GEM A Progress Report

June 29, 2012

A Brief History

Governmental Entities Mutual, Inc. (GEM) is a captive domiciled in Washington, DC

Incorporated 12/24/2002 and licensed to write liability, workers compensation and property insurance and reinsurance

GEM launched its liability reinsurance program on 1/1/2003, property and workers’ compensation programs followed in 2005

Converted to a Protected Cell Corporation as of 1/1/2010

GEM completed its ninth year of operations on 12/31/2011

10 Member Board comprised of Designated Member Representatives from our member pools.

Alaska Municipal League JIA

California Insurance Transit Pool

Delaware Valley Insurance Trust

Enduris

Miami Valley Risk Management Association

Michigan Risk Management Agency

MPR

Montana Municipal Interlocal Authority

Nevada Public Agency Insurance Pool

NH Public Risk Management Exchange

Park District Risk Management Agency

Texas Council Risk Management Fund

Texas School Boards Risk Management Fund

Texas Water Conservation Association Risk Management Fund

Virginia Liability Transit Pool

Washington Cities Insurance Authority

Washington State Transit Insurance Pool

Wisconsin Municipal Mutual Insurance Co.

Membership

GEM Board Members

Al Hatten, Washington State Transit Insurance Pool (WSTIP)

Michael Hammond, Miami Valley Risk Management Association (MVMRA)

Parker Chambers, Texas Water Conservation Assoc. Risk Mgmt Fund (TWCARMF)

Richard Lee, Delaware Valley Insurance Trust (DVIT)

Micheon Balmer, California Insurance Transit Pool (CalTIP)

Greg Womack – Chair, Texas Council Risk Management Fund (TCRMF)

Brett Davis – Vice Chair, Park District Risk Management Agency (PDRMA)

Dean Boes – Secretary, Wisconsin Municipal Mutual Insurance Company (WMMIC)

Mike Rhyner, Michigan Municipal Risk Management Authority (MMRMA)

Alan Hulse, Montana Municipal Interlocal Authority (MMIA)

Financial StabilityGEM is a regulated captive insurance company

GEM is required to maintain adequate Risk-Based Capital (RBC) ratios

GEM is member-owned and governedMembers have access to GEM’s financial information on a monthly basisAnnually GEM has an independent audit and actuarial loss reserve opinion

Members make a long-term capital commitment to GEM

Management provides an annual risk profile report to the Board of Directors

All profits inure to the benefit of the Members

GEM Risk Model

GEM Financial PerformanceGAAP Basis(000 omitted)

5/31/2012 12/31/2011 Difference(unaudited)

Total Assets $83,679 $87,484 -$3,805

Members' Equity $26,800 $25,331 $1,469

Investable Assets $59,366 $60,347 -$981

Loss & LAE Reserves $52,215 $54,295 -$2,080

Net Earned Premium $3,618 $8,408 N/A

Net Income $1,091 $1,810 N/A

Loss Ratio 87.0% 87.3% -0.3%

Expense Ratio 20.1% 20.3% -0.2%

Combined Ratio 107.1% 107.6% -0.5%

Members’ Equity

Return on Members’ Equity

A comparison of investing in GEM versus investing in 5-year Treasuries

The GEM/WSTIP Relationship

All Founding and Premier members are required to contribute a minimum of $500,000 or 70% of gross written premium as surplus to GEM. WSTIP has contributed capital of $750,000.

2012 Liability Reinsurance– WSTIP Retention: $ 1,000,000 per occurrence – Limit Retained by GEM: $ 2,000,000– GEM Net Written Premium: $ 796,000

2011 Member Accounting– Member Surplus Accounts $ 1,091,800– Member Policy Accounts $ 171,475

Expected Outcomes ofWSTIP’s Investment

Maintenance of an economically sound company while providing long term cost-effective reinsurance and service

Member control of the Company through member elected Board

Follow form coverage eliminating differences in conditions, retention of claims handing authority at the pool level

High quality claims, underwriting and pool support services provided by staff and service providers with extensive pool & public entity experience

Stabilization or reduction of the overall cost of reinsurance in GEM’s retained layer through the law of large numbers and risk distribution

Building mutual strength of pools to retain higher limits before accessing the commercial reinsurance market

GEM Value Added ServicesClaims Audits

Underwriting Reviews

HR Sentry & John Salisbury Grants through NAGEP

Building Mutual Strength Among PoolsGovernance – Summer 2007Finance – Fall 2007Member Services – Summer 2008Coverage Documents – Summer 2009Economic Outlook and Fixed Income Markets – Winter 2010 & 2011Risk Management – Summer 2011

Future Directions for GEM

Selectively launch new cells under the Protected Cell Company potentially beginning with Transit Re in 2012

Increase capacity to assume risk - $25 million member equity goal by 2013, net of unrealized capital gains.

Actively market GEM to attract new members

Continue development of the GEM risk profile model

Actively seek ability to collaborate with NCL Mutual and CRL

Integrate technology into how GEM delivers services to the membership

Remember our roots

In Conclusion

GEM – A Member Driven Reinsurer

Building Mutual Strength