Engineering success: FM Global has grown to become one of the largest commercial property writers in the world by relying on engineers and loss prevention instead of actuaries. As a mutual company, FM Global and its policyholders/owners take pride in having highly protected risks. (Property/Casualty).

FM Global is not your typical insurance company. To see how a client could safely store cartons of aerosol containers in a warehouse, FM Global set the to two pallets of cardboard containers filled with aerosol cans. The resulting fire was so intense, and the exploding cans so dangerous, that FM Global recommended that the client not store the boxes ill a main warehouse, but find a separate, protected facility.

FM Global, the business name for Johnston, R.I. based Factory Mutual Insurance Co. and its affiliates, specializes in writing commercial property insurance, and unlike most insurers, it doesn't have a single actuary on staff. Instead of calculating the odds of potential loss from fires, floods and natural catastrophes such as earthquakes, hurricanes and tornados, the company has an army of engineers dedicated to improving commercial buildings to better weather whatever storm they may face.

"Our strength comes from marrying engineering and underwriting," said Mike Burke, vice president and manager of catastrophe exposures underwriting/engineering.

With the largest fire and natural hazards testing center in the world, FM Global spends considerable time and money researching how building materials, electrical equipment and industrial fire-fighting equipment perform in disasters. Then, FM Global not only shares this information with the public, but also sends its engineers to work one-on-one with clients to offer specific suggestions on how policyholders can improve their properties to make them more secure--and a better risk. FM Global will also test its theories--as in the case of the aerosol-can fire--on behalf of individual clients to better understand potential hazards mad possible solutions.

This emphasis on stopping or mitigating a loss before it happens has helped save money for both FM Global and its policyholders, which has boosted FM Global to become one of the largest commercial property writers in the United States. As a mutual company, where the policyholders are the owners, FM Global and its policyholders have a stake in keeping losses low.

The company has rebounded from losses it faced several years ago, and successfully completed a merger among three Factory Mutual companies and their shared research arm. Since the merger in 1999, FM Global has nearly tripled its net premiums written to $2.24 billion at year-end 2002 and improved its profitability dramatically. After paying out $1.67 in claims and expenses for every $1 of premium written in 1999, the company paid out just 72 cents for every $1 in premium collected in 2002, reducing its combined ratio from 166.7 in 1999 to 72.1 in 2002.

To reduce expenses after the merger, FM Global laid off about 15% of the work force, or 800 to 900 people. Most of the positions eliminated were support staff. By cutting costs, FM Global has been able to bring its statutory expense ratio down to 19.7 from 51.3.

Steadfast Stakeholders

Chris Mandel, chief risk officer for the Risk and Insurance Management Society and assistant vice president of enterprise risk management for Texas-based insurer USAA Group, which insures members of the military, said USAA has been a client of FM Global for a dozen years, and insures about $3 billion in office space through the insurer.

FM Global hasn't been profitable for a number of years, but has started to come back now. It is a highly respected and relatively conservative company that prefers to stick to its knitting, Mandel said. FM Global does not write liability or personal lines, just commercial property and related lines.

FM Global has "great credentials and integrity," said Joe Hardy, risk manager with Hudson's Bay Co., a Toronto-based retailer that has been an insured with FM Global for 35 years. "They are leaders in education and research, and they are in the trenches with the insured. From a property-insurer perspective, I don't think anyone is better." FM Global's loss prevention results in good risk control, fewer losses, and less severity, so risk managers can concentrate on other things, Hardy said.

FM Global is a leading player in the commercial property market and has a focus "that's been difficult for others to penetrate," said Jim Amen, managing director of Philo Smith & Co., a Stamford, Conn.-based investment bank. "They have very close relationships to Fortune 500 and Fortune 1,000 companies, and add quite a bit of value from a loss-control standpoint and from an educational standpoint."

FM competes against many large, multiline companies, including American International Group, Travelers, Lloyd's and the Bermuda-based companies, but FM doesn't "worry too much about the competitive markets," Amen said. "They've always tried to add increased value, and are in it for the long term."

FM Global carefully chooses which customers it wants to do business with, and boasts a 90% retention rate.

Because FM Global is a mutual company, retention is "much more important to us than it probably is to other people," said Shivan S. Subramaniam, president and chief executive officer of FM Global. "In fact, it's more important than new business."

Underwriting Strategy

The typical customer of FM Global's principal insurance trait, Factory Mutual Insurance Co., has $4 billion to $5 billion in sales, with 40 or 50 locations worldwide, Subramaniam said. "It's a huge cost to write many different policies--a master policy and local policies. If we had to write a new customer every year to replace an existing customer, the cost would he enormous. While most companies would be happy to have a retention rate in the 80-percentage range, it would be a big deal for us if our retention rate went into the 80s."

Originally founded in 1835 by an industrialist who believed that good risks should be rewarded with lower insurance premiums, FM Global's philosophy is that it's better to stop a loss than to recover from one, said Steve Zenofsky, media liaison for the company. "The customer that we tend to insure already has a commitment to property loss prevention," Zenofsky said. "We wouldn't take on a company that didn't have that type of commitment, that it is better to prevent the loss than recover from it afterwards."

FM Global takes longer than most companies to write a policy, Subramaniam said. "We have to visit the facility and collect a lot of data. We'd rather do that and decide if this is a customer that we'll have a good relationship with over time than going into a relationship because we think the price is right. Risk assessment is a very important issue to us, which again, tends to be contrary to what most insurance companies do. Most insurance companies look and say if the price is more than adequate, if it's an attractive price for risk transfer, they'd probably accept it. But from our point of view, there are times when the price might be very attractive, but it might not be our vision of a good long-term relationship, in which case, we'd probably decline."

However, FM Global can also move quickly, said Carol Barton, senior vice president of commercial lines. The company has been growing its middle-market business, which is underwritten through a related company, Affiliated FM Insurance Co. When Affiliated FM proposes a customized policy, and the customer accepts it, the company can simply push a button to make a declaration of the policy.

"It's delivered in 10 days instead of 10 months," Barton said.

It's also unique in that FM Global allows customers to deal with the company either directly, or through a broker, Subramaniam said.

Affiliated FM has grown from under $100 million in gross premiums written in 1999 to just under $400 million at year-end 2002, and is expanding internationally. It has recently opened offices in London, Paris and Sydney, Australia. FM Global does business in 100 countries from offices in 39 locations.

Engineering Research

With 1,400 engineers on its staff of 4,000, and a new research campus, FM Global likely spends more than any other insurer on researching property hazards to commercial buildings (See "Fighting Fire With Fire," page 72). Engineers are highly prized at the company, and another 600 to 700 employees are also engineers by training, although they work as claims adjusters, underwriters and in other nonengineering roles.

The company specializes in communicating the information it discovers through its testing to its policyholders through engineers who make on-site inspections of insured property, and then offer recommendations to clients. The engineering services are not available on a stand-alone basis, and all prospective clients have to pass an inspection before FM Global will accept them as policyholders.

"There's only a certain group of potential industrial customers with whom we have the right fit," Subramaniam said. "It's not like we can write all of industrial America or commercial America. There's a group of customers that look at losses from a prevention point of view, rather than just a risk transfer. That's what allows you to have a lower cost of risk. All we are saying is if there's a group of customers dedicated to preventing losses, we can give them the right kind of advice to build their facilities and protect their facilities in such a way that they don't have losses. So the cost of losses is lower, and the cost of premium is lower."

FM Global hats only about 3,000 policyholders, but each property may be insured for billions of dollars.

"It's tough when you are a mono-line property insurance carrier and you are trying to explain to people why that is OK," said Tom Lawson, senior vice president of research and approval. "Property insurance is really volatile. These are big risks and big losses. A lot of companies have diverse portfolios to make up for that. We don't have a diverse portfolio, because that is what we do."

FM Global may be the largest insurer in the world that doesn't use actuaries.

"We don't see the value of actuaries," said Burke. "Actuaries are probably great if you have an enormous book of low-value, very homogenous business. Homeowners insurance, with homes ranging from $100,000 to $500,000, are all kind of the same. Their contribution to your aggregate is tiny, so you can use the large, large numbers and average everything out. If you miss a house here and there, it doesn't matter in the bigger scheme of things because you are adding tens of thousands of properties."

While a 1% variation on the estimated potential loss from a single house isn't a large amount, a 1% variation on a $2 billion property can have ,serious ramifications, Burke said. "The idea of pumping some numbers and taking some averages doesn't give you any sleep at night. Having an actuary tell me what our losses are isn't as valuable as having an engineer go to the site and tell me what is wrong with the site," Burke said.

