satisfactory to our board of directors.
In order to avoid adverse tax consequences to us and our
shareholders, our bye-laws provide generally that any
shareholder owning, directly, indirectly or, in the case of any
U.S. Person by attribution, more than 9.9% of our common
shares will have the voting rights attached to such common
shares reduced so that it may not exercise more than 9.9% of the
total voting rights. The reduction in votes is generally to be
applied proportionately among all shareholders who are members
of the first shareholder's "control group". A
"control group" means, with respect to any person, all
shares directly owned by such person and all shares directly
owned by each other shareholder any of whose shares are included
in the controlled shares of such person. "Controlled
shares" means all common shares that a person is deemed to
own directly, indirectly (within the meaning of Section 958
(a) of the Code), or, in the case of a U.S. person,
constructively (within the meaning of Section 958
(b) of the Code). A similar limitation is to be applied to
shares held directly by members of a "related group".
A "related group" means a group of shareholders that
are investment vehicles and are under common control and
management. Any reduction in votes is generally allocated
proportionately among members of the shareholder's
"control group" or "related group", as the
case may be. The amount of any reduction of votes that occurs by
operation of the above limitations will generally be reallocated
proportionately among all of our other shareholders who were not
members of these groups so long as such reallocation does not
cause any person to become a 9.9% shareholder.
Under these provisions, certain shareholders may have their
voting rights limited to less than one vote per share, while
other shareholders may have voting rights in excess of one vote
per share. Moreover, these provisions could have the effect of
reducing the votes of certain shareholders who would not
otherwise be subject to the 9.9% limitation by virtue of their
direct share ownership. Our bye-laws also provide that
shareholders will be notified of their voting interests prior to
any vote to be taken by the shareholders. See
"— Voting Adjustments."
Dividends
Bermuda law does not permit payment of dividends, or
distributions out of contributed surplus, by a company if there
are reasonable grounds for believing that the company, after the
payment is made, would be unable to pay its liabilities as they
become due, or the realizable value of the company's assets
would be less, as a result of the payment, than the aggregate of
its liabilities and its issued share capital and share premium
accounts. The excess of the consideration paid on issue of
shares over the aggregate par value of such shares must (except
in certain limited circumstances) be credited to a share premium
account. Share premium may be distributed in certain limited
circumstances, for example to pay up for unissued shares which
may be distributed to shareholders in proportion to their
holdings, but is otherwise subject to limitation. In addition,
our ability to pay dividends is subject to Bermuda and
U.S. state insurance laws and regulatory constraints.
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See "Regulation — Bermuda Regulation —
Solvency Margin and Restrictions on Dividends and
Distributions."
Under Delaware law, subject to any restrictions contained in the
company's certificate of incorporation, a company may pay
dividends out of surplus or, if there is no surplus, out of net
profits for the fiscal year in which the dividend is declared
and for the preceding fiscal year. Delaware law also provides
that dividends may not be paid out of net profits at any time
when capital is less than the capital represented by the
outstanding stock of all classes having a preference upon the
distribution of assets. There will be restrictions on the
payment of dividends to us by our insurance subsidiaries, which
are described in more detail in "Regulation."
Amalgamations, Mergers and Similar Arrangements
We may acquire the business of another Bermuda exempted company
or a company incorporated outside Bermuda when conducting such
business would benefit us and would be conducive to attaining
our objectives contained within our memorandum of association.
We may, with the approval of a majority of votes cast at a
general meeting of our shareholders at which a quorum is
present, amalgamate with another Bermuda company or with an
entity incorporated outside Bermuda. In the case of an
amalgamation, a shareholder may apply to a Bermuda court for a
proper valuation of such shareholder's shares if such
shareholder is not satisfied that fair value has been paid for
such shares. The court ordinarily would not disapprove the
transaction on that ground absent evidence of fraud or bad
faith. Under Delaware law, a stockholder of a corporation
participating in certain major corporate transactions may, under
certain circumstances, be entitled to appraisal rights pursuant
to which the stockholder may receive cash in the amount of the
fair value of the shares held by that stockholder (as determined
by a court) in lieu of the consideration that stockholder would
otherwise receive in the transaction.
Takeovers
Bermuda law provides that where an offer is made for shares of a
company and, within four months of the offer, the holders of not
less than 90% of the shares which are the subject of the offer
accept, the offeror may by notice require the non-tendering
shareholders to transfer their shares on the terms of the offer.
Dissenting shareholders may apply to the court within one month
of the notice objecting to the transfer. The burden is on the
dissenting shareholders to show that the court should exercise
its discretion to enjoin the required transfer, which the court
will be unlikely to do unless there is evidence of fraud or bad
faith or collusion between the offeror and the holders of the
shares who have accepted the offer as a means of unfairly
forcing out minority shareholders. Delaware law provides that a
parent corporation, by resolution of its board of directors and
without any shareholder vote, may merge with any subsidiary of
which it owns at least 90% of the outstanding shares of each
class of stock that is entitled to vote on the transaction. Upon
any such merger, dissenting stockholders of the subsidiary would
have appraisal rights.
Shareholders' Suits
The rights of shareholders under Bermuda law are not as
extensive as the rights of shareholders under legislation or
judicial precedent in many U.S. jurisdictions. Class
actions and derivative actions are generally not available to
shareholders under the laws of Bermuda. However, the Bermuda
courts ordinarily would be expected to follow English case law
precedent, which would permit a shareholder to commence an
action in our name to remedy a wrong done to us where the act
complained of is alleged to be beyond our corporate power or is
illegal or would result in the violation of our memorandum of
association or bye-laws. Furthermore, consideration would be
given by the court to acts that are alleged to constitute a
fraud against the minority shareholders or where an act requires
the approval of a greater percentage of our shareholders than
actually approved it. The winning party in such an action
generally would be able to recover a portion of attorneys'
fees incurred in connection with such action. In comparison,
class actions and derivative actions generally are available to
stockholders under Delaware law for, among other things, breach
of fiduciary duty, corporate waste and actions not taken in
accordance with applicable law. In such actions, the court has
discretion to permit the winning party to recover
attorneys' fees incurred in connection with such action.
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Approval of Corporate Matters by Written Consent
Under Bermuda law, the Companies Act provides that shareholders
or the board of directors may take action by written consent in
lieu of a shareholder's meeting or a meeting of the board
of directors, respectively, so long as the written consent is
signed by all of the shareholders entitled to attend and vote at
that meeting or the directors, respectively. Unless otherwise
provided in a corporation's certificate of incorporation,
Delaware law permits stockholders to take action by the consent
in writing by the holders of outstanding stock having not less
than the minimum number of votes that would be necessary to
authorize or take such action at a meeting of stockholders at
which all shares entitled to vote thereon were present and
voted. Under Delaware law, the board of directors may take
action by written consent so long as the written consent is
signed by all of the directors.
Indemnification of Directors and Officers
Under Bermuda law and our bye-laws, we indemnify our directors,
officers or any other person appointed to a committee of the
board of directors (and their respective heirs, executors or
administrators) to the full extent permitted by law against all
actions, costs, charges, liabilities, loss, damage or expense
incurred or suffered by such person by reason of any act done,
conceived in or omitted in the conduct of our business or in the
discharge of his/her duties; provided that such indemnification
shall not extend to any matter which would render it void
pursuant to the Companies Act. Under our bye-laws, each of our
shareholders agrees to waive any claim or right of action, other
than those involving fraud or dishonesty, against us or any of
our officers or directors.
Under Delaware law, a corporation may indemnify a director or
officer of the corporation against expenses (including
attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred in defense of an
action, suit or proceeding by reason of such position if
(1) the director or officer acted in good faith and in a
manner he reasonably believed to be in or not opposed to the
best interests of the corporation and (2) with respect to
any criminal action or proceeding, if the director or officer
had no reasonable cause to believe his conduct was unlawful.
Inspection of Corporate Records
Members of the general public have the right to inspect our
public documents available at the office of the Registrar of
Companies in Bermuda and our registered office in Bermuda, which
will include our memorandum of association (including its
objects and powers) and any alteration to our memorandum of
association and documents relating to any increase or reduction
of authorized capital. Our shareholders have the additional
right to inspect our bye-laws, minutes of general meetings and
financial statements, which must be presented to the annual
general meeting of shareholders. The register of our
shareholders is also open to inspection by shareholders without
charge, and to members of the public for a fee. We are required
to maintain our share register in Bermuda but may establish a
branch register outside of Bermuda. We are required to keep at
our registered office a register of our directors and officers
which is open for inspection by members of the public without
charge. Bermuda law does not, however, provide a general right
for shareholders to inspect or obtain copies of any other
corporate records. Delaware law permits any stockholder to
inspect or obtain copies of a corporation's stockholder
list and its other books and records for any purpose reasonably
related to such person's interest as a stockholder.
Shareholder Proposals
Under Bermuda law, the Companies Act provides that shareholders
may, as set forth below and at their own expense (unless a
company otherwise resolves), require a company to give notice of
any resolution that the shareholders can properly propose at the
next annual general meeting and/or to circulate a statement
prepared by the requesting shareholders in respect of any matter
referred to in a proposed resolution or any business to be
conducted at a general meeting. The number of shareholders
necessary for such a requisition is either that number of
shareholders representing at least 5% of the total voting rights
of all shareholders having a right to vote at the meeting to
which the requisition relates or not less than
100 shareholders. Delaware law
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does not include a provision restricting the manner in which
nominations for directors may be made by stockholders or the
manner in which business may be brought before a meeting.
Calling of Special Shareholders Meetings
Under our bye-laws, a special general meeting may be called by
the board of directors or by our Chairman of the Board or Deputy
Chairman of the Board. Under Bermuda law, a special meeting may
also be called by the shareholders when requisitioned by the
holders of at least 10% of the paid up voting share capital of
our company as provided by the Companies Act. Delaware law
permits the board of directors or any person who is authorized
under a corporation's certificate of incorporation or
bye-laws to call a special meeting of stockholders.
Staggered Board of Directors
Bermuda laws does not contain statutory provisions specifically
mandating staggered board of directors arrangements for a
Bermuda exempted company. Such provisions, however, may validly
be provided for in the bye-laws governing the affairs of such a
company. Delaware law permits corporations to have a staggered
board of directors.
Amendment of Memorandum of Association
Bermuda law provides that the memorandum of association of a
company may be amended by a resolution passed at a general
meeting of shareholders of which due notice has been given. An
amendment to the memorandum of association that alters the
company's business objects may require approval of the
Bermuda Minister of Finance, who may grant or withhold approval
at his or her discretion.
Under Bermuda law, the holders of an aggregate of not less than
20% in par value of a company's issued share capital have
the right to apply to the Bermuda courts for an annulment of any
amendment of the memorandum of association adopted by
shareholders at any general meeting, other than an amendment
which alters or reduces a company's share capital as
provided in the Companies Act. Where such an application is
made, the amendment becomes effective only to the extent that it
is confirmed by the Bermuda court. An application for an
annulment of an amendment of the memorandum of association must
be made within 21 days after the date on which the
resolution altering the company's memorandum of association
is passed and may be made on behalf of persons entitled to make
the application by one or more of their designees as such
holders may appoint in writing for such purpose. No application
may be made by the shareholders voting in favor of the amendment.
Under Delaware law, amendment of the certificate of
incorporation, which is the equivalent of a memorandum of
association, of a company must be made by a resolution of the
board of directors setting forth the amendment, declaring its
advisability, and either calling a special meeting of the
stockholders entitled to vote or directing that the amendment
proposed be considered at the next annual meeting of the
stockholders. Delaware law requires that, unless a different
percentage is provided for in the certificate of incorporation,
a majority of the outstanding shares entitled to vote thereon is
required to approve the amendment of the certificate of
incorporation at the stockholders meeting. If the amendment
would alter the number of authorized shares or par value or
otherwise adversely affect the rights or preference of any class
of a company's stock, the holders of the outstanding shares
of such affected class, regardless of whether such holders are
entitled to vote by the certificate of incorporation, should be
entitled to vote as a class upon the proposed amendment.
However, the number of authorized shares of any class may be
increased or decreased, to the extent not falling below the
number of shares then outstanding, by the affirmative vote of
the holders of a majority of the stock entitled to vote, if so
provided in the company's certificate of incorporation or
any amendment that created such class or was adopted prior to
the issuance of such class or that was authorized by the
affirmative vote of the holders of a majority of such class or
classes of stock.
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Amendment of Bye-laws
Our bye-laws provide that the bye-laws may only be revoked or
amended upon approval by a resolution of our board of directors
and by (a) a simple majority of votes cast by our shareholders
or (b) by resolution of eighty-five percent (85%) of the
total votes cast when the board proposes to repeal, alter or
amend the indemnities set out in the bye-laws.
Under Delaware law, holders of a majority of the voting power of
a corporation and if so provided in the certificate of
incorporation the directors of the corporation, have the power
to adopt, amend and repeal the bylaws of a corporation.
Enforcement of Judgments and Other Matters
There is no treaty in force between the United States and
Bermuda providing for the reciprocal recognition and enforcement
of judgments in civil and commercial matters. As a result,
whether a United States judgment would be enforceable in Bermuda
against us or our directors and officers depends on whether the
U.S. court that entered the judgment is recognized by the
Bermuda court as having jurisdiction over us or our directors
and officers, as determined by reference to Bermuda conflict of
law rules. A judgment debt from a U.S. court that is final
and for a sum certain based on U.S. federal securities laws
will not be enforceable in Bermuda unless the judgment debtor
had submitted to the jurisdiction of the U.S. court, and
the issue of submission and jurisdiction is a matter of Bermuda
(not United States) law.
