ORGANIZATION

The Princeton Insurance Company (“Princeton”), organized in 1982, is a for-profit stock property-casualty insurance company domiciled in the state of New Jersey. Princeton was initially formed to write non-assessable coverage for individual health care providers in New Jersey, and has gradually expanded its product lines and territories. Princeton now writes coverage for all types of health care providers, including hospitals in New Jersey and fifteen other states. Princeton generally writes business through independent agents.

The Health Care Insurance Company (HCIC), formerly The Health Care Insurance Exchange (HCIE), was formed by New Jersey hospitals in 1976 as a reciprocal inter-insurance exchange designed to offer malpractice liability insurance to New Jersey hospitals at a time when such coverage was not available through other insurers at reasonable rates.

In December of 2001 Princeton merged with HCIC. The combination was accounted for as a statutory merger and all amounts in the 2001 Annual Statement and herein have been combined as if the entities were merged for all periods presented. Pre-merger separate financial information as of September 30, 2001 and for the nine months ended, for Princeton and HCIC, respectively, were as follows (unaudited): net premiums earned $132,291,000 and $9,221,000; net loss ($14,339,000) and ($4,682,000); net unrealized gains and other surplus changes $1,755,000 and ($646,000); and policyholder surplus $166,129,000 and $143,129,000. As of December 31, 2000 and for the year ended, separate financial information for Princeton and HCIC, respectively, were as follows: net premiums earned $160,334,000 and $23,372,000; net income (loss) $19,385,000 and ($11,856,000); net unrealized gains and other surplus changes ($7,356,000) and $13,020,000; and policyholders’ surplus $164,980,000 and $143,743,000.

Princeton owns 100 percent of the outstanding shares of Princeton Risk Protection, Inc. (“PRP”), which sells claims processing, investment consulting and risk management services. Princeton owns 100 percent of the outstanding shares of The Princeton Agency (“TPA”), which markets workers’ compensation and other coverages to small businesses in several states. Princeton also owns 100% of The Princeton Insurance Agency (“TPIA”), formed in 2001, which is a Massachusetts corporation licensed as an insurance agency to provide marketing and general agency services. Princeton owns 100 percent of the outstanding shares of Princeton Cayman Liability, Ltd. (“Princeton Cayman”), which was formed to provide an option to medical providers who are willing to accept more risk but are not ready to form and capitalize their own captive insurer. No business was written by Princeton Cayman during 2001 or 2000.

Princeton is a wholly-owned subsidiary of MLMIC Holding Company, Inc., a downstream holding company, 100 percent owned by Medical Liability Mutual Insurance Company (MLMIC).

| 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | table of contents |