Insurers that use an actuarial approach to underwrite large industrial locations, which have the potential for large losses, should diversify their risk by taking on various other properties or limit their risk appetite for just a small portion of any single property. Instead, FM Global uses its engineering skills to study the exposures and hazards inherent in a particular property.

"This is not brilliant stuff," said Subramaniam. "If it fits our criteria, we can make a big bet. What we've done is picked a situation that through our engineering principles, we've reduced the possibility of a loss, and if the loss occurs, controlled the loss through good construction, good practices."

Taming the Cat

Before Hurricane Andrew struck in 1992, FM Global, like a lot of insurers, had a habit of saying that any given year "was a good year, except for that hurricane, or except for that flood," Burke said. "And who can stop a hurricane? We could go to our board of directors, use that excuse and they'd pat us on the back."

FM Global may not be able to stop a hurricane, but in the days following Hurricane Andrew, the company realized that 75% or 80% of its losses were not only preventable, but the company's engineers knew how to prevent them. "We were accountable for this, just like we were accountable for fire loss. We know we are going to have fires. Our strength comes from have we prepared the customer right? Does he have a good sprinkler system? Does he have good planning for fighting and responding? And we had given ourselves a free pass on the natural hazards," Burke said.

Within a matter of weeks after Hurricane Andrew, the company put an action plan into place. "We adopted the philosophy we've always had for fire--which is that the majority of fire losses are preventable--and took 'fire' out of it and said the majority of all losses are preventable," Burke said.

The key to stopping losses was applying the engineering principles that FM Global already believed in. For instance, a simple, fairly inexpensive improvement--such as increasing the number of fasteners on the corner of a roof, the weakest part during a windstorm--can keep a warehouse roof from being blown off during a hurricane, which in turn, can prevent costly water damage.

Burke explained that most building codes are designed to keep a building standing during a disaster, but they aren't designed to prevent property damage. When Hurricane Georges struck Puerto Rico in 1998, none of the buildings that FM Global insures was blown down. If a part of a roof or roof cover was blown away, however, anywhere from 18 inches to 25 inches of rain flooded the buildings, resulting in millions of dollars of damage.

At that time, not all of FM Global's customers had followed its recommended improvements. Those that did not had losses four times higher on a cents-per-dollar basis than those that had made the recommended changes.

"We're not talking about backing up a tractor trailer with steel beams and rebuilding the buildings. These are minor, minor intelligent changes. The damage is preventable," Burke said.

The vast majority of FM Global's clients make the changes the company's engineers suggest, Burke said. For example, Mandel of USAA said the company agreed with FM Global engineers to make a minor change to the grounds at a facility being built in Phoenix. The recommended change will help prevent loss from a flood.

Now FM Global, and its insureds, are better positioned to withstand natural catastrophes, Burke said. In fact, on learning that Professor William Gray of Colorado State University was predicting an active hurricane season this year, Burke joked, "I don't need no stinking forecasts. I've got 1,400 engineers."

All for One

In an era where many mutual companies have converted into public companies or public holding companies, FM Global is committed to remaining a mutual company.

"Because the nature of our business is very volatile, it is best delivered as a mutual organization rather than a stock company," Subramaniam said. "By being a mutual insurance company, we can afford to take a very, very large loss, and not have that change our view in the marketplace or risk assumptions in the marketplace. If we were a stock company, we could not afford to do that. If we were a stock company, we couldn't provide the capacity that we do, and we wouldn't be able to have that kind of variability in earnings."

Immediately after Sept. 11, 2001, FM Global was probably the only large commercial property company that was still doing business as it did before, Subramaniam said. "We had the same capacity, the same services, and we were still delivering them on a worldwide basis. I don't think anyone else can say that."

It's not that the company wasn't impacted by Sept. 11. In fact, it sustained $252 million in losses related to the terrorist attack on New York. Still, in 2001, FM Global was able to return $241 million--about one-fourth of its annual revenues at the time--to policyholders/owners in dividends.

"From our customers' point of view, the reason they are with us is that we can provide very large capacity, and as a mutual organization, we provide stability of services," Subramaniam said. "If you are a public company, your ownership is different from the people who you deliver your services to. The reason we are successful today is that we're a mutual, so we can't kill the goose that laid the golden egg."

As a mutual insurance company, FM Global can also invest more of its assets into equities, Subramaniam said. On an invested asset basis, FM Global tends to have at least 40% of its assets invested in equities.

"We take a bigger equity position than other companies because as a mutual organization we can absorb more volatility. Also it is because we're a property-only company--we don't have long-tail exposures," Subramaniam said.

While FM Global has been hurt by the downturn in the markets, "the other side is that our surplus is where it is today because of our equity position. If you look at it on a five- or 10-year basis, it's still been the best strategy," Subramanian said. "We are very strongly capitalized. We have a strong asset base, and a very strong surplus, and that allows us to do two things: provide a lot of capacity to our customers, and at the same time, take bigger risks on investments.

"The second issue is that we are getting more price for our product now. The third issue is that as a merged organization, we are really beginning to recognize all the things that we said would happen ... that we'd get economies of scale, that we'd get more focused as an organization, and that we'd be able to get a more focused engineering approach. All of those promises have turned out to be true."

FM Global meets regularly with its policyholders' risk managers to better understand their concerns and problems. "It's a very long-term strategic outlook," said Hardy of Hudson's Bay, one of FM Global's clients. "We sit in a room with our peers, and our insurer is a partner in developing our plans."

As an offshoot of those meetings, FM Global was one of the first commercial property insurers to offer terrorism coverage, and today is one of the few companies to say the coverage is selling well. While most companies said only 20% of their clients are buying terrorism insurance, FM Global said about 70%, of its clients are taking it up.

The federal Terrorism Risk Insurance Act offered a government-sponsored reinsurance backstop to primary writers in exchange for requiring all companies to offer the coverage. TRIA defines, or certifies, a terrorism act that would qualify for its coverage as one done by a foreign terrorist--so, for example, the bombing of the Oklahoma City federal building would not qualify.

Not only is FM seeing a great demand for its terrorism coverage, it is offering more coverage than TRIA requires. In addition to providing coverage for a certified act, it also sells coverage for terrorism committed by a domestic terrorist as well as terrorist acts on non-U.S, property.

Mandel, of USAA, said one reason that FM Global may be able to reasonably price the insurance is that the TRIA backstop would kick in earlier for FM Global than for its competitors. The TRIA backstop ks based on a company's total book of business, and unlike most of its competitors, FM Global doesn't write casualty lines. So although it's a large property writer, it's relatively small compared to other carriers, ranking 33rd by net premiums written among U.S. property/casualty writers.

FM Global views terrorism as another threat that loss-prevention skills can help mitigate. "Fire and explosion is still the most common peril that can put you out of business. You can't prevent a terrorism event with engineering. What you can do is build your facilities right, have good controls systems in place, have all the security in place and have a good disaster plan in place to help you recover," Subramaniam said.

It is this interest in its insureds and its focus on helping them prevent losses that seem to breed pride and loyalty in FM Global's clients and its employees.

"We have a vested interest in how FM performs," Hardy said. He notes with pride that FM was one of the first companies to continue to write industrial risks after Sept. 11. FM Global is "on the radar for every broker," Hardy said. "They came to the rescue, wherever they could, yet did not jeopardize their book of business. Each of us owns a little piece of that," he said.

FM Global's employees also tend to stay for the long term. FM Global has a 93% employee retention rate. About 16% of employees have been with the company more than 25 years. In fact, the company has a special parking lot reserved for those employees, and the complaint is that they have to be at the office by 8:30 a.m. to score one of the spots.

The company's highest-ranking officer, Subramaniam, is an example of that loyalty. Except for taking two years to pursue a business degree, Subramaniam has been at the company since 1974. "What has kept me here is the same thing that has kept most of us here. It's such a unique product," he said. "You talk to virtually anyone in this organization and you'll find a huge amount of pride in what we do. We keep our customers from having losses. We are making something that has great value. Although, sometimes we don't say we're in the insurance business. At times, we tend to say we're in the engineering business."

Factory Mutual Insurance Co.

Headquarters: Johnston, R.I.

Principal Business Units:

* Affiliated FM Insurance Co.

* FM Global Research

* FM Insurance Co. Ltd.

* Mutual Boiler Re

* TSB Loss Control Consultants Inc.

