SPARTA Overview Specialty Program and Risk Transfer Alternatives.

SPARTA Overview

Specialty Program and Risk Transfer Alternatives

SPARTA Overview | 2008 2

SPARTA Overview

SPARTASpecialty Program and Risk Transfer Alternatives

Vision: • Premier provider of customized unbundled

program solutions• Single source solution for program

structures delivered by experts whose objective is sustained customer success

• “Exclusive Practice. Collective Purpose.”


Vision: To be the premier provider of customized unbundled program solutions in the property and casualty market place. “Exclusive Practice. Collective Purpose.”

MISSION: To provide the unbundled program marketplace a long term solution for the placement of ART and Specialty programs characterized by expertise, focused service and a controls orientation that adds value to our customers’ business.

Core ValuesService: We are a customer-centric organization designed to deliver and maintain a customized product timely, smoothly, and with value added. We believe that to lead is to serve.Pluralism: We believe the best outcomes are the product of communication, transparency and input from a variety of unique perspectives. Accountability: We conduct business in a manner that evinces the highest ethical standards, unqualified respect for our business partners and accountability for our results.Rigor: We pursue excellence in all aspects of our enterprise and strive for continuous improvement and innovation in pursuit of our goals.Teamwork: We recognize our collective purpose is furthered by teamwork and that each individual makes an indispensable contribution to the success of the company. Action: We have a bias for action and initiative.

Strategic ObjectivesFinancial: Create Shareholder value by delivering on the Plan. Customer Value: Develop reputation and branding based upon focus, commitment, breadth of product offering and expertise. Be recognized as long term partners for best in class producers and providers whose interests are aligned for the ultimate goal of sustained customer success. Operational Excellence: Leverage experience to create leading edge, technology-based infrastructure that promotes ease of doing business, speed to market and value added support characterized by due diligence, information-based decision making and a controls and execution orientation. People: Attract, develop and retain top tier intellectual capital regarded as industry leaders.

SPARTA Overview:Vision, Mission, Values, Strategic Objectives


SPARTA Overview

SPARTA operates in two niche P&C segmentsSpecialty Insurance Programs• Risk fully retained by SPARTA with sliding scale

commission

Alternative Risk Programs• Program-level risk sharing with captives• Groups, Franchise/Association, Sponsored

Unbundled program services • Policy underwriting and administration, Claims handling,

Risk control, • Subject to SPARTA approval


SPARTA Company Background

SPARTA Insurance Holdings• Formed in March 2007• Founders: George Estes III – Chairman & CEO,

Kevin Costello – President & COO, Dawne Ware – EVP & CFO• Private Equity Investment of $279.1 million

– Corsair Capital, York Capital Management, Goldman Sachs, Primus Capital, Keefe Bruyette & Woods, SPARTA Execs

• Diverse group of investors with previous experience investing in successful insurance entities and an understanding of the insurance industry’s long-term, stringent capital requirements.


SPARTA Financial Highlights

SPARTA Insurance Company• Rated A - (Excellent), financial size category IX, by A.M. Best with a

clean balance sheet and surplus of $257 Million. This rating was just re-affirmed in Sept. 2008.

• The $257 Million of capital resides at the insurance company level, not the holding company, and is subject to regulatory oversight as an admitted insurance company.

• SPARTA’s capital is all equity. There is no debt to service, no interest to be paid, no loans to be called or variable interest rates.

• Investment portfolio consists of a high quality, well diversified, fixed income (only bonds), and cash portfolio with an average rating of AA+ and avoids concentration by issuers or types (treasuries, municipalities, corporates).

• Investment portfolio is professionally managed by General Re-New England Asset Management, a Berkshire Hathaway company specializing in insurance company management for 24 years.


SPARTA Timeline

April – May 2007: • Hiring of Senior Mgt Team

– 18 of 18 offers accepted. All senior management positions filled. Average industry experience of 19 years specializing in Program and ART segments

August 2007: • Purchased American Employers Insurance Co - 52 jurisdiction, admitted carrier• Received A – (Excellent) rating from A.M. Best• Changed company name to SPARTA Insurance Company and updating filings• State-of-the-art infrastructure exclusively and comprehensively built to service and

support unbundled program business• Targeted marketing rollout and began accepting submissions

December 2007 - November 2008:• Strong market reception - SPARTA has received over 200 program submissions

representing over $2 Billion in premium since August 2007 • 14 new programs under implementation or actively producing business;

Representing over $100 million annualized GWP. • Over 3,000 policies issued and counting• Now at 37 employees with staff additions timed to coincide with program growth


SPARTA is uniquely qualified to meet the challenging needs of today’s Specialty & ART Program Market