In addition, and irrespective of jurisdictional issues, the
Bermuda courts will not enforce a United States federal
securities law that is either penal or contrary to the public
policy of Bermuda. An action brought pursuant to a public or
penal law, the purpose of which is the enforcement of a
sanction, power or right at the instance of the state in its
sovereign capacity, may not be entertained by a Bermuda court to
the extent they are contrary to Bermuda public policy. Certain
remedies available under the laws of U.S. jurisdictions,
including certain remedies under U.S. federal securities
laws, may not be available under Bermuda law or enforceable in a
Bermuda court, to the extent they are contrary to Bermuda public
policy. Further, no claim may be brought in Bermuda against us
or our directors and officers in the first instance for
violations of U.S. federal securities laws because these
laws have no extraterritorial jurisdiction under Bermuda law and
do not have force of law in Bermuda. A Bermuda court may,
however, impose civil liability on us or our directors and
officers if the facts alleged in a complaint constitute or give
rise to a cause of action under Bermuda law.
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UNDERWRITING
We and Sandler O'Neill & Partners, L.P. and
KeyBanc Capital Markets, a division of McDonald Investments
Inc., as representatives of the underwriters for this offering,
have entered into an underwriting agreement with respect to the
shares being offered. Subject to the terms and conditions of the
underwriting agreement, each of the underwriters named below has
agreed to purchase from us the respective number of common
shares shown opposite its name below:
Number
Underwriters
of Shares
Sandler O'Neill & Partners, L.P.
KeyBanc Capital Markets
a division of McDonald Investments Inc.
Total
The underwriting agreement provides that the obligations of the
underwriters are conditional and may be terminated at their
discretion based on their assessment of the financial markets.
The obligations of the underwriters may also be terminated upon
the occurrence of the events specified in the underwriting
agreement. The underwriting agreement provides that the
underwriters are obligated to purchase all of the common shares
in this offering if any are purchased, other than those covered
by the over-allotment option described below.
The selling shareholders have severally granted the underwriters
an option to purchase up
to                     additional
common shares at the initial price to the public, less the
underwriting discounts and commissions, set forth on the cover
page of this prospectus. This option is exercisable for a period
of 30 days. The selling shareholders will be obligated to
sell additional shares to the underwriters to the extent the
option is exercised. The underwriters may exercise this option
only to cover over-allotments made in connection with the sale
of common shares offered by this prospectus, if any.
The following table shows the per-share and total underwriting
discounts and commissions that we and the selling shareholders
will pay to each underwriter:
By Selling
By Selling
Shareholders
Shareholders
By us without
By us with
without
with
Over-allotment
Over-allotment
Over-allotment
Over-allotment
Per Share
Total
We estimate that the total expenses of the offering, excluding
underwriting discounts and commissions, will be
approximately
l
.
These expenses are payable by us. We have agreed to reimburse
each underwriter for certain actual out-of-pocket expenses
incurred in connection with the offering, including certain fees
and disbursements of underwriters' counsel in an amount not
to exceed $250,000.
The underwriters propose to offer the common shares directly to
the public at the public offering price set forth on the cover
page of this prospectus. The underwriters may offer the shares
to securities dealers at the public offering price less a
concession not in excess of
$
l
per
share. The underwriters may allow, and the dealers may reallow,
a discount not in excess of
$
l
per
share on sales to other brokers or dealers. If all of the shares
are not sold at the initial price to the public, the
underwriters may change the offering price and other selling
terms.
The shares are being offered by the underwriters, subject to
prior sale, when, as and if issued to and accepted by them,
subject to approval of certain legal matters by counsel for the
underwriters and other conditions specified in the underwriting
agreement. The underwriters reserve the right to withdraw,
cancel or modify this offer and reject orders in whole or in
part.
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Table of Contents
We, and our executive officers, directors and principal
shareholders (greater than 5% shareholders) have agreed, for a
period of 180 days after the date of this prospectus, not
to sell, offer, agree to sell, contract to sell, hypothecate,
pledge, grant any option to sell, or otherwise dispose of or
hedge, directly or indirectly, any of our common shares or
securities convertible into, exchangeable or exercisable for any
common shares or warrants or other rights to purchase common
shares or similar securities without, in each case, the prior
written consent of Sandler, O'Neill & Partners,
L.P. These restrictions are expressly agreed to preclude us, and
our executive officers, directors and principal shareholders
from engaging in any hedging or other transaction or arrangement
that is designed to, or which reasonably could be expected to,
lead to or result in a sale, disposition or transfer, in whole
or in part, of any of the economic consequences of ownership of
our common shares, whether such transaction would be settled by
delivery of common shares or other securities, in cash or
otherwise.
The 180-day restricted period described above is subject to
extension such that, in the event that either (1) during
the last 17 days of the 180-day restricted period, we issue
an earnings release or material news or material event relating
to us occurs or (2) prior to the expiration of the 180-day
restricted period, we announce that we will release earnings
results during the 16-day period beginning on the last day of
the 180-day period, the "lock up" restrictions
described above will, subject to limited exceptions, continue to
apply until the expiration of the 18-day period beginning on the
earnings release or the occurrence of the material news or
material event.
Prior to this offering, there has been no established public
trading market for our common shares. The initial public
offering price was determined by negotiation between us and the
underwriter. The principal factors that were considered in
determining the initial public offering price were:
•
our results of operations;
•
expectations regarding our future results of operations,
    including financial estimates by securities analysts and
    investors;
•
possible third-party claims against us;
•
possible changes in law and regulations; and
•
future sales of our common shares.
The factors described above were not assigned any particular
weight. Rather, these factors, together with market valuations
and the financial performance of other publicly companies in our
industry, were considered as a totality in our negotiation with
the underwriters over our initial public offering price.
We intend to apply to have our common shares listed for
quotation on the Nasdaq National Market under the
symbol                     .
In connection with this offering, the underwriters may engage in
stabilizing transactions, over-allotment transactions, syndicate
covering transactions and penalty bids.
•
Stabilizing transactions permit bids to purchase common shares
    so long as the stabilizing bids do not exceed a specified
    maximum, and are engaged in for the purpose of preventing or
    retarding a decline in the market price of the common shares
    while the offering is in progress.
•
Over-allotment transactions involve sales by the underwriters of
    common shares in excess of the number of shares the underwriters
    are obligated to purchase. This creates a syndicate short
    position that may be either a covered short position or a naked
    short position. In a covered short position, the number of
    shares over-allotted by the underwriters is not greater than the
    number of shares that it may purchase in the over-allotment
    option. In a naked short position, the number of shares involved
    is greater than the number of shares in the over-allotment
    option. The underwriters may close out any short position by
    exercising their over-allotment option and/or purchasing shares
    in the open market.
•
Syndicate covering transactions involve purchases of common
    shares in the open market after the distribution has been
    completed in order to cover syndicate short positions. In
    determining the source of shares to close out the short
    position, the underwriters will consider, among other things,
    the price of
104
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shares available for purchase in the open market compared with
    the price at which they may purchase shares through exercise of
    the over-allotment option. If the underwriters sell more shares
    than could be covered by exercise of the over-allotment option
    and, therefore, have a naked short position, the position can be
    closed out only by buying shares in the open market. A naked
    short position is more likely to be created if the underwriters
    are concerned that after pricing there could be a downward
    pressure on the price of the shares in the open market that
    could adversely affect investors who purchase in this offering.
•
Penalty bids permit the underwriters to reclaim a selling
    concession from a syndicate member when the common shares
    originally sold by that syndicate member are purchased in a
    stabilizing or syndicate covering transaction to cover syndicate
    short positions.
These stabilizing transactions, syndicate covering transactions
and penalty bids may have the effect of raising or maintaining
the market price of our common shares or preventing or retarding
a decline in the market price of our common shares. As a result,
the price of our common shares in the open market may be higher
than it would otherwise be in the absence of these transactions.
Neither we nor the underwriters make any representation or
prediction as to the effect that the transactions described
above may have on the price of our common shares. These
transactions may be effected on the Nasdaq National Market, in
the over-the-counter market or otherwise and, if commenced, may
be discontinued at any time.
We and the selling shareholders have agreed to indemnify the
underwriters against specified liabilities, including
liabilities under the Securities Act, and to contribute to
payments that the underwriters may be required to make in
respect thereof.
Affiliates of the underwriters act as lenders to CRM and Twin
Bridges under their credit facilities and letters of credit.
Also, certain of the underwriters and their affiliates have,
from time to time, provided, and may in the future provide,
financial advisory, investment banking and general financing and
banking services to us and our executive officers, for which
they have received, and may receive, customary fees and expenses.
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Table of Contents
SHARES ELIGIBLE FOR FUTURE SALE
General
Prior to this offering, there has been no public market for our
common shares. No prediction can be made as to the effect, if
any, that sales of common shares or the availability of common
shares for sale will have on the market price of our shares. The
market price of our common shares could decline because of the
sale of a large number of shares or the perception that such
sales could occur. These factors could also make it more
difficult for us to raise funds through future offerings of
shares.
After this
offering,                     of
our common shares will be outstanding,
or                     common
shares if the underwriters' over-allotment option is
exercised in full. Of these common shares,
the                     common
shares sold in this offering,
or                     common
shares if the underwriters' over-allotment option is
exercised in full, will be freely tradable without restriction
under the Securities Act, except that any common shares held by
our "affiliates" as defined in Rule 144 under the
Securities Act may be sold only in compliance with the
limitations described below. Our restricted securities generally
may not be sold unless they are registered under the Securities
Act or are sold pursuant to an exemption under the Securities
Act, such as the exemption provided by Rule 144 under the
Securities Act.
In connection with this offering, our existing officers,
directors and principal shareholders, who will beneficially own
a total of up
to                     common
shares after this offering, have entered into lock-up agreements
pursuant to which they have agreed not to sell any common shares
for a period of 180 days after the date of this prospectus
without the prior written consent of Sandler
O'Neill & Partners, L.P., which may, in its sole
discretion, at any time and without notice, waive any of the
terms of these lock-up agreements. The underwriters presently
have no intention to allow any common shares held by our
existing officers, directors and principal shareholders to be
sold prior to the expiration of the 180 day lock-up period.
Following the lock-up period, these shares will not be eligible
for sale in the public market without registration under the
Securities Act unless such sale meets the conditions and
restrictions of an exemption under the Securities Act such as
Rule 144 as described below.
The 180-day restricted period described above is subject to
extension such that, in the event that either (1) during
the last 17 days of the 180-day restricted period, we issue
an earnings release or material news or material event relating
to us occurs or (2) prior to the expiration of the 180-day
restricted period, we announce that we will release earnings
results during the 16-day period beginning on the last day of
the 180-day period, the "lock up" restrictions
described above will, subject to limited exceptions, continue to
apply until the expiration of the 18-day period beginning on the
earnings release or the occurrence of the material news or
material event.
In general, under Rule 144, as currently in effect, any
person or persons whose shares are aggregated, including an
affiliate of ours, who has beneficially owned restricted shares
for a period of at least one year is entitled to sell, within
any three month period, commencing 90 days after the date
of this prospectus, a number of common shares that does not
exceed the greater of:
•
1% of the then outstanding common shares; and
•
the average weekly trading volume in the common shares during
    the four calendar weeks immediately preceding the date on which
    the notice of such sale on Form 144 is filed with the SEC.
Sales under Rule 144 are subject to provisions relating to
notice and manner of sale and the availability of current public
information about us during the 90 days immediately
preceding a sale. In addition, a person who is not an affiliate
of ours during the 90 days preceding a sale and who has
beneficially owned the common shares proposed to be sold for at
least two years would be entitled to sell such shares under
Rule 144(k) without regard to the volume limitation and
other conditions described above.
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Table of Contents
LEGAL MATTERS
We are being represented by Baker & McKenzie LLP, New
York, New York in connection with this offering. The validity of
the common shares and other legal matters in connection with
this offering with respect to Bermuda law will be passed upon
for us by Appleby Spurling Hunter, Bermuda. Certain legal
matters will be passed upon for the underwriters by Kramer Levin
Naftalis & Frankel LLP, New York, New York and, with
respect to legal matters under Bermuda law, by Conyers
Dill & Pearman, Bermuda.
EXPERTS
The combined financial statements of Compensation Risk Managers,
LLC and Affiliates for each of the years ended December 31,
2004, 2003 and 2002 and as of December 31, 2004 and 2003
and the balance sheet of CRM Holdings, Ltd. (in formation)
as of September 7, 2005 included in this prospectus have
been so included in reliance on the report of Johnson
Lambert & Co., independent accountants, given on their
authority as experts in auditing and accounting.
ENFORCEABILITY OF CIVIL LIABILITIES UNDER U.S. FEDERAL
SECURITIES LAWS
We are a Bermuda company and a substantial portion of our assets
are or may be located in jurisdictions outside the United
States. It may therefore be difficult for investors to effect
service of process against us or to enforce against us judgments
of U.S. courts predicated upon civil liability provisions
of the U.S. federal securities laws.