History: FM Global was formed when Allendale Insurance, Arkwright
and Protection Mutual Insurance Cos. merged in 1999. The predecessor
company to the oldest original company, Allendale, began doing
business in 1835 as Manufacturers Mutual Fire Insurance Co.

Employees: 4,000+, of which 1,400 are engineers. Another 600+ are
engineers by training, but have other roles at the company.

Top Officer: Shivan S. Subramaniam, chairman and CEO

Product Lines and Percentage
Of 2002 Net Premiums Written:

Allied Lines            40.6
Fire                    25.5
Inland Marine           17.1
Boiler & Machine        15.5
All Other                1.2

Note: Table made from pie chart.

Financial Data

(Statutory Data Year-end 2002):

Direct premiums written: $2.76 billion
Net premiums written: $2.24 billion
Net income: $234.1 million
Combined ratio: 72.1

Source: A.M. Best Co. data and
FM Global Web site

Expense Ratio

Since its merger in 1999, FM
Global has worked to steadily
reduce its expense ratio, which
is the ratio of underwriting
expenses to net premiums
written.

1998   47.0
1999   51.3
2000   34.6
2001   30.5
2002   19.7

Note: Table made from bar graph.

Source: A.M. Best Co. (Best's Executive
Summary Report)

Combined Ratio

Although commercial property
remains a volatile line with the
potential for large losses, FM
Global's focus on reducing
expenses has helped it to
improve profitablility.

       FM Global   Industry Average

1998     140.0          108.7
1999     166.7          107.7
2000      99.3           98.8
2001     141.9          106.9
2002      72.1           92.0

Note: Table made from bar graph.

Source: A.M. Best Co. (Best's Executive Summary
Report and A.M. Best Company Reports)

Top of the Charts

FM Global is a leader in providing commercial property coverage in the United States. Based on 2002 year-end direct premiums written, FM Global is the top writer of boiler and machinery coverage and allied lines, which is coverage generally written with fire that includes glass, tornado, windstorm and hail, sprinkler and water damage, explosion, riot and civil commotion, growing crops, flood, rain and damage from aircraft and vehicles. FM Global also ranks among the top five writers of fire--which includes property insurance and business interruption from fire and lightning--and inland marine. ($ Thousands)

Allied Lines, Top Writers

                                Market       Direct
                                 Share     Premiums
Rank   Company                       %      Written

   1   FM Global Group           14.14     $853,738
   2   Zurich/Farmers Group       7.34      443,362
   3   Royal & SunAlliance        6.14      370,522
   4   Amer Intern Group Inc      4.76      287,657
   5   Travelers P/C Group        4.47      269,788

Boiler & Machinery, Top Writers

                                Market       Direct
                                 Share     Premiums
Rank   Company                       %      Written

   1   FM Global Group           26.88     $306,339
   2   Amer Intern Group Inc     14.88      169,592
   3   Travelers P/C Group       11.66      132,836
   4   Chubb Group of Ins Cos    10.32      117,649
   5   Zurich/Farmers Group       9.70      110,508

Fire, Top Writers

                                Market       Direct
                                 Share     Premiums
Rank   Company                       %      Written

   1   Amer Intern Group Inc     12.83   $1,066,693
   2   Zurich/Farmers Group       8.95      743,982
   3   FM Global Group            6.90      573,246
   4   Travelers P/C Group        4.59      381,845
   5   Allianz of America         4.28      355,704

Inland Marine, Top Writers

                                Market       Direct
                                 Share     Premiums
Rank   Company                       %      Written

   1   Amer Intern Group Inc      9.14     $927,391
   2   Zurich/Farmers Group       7.37      747,183
   3   CNA Insurance Cos.         5.56      563,927
   4   FM Global Group            5.50      558,333
   5   State Farm Group           4.78      485,166

Source: A.M. Best Co. Property/Casualty State/Line
Report, 2003 Edition.

Property/Casualty Direct Premiums Written by Line--2002

($ Thousands)

                                Direct                       Adjusted
                              Premiums     % of       %     Loss Ratio
Business Line                  Written    Total     Chg    2002    2001

Private-Passenger
  Auto Liability            $83,203,032    20.5    11.1    72.4    76.9
    No-Fault                 $9,816,966     2.4    23.0   101.7   113.4
    Other Liability         $73,386,066    18.0     9.6    68.6    72.6
Private-Passenger Auto
  Physical Damage           $60,550,519    14.9     8.9    61.6    67.8
Workers' Compensation       $43,124,735    10.6    14.2    79.8    89.2
Homeowners                  $42,651,032    10.5    14.3    66.2    77.6
Other Liability             $39,718,754     9.8    32.5    91.8    74.4
Commercial                  $29,225,671     7.2    15.5    55.9    82.0
  Nonliability              $17,695,153     4.4    18.6    56.3    94.8
  Liability                 $11,530,517     2.8    11.1    55.2    64.0
Commercial
  Auto Liability            $19,826,750     4.9    14.8    70.9    80.0
    No-Fault                   $499,366     0.1    21.9    84.4    94.2
    Other Liability         $19,327,384     4.8    14.7    70.6    79.7
Inland Marine               $10,144,937     2.5    11.4    45.1    62.9
Group Accident & Health      $9,187,282     2.3    25.9    77.6    73.7
Medical Malpractice          $8,928,252     2.2    22.5    95.1   101.7
Fire                         $8,312,072     2.0    37.5    30.0   142.8
Commercial Auto
  Physical Damage            $7,251,460     1.8     9.5    54.1    63.7
Allied                       $6,037,636     1.5    40.0    44.7   213.3
Mortgage Guaranty            $3,871,104     1.0    12.4    33.2    27.6
Other Accident & Health      $3,689,817     0.9     0.5    65.0    58.9
Surety                       $3,626,152     0.9     4.1    65.0    82.9
Product Liability            $3,067,009     0.8    27.7   204.6   168.9
Multiple Peril Crop          $2,897,450     0.7    12.6   129.8    96.1
Federal Flood                $1,524,838     0.4     7.6    24.4    83.9
Farmowners                   $1,944,422     0.5     9.9    67.1    75.1
Earthquake                   $1,697,700     0.4    16.6    28.5    34.3
Financial Guaranty           $2,645,745     0.7    43.7     5.5     3.0
Ocean Marine                 $2,347,536     0.6    17.7    59.0    63.5
Aircraft                     $2,318,967     0.6    57.5    62.4   206.2
Federal Employees Health     $2,231,754     0.5   -32.9    91.6    90.7
Boiler and Machinery         $1,139,498     0.3    32.1    25.5    41.0
Fidelity                     $1,007,691     0.2    17.2    59.9    58.3
Credit                         $683,478     0.2    21.3    47.8    72.8
Burglary and Theft             $111,757     0.0   -10.3    17.2    31.2
Miscellaneous                $3,770,540     0.9   -13.2    69.0    78.5
Total P/C Industry         $406,737,588   100.0    14.8    69.7    79.6

                                                                %
                           Leading                         Market
Business Line              Writer                  AMB #    Share

Private-Passenger
  Auto Liability           State Farm Group        00088     19.2
    No-Fault               State Farm Group        00088     18.7
    Other Liability        State Farm Group        00088     19.2
Private-Passenger Auto
  Physical Damage          State Farm Group        00088     19.5
Workers' Compensation      State Comp Fund CA      04028     12.7
Homeowners                 State Farm Group        00088     22.3
Other Liability            Amer Intl Group         18540     21.6
Commercial                 Zurich/Farmers Group    18549      8.3
  Nonliability             Zurich/Farmers Group    18549     10.4
  Liability                Travelers P C Group     18358      9.1
Commercial
  Auto Liability           Zurich/Farmers Group    18549      6.9
    No-Fault               Amer Transit Ins Co     04660     11.5
    Other Liability        Zurich/Farmers Group    18549      7.0
Inland Marine              Amer Intl Group         18540      9.1
Group Accident & Health    Anthem Group            18184     30.3
Medical Malpractice        MLMIC Group             18439     10.7
Fire                       Amer Intl Group         18540     12.8
Commercial Auto
  Physical Damage          Zurich/Farmers Group    18549      7.0
Allied                     FM Global Group         18502     14.1
Mortgage Guaranty          Mortgage Guar Group     03014     33.0
Other Accident & Health    Anthem Group            18184     23.0
Surety                     Travelers P C Group     18358     14.3
Product Liability          Zurich/Farmers Group    18549     14.5
Multiple Peril Crop        Acceptance Ins Cos      18003     19.6
Federal Flood              State Farm Group        00088     17.4
Farmowners                 Nationwide Group        05987      7.4
Earthquake                 Calif Earthquake        12534     25.6
Financial Guaranty         Ambas Financial Group   18449     30.0
Ocean Marine               CAN Ins Cos             18313     11.9
Aircraft                   Amer Intl Group         18540     19.5
Federal Employees Health   CNA Ins Cos             18313     50.7
Boiler and Machinery       FM Global Group         18502     26.9
Fidelity                   Chuba Group of Ins Cos  00012     17.2
Credit                     Euler Amer Credt Ind    02097     16.6
Burglary and Theft         Chuba Group of Ins Cos  00012     21.5
Miscellaneous
Total P/C Industry         State Farm Group        00088     10.4

