Executive Report

Our financial results continued to be very strong in 2008, with a net profit for the year of $34.7 million. We have maintained our capital adequacy well above the Canadian insurance industry average. This outstanding result reflects our ongoing focus on consistent underwriting standards and discipline, delivery of competitive products and responsive service to our network of leading independent brokers and agents. Our strong capital position coupled with the experience and expertise of our professional staff across all our lines of business position us well for the difficult economic times that presently exist.

Our Surety business generated exceptional underwriting results thanks to our longstanding partnership with the construction industry, superior prequalification expertise and the financial stability we offer our clientele. In the United States, our web-based technology platform, and our experienced professional staff have enabled us to increase our business revenue and to efficiently service our agents and clients in both Contract and Commercial Surety. We continue to expand our market presence with the addition of offices in Tampa, Florida, St Paul / Minneapolis, Minnesota and Los Angeles, California.

Our Corporate Risk business delivering Fidelity, Directors’ and Officers’ Liability to corporations and non-profit organizations also continued to exhibit strong performance despite softening market prices. Our commitment to providing our brokers and their clients with a competitive range of products in these lines of business and access to the highest standard of service was furthered through the expansion of our Halifax office to include a Corporate Risk underwriter.

Our Personal Lines Insurance business performed well through a year of frequent and extreme weather occurrences. Our Guarantee GOLD Centres in Toronto, Woodstock and Montreal experienced solid growth which reinforces our position as a leading insurer of high value homes and automobiles. With our strong capital position, our depth of expertise in our specialty lines and our continuing commitment to the independent broker/agent distribution system, we are very well prepared to deal with the challenging economic times ahead of us. On behalf of management and the Board of Directors, we thank our brokers and agents for their confidence and continuing support. We also thank our dedicated employees for their excellent work in achieving another year of profitable results enhancing our reputation in the marketplace as a respected stable and successful insurer.