There is no treaty in force between the United States and
Bermuda providing for the reciprocal recognition and enforcement
of judgments in civil and commercial matters. As a result,
whether a United States judgment would be enforceable in Bermuda
against us or our directors and officers depends on whether the
U.S. court that entered the judgment is recognized by the
Bermuda court as having jurisdiction over us or our directors
and officers, as determined by reference to Bermuda conflict of
law rules. A judgment debt from a U.S. court that is final
and for a sum certain based on U.S. federal securities laws
will not be enforceable in Bermuda unless the judgment debtor
had submitted to the jurisdiction of the U.S. court, and
the issue of submission and jurisdiction is a matter of Bermuda
(not U.S.) law.
In addition, and irrespective of jurisdictional issues, the
Bermuda courts will not enforce a U.S. federal securities
law that is either penal or contrary to the public policy of
Bermuda. An action brought pursuant to a public or penal law,
the purpose of which is the enforcement of a sanction, power or
right at the instance of the state in its sovereign capacity,
may not be entertained by a Bermuda court to the extent they are
contrary to Bermuda public policy. Certain remedies available
under the laws of U.S. jurisdictions, including certain
remedies under U.S. federal securities laws, may not be
available under Bermuda law or enforceable in a Bermuda court,
to the extent they are contrary to Bermuda public policy.
Further, no claim may be brought in Bermuda against us or our
directors and officers in the first instance for violations of
U.S. federal securities laws because these laws have no
extraterritorial jurisdiction under Bermuda law and do not have
force of law in Bermuda. A Bermuda court may, however, impose
civil liability on us or our directors and officers if the facts
alleged in a complaint constitute or give rise to a cause of
action under Bermuda law.
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Table of Contents
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission, or
SEC, a registration statement on Form S-1 under the
Securities Act of 1933, as amended, with respect to the common
shares that are being offered by this prospectus. This
prospectus, which is a part of the registration statement, does
not contain all of the information set forth in the registration
statement and the exhibits and schedules to the registration
statement. Refer to the registration statement, exhibits and
schedules for further information with respect to the common
shares offered by this prospectus. Statements contained in this
prospectus regarding the contents of any contract or other
documents are only summaries. With respect to any contract or
document filed as an exhibit to the registration statement, you
should refer to the exhibit for a copy of the contract or
document, and each statement in this prospectus regarding that
contract or document is qualified by reference to the exhibit.
The registration statement, including all exhibits, may be
inspected without charge at the SEC's Public Reference Room
at 100 F Street, N.E., Washington, D.C. 20549.
Information on the operation of the Public Reference Room can be
obtained by calling the SEC at 1-800-SEC-0330. Our SEC filings
also are available to the public from the SEC's website at
www.sec.gov.
Website Access to our Periodic SEC Reports
The Internet address of our corporate website is
www.trustcrm.com. We intend to make our periodic SEC reports (on
Forms 10-K and 10-Q) and current reports (on
Form 8-K), as well as the beneficial ownership reports
filed by our directors, officers and 10% shareholders (on
Forms 3, 4 and 5) available free of charge through our
website as soon as reasonably practicable after they are filed
electronically with the SEC. We may from time to time provide
important disclosures to investors by posting them in the
investor relations section of our website, as allowed by SEC
rules. The information on our website is not a part of this
prospectus and will not be part of any of our periodic or
current reports to the SEC.
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Table of Contents
INDEX TO FINANCIAL STATEMENTS
Page
Compensation Risk Managers, LLC and Affiliates
Interim Unaudited Combined Financial Statements:
Combined Balance Sheets as of June 30, 2005 and
    December 31, 2004
F-2
Combined Statements of Income for the six months ended
    June 30, 2005 and 2004
F-3
Combined Statement of Changes in Shareholders' and
    Members' Equity for the six months ended June 30, 2005
    and 2004
F-4
Combined Statements of Cash Flows for the six months ended
    June 30, 2005 and 2004
F-5
Notes to Interim Combined Financial Statements
F-6
Annual Combined Financial Statements:
Report of Johnson Lambert & Co., Independent Registered
    Public Accounting Firm
F-13
Combined Balance Sheets as of December 31, 2004 and 2003
F-14
Combined Statements of Income for the years ended
    December 31, 2004, 2003 and 2002
F-15
Combined Statements of Changes in Members' and
    Shareholders' Equity for the years ended December 2004,
    2003 and 2002
F-16
Combined Statements of Cash Flows for the years ended December
    2004, 2003 and 2002
F-17
Notes to Combined Financial Statements
F-18
CRM Holdings Ltd. (in formation):
Report of Johnson Lambert & Co., Independent Registered
    Public Accounting Firm
F-29
Balance Sheet as of September 7, 2005
F-30
Note to Balance Sheet
F-30
F-1
Table of Contents
Compensation Risk Managers, LLC and Affiliates
Unaudited Combined Balance Sheets
June 30,
December 31,
2005
2004
ASSETS
Cash and cash equivalents
$
2,492,564
$
1,576,479
Cash and cash equivalents, restricted
6,269,678
4,398,342
Premiums receivable, net
3,844,845
3,758,139
Accounts receivable
925,446
—
Deferred policy acquisition costs
1,340,565
1,413,500
Property and equipment, net
955,292
912,956
Loans receivable
414,173
431,606
Prepaid expenses and other assets
382,019
233,289
Total assets
$
16,624,582
$
12,724,311
LIABILITIES AND SHAREHOLDERS' AND MEMBERS'
    EQUITY
Reserve for losses and loss adjustment expenses
$
4,001,062
$
2,696,000
Unearned reinsurance premiums
4,533,316
4,779,950
Unearned management fee revenues
1,182,342
670,631
Unearned commission income
3,382,976
2,333,940
Borrowings under credit facilities
1,109,399
158,307
Fees payable to general agents and brokers
740,430
565,571
Accrued expenses
1,733,438
631,885
Total liabilities
16,682,963
$
11,836,284
Twin Bridges
Common stock
120,000
120,000
Additional paid-in capital
880,000
880,000
Retained earnings
1,576,139
834,891
LLC members' equity (deficit)
(2,634,520
)
(946,864
)
Total shareholders' and members' equity
    (deficit)
(58,381
)
888,027
Total liabilities and shareholders' and members'
    equity
$
16,624,582
$
12,724,311
See Notes to Combined Financial Statements.
F-2
Table of Contents
Compensation Risk Managers, LLC and Affiliates
Unaudited Combined Statements of Income
Six Months Ended June 30
2005
2004
Revenues
Fee-based management services:
Management fees
$
14,384,151
$
12,221,141
Commission income
2,110,292
1,699,041
16,494,443
13,920,182
Net reinsurance premiums
3,045,146
2,122,925
Investment income, net of advisory fees
53,463
21,170
Total revenues
19,593,052
16,064,277
Expenses
Losses and loss adjustment expenses
1,305,062
1,165,604
Fees paid to general agents and brokers
5,627,711
5,125,836
Policy acquisition costs
900,496
627,779
Selling, general and administrative expenses
8,883,709
6,274,647
Interest expense
28,780
25,000
Total expenses
16,745,758
13,218,866
Income before taxes
2,847,294
2,845,411
Provision for income taxes
—
—
Net income
$
2,847,294
$
2,845,411
See Notes to Combined Financial Statements.
F-3
Table of Contents
Compensation Risk Managers, LLC and Affiliates
Unaudited Combined Statement of Changes in Shareholders'
And Members' Equity
Six Months Ended June 30
Twin Bridges
Total Share-
LLC
holders' and
Common
Paid-in
Retained
Members'
Members'
Stock
Capital
Earnings
Equity
Equity
Balance at January 1, 2004
$
120,000
$
880,000
$
(51,276
)
$
(2,112,661
)
$
(1,163,937
)
Net income for the period
—
—
250,320
2,595,091
2,845,411
Distributions to members
—
—
—
(2,060,191
)
(2,060,191
)
Balance at June 30, 2004
$
120,000
$
880,000
$
199,044
$
(1,577,761
)
$
(378,717
)
Balance at January 1, 2005
$
120,000
$
880,000
$
834,891
$
(946,864
)
$
888,027
Net income for the period
—
—
741,248
2,106,046
2,847,294
Distributions to members
—
—
—
(3,793,702
)
(3,793,702
)
Balance at June 30, 2005
$
120,000
$
880,000
$
1,576,139
$
(2,634,520
)
$
(58,381
)
See Notes to Combined Financial Statements
F-4
Table of Contents
Compensation Risk Managers, LLC and Affiliates
Unaudited Combined Statements of Cash Flows
Six Months Ended June 30
2005
2004
CASH FLOWS FROM OPERATING ACTIVITIES
Net income
$
2,847,294
$
2,845,411
Adjustments to reconcile net income to net cash provided by
    operating activities:
Depreciation and amortization
102,281
123,533
Changes in:
Cash and cash equivalents, restricted
(1,871,336
)
(1,318,282
)
Premiums receivable, net
(86,706
)
(507,297
)
Accounts receivable
(884,276
)
(115,185
)
Deferred policy acquisition costs
72,935
(138,742
)
Prepaid expenses and other assets
(189,900
)
(160,600
)
Reserve for losses and loss adjustment expenses
1,305,062
1,165,604
Unearned reinsurance premiums
(246,634
)
469,175
Unearned management fee revenues
511,711
455,542
Unearned commission income
1,049,036
(36,024
)
Fees payable to general agents and brokers
174,859
327,898
Accrued expenses
1,101,553
627,765
Net cash provided by operating activities
3,885,879
3,738,798
CASH FLOWS FROM INVESTING ACTIVITIES
Property and equipment
(144,617
)
(130,966
)
Loans receivable
17,433
(329,330
)
Net cash used in investing activities
(127,184
)
(460,296
)
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings under credit facilities
951,092
148,761
Distributions paid to LLC Members
(3,793,702
)
(2,060,191
)
Net cash used in financing activities
(2,842,610
)
(1,911,430
)
Net increase in cash
916,085
1,367,072
Cash and cash equivalents
Beginning
1,576,479
659,508
Ending
$
2,492,564
$
2,026,580
Supplemental Cash Flow Disclosures
Income taxes paid
$
—
$
—
Interest paid
$
29,182
$
25,551
See Notes to Combined Financial Statements.
F-5
Table of Contents
Compensation Risk Managers, LLC and Affiliates
Notes to Unaudited Combined Financial Statements
Note 1.
Significant Accounting Policies
Principles of Consolidation
These interim unaudited combined financial statements include
the accounts of Compensation Risk Mangers, LLC, Compensation
Risk Managers of California, LLC, Eimar, LLC and Twin Bridges
(Bermuda) Ltd. (collectively, "the Company"). These
entities, in substance, have identical beneficial ownership.
These interim unaudited combined financial statements and notes
have been prepared in conformity with the rules and regulations
of the Securities and Exchange Commission ("SEC") for
interim financial information. Accordingly, they do not include
all of the information and note disclosure required by generally
accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments
considered necessary for a fair presentation of the results for
the interim periods have been included. These interim unaudited
combined financial statements and related notes should be read
in conjunction with the Company's audited combined
financial statements and related notes. The Company's
results of operations for interim periods are not necessarily
indicative of the results to be expected for the entire year.
Use of Estimates
The preparation of interim unaudited combined financial
statements in conformity with generally accepted accounting
principles in the United States requires management to make
estimates and assumptions that affect certain reported amounts
and disclosures. Those estimates are inherently subject to
change, and actual results may ultimately differ materially from
those estimates.
Note 2.
Deferred Policy Acquisition Costs
Changes in deferred policy acquisition costs are as follows:
As at June 30,
2005
2004
Balance at beginning of period
$
1,413,500
$
823,515
Policy acquisition costs deferred:
Ceding commissions
799,575
740,600
Other
27,986
25,921
827,561
766,521
Amortization of policy acquisition costs
(900,496
)
(627,779
)
Net change
(72,935
)
138,742
Balance at end of period
$
1,340,565
$
962,257
F-6
Table of Contents
Compensation Risk Managers, LLC and Affiliates
Notes to Unaudited Combined Financial
Statements — (Continued)
Note 3.
Loans Receivable
The Company has extended credit through loan arrangements as
follows:
As at June 30,
2005
2004
Working capital loan to a general agent and its principals in
    connection with a self-insured group managed by CRM, which
    consisted of monthly advances from November, 2003 through June,
    2004 totalling $468,783, at which time monthly payments of
    $14,261, including principal and interest at 6% per annum over
    36 months, commenced
$
371,759
$
468,783
Employee loans of varying amounts, with repayment terms
    extending to 2006 and bearing interest up to 6% per annum
42,414
33,214
$
414,173
$
501,997
Interest on loans receivable is recorded on the accrual basis
except for loans in default. No interest is accrued on loans in
default.
The general agent and its principals failed to make timely
installment payments due under the working capital loan
commencing March 15, 2005 and the Company has declared the
loan in default and immediately due and payable in full and
brought an action for collection. Management has assessed the
likelihood of collecting the working capital loan and believes
all amounts will ultimately be collected. Accordingly, no
provision for uncollectible amounts has been recorded. See
Note 6.
Note 4.