                             % of
                           Writer's
                              Total   Second
Business Line                   DPW   Leading Writer           AMB #

Private-Passenger
  Auto Liability               37.7   Allstate Ins Group       00008
    No-Fault                    4.3   Allstate Ins Group       00008
    Other Liability            33.3   Allstate Ins Group       00008
Private-Passenger Auto
  Physical Damage              27.9   Allstate Ins Group       00008
Workers' Compensation         100.0   Liberty Mutual Ins Cos   00060
Homeowners                     22.4   Allstate Ins Group       00008
Other Liability                40.1   Zurich/Farmers Group     18549
Commercial                      9.0   Travelers P C Group      18358
  Nonliability                  7.4   Travelers P C Group      18358
  Liability                     7.9   CAN Ins Cos              18313
Commercial
  Auto Liability                5.6   Travelers P C Group      18358
    No-Fault                   24.6   Progressive Group        00780
    Other Liability             5.5   Travelers P C Group      18358
Inland Marine                   4.3   Zurich/Farmers Group     18549
Group Accident & Health        63.0   Medical Mutual of Ohio   04693
Medical Malpractice            84.3   Amer Intl Group          18540
Fire                            5.0   Zurich/Farmers Group     18549
Commercial Auto
  Physical Damage               2.1   State Farm Group         00088
Allied                         36.7   Zurich/Farmers Group     18549
Mortgage Guaranty             100.0   PMI Mortgage Group       03267
Other Accident & Health        19.2   State Farm Group         00088
Surety                          3.9   St Paul Cos              00080
Product Liability               1.5   St Paul Cos              00080
Multiple Peril Crop            89.8   Ace INA Group            18498
Federal Flood                   0.6   Bankers Ins Group        18379
Farmowners                      1.2   State Farm Group         00088
Earthquake                    100.0   State Farm Group         00088
Financial Guaranty             99.1   MBIA Group               03166
Ocean Marine                    2.3   Amer Intl Group          18540
Aircraft                        2.1   Chubb Group of Ins Cos   00012
Federal Employees Health        9.5   Anthem Group             18184
Boiler and Machinery           13.2   Amer Intl Group          18540
Fidelity                        2.2   Amer Intl Group          18540
Credit                        100.0   Radian Group             18150
Burglary and Theft              0.3   Travelers P C Group      18358
Miscellaneous
Total P/C Industry            100.0   Zurich/Farmers Group     18549

                                        % of
                                %   Writer's
                           Market      Total
Business Line               Share        DPW

Private-Passenger
  Auto Liability             10.5       40.0
    No-Fault                 11.9        5.3
    Other Liability          10.4       34.7
Private-Passenger Auto
  Physical Damage            10.8       29.9
Workers' Compensation         8.8       32.4
Homeowners                   11.6       22.5
Other Liability               7.1       11.4
Commercial                    7.5       16.4
  Nonliability                6.4        8.5
  Liability                   5.8        5.6
Commercial
  Auto Liability              5.5        8.2
    No-Fault                  8.3        0.4
    Other Liability           5.6        8.1
Inland Marine                 7.4        3.0
Group Accident & Health      14.6       93.6
Medical Malpractice           7.2        3.0
Fire                          9.0        3.0
Commercial Auto
  Physical Damage             6.0       10.0
Allied                        7.3        1.8
Mortgage Guaranty            17.9      100.0
Other Accident & Health      19.6        1.7
Surety                       12.2        6.7
Product Liability            10.9        5.1
Multiple Peril Crop          16.1        9.7
Federal Flood                11.7       67.4
Farmowners                    6.6        0.3
Earthquake                    9.7        0.4
Financial Guaranty           27.3      100.0
Ocean Marine                 11.3        1.2
Aircraft                     12.3        3.5
Federal Employees Health     35.3       17.8
Boiler and Machinery         14.9        0.8
Fidelity                     14.8        0.7
Credit                        9.2        7.2
Burglary and Theft           15.0        0.1
Miscellaneous
Total P/C Industry            6.1      100.0

Source: A.M. Best Co.

Total Auto, Top Writers--2002

Rank is based on 2002 direct premiums written.

($ Thousands)

                                              2002 Direct           %
                                                 Premiums   Change in
Rank   Group                         AMB #        Written    Premiums

   1   State Farm Group              00088    $28,645,260        12.0
   2   Allstate Ins Group            00008     15,834,659         4.2
   3   Zurich/Farmers Group          18549      9,770,108         7.9
   4   Progressive Group             00780      9,479,492        31.2
   5   Nationwide Group              05987      7,309,004         8.4

   6   Berkshire Hathaway            00811      7,070,986        14.1
   7   USAA Group                    04080      5,137,240        13.6
   8   Travelers P C Group           18358      4,312,288         9.3
   9   Liberty Mutual Ins Cos        00060      4,273,481        15.5
  10   Amer Intl Group               18540      3,879,695        18.9

  11   Amer Family Ins Group         00124      3,160,734        16.1
  12   Hartford Ins Group            00048      2,902,047         8.7
  13   Safeco Ins Cos                00078      2,370,515         9.9
  14   CNA Ins Cos                   18313      2,180,298        -4.5
  15   MetLife Auto & Home Group     18552      2,141,666        13.1

  16   Erie Ins Group                04283      1,926,094        20.6
  17   Mercury Gen Group             04524      1,717,328        28.4
  18   Auto-Owners Ins Group         04354      1,681,709        22.0
  19   Calif State Auto Group        18460      1,631,035         7.5
  20   Prudential of America Group   03905      1,575,118         9.5

  21   Auto Club So Calif Group      18515      1,526,008        15.9
  22   GMAC Ins Group                18431      1,523,389         8.6
  23   Great Amer P&C Group          04835      1,522,478        -0.5
  24   Allmerica Finl P&C Cos        04861      1,373,026         1.2
  25   White Mountains Ins Group     18490      1,284,452       -20.5

       Top 25 Writers                        $124,228,111        11.3
       Total U.S. P/C Industry               $170,831,761        10.6

                                        Market Share (%)

Rank   Group                          2002    2001    2000

   1   State Farm Group               16.8    16.6    15.8
   2   Allstate Ins Group              9.3     9.8    10.4
   3   Zurich/Farmers Group            5.7     5.9     5.9
   4   Progressive Group               5.5     4.7     4.4
   5   Nationwide Group                4.3     4.4     4.3
   6   Berkshire Hathaway              4.1     4.0     4.1
   7   USAA Group                      3.0     2.9     2.9
   8   Travelers P C Group             2.5     2.6     2.6
   9   Liberty Mutual Ins Cos          2.5     2.4     2.6
  10   Amer Intl Group                 2.3     2.1     2.0
  11   Amer Family Ins Group           1.9     1.8     1.8
  12   Hartford Ins Group              1.7     1.7     1.7
  13   Safeco Ins Cos                  1.4     1.4     1.5
  14   CNA Ins Cos                     1.3     1.5     1.6
  15   MetLife Auto & Home Group       1.3     1.2     1.1
  16   Erie Ins Group                  1.1     1.0     1.0
  17   Mercury Gen Group               1.0     0.9     0.8
  18   Auto-Owners Ins Group           1.0     0.9     0.8
  19   Calif State Auto Group          1.0     1.0     1.0
  20   Prudential of America Group     0.9     0.9     0.9
  21   Auto Club So Calif Group        0.9     0.9     0.9
  22   GMAC Ins Group                  0.9     0.9     0.9
  23   Great Amer P&C Group            0.9     1.0     1.1
  24   Allmerica Finl P&C Cos          0.8     0.9     0.9
  25   White Mountains Ins Group       0.8     1.0     1.4

