Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

Refer to the Management's Discussion and Analysis of Financial Condition and Results of Operations on pages 1 through 27 of the 2008 Financial Report to Shareholders, attached as Exhibit 13 and incorporated by reference herein. Certain accounting policies are viewed by Management to be "critical accounting policies." These policies relate to unpaid loss and settlement expenses, investment valuation, recoverability of reinsurance balances, deferred policy acquisition costs and deferred taxes. A detailed discussion of these critical accounting policies can be found on pages 3 through 8 of the 2008 Financial Report to Shareholders, attached as Exhibit 13 and incorporated by reference herein.

Throughout this report (including portions incorporated by reference herein), we present our operations in the way we believe will be most meaningful, useful and transparent to anyone using this financial information to evaluate our performance. In addition to the GAAP presentation of net income and certain statutory reporting information, we show certain non-GAAP financial measures that are valuable in managing our business, including underwriting income, gross premiums written, net written premiums and combined ratios. A detailed discussion of these measures can be found on page 2 of the 2008 Financial Report to Shareholders, attached as Exhibit 13 and incorporated by reference herein.