Credit Facilities
CRM entered into a revolving credit facility with KeyBank
National Association, or KeyBank, under which CRM was entitled
to borrow up to $3 million until June 30, 2005. The
facility was amended in May 2005 to permit CRM to borrow up to
$5 million until December 31, 2005. Borrowings under
the facility may be used for general business purposes,
including distributions to members. Loans under the facility are
due on demand and any loan outstanding on December 31,
2005, if not sooner demanded, shall be fully amortized in
12 equal monthly installments. Interest on the loans
outstanding under the facility is payable monthly at a rate per
annum equal to KeyBank's prime rate from time to time. All
of CRM's obligations under the facility are secured by a
lien on substantially all of CRM's assets and by the
personal guarantees of CRM's shareholders. The facility
limits CRM's ability to purchase or sell assets otherwise
than in the ordinary course of business, prohibits CRM from
permitting any liens on its assets, subject to customary
exceptions, prohibits CRM from incurring debt for borrowed
money, including leases, except for trade debt incurred in the
normal course of business and indebtedness or leases for term
loans, leases, vehicles or equipment of up to $400,000, limits
mergers and consolidations of CRM and prohibits investments and
loans by CRM.
The weighted average interest rate on borrowings under this line
of credit was 5.4% and 4.6% for the six months ended
June 30, 2005 and 2004, respectively.
Under Twin Bridges' contract with NY Marine &
General, Twin Bridges is required to post security, which may be
in the form of letters of credit issued by an acceptable bank,
in order to secure any unpaid liabilities under the contract.
Twin Bridges has entered into a letter of credit loan facility
(the "Unsecured Letter of Credit Facility") with
KeyBank under which Twin Bridges is entitled to draw letters of
credit in the principal amount of up to $3 million, for
which Twin Bridges pays a fee of 1.50% of the principal amount
of each letter of credit drawn. Any payments under the letters
of credit must be repaid by Twin Bridges within 90 days.
The letter of credit loan facility terminated on June 30,
2005 but has been extended until September 30, 2005. The
loan agreement contains covenants similar to the covenants in
CRM's revolving credit facility with KeyBank described
above. The borrowings outstanding under it have been guaranteed
by the shareholders of Twin Bridges. In addition, Twin Bridges
entered into a second letter of credit loan facility
F-7
Table of Contents
Compensation Risk Managers, LLC and Affiliates
Notes to Unaudited Combined Financial
Statements — (Continued)
(the "Secured Letter of Credit Facility") under which
Twin Bridges was entitled to draw letters of credit in the
principal amount of up to $7.5 million, for which Twin
Bridges paid a fee of 1.50% of the principal amount of each
letter of credit drawn. Any payments under the letters of credit
were required to be repaid by Twin Bridges within 90 days.
Any letter of credit issued under the Secured Letter of Credit
Facility was secured by cash and cash equivalents held in a
carrying value of equal amount and guaranteed by the
shareholders of Twin Bridges. The Secured Letter of Credit
Facility terminated on June 30, 2005 and was not renewed or
extended. Twin Bridges also has informal arrangements with
KeyBank and Smith Barney Citigroup pursuant to which Twin
Bridges may obtain cash collateralized letters of credit. See
Note 5.
Amounts outstanding under these facilities were as follows:
6/30/2005
12/31/2004
Amount
Amount
Revolving Credit Facility
$
1,000,000
$
—
Secured Letter of Credit Facility and other cash collateralized
    letters of credit
6,269,678
4,390,738
Unsecured Letter of Credit
2,449,781
1,752,609
$
9,719,459
$
6,143,347
The credit facilities collectively require CRM to maintain a
minimum level of members' equity, which was waived at
June 30, 2005.
Note 5.
Reinsurance Activity
Pursuant to the reinsurance agreement with NY Marine &
General, Twin Bridges reinsures 50% of liabilities arising from
policies issued by NY Marine & General to self-insured
groups managed by CRM and CRM CA. Under the agreement with NY
Marine & General, Twin Bridges reinsures 50% of all the
coverage it provides and receives 50% of the premiums paid to NY
Marine & General by these groups. Twin Bridges allows
NY Marine & General a ceding commission of 28% of the
premium assumed by Twin Bridges to cover its acquisition,
general and administrative expenses, a further 2% for stop-loss
coverage and 1% to cover the U.S. federal excise tax, or a
total of 31% of the premium assumed by Twin Bridges. The stop
loss coverage limits its losses under its reinsurance agreement
to 181.16% of the premium assumed by Twin Bridges, net of the
ceding commission, and the cost of the stop-loss coverage and
the U.S. federal excise tax. NY Marine & General in
turn pays a 20% commission to CRM for any excess coverage placed
with NY Marine & General by CRM or CRM CA.
A summary of reinsurance premiums assumed consisted of the
following:
For the Six Months Ended June 30,
2005
2004
Premiums assumed
2,798,512
2,592,100
Change in unearned reinsurance premiums
246,634
(469,175
)
Net reinsurance premiums
3,045,146
2,122,925
F-8
Table of Contents
Compensation Risk Managers, LLC and Affiliates
Notes to Unaudited Combined Financial
Statements — (Continued)
No losses have been reported through June 30, 2005.
Accordingly, no case reserves have been recorded. Changes in
Twin Bridges' liability for incurred but not reported
losses and loss adjustment expenses ("LAE") were
as follows:
As at June 30,
2005
2004
Liability at beginning of period
$
2,696,000
$
167,917
Incurred losses and LAE relating to:
Current year
1,305,062
1,165,604
Prior years
—
—
Total incurred losses and LAE
1,305,062
1,165,604
Paid losses and LAE relating to:
Current year
—
—
Prior years
—
—
Total paid losses and LAE
—
—
Liability at end of period
$
4,001,062
$
1,333,521
The reinsurance agreements require Twin Bridges to provide
certain collateral to secure its obligations to NY
Marine & General. Letters of credit in the aggregate
principal amount of $8,719,459 and $3,306,046 at June 30,
2005 and 2004, respectively, were issued under the letter of
credit facilities described in Note 4. Of these letters of
credit, letters of credit in the aggregate principal amount of
$6,269,678 and $2,318,282 at June 30, 2005 and 2004,
respectively, were secured by cash and cash equivalents held
with a carrying value in those amounts pursuant to the Secured
Letter of Credit Facility and informal arrangements with KeyBank
and Smith Barney Citigroup. The remaining letters of credit
outstanding on those dates were issued pursuant to the Unsecured
Letter of Credit Facility.
Note 6.
Contingencies
In April 2005, a former general agent for one of the
self-insured groups in California managed by CRM commenced
litigation against CRM and CRM CA alleging that CRM wrongfully
caused the general agent to be terminated as the general agent
for the group and wrongfully assumed the general agent's
responsibilities to the group. The general agent also alleges
that CRM had falsely accused the general agent and its
principals of wrongfully diverting money and of other wrongful
conduct. The general agent's complaint does not seek a
specific amount of damages. CRM intends to defend the litigation
vigorously and has asserted counterclaims against the general
agent for breach of contract, fraud and intentional interference
with economic advantage and alleging that the general agent had
wrongfully used confidential information it had received from
CRM to establish a workers' compensation self-insurance
program for California automobile dealers. CRM has been
collecting from the self-insured group the portion of the fees
that would have been paid to the general agent under the
arrangements that existed prior to its termination as the
general agent. These fees totaled $268,008 as of June 30,
2005 and are being held by CRM pending the resolution of the
disputes with the general agent. This amount is included in cash
and cash equivalents, and a corresponding liability is included
in accrued expenses, as of June 30, 2005 and this cash may
be available to reduce the loan to the general agent described
in Note 3.
On December 29, 2004 H.F.C.A. Associates Corp. and
17 related companies, all of which were members or former
members of the Healthcare Industry Trust of New York, or HITNY,
sued HITNY and CRM in the Supreme Court of the State of New
York, Ulster County, alleging, among other things, that the
defendants had improperly terminated their membership in HITNY
and failed to process claims on their behalf. The plaintiffs
also alleged that CRM had engaged in self dealing and had
committed a breach of fiduciary duties
F-9
Table of Contents
Compensation Risk Managers, LLC and Affiliates
Notes to Unaudited Combined Financial
Statements — (Continued)
owed to them in connection with the placement of reinsurance for
the members of HITNY. The complaint asks for damages of
$1 million against both defendants and a judgment that the
plaintiffs did not owe HITNY the outstanding premium for which
they had been invoiced. HITNY answered the complaint, denying
the plaintiffs' material allegations. HITNY alleged that
the plaintiffs' membership had been properly terminated and
asserted a counterclaim against the plaintiffs in the amount of
$107,000 for unpaid premium. HITNY also asserted a claim against
CRM alleging generally that if the plaintiffs suffered any
damages they were caused by CRM's actions or wrongdoing.
CRM answered the complaint, denying the plaintiffs'
material allegations, including the allegations of self dealing
and breach of fiduciary duty, and asserting a claim based on
breach of contract and contribution against HITNY for whatever
damages the plaintiffs may recover from CRM. This litigation is
in its early stages; the parties have not yet exchanged any
responses to discovery demands.
No amount has been accrued in these combined financial
statements for either claim as the outcomes are uncertain and a
liability cannot be determined.
Note 7.
Segment Information
The Company has two reportable segments: fee-based management
services and reinsurance. The determination of these two
segments was based on the Company's methodology for
monitoring the performance of the self-insured group business
and reinsurance operations. The Company evaluates each segment
based on management fees and commission income or reinsurance
premiums earned, as applicable, including items of revenue and
expense that are associated with, and directly related to, each
segment. The Company has not developed a methodology to allocate
non-direct items of expense between the segments. Accordingly,
all non-direct expenses are recorded as part of the fee based
management services segment.
F-10
Table of Contents
Compensation Risk Managers, LLC and Affiliates
Notes to Unaudited Combined Financial
Statements — (Continued)
The following table sets forth the Company's revenues,
expenses, income before taxes and assets by business segment and
on a combined basis:
Six Months Ended June 30,
2005
2004
Fee Based Management Services Segment
Revenues:
Management fees
$
14,384,151
$
12,221,141
Commission income
2,110,292
1,699,041
Interest income
13,390
17,038
Total revenues
$
16,507,833
$
13,937,220
Expenses
Interest expense
28,780
25,000
Depreciation
102,281
123,533
Operating expenses
14,270,726
11,193,596
Total expenses
14,401,787
11,342,129
Income before taxes
$
2,106,046
$
2,595,091
Total Assets (at end of period)
$
5,093,003
$
3,779,077
Reinsurance Segment
Revenues:
Net reinsurance premiums
$
3,045,146
$
2,122,925
Investment income, net of advisory fees
40,073
4,132
Total revenues
3,085,219
2,127,057
Expenses
Underwriting
    expenses
1
2,343,971
1,876,737
Income before taxes
$
741,248
$
250,320
Total Assets (at end of period)
$
11,531,579
$
6,047,210
Combined
Total revenues
$
19,593,052
$
16,064,277
Total expenses
16,745,758
13,218,866
Income before taxes
$
2,847,294
$
2,845,411
Total Assets (at end of period)
$
16,624,582
$
9,826,287
1.
Underwriting expenses include policy acquisition costs,
    professional fees and losses and loss adjustment expenses.
Note 8.
Related Parties
The Company conducts business with an insurance broker whose
owners include an individual who is a shareholder and a director
of Twin Bridges, and a member of CRM, CRM CA and Eimar. The
Company pays the broker fees for business placed with several of
the self insurance groups managed by the Company. In addition,
the Company leases office space and purchases various liability,
property and casualty insurance coverage from the broker. The
following table represents amounts paid to the broker for
services rendered:
Six Months ended June 30
2005
2004
Fees paid to general agents and brokers
$
116,684
$
121,337
Other operating expenses
27,948
30,410
$
144,632
$
151,747
F-11
Table of Contents
Compensation Risk Managers, LLC and Affiliates
Notes to Unaudited Combined Financial
Statements — (Continued)
Compensation Risk Managers Agency Captive, LLC ("Agency
Captive") is a licensed insurance broker that shares common
ownership with the Company. Agency Captive was originally formed
to underwrite a business unrelated to the self-insured groups
managed by CRM or CRM CA. Agency Captive currently holds the
brokerage license that CRM and CRM CA use to place the excess
coverage with U.S. admitted insurers and surety bonds on
behalf of the self-insured groups they manage. Agency Captive
receives the brokerage commissions which are then fully remitted
to CRM or CRM CA, as applicable. The brokerage license is owned
by Daniel G. Hickey, Jr., the Company's Co-Chief
Executive Officer and Chairman of the Board and one of its
principal shareholders and members. Mr. Hickey, Jr.
intends to transfer the license to CRM pursuant to an oral
agreement, following which brokerage commissions will be paid
directly to CRM.
Included in selling, general and administrative expenses are
guaranteed payments and bonuses to the members of the limited
liability companies totaling $1,278,899 and $1,118,764 for the
six month periods ended June 30, 2005 and 2004,
respectively.
F-12
Table of Contents
Report of Independent Registered Public Accounting Firm
To the Members of
Compensation Risk Manager, LLC and Affiliates
We have audited the accompanying combined balance sheets of
Compensation Risk Managers, LLC and Affiliates (the
"Company") as of December 31, 2004 and 2003 and
the related combined statements of income and comprehensive net
income, changes in stockholders' equity and cash flows for
each of the three years in the period ended December 31,
2004. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes consideration
of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the Company's internal control over
financial reporting. Accordingly, we express no such opinion. An
audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the Company's financial statements present
fairly, in all material respects, the financial position of the
Company as of December 31, 2004 and 2003, and the results
of its operations and its cash flows for the three years in the
period ended December 31, 2004 in conformity with
accounting principles generally accepted in the United States.