       Top 25 Writers                 72.7    72.3    72.5
       Total U.S. P/C Industry       100.0   100.0   100.0

                                     Adjusted Loss Ratios       % of
                                                             Company
Rank   Group                         2002    2001   2000    Premiums

   1   State Farm Group              77.6    84.3   80.2        67.7
   2   Allstate Ins Group            63.0    64.9   65.4        72.3
   3   Zurich/Farmers Group          58.9    68.4   72.6        39.5
   4   Progressive Group             57.9    59.7   69.9        98.1
   5   Nationwide Group              59.4    68.4   72.7        59.9
   6   Berkshire Hathaway            67.5    71.5   78.2        80.7
   7   USAA Group                    71.5    74.0   76.3        72.8
   8   Travelers P C Group           68.0    74.7   72.4        32.3
   9   Liberty Mutual Ins Cos        68.1    78.7   77.9        36.3
  10   Amer Intl Group               75.7    75.7   78.2        18.1
  11   Amer Family Ins Group         67.2    70.6   70.3        64.3
  12   Hartford Ins Group            63.0    67.0   67.7        32.2
  13   Safeco Ins Cos                64.5    68.3   74.3        51.3
  14   CNA Ins Cos                   44.7   110.9   76.3        18.3
  15   MetLife Auto & Home Group     63.3    66.9   67.1        73.3
  16   Erie Ins Group                84.1    74.2   67.8        61.1
  17   Mercury Gen Group             61.4    61.1   59.3        92.2
  18   Auto-Owners Ins Group         71.7    74.5   69.9        50.3
  19   Calif State Auto Group        68.5    71.6   73.3        86.2
  20   Prudential of America Group   68.7    65.8   57.2        75.0
  21   Auto Club So Calif Group      69.6    72.5   72.3        88.9
  22   GMAC Ins Group                74.9    81.6   64.0        64.1
  23   Great Amer P&C Group          60.2    65.4   68.7        38.2
  24   Allmerica Finl P&C Cos        72.7    77.5   71.4        55.3
  25   White Mountains Ins Group     70.9    80.2   83.9        47.5

       Top 25 Writers                67.5    73.6   73.3        53.5
       Total U.S. P/C Industry       67.6    73.4   73.1        42.0

Source: A.M. Best Go.

Commercial Multiple Peril, Top Writers--2002

Rank is based on 2002 direct premiums written.

($ Thousands)

                                           2002 Direct           %
                                              Premiums   Change in
Rank   Group                       AMB #       Written    Premiums

   1   Zurich/Farmers Group        18549    $2,431,315        17.5
   2   Travelers P C Group         18358     2,182,662        16.5
   3   Hartford Ins Group          00048     1,602,237        17.8
   4   Chubb Group of Ins Cos      00012     1,477,327        45.4
   5   CNA Ins Cos                 18313     1,326,567        -4.6

   6   State Farm Group            00088     1,152,988        18.7
   7   Nationwide Group            05987     1,095,167        21.2
   8   Liberty Mutual Ins Cos      00060     1,046,759        28.5
   9   Allianz of America          18429       789,310        -7.3
  10   Cincinnati Ins Cos          04294       692,136         0.8

  11   Royal & SunAlliance         18371       667,799        20.8
  12   St Paul Cos                 00080       583,402         4.5
  13   Safeco Ins Cos              00078       547,899        -2.2
  14   Auto-Owners Ins Group       04354       502,218        35.2
  15   Kemper Ins Cos              04427       479,220        16.5

  16   GE Global Ins Group         18572       442,475        -8.9
  17   Ace INA Group               18498       441,674       146.1
  18   Allstate Ins Group          00008       412,848         7.5
  19   WR Berkley Group            04655       411,168        74.7
  20   Allmerica Finl P&C Cos      04861       400,862        -6.6

  21   White Mountains Ins Group   18490       397,446       -48.1
  22   Philadelphia Ins Cos        00476       397,160        80.9
  23   Erie Ins Group              04283       367,071        41.1
  24   Amer Intl Group             18540       335,695        25.4
  25   Harleysville Ins            03916       330,591        22.0

       Top 25 Writers                      $20,513,995        14.7
       Total U.S. P/C Industry             $29,225,671        15.5

                                      Market Share (%)

Rank   Group                        2002    2001    2000

   1   Zurich/Farmers Group          8.3     8.2     7.2
   2   Travelers P C Group           7.5     7.4     7.7
   3   Hartford Ins Group            5.5     5.4     5.3
   4   Chubb Group of Ins Cos        5.1     4.0     3.9
   5   CNA Ins Cos                   4.5     5.5     5.6

   6   State Farm Group              3.9     3.8     3.6
   7   Nationwide Group              3.7     3.6     3.5
   8   Liberty Mutual Ins Cos        3.6     3.2     3.0
   9   Allianz of America            2.7     3.4     3.7
  10   Cincinnati Ins Cos            2.4     2.7     2.2

  11   Royal & SunAlliance           2.3     2.2     2.3
  12   St Paul Cos                   2.0     2.2     2.3
  13   Safeco Ins Cos                1.9     2.2     2.8
  14   Auto-Owners Ins Group         1.7     1.5     1.4
  15   Kemper Ins Cos                1.6     1.6     1.6

  16   GE Global Ins Group           1.5     1.9     1.7
  17   Ace INA Group                 1.5     0.7     0.6
  18   Allstate Ins Group            1.4     1.5     1.7
  19   WR Berkley Group              1.4     0.9     0.9
  20   Allmerica Finl P&C Cos        1.4     1.7     1.7

  21   White Mountains Ins Group     1.4     3.0     4.2
  22   Philadelphia Ins Cos          1.4     0.9     0.6
  23   Erie Ins Group                1.3     1.0     0.9
  24   Amer Intl Group               1.1     1.1     0.8
  25   Harleysville Ins              1.1     1.1     1.1

       Top 25 Writers               70.2    70.7    70.4
       Total U.S. P/C Industry     100.0   100.0   100.0

                                   Adjusted Loss Ratios        % of
                                                            Company
Rank   Group                        2002    2001    2000   Premiums

   1   Zurich/Farmers Group         65.1    62.8    64.3        9.8
   2   Travelers P C Group          50.4    62.1    57.5       16.4
   3   Hartford Ins Group           49.3    60.6    49.5       17.8
   4   Chubb Group of Ins Cos       57.4   231.4    62.6       18.3
   5   CNA Ins Cos                  50.4   103.4    73.5       11.1

   6   State Farm Group             59.7    76.1    71.5        2.7
   7   Nationwide Group             43.1    59.9    59.4        9.0
   8   Liberty Mutual Ins Cos       53.9   108.7    68.0        8.9
   9   Allianz of America           47.5    73.7    69.2       16.5
  10   Cincinnati Ins Cos           55.8    68.6    62.5       23.9

  11   Royal & SunAlliance         135.2   147.8    67.1       12.9
  12   St Paul Cos                  35.0   179.1    54.3        8.9
  13   Safeco Ins Cos               68.6    60.1    66.7       11.8
  14   Auto-Owners Ins Group        50.5    76.8    82.1       15.0
  15   Kemper Ins Cos               32.3   109.9    72.8       10.7

  16   GE Global Ins Group          70.9    74.9    82.1       20.1
  17   Ace INA Group                32.6    77.4    11.1        9.1
  18   Allstate Ins Group           56.7    54.8    53.7        1.9
  19   WR Berkley Group             40.6    71.1    54.2       17.4
  20   Allmerica Finl P&C Cos       48.9    73.4    64.7       16.1

  21   White Mountains Ins Group    42.0    79.4    83.4       14.7
  22   Philadelphia Ins Cos         45.1    52.0    61.4       60.0
  23   Erie Ins Group               61.7    63.0    59.2       11.7
  24   Amer Intl Group              66.9    30.6   105.5        1.6
  25   Harleysville Ins             41.9    50.7    53.2       28.1

       Top 25 Writers               55.3    86.9    65.0        9.0
       Total U.S. P/C Industry      55.9    82.0    65.3        7.2

Source: A.M. Best Co.

Homeowners Multiple Peril, Top Writers--2002

Rank is based on 2002 direct premiums written.