• Experienced management – the expertise to execute• Breadth of product offering along the entire continuum of risk sharing• Customized product capability, structure flexibility, unbundled services• Countrywide, admitted company rated A – (Excellent) by A.M. Best• Selective and disciplined underwriting• Integrated technology platform designed for Specialty & ART Programs• Expense conscious business model – focus on efficiency and value• Unencumbered balance sheet with no legacy issues and distractions• Exclusive focus and long-term commitment to the unbundled program

market – no inherent channel conflicts

SPARTA Advantages & Competitive Strengths


SPARTA Program Appetite & Product Offerings

SPARTA Targeted Lines of Business

• Commercial Auto, General Liability, Workers Compensation, Property (mono-line or multi-line basis, but prefer balance)

• Ability to offer typical limits profiles for program business

• Available on state-specific, regional, countrywide basis subject to approved filings and overall exposure management

• Admitted coverages only at this time


SPARTA Program Appetite & Product Offerings

SPARTA Targeted Classes of Business• Retail / Wholesale• Service • Light Manufacturing• Hospitality – hotel/motel, restaurants• Habitation – apartment managers, condos• Light-Medium Trade Contractors – electrical, mechanical, comm’l.• Transportation / Distribution – small/medium fleets,

short/intermediate radius, general commodity hauling

Non-targeted ClassesPEO’s, General Contractors, Homebuilders, Roofers, Professional Liability, Inherently High Hazard Classes


SPARTA Program Eligibility & Review

SPARTA Program Eligibility• Targeting an average program GWP of $10-15 million • Minimum first program year GWP potential of $5 million• Prefer homogeneous, targeted classes - avoid cat risk• Structured with either sliding scale or captive risk-sharing

– Structure can be re-visited at each program renewal

• Established track record (5 years of data), proven service providers, and viable business plan

• Subject to due diligence and review by SPARTA’s team: Underwriting & Compliance, Marketing, Actuarial, Business & Customer Operations, Claims, Finance & Credit, Systems


SPARTA Review Process

Exposure EvaluationStructure EvaluationRate ComplianceLoss Rated PricingActuarial

Financial Review of pertinent partiesSet collateral level based onfinancial reviewSecure initial collateral

Evaluation and DueDiligence of ProgramAdministrator

Agency Appointment

Product Evaluation

Program Financial Terms

Payment Terms

TPA Selection, Approval,Oversight & Management

Assess requirements to supportoperational platform

CONSOLIDATED MANAGEMENT

REVIEW

Pre-Binding Process

Log & Clear

PRE-SCREENING Pre-Qualify

Assign Disposition

Underwriting & Pricing

Credit

FULL EVALUATION

Customer Operations

Regulatory & Financial Compliance

Finance

Claims

Systems

COLLABORATIVE REVIEW BY

UNDERWRITING COMMITTEE

ISSUE PROPOSAL

NEGOTIATIONS

BINDING OF COVERAGE

POST BINDING ROUTINES


SPARTA Success Stories

Specialty Programs:• $7.5 million Workers Compensation Specialty Program in Northeast states managed by a Program Administrator

with an affiliated TPA. Targeted classes are auto services, hotel/motel, restaurants, and grocery stores. Plan to offer Property/GL coverages within 1 year.

– Needs addressed: Solved channel conflicts, expanded territory and eligible coverages

• $7.5 million Multi-line (Workers Comp, GL, AL, APD) Specialty Program for Mergers & Acquisitions customers countrywide and a $10 million Multi-line (Workers Comp, GL, AL, APD) Specialty Program for Trade Contractors in Northeast. Both programs are managed by an experienced Program Administrator with dedicated expertise in these classes. Gallagher Bassett is the TPA.

– Needs addressed: Solved channel conflicts, overage and territory expansion, improved technology platform, stabilized programs with a long-term commitment

Captive Programs:• $20 million Multi-line (Workers Comp, GL, AL) Agency Captive Program for Service Contractors in Mid-Atlantic

and Southeast states. Program Administrator has dedicated underwriting, loss control, and claims oversight staff. Gallagher Bassett is the TPA.

– Needs addressed: Agency participation in results via a quota share captive arrangement

• $5mm Workers Compensation Agency Captive Program concentrated in California and managed by a Program Administrator. GAB is the TPA. Targeted classes are retail, light manufacturing, habitation, restaurant.

– Needs addressed: Dedicated agency captive market, ability to offer coverages in addition to workers compensation


SPARTA Submission Process

SPARTA Program Submission Contacts• For initial screening and structure discussion contact either:

Brian First or Phil CameronChief Marketing Officer VP of Marketing

Ph) 860.275.6520 Ph) 860.760.4010

[email protected] [email protected]

• Complete Program Evaluation Forms– Prospective Program Summary (minimum info required to log in)– Program Submission Questionnaire w/ attachments– Program Administrator Due Diligence Questionnaire– Expect on-site due diligence if we proceed

SPARTA Overview Specialty Program and Risk Transfer Alternatives.

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