/s/ JOHNSON LAMBERT & CO.
Reston, Virginia
August 5, 2005
F-13
Table of Contents
Compensation Risk Managers, LLC and Affiliates
Combined Balance Sheets
December 31
2004
2003
Assets
Cash and cash equivalents
$
1,576,479
$
766,697
Cash and cash equivalents, restricted
4,398,342
1,000,000
Premiums receivable, net
3,758,139
2,139,620
Deferred policy acquisition costs
1,413,500
823,515
Property and equipment, net
912,956
792,192
Loans receivable
431,606
172,667
Prepaid expenses and other assets
233,289
187,655
Total assets
$
12,724,311
$
5,882,346
Liabilities and shareholders' and members'
    equity
Reserve for losses and loss adjustment expenses
$
2,696,000
$
167,917
Unearned reinsurance premiums
4,779,950
2,784,834
Unearned management fees
670,631
614,299
Unearned commission income
2,333,940
2,246,828
Fees payable to general agents and brokers
565,571
578,349
Accrued expenses
631,885
369,025
Borrowings under credit facilities
158,307
285,031
Total liabilities
11,836,284
7,046,283
Twin Bridges
Common stock
120,000
120,000
Additional paid-in capital
880,000
880,000
Retained earnings
834,891
(51,276
)
LLC members' equity (deficit)
(946,864
)
(2,112,661
)
Total shareholders' and members' equity
888,027
(1,163,937
)
Total liabilities and shareholders' and members'
    equity
$
12,724,311
$
5,882,346
See Notes to Combined Financial Statements.
F-14
Table of Contents
Compensation Risk Managers, LLC and Affiliates
Combined Statements of Income
Years Ended December 31
2004
2003
2002
Revenues
Fee-based management services:
Management fees
$
23,510,174
$
17,889,315
$
15,084,733
Commission income
4,145,552
2,931,813
2,529,592
27,655,726
20,821,128
17,614,325
Net reinsurance premiums
5,109,883
253,167
—
Investment income, net of advisory fees
54,477
15,789
36,999
Total revenues
32,820,086
21,090,084
17,651,324
Expenses
Losses and loss adjustment expenses
2,528,083
167,917
—
Fees paid to general agents and brokers
9,507,546
7,829,685
7,650,629
Policy acquisition costs
1,511,065
74,865
—
Selling, general and administrative expenses
13,440,809
9,240,562
6,471,273
Interest expense
26,753
45,989
33,173
Total expenses
27,014,256
17,359,018
14,155,075
Income before taxes
5,805,830
3,731,066
3,496,249
Provision for income taxes
—
—
—
Net income
$
5,805,830
$
3,731,066
$
3,496,249
See Notes to Combined Financial Statements.
F-15
Table of Contents
Compensation Risk Managers, LLC and Affiliates
Combined Statements of Changes in Shareholders' and
Members' Equity
Years Ended December 31
Twin Bridges
Total
LLC
Shareholders'
Common
Paid-in
Retained
Members'
and Members'
Stock
Capital
Earnings
Equity
Equity
Balance at January 1, 2002
$
—
$
—
$
—
$
896,636
$
896,636
Net income
3,496,249
3,496,249
Distributions to members
(3,498,782
)
(3,498,782
)
Balances at December 31, 2002
—
—
—
894,103
894,103
Net income (loss)
(51,276
)
3,782,342
3,731,066
Distributions to members
(6,789,106
)
(6,789,106
)
Issuance of common shares
120,000
880,000
1,000,000
Balances at December 31, 2003
120,000
880,000
(51,276
)
(2,112,661
)
(1,163,937
)
Net income
886,167
4,919,663
5,805,830
Distributions to members
(3,753,866
)
(3,753,866
)
Balances at December 31, 2004
$
120,000
$
880,000
$
834,891
$
(946,864
)
$
888,027
See Notes to Combined Financial Statements.
F-16
Table of Contents
Compensation Risk Managers, LLC and Affiliates
Combined Statements of Cash Flows
Years Ended December 31
2004
2003
2002
CASH FLOWS FROM OPERATING ACTIVITIES
Net income
$
5,805,830
$
3,731,066
$
3,496,249
Adjustments to reconcile net income to net cash provided by
    operating activities:
Depreciation and amortization
189,474
179,336
108,035
Changes in:
Cash and cash equivalents, restricted
(3,398,342
)
(1,000,000
)
—
Premiums receivable, net
(1,618,519
)
(2,139,620
)
388,146
Deferred policy acquisition costs
(589,985
)
(823,515
)
—
Prepaid expenses and other assets
(45,634
)
1,103,655
(1,228,708
)
Reserve for losses and loss adjustment expenses
2,528,083
167,917
—
Unearned reinsurance premiums
1,995,116
2,784,834
—
Unearned management fee revenues
56,332
(1,174,676
)
1,447,682
Unearned commission income
87,112
84,211
1,018,217
Fees payable to general agents and brokers
(12,778
)
41,093
161,756
Accrued expenses
262,860
52,322
241,520
Net cash provided by operating activities
5,259,549
3,006,623
5,632,897
CASH FLOWS FROM INVESTING ACTIVITIES
Property and equipment
(310,238
)
(175,442
)
(694,813
)
Loans receivable
(258,939
)
(99,667
)
(73,000
)
Net cash used in investing activities
(569,177
)
(275,109
)
(767,813
)
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings under credit facilities
(126,724
)
(819,786
)
935,631
Issuance of common stock — Twin Bridges
—
1,000,000
—
Distributions paid to LLC Members
(3,753,866
)
(6,789,106
)
(3,498,782
)
Net cash used in financing activities
(3,880,590
)
(6,608,892
)
(2,563,151
)
Net increase (decrease) in cash
809,282
(3,877,378
)
2,301,933
Cash and cash equivalents
Beginning
766,697
4,644,075
2,342,142
Ending
$
1,576,479
$
766,697
$
4,644,075
Supplemental Cash Flow Disclosures
Income taxes paid
$
—
$
—
$
—
Interest paid
$
26,351
$
45,438
$
31,494
See Notes to Combined Financial Statements.
F-17
Table of Contents
Compensation Risk Managers, LLC and Affiliates
Notes to Combined Financial Statements
Note 1.
Nature of Business and Significant Accounting Policies
Nature of Business
These combined financial statements include the accounts of
Compensation Risk Mangers, LLC ("CRM"), Compensation
Risk Managers of California, LLC ("CRM CA"), Eimar,
LLC ("Eimar") and Twin Bridges (Bermuda) Ltd.
("Twin Bridges") (collectively, "the
Company"). These entities, in substance, have identical
beneficial ownership, as more fully described in Note 6.
CRM and CRM CA provide management and other services to self
insured workers' compensation groups ("self-insured
groups") in the states of New York and California,
respectively. Eimar provides medical bill review and case
management services to the aforementioned self-insured groups
and other clients. Twin Bridges is registered in Bermuda as a
Class 3 insurer and is authorized to carry on business in
the capacity of a reinsurer. Twin Bridges has entered into a
reinsurance arrangement with New York Marine & General
Insurance Company ("NY Marine & General")
which provides excess workers compensation and employers'
liability insurance coverage to self-insured groups managed by
CRM and CRM CA.
Basis of Accounting and Principles of Combination
These combined financial statements have been prepared in
conformity with accounting principles generally accepted in the
United States of America. All significant inter-company
transactions and balances have been eliminated in the combined
financial statements.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles in the United States
requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Those estimates
are inherently subject to change, and actual results may
ultimately differ materially from those estimates.
Fee-Based Management Services
Revenues from fee-based management services include management
fees received from self-insured groups for management and other
services. In New York, the fees the Company receives from all
but one of the self-insured groups are based on a percentage of
the manual workers' compensation rates set by the New York
State Workers Compensation Board that are attributable to the
members of the self-insured groups and the Company's fees
include claims management services. With respect to the
self-insured groups in California and one of the self-insured
groups in New York, the Company's fees are based on a
percentage of the premiums paid to the self-insured groups by
their members. The self-insured groups in California pay the
fees for claims management services directly to a third party
administrator. The portion of such fees that is equal to related
fees paid to general agents and brokers is recorded as revenue
when payable by the group, which is the same time that fees paid
to general agents and brokers are recorded. The balance of such
fees is earned ratably over the period to which they apply. The
portion of the balance of the management fees that relate to the
remaining period at the balance sheet date is recorded as
unearned management fee revenues. Revenue from medical bill
review and case management services is also included in
management fees, and is recorded as revenue as the services are
rendered.
The Company also receives commission income for excess coverage
and surety bonds it places for these groups. Such commission
income is earned ratably over the terms of the underlying
insurance coverage and surety bonds. The portion of commission
income that relates to the remaining term of the underlying
insurance coverage at the balance sheet date is recorded as
unearned commission income revenues. Commission income revenues
for the placement of excess coverage represented placements
with 7, 7 and 9 U.S. admitted insurers for the years
ended December 31, 2004, 2003 and 2002, respectively.
Commission
F-18
Table of Contents
Compensation Risk Managers, LLC and Affiliates
Notes to Combined Financial
Statements — (Continued)
income from NY Marine & General represented 50%, 4% and
0% of such revenues for the years ended December 31, 2004,
2003 and 2002, respectively.
During the years ended December 31, 2004, 2003 and 2002,
the Company provided management and other related services
to 12, 9 and 8 self-insured groups, respectively. During
the years ended December 31, 2004, 2003 and 2002, 93%, 100%
and 100% of fee-based management services revenues were from
self-insured groups located in New York. The balance of such
revenues earned in the year ended December 31, 2004 was
from groups located in California.
One self-insured group accounted for 38%, 47% and 48% of the
Company's fee-based management services revenues for the
years ended December 31, 2004, 2003 and 2002, respectively.
For the year ended December 31, 2004, the three largest
self-insured groups, all located in New York, accounted for 74%
of total fee-based management services revenue. For the year
ended December 31, 2003, the four largest self-insured
groups, all located in New York, accounted for 94% of total
fee-based management services revenues. For the year ended
December 31, 2002, the three largest self-insured groups,
all located in New York, accounted for 91% of total fee-based
management services revenues.
Reinsurance Premiums
Management has evaluated its reinsurance arrangement with NY
Marine & General and determined that insurance risk is
transferred to Twin Bridges pursuant to this reinsurance
agreement. Under Statement of Financial Accounting Standards
("SFAS") No. 113, Accounting and Reporting for
Reinsurance of Short-Duration and Long-Duration Contracts, this
reinsurance agreement has been determined to be a short duration
prospective contract and accordingly, reinsurance premiums are
earned ratably over the term of the underlying excess coverage
policy. The portion of the reinsurance premiums that relate to
the remaining term of the reinsurance policy at the balance
sheet date is recorded as unearned reinsurance premiums. Such
reinsurance premiums are subject to adjustment based upon
modification to the premiums charged on the underlying excess
coverage policy. Such adjustments are reflected in current
operations when estimable.
Cash and Cash Equivalents
The Company considers all highly liquid debt instruments
purchased with maturities of three months or less to be cash
equivalents. At times, management maintains cash balances in
excess of insured limits and believes they do not represent a
significant credit risk to the Company. Certain cash and cash
equivalent balances have been pledged as security under certain
credit facilities, as more fully described in Note 5 and
Note 7.
Premiums Receivable
Premiums receivable pursuant to reinsurance agreements are
carried at face value less any allowance for doubtful accounts.
At December 31, 2004, 2003 and 2002, no allowance was
deemed necessary. No receivable balances were written off during
the years ended December 31, 2004, 2003 and 2002.
Policy Acquisition Costs
Policy acquisition costs are comprised of ceding commissions and
U.S. federal excise tax costs incurred pursuant to the
Company's reinsurance agreement with NY Marine &
General. These costs are deferred and amortized as the related
reinsurance premiums are earned or recorded. The Company
considers estimated investment income in determining the
recoverability of these costs. The Company believes that these
costs are fully recoverable at December 31, 2004 and 2003.
F-19
Table of Contents
Compensation Risk Managers, LLC and Affiliates
Notes to Combined Financial
Statements — (Continued)
Property and Equipment
Property and equipment is stated at cost, less accumulated
depreciation and amortization, and is depreciated using
straight-line and other methods that approximate the
straight-line method over the estimated useful lives of the
assets.
Reserve for Losses and Loss Adjustment Expenses
The reserve for losses and loss adjustment expenses represents
an estimate of the ultimate cost of all reported and unreported
losses and loss adjustment expenses assumed pursuant to
reinsurance agreements associated with reported claims and
claims incurred but not reported which are unpaid at the balance
sheet date. This liability is estimated using actuarial studies
of individual case-basis valuations, statistical analyses and
industry data. Management believes that its aggregate liability
for losses and loss adjustment expenses at year-end represent
its best estimate, based on available data, of the amounts
necessary to settle the ultimate cost of expected losses and
loss adjustment expenses. However, Twin Bridges has only been in
existence since December 2003 and thus has limited loss
experience, and due to the relatively small population of
underlying risks, Twin Bridges is exposed to an increased
likelihood that actual results may not conform to the
Company's estimates. These estimates also are subject to
the effects of trends in loss severity and frequency risks and
other trends such as fluctuations in inflation, prevailing
economic, social and judicial trends, legislative changes and
internal and third party claims handling procedures. There also
may be a significant delay between the occurrence of the insured
event and the time it is actually reported to us. Accordingly,
the ultimate settlement of losses and related loss adjustment
expenses may vary significantly from the estimates included in
the Company's financial statements. These estimates are
reviewed regularly and are adjusted as experience develops or
new information becomes known. Any such adjustments are included
in income in the period in which they are made.