($ Thousands)

                                             2002 Direct           %
                                                Premiums   Change in
Rank   Group                         AMB #       Written    Premiums

   1   State Farm Group              00088    $9,503,668        16.4
   2   Allstate Ins Group            00008     4,930,281        16.2
   3   Zurich/Farmers Group          18549     3,435,356         7.2
   4   Nationwide Group              05987     1,968,627        15.7
   5   USAA Group                    04080     1,529,006        12.4

   6   Travelers P C Group           18358     1,479,309        10.3
   7   Chubb Group of Ins Cos        00012     1,181,983        23.0
   8   Amer Family Ins Group         00124     1,001,678        20.1
   9   Liberty Mutual Ins Cos        00060       872,979        16.8
  10   Safeco Ins Cos                00078       785,909         3.0

  11   Hartford Ins Group            00048       686,085        11.8
  12   MetLife Auto & Home Group     18552       671,950        22.9
  13   Auto-Owners Ins Group         04354       565,246        27.5
  14   CNA Ins Cos                   18313       504,630         5.3
  15   Erie Ins Group                04283       495,843        22.1

  16   Prudential of America Group   03905       470,739         5.0
  17   Allianz of America            18429       459,757         3.9
  18   Southern Farm Bureau Group    02962       412,461        18.4
  19   Allmerica Finl P&C Cos        04861       383,128        13.1
  20   Vesta Ins Group Inc           05681       338,702       111.9

  21   White Mountains Ins Group     18490       319,245       -24.3
  22   HDI U S Group                 18492       281,994       -16.5
  23   Amica Mutual Group            18522       264,958        22.3
  24   Amer Intl Group               18540       263,540        33.7
  25   Calif State Auto Group        18460       241,885        10.2

       Top 25 Writers                        $33,048,958        14.2
       Total U.S. P/C Industry               $42,651,032        14.3

                                        Market Share (%)

Rank   Group                          2002    2001    2000

   1   State Farm Group               22.3    21.9    21.4
   2   Allstate Ins Group             11.6    11.4    11.5
   3   Zurich/Farmers Group            8.1     8.6     8.4
   4   Nationwide Group                4.6     4.6     4.5
   5   USAA Group                      3.6     3.6     3.6

   6   Travelers P C Group             3.5     3.6     3.8
   7   Chubb Group of Ins Cos          2.8     2.6     2.4
   8   Amer Family Ins Group           2.3     2.2     2.1
   9   Liberty Mutual Ins Cos          2.0     2.0     2.0
  10   Safeco Ins Cos                  1.8     2.0     2.2

  11   Hartford Ins Group              1.6     1.6     1.7
  12   MetLife Auto & Home Group       1.6     1.5     1.2
  13   Auto-Owners Ins Group           1.3     1.2     1.1
  14   CNA Ins Cos                     1.2     1.3     1.4
  15   Erie Ins Group                  1.2     1.1     1.0

  16   Prudential of America Group     1.1     1.2     1.3
  17   Allianz of America              1.1     1.2     1.2
  18   Southern Farm Bureau Group      1.0     0.9     0.9
  19   Allmerica Finl P&C Cos          0.9     0.9     0.9
  20   Vesta Ins Group Inc             0.8     0.4     0.4

  21   White Mountains Ins Group       0.7     1.1     1.4
  22   HDI U S Group                   0.7     0.9     1.0
  23   Amica Mutual Group              0.6     0.6     0.6
  24   Amer Intl Group                 0.6     0.5     0.5
  25   Calif State Auto Group          0.6     0.6     0.6

       Top 25 Writers                 77.5    77.6    77.0
       Total U.S. P/C Industry       100.0   100.0   100.0

                                     Adjusted Loss Ratios       % of
                                                             Company
Rank   Group                         2002    2001   2000    Premiums

   1   State Farm Group              73.1    87.9   71.3        22.4
   2   Allstate Ins Group            61.2    70.2   58.7        22.5
   3   Zurich/Farmers Group          67.8    88.3   73.8        13.9
   4   Nationwide Group              62.3    72.5   70.1        16.1
   5   USAA Group                    59.7    60.7   57.3        21.7

   6   Travelers P C Group           59.8    71.3   65.0        11.1
   7   Chubb Group of Ins Cos        60.8    69.3   54.7        14.6
   8   Amer Family Ins Group         67.4   124.3   89.3        20.4
   9   Liberty Mutual Ins Cos        63.2    76.9   68.3         7.4
  10   Safeco Ins Cos                65.7    86.5   75.9        17.0

  11   Hartford Ins Group            57.3    58.5   56.6         7.6
  12   MetLife Auto & Home Group     54.0    71.7   75.3        23.0
  13   Auto-Owners Ins Group         81.2   102.2   84.6        16.9
  14   CNA Ins Cos                   60.8    74.6   68.6         4.2
  15   Erie Ins Group                85.7    64.6   64.9        15.7

  16   Prudential of America Group   59.9    61.1   51.8        22.4
  17   Allianz of America            62.0    76.3   62.0         9.6
  18   Southern Farm Bureau Group    86.1    76.4   68.4        23.2
  19   Allmerica Finl P&C Cos        58.6    71.9   73.9        15.4
  20   Vesta Ins Group Inc           48.9    58.4   56.2        47.3

  21   White Mountains Ins Group     64.4    71.8   70.8        11.8
  22   HDI U S Group                 40.2    39.4   28.1        11.2
  23   Amica Mutual Group            69.6    77.3   61.0        22.4
  24   Amer Intl Group               62.3    53.9   67.7         1.2
  25   Calif State Auto Group        63.4    62.4   60.2        12.8

       Top 25 Writers                66.1    78.9   67.2        14.8
       Total U.S. P/C Industry       66.2    77.6   66.7        10.5

Source: A.M. Best Co.

Medical Malpractice, Top Writers--2002

Rank is based on 2002 direct premiums written.

($ Thousands)

                                           2002 Direct           %
                                              Premiums   Change in
Rank   Group                       AMB #       Written    Premiums

   1   MLMIC Group                 18439      $958,842        36.1
   2   Amer Intl Group             18540       642,410       180.0
   3   GE Global Ins Group         18572       633,229        56.4
   4   ProAssurance Group          18559       443,275        30.5
   5   Zurich/Farmers Group        18549       416,496        31.8

   6   Doctors Co Ins Group        18083       404,949        49.1
   7   Health Care Indemnity       03701       340,927        18.5
   8   CNA Ins Cos                 18313       329,422        31.2
   9   FPIC Ins Group              18457       291,530        44.6
  10   ISMIE Mutual Ins Co         03757       260,757        25.5

  11   Norcal Group                18539       246,744        -0.7
  12   St Paul Cos                 00080       217,997       -62.6
  13   MAG Mutual Ins Co           01936       212,654        65.3
  14   Allianz of America          18429       207,381       -11.0
  15   Markel Corp Group           18468       186,205       123.7
  16   Physicians Reciprocal
         Insurers                  02888       185,332         8.7
  17   ProMutual Group             18359       179,791        31.1
  18   Fairfax Finl (US) Group     03116       177,194       105.4
  19   AP Capital Group            18321       176,627        19.9
  20   State Volunteer Mutual      03706       163,859        36.3

  21   SCPIE Cos                   18350       159,767       -13.1
  22   Mutual Ins Arizona          03659       107,230        29.7
  23   Medical Mutual Group (MD)   05006       100,155        10.6
  24   Miix Group                  18349        95,700       -58.1
  25   Chubb Group of Ins Cos      00012        93,385        24.7

       Top 25 Writers                       $7,231,860        24.4
       Total U.S. P/C Industry              $8,928,252        22.5

                                      Market Share (%)

Rank   Group                        2002    2001    2000

   1   MLMIC Group                  10.7     9.7    10.0
   2   Amer Intl Group               7.2     3.1     2.5
   3   GE Global Ins Group           7.1     5.6     5.1
   4   ProAssurance Group            5.0     4.7     4.9
   5   Zurich/Farmers Group          4.7     4.3     3.6

   6   Doctors Co Ins Group          4.5     3.7     3.3
   7   Health Care Indemnity         3.8     3.9     3.9
   8   CNA Ins Cos                   3.7     3.4     3.7
   9   FPIC Ins Group                3.3     2.8     1.8
  10   ISMIE Mutual Ins Co           2.9     2.9     2.6

  11   Norcal Group                  2.8     3.4     3.4
  12   St Paul Cos                   2.4     8.0     9.1
  13   MAG Mutual Ins Co             2.4     1.8     1.3
  14   Allianz of America            2.3     3.2     2.1
  15   Markel Corp Group             2.1     1.1     0.8
  16   Physicians Reciprocal
         Insurers                    2.1     2.3     2.1
  17   ProMutual Group               2.0     1.9     1.7
  18   Fairfax Finl (US) Group       2.0     1.2     1.0
  19   AP Capital Group              2.0     2.0     1.9
  20   State Volunteer Mutual        1.8     1.6     1.6

