Physicians Insurance
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Physicians Insurance's Financial Position at June 30, 2009

The company continued to produce solid financial results in the first six months of 2009. Surplus grew to $145 million at June 30. The net premiums written-to-surplus ratio is a very strong and conservative .46 to 1.00. The number of physicians insured continued to increase.
Our investment portfolio has performed well in the difficult environment in 2009 and 2008 as we take a fairly conservative approach to our investments and stress high quality. This is in keeping with the company's mission to provide excellent insurance coverage consistent with sound financial and insurance practices .  

Our investment portfolio totaled approximately $331 million at June 30, 2009, with 6% invested in equities and 94% in bonds. The equity investments are all in six mutual funds, and the company owns no individual stocks. Nearly 70% of these equity investments are in index funds that track the S&P 500. The remaining 30% are in mid cap, small cap, and international funds. Not surprisingly, the total results of these investments track fairly closely with changes in the overall stock market.

Our well-diversified bond portfolio is composed primarily of three components: tax-exempt municipal bonds (32% of the total), mortgage pass-throughs (25%), and corporate bonds (16%). The remaining 27% is composed primarily of U.S. Treasury bonds, bonds of U.S. government agencies, and commercial mortgage-backed securities. The mortgage pass-throughs are pools of mortgages through Fannie Mae and similar organizations; all are high-quality mortgages and in effect guaranteed by Fannie Mae and Freddie Mac, and none are sub-prime. All of Physicians Insurance's bond holdings are currently rated investment grade by the rating agencies, with the exception of one $2 million municipal bond that was downgraded by one rating agency to below   investment grade in 2008 but remains rated investment grade by the other major rating agency. 

At the end of June, the market value of the company's $311 million bond portfolio in total was approximately $million higher than amortized cost (carrying value).

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David Kinard
Marketing and Communications
206-343-6618 or

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