Advertising Costs
Advertising costs, including selling and marketing expenses, are
expensed as incurred. Advertising costs totaling $1,065,763,
$509,415 and $289,408 were included in selling, general and
administrative expenses for the years ended December 31,
2004, 2003 and 2002, respectively.
Income Taxes
CRM, CRM CA and Eimar have been organized as limited liability
companies. The members of a limited liability company are taxed
on their proportionate share of the company's taxable
income. Therefore, no provision or liability for federal and
state income taxes has been included in the financial statements.
Twin Bridges has received an undertaking from the Bermuda
Minister of Finance assuring it that if any legislation is
enacted in Bermuda that would impose tax computed on profits or
income, or computed on any capital asset, gain or appreciation,
or any tax in the nature of estate duty or inheritance tax, then
the imposition of any such tax will not be applicable to Twin
Bridges or any of its operations, shares, debentures or other
obligations until March 28, 2016.
Segment Reporting
The Company manages its operations through two reportable
segments, fee-based management services and reinsurance. Certain
information about segment operations is addressed in
Note 14.
F-20
Table of Contents
Compensation Risk Managers, LLC and Affiliates
Notes to Combined Financial
Statements — (Continued)
Note 2.
Deferred Policy Acquisition Costs
Changes in deferred policy acquisition costs are as follows:
As of December 31,
2004
2003
Balance at beginning of year
$
823,515
$
—
Policy acquisition costs deferred:
Ceding commissions
2,030,000
868,000
Other
71,050
30,380
2,101,050
898,380
Amortization of policy acquisition costs
(1,511,065
)
(74,865
)
Net change
589,985
823,515
Balance at end of year
$
1,413,500
$
823,515
Note 3.
Property and Equipment
Property and equipment is stated at cost and summarized as
follows:
As of December 31,
2004
2003
2002
Furniture & fixtures
$
504,158
$
316,994
$
298,068
Computer equipment
481,716
399,410
286,193
Automobiles
84,924
116,372
116,372
Leasehold improvements
281,593
281,593
243,918
1,352,391
1,114,369
944,551
Less accumulated depreciation and amortization
(439,435
)
(322,177
)
(148,465
)
$
912,956
$
792,192
$
796,086
Note 4.
Loans Receivable
The Company has extended credit through loan arrangements as
follows:
As of December 31,
2004
2003
2002
Working capital loan to a general agent and its principals in
    connection with a self-insured group managed by CRM, which
    consisted of monthly advances from November, 2003 through June,
    2004 totalling $468,783, at which time monthly payments of
    $14,261 including principal and interest at 6% per annum over
    36 months commenced
$
396,379
$
130,000
$
—
Employee loan with an initial principal of $73,000, with
    repayment terms extending to 2006 and bearing interest at 6% per
    annum
35,227
42,667
73,000
$
431,606
$
172,667
$
73,000
Interest on loans receivable is recorded on the accrual basis
except for loans in default. No interest is accrued on loans in
default.
Subsequent to December 31, 2004, the general agent and its
principals failed to make timely installment payments due under
the working capital loan and the Company has declared the loan
in default and
F-21
Table of Contents
Compensation Risk Managers, LLC and Affiliates
Notes to Combined Financial
Statements — (Continued)
immediately due and payable in full and brought an action
against the borrowers for collection. Management has assessed
the likelihood of collecting the working capital loan and
believes all amounts will ultimately be collected. Accordingly,
no provision for uncollectible amounts has been recorded. See
Note 11.
Note 5.
Credit Facilities
CRM entered into a revolving credit facility with KeyBank
National Association, or KeyBank, under which CRM was entitled
to borrow up to $3 million until June 30, 2005. The
facility was subsequently amended in May 2005 to permit CRM to
borrow up to $5 million until December 31, 2005.
Borrowings under the facility may be used for general business
purposes, including distributions to members. Loans under the
facility are due on demand and any loan outstanding on
December 31, 2005, if not sooner demanded, shall be fully
amortized in 12 equal monthly installments. Interest on the
loans outstanding under the facility is payable monthly at a
rate per annum equal to KeyBank's prime rate from time to
time. All of CRM's obligations under the facility are
secured by a lien on substantially all of CRM's assets and
by the personal guarantees of CRM's shareholders. The
facility limits CRM's ability to purchase or sell assets
otherwise than in the ordinary course of business, prohibits CRM
from permitting any liens on its assets, subject to customary
exceptions, prohibits CRM from incurring debt for borrowed
money, including leases, except for trade debt incurred in the
normal course of business and indebtedness or leases for term
loans, leases, vehicles or equipment of up to $400,000, limits
mergers and consolidations of CRM and prohibits investments and
loans by CRM.
The weighted average interest rate on borrowings under this line
of credit was 4.4%, 7.2% and 4.2% for the years ended
December 31, 2004, 2003 and 2002 respectively.
Under Twin Bridges' contract with NY Marine &
General, Twin Bridges is required to post security, which may be
in the form of letters of credit issued by an acceptable bank,
in order to secure any unpaid liabilities under the contract.
Twin Bridges has entered into a letter of credit loan facility
(the "Unsecured Letter of Credit Facility") with
KeyBank under which Twin Bridges is entitled to draw letters of
credit in the principal amount of up to $3 million, for
which Twin Bridges pays a fee of 1.50% of the principal amount
of each letter of credit drawn. Any payments under the letters
of credit must be repaid by Twin Bridges within 90 days.
The letter of credit loan facility terminated on June 30,
2005 but was subsequently extended until September 30,
2005. The loan agreement contains covenants similar to the
covenants in CRM's revolving credit facility with KeyBank
described above. The borrowings outstanding under it have been
guaranteed by the shareholders of Twin Bridges. In addition,
Twin Bridges entered into a second letter of credit loan
facility (the "Secured Letter of Credit Facility")
under which Twin Bridges was entitled to draw letters of credit
in the principal amount of up to $7.5 million, for which
Twin Bridges paid a fee of 1.50% of the principal amount of each
letter of credit drawn. Any payments under the letters of credit
were required to be repaid by Twin Bridges within 90 days.
Any letter of credit issued under the Secured Letter of Credit
Facility was secured by cash and cash equivalents held in a
carrying value in equal amount and guaranteed by the
shareholders of Twin Bridges. The Secured Letter of Credit
Facility terminated on June 30, 2005 and was not renewed or
extended. Twin Bridges also has informal arrangements with
KeyBank and Smith Barney Citigroup pursuant to which Twin
Bridges may obtain cash collateralized letters of credit. See
Note 7.
F-22
Table of Contents
Compensation Risk Managers, LLC and Affiliates
Notes to Combined Financial
Statements — (Continued)
Amounts outstanding under these facilities and the period end
interest rates were as follows:
12/31/2004
12/31/2003
Amount
Amount
Revolving Credit Facility
$
—
$
—
Secured Letter of Credit Facility and other cash collateralized
    letters of credit
4,390,738
1,000,000
Unsecured Letter of Credit Facility
1,752,609
500,000
$
6,143,347
$
1,500,000
The credit facilities collectively require the Company to
maintain a minimum level of members' equity, which was
waived at December 31, 2004.
Note 6.
Shareholders' and Members' Equity
As limited liability companies, CRM, CRM CA and Eimar do not
have outstanding shares; rather, ownership is evidenced through
membership agreements.
Twin Bridges was formed in 2003 and issued 120,000 commons
shares for $120,000 and also received $880,000 as contributed
surplus and not in respect of subscription for shares. The
authorized share capital of Twin Bridges is 120,000 common
shares of the par value $1 each, of which 120,000 shares
are issued and outstanding at December 31, 2004 and 2003.
The underlying shareholders and ownership interest of Twin
Bridges are substantially equivalent to the members and
ownership percentages of CRM and Eimar. CRM CA is a wholly-owned
subsidiary of CRM.
Note 7.
Reinsurance Activity
Pursuant to the reinsurance agreement with NY Marine &
General, Twin Bridges reinsures 50% of liabilities arising from
policies issued by NY Marine & General to self-insured
groups managed by CRM and CRM CA. Under the agreement with NY
Marine & General, Twin Bridges reinsures 50% of all the
coverage it provides and receives 50% of the premiums paid to NY
Marine & General by these groups. Twin Bridges allows
NY Marine & General a ceding commission of 28% of the
premium assumed by Twin Bridges to cover its acquisition,
general and administrative expenses, a further 2% for stop-loss
coverage and 1% to cover the U.S. federal excise tax, or a
total of 31% of the premium assumed by Twin Bridges. The stop
loss coverage limits its losses under its reinsurance agreement
to 181.16% of the premium assumed by Twin Bridges, net of the
ceding commission, and the cost of the stop-loss coverage and
the U.S. federal excise tax. NY Marine & General in
turn pays a 20% commission to CRM for any excess coverage placed
with NY Marine & General by CRM or CRM CA, as described in
Note 1.
A summary of reinsurance premiums assumed consisted of the
following:
Years Ended December 31,
2004
2003
2002
Premiums assumed
$
7,105,000
$
3,038,000
$
—
Change in unearned reinsurance premiums
(1,995,117
)
(2,784,833
)
—
Net reinsurance premiums
$
5,109,883
$
253,167
$
—
F-23
Table of Contents
Compensation Risk Managers, LLC and Affiliates
Notes to Combined Financial
Statements — (Continued)
No losses have been reported through December 31, 2004.
Accordingly, no case reserves have been recorded. Changes in
Twin Bridges' liability for incurred but not reported
losses and loss adjustment expenses ("LAE") were
as follows:
As of December 31,
2004
2003
2002
Liability at beginning of year
$
167,917
$
—
$
—
Incurred losses and LAE relating to:
Current year
2,528,083
167,917
—
Prior year
—
—
—
Total incurred losses and LAE
2,528,083
167,917
—
Paid losses and LAE relating to:
Current year
—
—
—
Prior year
—
—
—
Total paid losses and LAE
—
—
—
Liability at end of year
$
2,696,000
$
167,917
$
—
The reinsurance agreements require Twin Bridges to provide
certain collateral to secure its obligations to NY
Marine & General. Letters of credit in the aggregate
principal amount of $6,143,347 and $1,500,000 at
December 31, 2004 and 2003, respectively, were issued under
the letter of credit facilities described in Note 5. Of
these letters of credit, letters of credit in the aggregate
principal amount of $4,398,342 and $1,000,000 at
December 31, 2004 and 2003, respectively, were secured by
cash and cash equivalents held with a carrying value in those
amounts pursuant to the Secured Letter of Credit Facility and
informal arrangements with KeyBank and Smith Barney Citigroup.
The balance of the letters of credit outstanding on those dates
was issued pursuant to the Unsecured Letter of Credit Facility.
Note 8.
Lease Commitments
The Company leases transportation vehicles, office space, and
office equipment under various operating lease agreements. Total
minimum future lease payments under these leases are
approximately as follows:
Years ending December 31,
2005
$
493,000
2006
333,000
2007
172,000
2008
128,000
2009
91,000
$
1,217,000
Rent expense was approximately $313,000, $216,000 and $156,000
for the years ended December 31, 2004, 2003 and 2002,
respectively.
Note 9.
Retirement Plan
In 2001 the Company established a 401(k) profit sharing plan for
employees meeting certain age and service requirements as
defined by the plan. Eligible employees may contribute up to
statutory limits. The Company makes matching contributions of
50% of an employee's annual contribution until the employee
has contributed 3% of annual compensation. The Company may also
make a discretionary annual profit sharing
F-24
Table of Contents
Compensation Risk Managers, LLC and Affiliates
Notes to Combined Financial
Statements — (Continued)
contribution to the plan. Employer matching contributions to the
plan were approximately $31,300, $27,300 and $17,300 for the
years ended December 31, 2004, 2003 and 2002, respectively.
No discretionary contributions were made for any of those years.
Note 10.
Related Parties
The Company conducts business with an insurance broker whose
owners include an individual who is a shareholder and a director
of Twin Bridges, and a member of CRM, CRM CA and Eimar. The
Company pays the broker fees for business placed with several of
the self insurance groups managed by the Company. In addition,
the Company leases office space and purchases various liability,
property and casualty insurance coverage from the broker. The
following table represents amounts paid to the broker for
services rendered:
Years Ended December 31,
2004
2003
2002
Fees paid to general agents and brokers
$
229,124
$
257,355
$
290,442
Other operating expenses
39,969
44,986
29,928
$
269,093
$
302,341
$
320,370
Compensation Risk Managers Agency Captive, LLC, ("Agency
Captive"), is a licensed insurance broker that shares
common ownership with the Company. Agency Captive was originally
formed to underwrite a business unrelated to the self-insured
groups managed by CRM or CRM CA. Agency Captive currently holds
the brokerage license that CRM and CRM CA use to place the
excess coverage with U.S. admitted insurers and surety
bonds on behalf of the self-insured groups they manage. Agency
Captive receives the brokerage commissions which are then fully
remitted to CRM or CRM CA, as applicable. The brokerage license
is owned by Daniel G. Hickey, Jr., the Company's
Co-Chief Executive Officer and Chairman of the Board and one of
its principal shareholders and members.