  21   SCPIE Cos                     1.8     2.5     2.4
  22   Mutual Ins Arizona            1.2     1.1     1.1
  23   Medical Mutual Group (MD)     1.1     1.2     1.3
  24   Miix Group                    1.1     3.1     3.3
  25   Chubb Group of Ins Cos        1.0     1.0     0.7

       Top 25 Writers               81.0    79.8    75.1
       Total U.S. P/C Industry     100.0   100.0   100.0

                                   Adjusted Loss Ratios        % of
                                                            Company
Rank   Group                        2002    2001    2000   Premiums

   1   MLMIC Group                 149.8   114.9    62.7       84.3
   2   Amer Intl Group             100.1   135.7    70.1        3.0
   3   GE Global Ins Group          76.8    53.4    51.4       28.7
   4   ProAssurance Group           63.8    65.1    63.2       69.9
   5   Zurich/Farmers Group        149.3   152.0   145.0        1.7

   6   Doctors Co Ins Group         67.6    51.1    51.5       96.9
   7   Health Care Indemnity        82.9   110.9    95.5      100.0
   8   CNA Ins Cos                  82.1   138.2    56.6        2.8
   9   FPIC Ins Group               63.3    67.3    63.8       89.0
  10   ISMIE Mutual Ins Co         109.2    72.8    68.6       99.9

  11   Norcal Group                 61.9    72.8    66.1       99.9
  12   St Paul Cos                 138.3   177.7   131.6        3.3
  13   MAG Mutual Ins Co           111.3    93.0    89.1       97.4
  14   Allianz of America          112.2    50.2    49.1        4.3
  15   Markel Corp Group            55.0    61.0    79.0       12.1
  16   Physicians Reciprocal
         Insurers                    9.0    66.8    38.9       99.1
  17   ProMutual Group             107.7   142.0   200.4       96.9
  18   Fairfax Finl (US) Group     139.9    59.9    51.9        8.7
  19   AP Capital Group             78.8   107.7    65.6       66.3
  20   State Volunteer Mutual       84.1    83.6    99.3       99.9

  21   SCPIE Cos                    78.1    86.5    46.1       97.9
  22   Mutual Ins Arizona           69.9    85.8    69.6      100.0
  23   Medical Mutual Group (MD)    77.6    76.1    67.6       99.6
  24   Miix Group                  155.7   133.0   111.8       99.5
  25   Chubb Group of Ins Cos       81.8   130.6    73.1        1.2

       Top 25 Writers               99.1   104.0    81.5        8.2
       Total U.S. P/C Industry      95.1   101.7    82.6        2.2

Source: A.M. Best Go.

Workers' Compensation, Top Writers--2002

Rank is based on 2002 direct premiums written.

($ Thousands)

                                           2002 Direct           %
                                              Premiums   Change in
Rank   Group                       AMB #       Written    Premiums

   1   State Comp Fund Calif       04028    $5,492,547        51.0
   2   Liberty Mutual Ins Cos      00060     3,807,507        27.5
   3   Amer Intl Group             18540     3,135,134        63.2
   4   Zurich/Farmers Group        18549     2,107,534        13.8
   5   Travelers P C Group         18358     1,533,078        29.5

   6   Hartford Ins Group          00048     1,495,662        25.8
   7   CNA Ins Cos                 18313     1,438,229       -14.4
   8   Kemper Ins Cos              04427     1,350,448         2.4
   9   Royal & SunAlliance         18371     1,179,654       -11.4
  10   St Paul Cos                 00080       956,767        13.7

  11   Ace INA Group               18498       723,660        27.5
  12   Everest Reins US Group      05696       634,949        87.5
  13   Texas Mutual Ins Co         11453       609,064        44.4
  14   Zenith National Ins Group   03020       581,653        33.8
  15   Chubb Group of Ins Cos      00012       578,267        30.7
  16
       HDI U S Group               18492       521,154        13.5
  17   WR Berkley Group            04655       508,514        62.0
  18   Pinnacol Assur Co           03471       475,328        16.3
  19   Aon Corp Group              03341       396,575        37.2
  20   Fairfax Finl (US) Group     03116       393,767       -34.3

  21   PMA Capital Ins Group       18436       390,081        26.2
  22   Accident Fund Ins Co        11770       368,117        40.9
  23   Great Amer P&C Group        04835       362,666         2.0
  24   FCCI Ins Group              18290       341,223       -12.1
  25   Old Republic Gen Group      00734       437,251        26.1

       Top 25 Writers                      $29,718,831        24.9
       Total U.S. P/C Industry             $43,124,735        14.2

                                      Market Share (%)

Rank   Group                        2002    2001    2000

   1   State Comp Fund Calif        12.7     9.6     5.4
   2   Liberty Mutual Ins Cos        8.8     7.9     8.9
   3   Amer Intl Group               7.3     5.1     4.9
   4   Zurich/Farmers Group          4.9     4.9     4.3
   5   Travelers P C Group           3.6     3.1     3.3

   6   Hartford Ins Group            3.5     3.1     3.2
   7   CNA Ins Cos                   3.3     4.5     4.7
   8   Kemper Ins Cos                3.1     3.5     4.0
   9   Royal & SunAlliance           2.7     3.5     3.2
  10   St Paul Cos                   2.2     2.2     1.9

  11   Ace INA Group                 1.7     1.5     0.9
  12   Everest Reins US Group        1.5     0.9     0.4
  13   Texas Mutual Ins Co           1.4     1.1     0.9
  14   Zenith National Ins Group     1.3     1.2     1.0
  15   Chubb Group of Ins Cos        1.3     1.2     1.2
  16
       HDI U S Group                 1.2     1.2     0.9
  17   WR Berkley Group              1.2     0.8     0.7
  18   Pinnacol Assur Co             1.1     1.1     0.9
  19   Aon Corp Group                0.9     0.8     0.7
  20   Fairfax Finl (US) Group       0.9     1.6     1.8

  21   PMA Capital Ins Group         0.9     0.8     0.7
  22   Accident Fund Ins Co          0.9     0.7     0.6
  23   Great Amer P&C Group          0.8     0.9     1.2
  24   FCCI Ins Group                0.8     1.0     1.1
  25   Old Republic Gen Group        0.8     0.7     0.6

       Top 25 Writers               68.9    63.0    57.4
       Total U.S. P/C Industry     100.0   100.0   100.0

                                   Adjusted Loss Ratios       % of
                                                           Company
Rank   Group                       2002    2001    2000   Premiums

   1   State Comp Fund Calif       88.5    87.9    96.3      100.0
   2   Liberty Mutual Ins Cos      77.4   101.5    85.1       32.4
   3   Amer Intl Group             99.5    77.5    94.4       14.6
   4   Zurich/Farmers Group        78.2    91.3    86.5        8.5
   5   Travelers P C Group         60.5   123.7    78.3       11.5

   6   Hartford Ins Group          64.9    84.3    65.6       16.6
   7   CNA Ins Cos                 73.7   118.2    93.2       12.1
   8   Kemper Ins Cos              86.5    90.0    83.2       30.1
   9   Royal & SunAlliance         83.7    85.6    84.5       22.7
  10   St Paul Cos                 78.2    43.4   -18.6       14.6

  11   Ace INA Group               18.0    52.0    83.3       14.9
  12   Everest Reins US Group      64.4    63.3    63.8       75.3
  13   Texas Mutual Ins Co         64.5    78.3    81.4      100.0
  14   Zenith National Ins Group   58.0    61.9    75.1      100.0
  15   Chubb Group of Ins Cos      44.4   146.4    54.1        7.2
  16
       HDI U S Group               97.9    76.0   150.0       20.7
  17   WR Berkley Group            62.9    65.1    20.8       21.6
  18   Pinnacol Assur Co           75.8    71.6    85.1      100.0
  19   Aon Corp Group              78.2    93.0   102.3       38.3
  20   Fairfax Finl (US) Group     99.8    79.0    65.5       19.3

  21   PMA Capital Ins Group       65.9    85.3    78.5       67.2
  22   Accident Fund Ins Co        68.7    65.6    58.2       99.7
  23   Great Amer P&C Group        72.8    82.2    91.3        9.1
  24   FCCI Ins Group              64.8    69.2    81.2       66.5
  25   Old Republic Gen Group      87.7    84.8    87.1       16.9

       Top 25 Writers              78.0    88.3    81.8       20.5
       Total U.S. P/C Industry     79.8    89.2    84.0       10.6

Source: A.M. Best Co.