Mr. Hickey, Jr. intends to transfer the license to CRM
pursuant to an oral agreement, following which brokerage
commissions will be paid directly to CRM.
Included in selling, general and administrative expenses are
guaranteed payments and bonuses to the members of the limited
liability companies totaling $2,271,786, $1,775,792 and
$1,877,458 for the years ended December 31, 2004, 2003 and
2002, respectively.
Note 11.
Contingencies
In April 2005, a former general agent for one of the
self-insured groups in California managed by CRM commenced
litigation against CRM and CRM CA alleging that CRM
wrongfully caused the general agent to be terminated as the
general agent for the group and wrongfully assumed the general
agent's responsibilities to the group. The general agent
also alleges that CRM had falsely accused the general agent and
its principals of wrongfully diverting money and of other
wrongful conduct. The general agent's complaint does not
seek a specific amount of damages. CRM intends to defend the
litigation vigorously and has asserted counterclaims against the
general agent for breach of contract, fraud and intentional
interference with economic advantage and alleging that the
general agent had wrongfully used confidential information it
had received from CRM to establish a workers' compensation
self-insurance program for California automobile dealers. CRM
has been collecting from the self-insured group the portion of
the fees that would have been paid to the general agent under
the arrangements that existed prior to its termination as the
general agent. These fees totaled $268,008 as of June 30,
2005 and are being held by CRM pending the resolution of the
disputes with the general agent. This amount is included in cash
and cash equivalents, and a corresponding liability is included
in accrued expenses, as of June 30, 2005 and this cash may
be available to reduce the loan to the general agent described
in Note 4.
F-25
Table of Contents
Compensation Risk Managers, LLC and Affiliates
Notes to Combined Financial
Statements — (Continued)
On December 29, 2004 H.F.C.A. Associates Corp. and 17
related companies, all of which were members or former members
of the Healthcare Industry Trust of New York, or HITNY, sued
HITNY and CRM in the Supreme Court of the State of New York,
Ulster County, alleging, among other things, that the defendants
had improperly terminated their membership in HITNY and failed
to process claims on their behalf. The plaintiffs also alleged
that CRM had engaged in self dealing and had committed a breach
of fiduciary duties owed to them in connection with the
placement of reinsurance for the members of HITNY. The complaint
asks for damages of $1 million against both defendants and
a judgment that the plaintiffs did not owe HITNY the outstanding
premium for which they had been invoiced. HITNY answered the
complaint, denying the plaintiffs' material allegations.
HITNY alleged that the plaintiffs' membership had been
properly terminated and asserted a counterclaim against the
plaintiffs in the amount of $107,000 for unpaid premium. HITNY
also asserted a claim against CRM alleging generally that if the
plaintiffs suffered any damages they were caused by CRM's
actions or wrongdoing. CRM answered the complaint, denying the
plaintiffs' material allegations, including the allegations
of self dealing and breach of fiduciary duty, and asserting a
claim based on breach of contract and contribution against HITNY
for whatever damages the plaintiffs may recover from CRM. This
litigation is in its early stages; the parties have not yet
exchanged any responses to discovery demands.
No amount has been accrued in these combined financial
statements for either claim as the outcomes are uncertain and a
liability cannot be determined.
Note 12.
Fair Value of Financial Instruments
Statement of Financial Accounting Standards ("SFAS")
No. 107, Disclosures about Fair Value of Financial
Instruments, requires companies to disclose the fair value
information about their financial instruments.
SFAS No. 107 excludes certain insurance related
financial assets and liabilities and all non-financial
instruments from its disclosure requirements.
Because of the short-term nature of cash and cash equivalents,
premiums and other accounts receivable, and employee loans
receivable, their carrying value approximates their estimated
fair value. Any borrowings under credit facilities bear variable
interest rates, thus their carrying value approximates their
fair value. Due to the nature of the litigation with regard to
the working capital loan receivable described in Note 4, it
is not practicable to estimate its fair value.
Note 13.
Statutory Requirements
Under The Insurance Act 1978 of Bermuda and related regulations
(the "Act"), Twin Bridges is required to prepare
Statutory Financial Statements and to file a Statutory Financial
Return. The Act also requires Twin Bridges to meet certain
minimum capital and surplus requirements. To satisfy these
requirements, Twin Bridges was required to maintain a minimum
level of statutory capital and surplus of $1,821,450 at
December 31, 2004. Because Twin Bridges made its first
statutory filing for the 13 months ended December 31,
2004, no Statutory Financial Statements were filed for 2003.
Statutory capital and surplus as reported under the Act is
different from shareholder's equity as determined in
conformity with accounting principles generally accepted in the
United States of America ("GAAP") due to certain items
that are capitalized under GAAP but expensed under the Act.
F-26
Table of Contents
Compensation Risk Managers, LLC and Affiliates
Notes to Combined Financial
Statements — (Continued)
At December 31, 2004 and 2003, the reconciling items are as
follows:
As of December 31,
2004
2003
Shareholders' equity, per GAAP
$
1,834,891
$
948,724
Reconciling items:
Prepaid expenses
(4,885
)
—
Statutory capital and surplus, per The Act
$
1,830,006
$
948,724
The Twin Bridges is also required to maintain a minimum
liquidity ratio, whereby the value of its relevant assets must
be not less than 75% of its relevant liabilities. Twin Bridges
met this test at December 31, 2004.
Under the Act, the value of the general business assets of a
Class 3 insurer such as Twin Bridges must exceed the amount
of its general business liabilities by an amount greater than
the prescribed solvency margin. Twin Bridges is required, with
respect to its general business, to maintain a minimum solvency
margin equal to the greatest of:
(A) $1,000,000
(B)
Net Premium Written ("NPW")
Prescribed Amount
Up to $6,000,000
20% of NPW
Greater than $6,000,000
The aggregate of $1,200,000 and 15% of the amount by which NPW
    exceeds $6,000,000 in that year; and
(C)
15% of the aggregate of the insurer's loss expense
    provisions and other general business insurance reserves.
Generally, net premium written equals gross premium written
after deduction of any premium added by the insurer for
reinsurance.
Twin Bridges is prohibited from declaring or paying any
dividends during any financial year if it is in breach of its
solvency margin or minimum liquidity ratio or if the declaration
or payment of such dividends would cause it to fail to meet such
margin or ratio. In addition, if it has failed to meet its
minimum solvency margin or minimum liquidity ratio on the last
day of any financial year, Twin Bridges will be prohibited,
without the approval of the Bermuda Monetary Authority, from
declaring or paying any dividends during the next financial
year. Twin Bridges is prohibited, without prior approval from
the Bermuda Monetary Authority, from reducing by 15% or more its
total statutory capital as set out in its previous year's
financial statements Additionally, under the Act, Twin Bridges
may not declare or pay a dividend out of retained earnings, or
make a distribution from contributed surplus, if there are
reasonable grounds for believing that it is or would be unable
to pay its liabilities as they become due, or the realizable
value of its assets would be less than the aggregate of its
liabilities and its issued share capital and share premium
accounts.
Note 14.
Segment Information
The Company has two reportable segments, fee-based management
services and reinsurance. The determination of these two
segments was based on the Company's methodology for
monitoring the performance of the self-insured group business
and reinsurance operations. The Company evaluates each segment
based on management fees and commission income or reinsurance
premiums earned, as applicable, including items of revenue and
expense that are associated with, and directly related to, each
segment. The Company has not developed a methodology to allocate
non-direct items of expense between the segments. Accordingly,
all non-direct expenses are recorded as part of the fee based
management services segment. Accounting policies of the segments
are the same as those described in Note 1.
F-27
Table of Contents
Compensation Risk Managers, LLC and Affiliates
Notes to Combined Financial
Statements — (Continued)
The following table sets forth the Company's revenues,
expenses, income before taxes and total assets by business
segment and on a combined basis:
Years Ended December 31,
2004
2003
2002
Fee Based Management Services Segment
Revenues:
Management fees
$
23,510,174
$
17,889,315
$
15,084,733
Commission income
4,145,552
2,931,813
2,529,592
Interest income
32,807
15,701
36,999
Total revenues
$
27,688,533
$
20,836,829
$
17,651,324
Expenses
Interest expense
26,753
45,989
33,173
Depreciation
189,474
179,336
108,035
Operating expenses
22,552,643
16,829,162
14,013,867
Total expenses
22,768,870
17,054,487
14,155,075
Income before taxes
$
4,919,663
$
3,782,342
$
3,496,249
Total Assets
$
3,126,938
$
1,919,123
$
6,804,471
Reinsurance Segment
Revenues:
Net reinsurance premiums
$
5,109,883
$
253,167
$
—
Interest income
21,670
88
—
Total revenues
5,131,553
253,255
—
Expenses
Underwriting expenses(1)
4,245,386
304,531
—
Income before taxes
$
886,167
$
(51,276
)
$
—
Total Assets
$
9,597,373
$
3,963,223
$
—
Combined
Total revenues
$
32,820,086
$
21,090,084
$
17,651,324
Total expenses
27,014,256
17,359,018
14,155,075
Income before taxes
$
5,805,830
$
3,731,066
$
3,496,249
Total Assets
$
12,724,311
$
5,882,346
$
6,804,471
1.
Underwriting expenses include policy acquisition costs,
    professional fees and losses and loss adjustment expenses.
F-28
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders of
CRM Holdings, Ltd. (in formation)
We have audited the accompanying balance sheet of CRM Holdings,
Ltd. (in formation) (the "Company") as of
September 7, 2005. These financial statements are the
responsibility of the Company's management. Our
responsibility to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes consideration
of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the Company's internal control over
financial reporting. Accordingly, we express no such opinion. An
audit also includes examining, on a test basis, evidence
supporting the amount and disclosures in the financial
statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the Company's financial statements present
fairly, in all material respects, the financial position of the
Company as of September 7, 2005 in conformity with
accounting principles generally accepted in the United States.
/s/ JOHNSON LAMBERT & CO.
Reston, Virginia
September 19, 2005
F-29
Table of Contents
CRM Holdings, Ltd. (In formation)
Balance Sheet
September 7, 2005
Assets
Cash
$
12,000
Total Assets
$
12,000
Shareholders' Equity
Common Shares, $0.01 par value; 50,000,000,000 shares
    authorized; 1,200,000 shares issued and outstanding
$
12,000
Total Shareholders' Equity
$
12,000
Note to Balance Sheet
1.
Organization and Purpose
CRM Holdings, Ltd. ("CRM Holdings") was incorporated
in Bermuda on September 7, 2005. In connection with its
formation, CRM Holdings issued 1,200,000 common shares for
$12,000 to Reid Finance Ltd., an affiliate of Appleby Spurling
Hunter.
CRM Holdings was formed in preparation for the restructuring of
certain insurance and related companies and an initial public
offering of its common shares. CRM Holdings will acquire
substantially all of the assets and liabilities of Compensation
Risk Managers, LLC ("CRM"), Compensation Risk Managers
of California, LLC ("CRM CA"), EIMAR, L.L.C.
("Eimar"), and Twin Bridges (Bermuda) Ltd. ("Twin
Bridges"). These entities, in substance, have identical
beneficial ownership. CRM, CRM CA and Eimar will first be
converted from limited liability companies into corporations.
The shareholders will contribute all of their interests in CRM
and Eimar to CRM USA Holdings Inc. which will be a wholly owned
subsidiary of CRM Holdings and will hold all of the
outstanding shares of the U.S. subsidiaries of
CRM Holdings. In exchange, the shareholders will receive
shares issued by CRM USA Holdings Inc. The shareholders
will then contribute their CRM USA Holdings shares to
CRM Holdings in exchange for common shares of
CRM Holdings. CRM will then distribute its shares in
CRM CA to CRM USA Holdings. In addition, the
shareholders will contribute all of their interests in Twin
Bridges to CRM Holdings in exchange for common shares of
CRM Holdings.
Other than the receipt and deposit of its initial capital, CRM
Holdings has not been active. Initial public offering costs
incurred to date are the obligation of CRM. Upon completion of
the offering, these costs will be transferred to CRM Holdings
and recorded as a reduction of paid-in capital.
F-30
Table of Contents
Common
Shares
CRM Holdings, Ltd.
PROSPECTUS
Sandler O'Neill & Partners, L.P.
KeyBanc Capital Markets
,
2005
Table of Contents
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13.
Other Expenses of Issuance and Distribution.
The expenses in connection with the registration of the common
shares covered by this prospectus are set forth in the following
table. All amounts except the registration and NASD filing fee
are estimated:
Securities and Exchange Commission registration fee
NASD filing fee
Printing and engraving expenses
*
Accounting fees and expenses
*
Legal fees and expenses
*
Miscellaneous
*
Total
$
*
*
To be filed by amendment.
All expenses in connection with the issuance and distribution of
the securities being offered shall be borne by the registrant,
other than underwriting discounts and selling commissions, if
any.
Item 14.
Indemnification of Directors and Officers.