RELATED ARTICLE: Fighting fire with fire.

At the heart of FM Global's operation is its engineering, Research and testing. The company spends tens of millions of dollars annually to study how building materials, electrical products and fire-fighting equipment respond under stress.

FM Global's engineers share this information with policyholders, and work with them to eliminate potential hazards and better prepare for natural catastrophes and fires.

FM Global also shares the information with the public. A central part of FM Global's constant testing is its subsidiary, FM Approvals, which acts as an independent third-party testing laboratory to study building materials, electrical equipment and fire-protection equipment. The tests are more stringent than anything the products might face in reality, said Steve Zenofsky, media liaison for the company.

"We know if they pass our testing here. they will perform as intended in the real world. Manufacturers might make a lot of claims about their products, but the only way the client knows they will perform as intended is if they are approved by an independent laboratory," Zenofsky said. About 45,000 products and services have been tested and earned FM Approvals' seal of approval.

FM Global also shares its knowledge with the public through FM Global Property Loss Prevention Data Sheets, which are engineering guidelines to help reduce potential property loss from natural hazards, fires and equipment failures. FM Global produces data sheets for specific areas, including architects and engineers, roofing contractors, and sprinkling contractors.

The company has just spent more than $70 million to modernize the FM Global test center, which, when it opened in 1967, was the largest commercial-property fire testing center in the world. Located in West Glocester, R.I., about 18 miles from FM Global headquarters in Johnston, R.I., the new facility, now called the FM Global Research Campus, will open for testing in the fall of 2003. The campus still will be used for both scientific research and product testing and certification, and includes test fire technology, natural hazards, hydraulics and electrical hazards.

"Scientific research is an integral part to what makes FM Global different from any other commercial property insurance company. Scientific research is the backbone for the engineering services that we provide our clients," Zenofsky said. The testing helps FM Global to better understand the hazards at its customers' facilities, and develop solutions to protect their facilities, Zenofsky said.

FM Global focuses on four main areas of research and product testing: fire technology; natural hazards: hydraulics, or fire-fighting equipment; and electrical hazards. The company conducts hundreds of experiments and tests a year.

Fire Is Still First

Because fire remains the leading cause of property losses worldwide, the fire technology laboratory is the jewel of the research campus. With a building footprint of two acres, it is twice the size of FM Global's original fire-testing facility, and will once again make FM Global the owner of the largest fire-testing laboratory in the world, the company said. It allows the company to do both large- and small-scale fire testing.

"I can have everyone store their product under water, so I'm sure it won't catch fire. But that's not very practical," said Tom Lawson, senior vice president of research and approval.

The new fire technology testing laboratory includes a large burn room, which is larger than a football field, and has an adjustable ceiling that can be raised as high as 60 feet so the company can test and study warehouse-sized fires. The scientists and engineers study the flammability of materials, fire behavior and the corrosive byproducts of fires. The fire technology center is equipped with a large air handling system, which captures the smoke from the test fires, analyzes the contents, and cleans the air so no pollution is released into the environment. It also has a water system that captures and recycles water used to put out fires during testing. The site's water tank holds 300,000 gallons of water.

The tests are often tailored to specific clients. For instance, one client, a flooring manufacturer, faced a major expense to add more sprinklers. The company wanted to determine the true flammability of the flooring it made, which had previously been subjected to only a small-scale sample burn test.

To better understand the hazard, FM Global Research performed a full-scale fire test using the flooring company's own storage rack and 70 rolls of vinyl flouring wrapped around cardboard tubes. The test found the vinyl was wrapped too tightly to combust, although several burning robes caused the vinyl to smoke. The smoke could have filled the warehouse in just two to three minutes.

Based on the test results, the flooring manufacturer was able to save $1 million by not installing additional sprinklers, and in fact, removed some existing sprinklers which were determined to be vulnerable to fork-lift damage. Faced with the new risk of smoke damage, however, the company installed a detection system for faster response to potential smoke hazards.

"More isn't always better," Lawson said. "What we find out is the more we test, the better answers we give."

Indoor Hurricane

As part of its new research area, FM Global has built a 12,000 square-foot natural hazards laboratory that will allow the company to test products by subjecting them to winds of up to 160 mph. "We believe this will be the only place in the world where you will be able to replicate a hurricane inside a building," Zenofsky said. FM Global plans to test building materials to see how they withstand hurricane winds, and how impact resistant they are to wind-blown debris. Testing will also include earthquake and flood conditions, as well as extreme freezing and thawing conditions.

The hydraulics laboratory will continue FM Global's testing of fire protection equipment from sprinklers to fire hydrants and fire hoses. The tests include subjecting the equipment to extreme heat, cold and corrosive environments. The electrical hazards laboratory allows scientists to determine which products work best to prevent explosions and fires in various situations, and makes sure the equipment can withstand an explosion and won't cause electric shock or spark an explosion in a dusty atmosphere.

A dust explosion bunker is used to demonstrate the danger of dust buildup. If there's enough dust to write your name in, then it's a risk for an explosion, Lawson said. Dust just lying on a desk isn't a threat, but the risk arises when a first explosion scatters the dust into the air. Then a second spark can ignite the dust, causing a tremendous second explosion.

In addition to its constant testing, each year FM Global trains about 3,000 of its policyholders' employees how to prevent losses. The demonstration at the dust bunker is one of the most popular parts of the training, Lawson said.

RELATED ARTICLE: Pioneers in risk management.

FM Global traces its roots to the Factory Mutual System in the 1800s, when Zachariah Allen, a prominent textile mill owner, installed a fire pump and other fire protection devices on his Rhode Island mill, then asked his insurer to reduce his premium. His request was denied. "In those days, good rises paid for bad risks," said Steve Zenofsky, media liaison for FM Global.

But Allen was convinced that his fire prevention work should result in fewer losses, and fewer losses, in turn, should mean lower insurance premiums. So Allen gathered like-minded industrialists together to create their own mutual insurance company, Zenofsky said. The Manufacturers Mutual Fire Insurance Co., the oldest predecessor of FM Global, was launched in 1835 to insure other factories concerned with loss prevention. The company sent inspection teams to would-be policyholders to ensure they had taken the appropriate steps to become a "highly protected risk," or HPR properties--a practice that FM Global continues today. As a mutual company, FM Global paid dividends to policyholders if any premium remained at year-end.

For Manufacturers Mutual's first 14 years, the company's policyholders saw premiums 50% lower than what other companies were charging at the time, FM Global said. But the mutual insurance company still faced a lack of capacity and could not cover the Financial loss if an entire plant was destroyed. That led to the creation of other mutual insurers with similar loss prevention philosophies that could act as reinsurers for each other Called the Associated Factory Mutual Fire Insurance Cos., or the Factory Mutuals, the companies still had losses, but the losses were less frequent and less severe than those of their competitors. Following any losses--both their own and those of other companies--the Factory Mutuals studied what had gone wrong to learn not only how the loss was caused, but what could have been done to prevent or mitigate it. All the Factory Mutual insurers shared this information among their inspection teams. By 1878, the FM companies decided to form a dedicated unait, the Bureau of Inspections, to handle the inspection activities for all the Factory Mutuals' policyholders.

The bureau, now known as Factory Mutual Engineering and Research, also began performing appraisals and adjustments, loss analysis and research activities associated with preventing fire and other hazards. New Factory Mutual companies continued to pop up, until as many as 42 individual factory mutual insurance companies were writing insurance for various industries and sharing the engineering and research information.

As the industry evolved in the 20th century, the Factory Mutuals drew strength by merging. By 1987, the Factory Mutual predecessor companies had been combined into just three: Allendale Mutual Insurance Co., Johnston, R.I.; Arkwright Mutual Insurance Co., Waltham, Mass.; and Protection Mutual Insurance Co., Park Ridge, Ill. These parent companies also were the remaining co-owners of Factory Mutual Engineering and Research.

The companies didn't merge with anyone outside the Factory Mutual system. Because the business model is so different, it always made more sense to merge within the system, said Shivan S. Subramaniam, president and chief executive officer of FM Global.

By 1998, new competitors were entering the commercial property market and the three separate organizations found it difficult to deliver value-added engineering services at a competitive price, FM Global said. In 1999, the three companies and the engineering and research unit merged into one company: FM Global.