The amended and restated bye-laws of the Registrant provide for
the indemnification of the Registrant's officers and
directors, members of a (duly constituted) committee and any
resident representative (and their respective heirs, executors
or administrators), each referred to as an "Indemnified
Person," against all actions, costs, charges, liabilities,
loss, damage or expense to the full extent permitted by Bermuda
law, incurred or suffered by such party by reason of any act
done, conceived in or omitted in the conduct of the
Registrant's business or in the discharge of his/her
duties; provided that such indemnification shall not extend to
any matter which would render it void pursuant to the Companies
Act 1981 (the "Companies Act") as in effect from time
to time in Bermuda.
The Registrant's amended and restated bye-laws state that
an Indemnified Person shall be indemnified out of the funds of
the Registrant against all liabilities incurred by him or her by
reason of any act done, conceived in or omitted in the conduct
of the Registrant's business or in the discharge of his or
her duties, in defending any proceedings, whether civil or
criminal, in which judgment is given in his or her favor, or in
which he or she is acquitted, or in connection with the
application under the Companies Act in which relief is granted
to him or her by the court.
In addition, each shareholder and the Registrant agree to waive
any claim or right of action such shareholder or it may have at
any time, whether individually or by or in the right of the
Registrant against any Indemnified Person on account of any
action taken by such person in the performance of his or her
duties with or for the Registrant; provided that such waiver
shall not apply to any claims or rights of action which would
render it void pursuant to the Companies Act as in effect from
time to time in Bermuda, and any claim or rights of action
arising out of fraud or dishonesty on the part of such
Indemnified Person or with respect to the recovery of any gain,
personal profit or advantage to which such Indemnified Person is
not legally entitled.
The Companies Act provides that a Bermuda company may indemnify
its directors in respect of any loss arising or liability
attaching to them as a result of any negligence, default, breach
of duty or breach of trust of which they may be guilty. However,
the Companies Act also provides that any provision, whether
contained in the company's bye-laws or in a contract or
arrangement between the company and the director, indemnifying a
director against any liability which would attach to him in
respect of his fraud or dishonesty will be void.
Reference is made to the form of Underwriting Agreement filed as
Exhibit 1.1 hereto for provisions providing that the
Underwriters are obligated, under certain circumstances, to
indemnify the directors, certain officers and the controlling
persons of the Registrant against certain liabilities under the
U.S. Securities Act of 1933, as amended (the
"Securities Act").
II-1
Table of Contents
Item 15.
Recent Sales of Unregistered Securities.
The Registrant was incorporated in Bermuda on September 7,
2005 under the laws of Bermuda. In connection with the
formation, the Registrant issued 1,200,000 shares of common
stock for $12,000 to Reid Finance Ltd., an affiliate of Appleby
Spurling Hunter, pursuant to an exemption provided by
Section 4(2) of the Securities Act.
Item 16.
Exhibits and Financial Statement Schedules.
(a) Exhibits
Exhibit
Number
Description
†1.1
Underwriting Agreement by and between the Company and Sandler
    O'Neill & Partners, L.P. and KeyBank Capital
    Markets,
    dated
l
,
    2005
†2.1
Reorganization Agreement
3.1
Memorandum of Association of the Company
3.2
Bye-Laws of the Company
†4.1
Form of Common Share Certificate
†5.1
Opinion of Appleby Spurling Hunter
†10.1
Form of Employment Agreement of Daniel G. Hickey, Jr.,
    dated
l
,
    2005
†10.2
Form of Employment Agreement of Martin D. Rakoff,
    dated
l
,
    2005
10.3
Interest and Liabilities Contract to Workers' Compensation
    and Employer's Liability Proportional Reinsurance
    Agreement, between New York Marine & General
    Insurance Company and Twin Bridges (Bermuda) Limited, effective
    December 1, 2003
10.4
Lease Agreement between Oakwood Partners L.L.C. and Compensation
    Risk Managers, LLC, dated August 5, 2005
10.5
Loan Agreement, dated October 28, 2004, between
    Compensation Risk Managers, LLC and KeyBank National Association
10.6
Amended and Restated Loan Agreement, dated May 5, 2005,
    between Compensation Risk Managers, LLC and KeyBank National
    Association (amending and restating the Loan Agreement, between
    Compensation Risk Managers, LLC and KeyBank National
    Association, dated October 28, 2004)
10.7
Loan Agreement, between Twin Bridges (Bermuda) Ltd. and KeyBank
    National Association dated October 28, 2004
    ($3 million loan)
10.8
Loan Agreement, between Twin Bridges (Bermuda) Ltd. and KeyBank
    National Association dated October 28, 2004
    ($7.5 million loan)
†21.1
List of subsidiaries of the Company
23.1
Consent of Johnson Lambert & Co.
†23.5
Consent of Appleby Spurling Hunter (included in Exhibit 5.1)
24.1
Power of Attorney (included on signature page)
†
To be filed by amendment.
(b) Financial Statement Schedules for Compensation Risk
Managers, LLC and Affiliates
Report of Independent Registered Public Accounting Firm on
Financial Statement Schedules.
Schedule III — Supplementary insurance
information.
Schedule IV — Reinsurance.
Schedule VI — Supplemental information concerning
property-casualty insurance operations.
Financial Statement Schedules III, IV and VI for
Compensation Risk Managers, LLC and its affiliates are included
on II-4, II-5 and II-6, respectively. All other schedules for
which provision is made in the applicable accounting regulations
of the Securities and Exchange Commission are omitted because
they are not required, are not applicable or the information is
included in the financial statements or notes thereto.
II-2
Table of Contents
Report of Independent Registered Public Accounting Firm on
Financial Statement Schedules
To the Members of
Compensation Risk Managers, LLC and Affiliates
The audits referred to in our report dated August 5, 2005
include the related financial statement schedules as of
December 31, 2004, and for each of the years in the
three-year period ended December 31, 2004, included in this
Registration Statement on Form S-1. These financial
statement schedules are the responsibility of Compensation Risk
Managers, LLC's management. Our responsibility is to
express an opinion on these financial statement schedules based
on our audits. In our opinion, such financial statement
schedules, when considered in relation to the combined financial
statements taken as a whole, present fairly, in all material
respects, the information set forth therein.
/s/ JOHNSON LAMBERT & CO.
Reston, Virginia
August 5, 2005
II-3
Table of Contents
Compensation Risk Managers, LLC and Affiliates
Schedule III – Supplementary Insurance Information
Future policy
Other
Investment
Deferred
benefits,
policy
income,
Losses and
Amortization
policy
losses and
Unearned
claims and
Net
net of
loss
of policy
Other
acquisition
loss
reinsurance
benefits
reinsurance
advisory
adjustment
acquisition
underwriting
Premiums
costs
expenses
premiums
payable
premiums
fees
expenses
costs
expenses
written
2004
$
1,413,500
$
2,696,000
$
4,779,950
$
—
$
5,109,883
$
21,670
$
2,528,083
$
1,511,065
$
206,238
$
7,105,000
2003
823,515
167,917
2,784,834
—
253,167
88
167,917
74,865
61,749
3,038,000
II-4
Table of Contents
Compensation Risk Managers, LLC and Affiliates
Schedule IV — Reinsurance
Percentage
Ceded to
Assumed
of amount
Direct
other
from other
assumed to
amount
companies
companies
Net amount
net
Workers' Compensation Insurance:
2004
$
—
$
—
$
5,109,883
$
5,109,883
100
%
2003
—
—
253,167
253,167
100
%
II-5
Table of Contents
Compensation Risk Managers, LLC and Affiliates
Schedule VI – Supplemental Information Concerning
Insurance Operations
Incurred losses
and loss
adjustment
Reserve for
Investment
expenses
Paid claims
Deferred
losses and
income,
related to:
Amortization
and
policy
loss
Unearned
Net
net of
of policy
claim
acquisition
adjustment
Discount
reinsurance
reinsurance
advisory
Current
Prior
acquisition
adjustment
Premiums
costs
expenses
reserves
premiums
premiums
fees
year
year
costs
expenses
written
2004
$
1,413,500
$
2,696,000
$
—
$
4,779,950
$
5,109,883
$
21,670
$
2,528,083
$
—
$
1,511,065
$
—
$
7,105,000
2003
823,515
167,917
—
2,784,834
253,167
88
167,917
—
74,865
—
3,038,000
II-6
Table of Contents
Item 17.
Undertakings.
The undersigned Registrant hereby undertakes to provide to the
underwriters at the closing specified in the Underwriting
Agreement certificates in such denominations and registered in
such names as required by the underwriters to permit prompt
delivery to each purchaser.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the Registrant pursuant to the
foregoing provisions, or otherwise, the Registrant has been
advised that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as
expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer
or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and
will be governed by the final adjudication of such issue.
The Registrant hereby undertakes that:
(1) For purposes of determining any liability under the
    Securities Act of 1933, the information omitted from the form of
    prospectus filed as part of this Registration Statement in
    reliance upon Rule 430A and contained in the form of
    prospectus filed by the Registrant pursuant to
    Rule 424(b)(1) or (4) or 497(h) under the Securities Act
    shall be deemed to be part of the Registration Statement as of
    the time it was declared effective.
(2) For purposes of determining any liability under the
    Securities Act, each post-effective amendment that contains a
    form of prospectus shall be deemed to be a new registration
    statement relating to the securities offered therein, and the
    offering of such securities at that time shall be deemed to be
    the initial bona fide offering thereof.
II-7
Table of Contents
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, State of New York, on this
19th day of September, 2005.
CRM Holdings, Ltd.
/s/
Daniel G.
    Hickey, Jr.
Daniel G. Hickey, Jr.
Co-Chief Executive Officer
/s/
Martin D. Rakoff.
Martin D. Rakoff
Co-Chief Executive Officer
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose
signature appears below does hereby constitute and appoint
Daniel G. Hickey, Jr. and Martin D. Rakoff and
each of them, with full power of substitution and full power to
act, his true and lawful attorney-in-fact and agent to act for
him in his name, place and stead, in any and all capacities, to
sign any and all amendments (including post-effective
amendments) to this registration statement, any and all
registration statements filed pursuant to Rule 462(b) of
the Securities Act of 1933 (including post-effective amendments)
to register additional securities and to file the same, with all
exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing
requisite or necessary to be done in order to effectuate the
same as fully, to all intents and purposes, as they or he might
or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents or any of them or their or his
substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following
persons in the capacities and on the dates indicated.
Signature
Title
Date
/s/
Daniel G.
    Hickey, Jr.
Daniel
    G. Hickey, Jr.
Co-Chief Executive Officer and Chairman of the Board
September 19, 2005
/s/
Martin D. Rakoff
Martin
    D. Rakoff
Co-Chief Executive Officer and Deputy Chairman of the Board
September 19, 2005
/s/
James J. Scardino
James
    J. Scardino
Chief Financial Officer
September 19, 2005
/s/
Daniel G.
    Hickey, Sr.
Daniel
    G. Hickey, Sr.
Director
September 19, 2005
/s/
David M. Birsner
David
    M. Birsner
Director
September 19, 2005
II-8
Table of Contents
Signature
Title
Date
/s/
Philip J.
    Magnarella
Philip
    J. Magnarella
Director
September 19, 2005
/s/
Louis Rosner, Esq.
Louis
    Rosner
Director
September 19, 2005
/s/
Sal Patafio
Sal
    Patafio
Director
September 19, 2005
/s/
Daniel G. Hickey,
    Jr.
Daniel
    G. Hickey, Jr.
Authorized Representative in the United States
September 19, 2005
II-9
Table of Contents
Exhibit Index
Exhibit
Number
Description
†
1.1
Underwriting Agreement by and between the Company and Sandler
    O'Neill & Partners, L.P. and KeyBank Capital
    Markets,
    dated
l
,
    2005
†
2.1
Reorganization Agreement
3.1
Memorandum of Association of the Company
3.2
Bye-Laws of the Company
†
4.1
Form of Common Share Certificate
†
5.1
Opinion of Appleby Spurling Hunter
†
10.1
Form of Employment Agreement of Daniel G. Hickey, Jr.,
    dated
l
,
    2005
†
10.2
Form of Employment Agreement of Martin D. Rakoff,
    dated
l
,
    2005
10.3
Interest and Liabilities Contract to Workers' Compensation
    and Employer's Liability Proportional Reinsurance
    Agreement, between New York Marine & General
    Insurance Company and Twin Bridges (Bermuda) Limited, effective
    December 1, 2003
10.4
Lease Agreement between Oakwood Partners L.L.C. and Compensation
    Risk Managers, LLC, dated August 5, 2005
10.5
Loan Agreement, dated October 28, 2004, between
    Compensation Risk Managers, LLC and KeyBank National Association
10.6
Amended and Restated Loan Agreement, dated May 5, 2005,
    between Compensation Risk Managers, LLC and KeyBank National
    Association (amending and restating the Loan Agreement, between
    Compensation Risk Managers, LLC and KeyBank National
    Association, dated October 28, 2004)
10.7
Loan Agreement, between Twin Bridges (Bermuda) Ltd. and KeyBank
    National Association dated October 28, 2004
    ($3 million loan)
10.8
Loan Agreement, between Twin Bridges (Bermuda) Ltd. and KeyBank
    National Association dated October 28, 2004
    ($7.5 million loan)
†
21.1
List of subsidiaries of the Company
23.1
Consent of Johnson Lambert & Co.
†
23.5
Consent of Appleby Spurling Hunter (included in Exhibit 5.1)
24.1
Power of Attorney (included on signature page)
†
To be filed by amendment.
II-10