Dear MedAmerica Mutual Insured:

MedAmerica Mutual’s Board of Directors and Management Team are pleased to announce our 15th consecutive year of positive financial results. The 2006 operating results continue the path of solid financial performance. MedAmerica Mutual ended 2006 with $30.9 million in assets, an increase of $5.6 million from 2005, and net income of $872,000 that contributed to a surplus of $11.1 million. Operating expenses, after adjusting for reinsurance costs, a key component for measuring efficiency, were 12.5% of net written premium compared to the 2006 industry’s average of 17%. We attribute our 15 years of solid financial performance to our underwriting discipline, conservative investments, and low expense ratio, as well as your loyalty and commitment to the Mutual.

The passage of the Capitalization and Voting Equalization Plan (CVEP) in 2006 demonstrated your loyalty and commitment. CVEP requires each Participating Member of the Risk Retention Group to have a $6,000 membership account. Over the next three years, we estimate receiving $1.5 million in new capital contributions. Most importantly, the CVEP gives each Participating Member an equal vote. Equalized voting means each Participating Member has an equal voice in decisions regarding the Mutual; therefore, it is imperative that each Participating Member vote in the annual elections.

It is our mission to deliver quality claims service and risk management value to you in your everyday practice. A growing concern, however, is the escalation in the severity of our individual paid claims. While frequency of reported claims has dropped 33% over the recent two years, we continue to see increasing claim severity. Severity is the total amount paid to plaintiffs for damages on an individual claims basis. To correct this trend, all of our insureds must be diligent in using risk management best practices. To assist in risk management best practices, we launched a new risk management program in 2006 entitled “Litigation Stress Seminar.” The program focuses on preparing practitioners for their depositions and/or trials. It also includes an overview of the litigation process. It is our strong belief that practicing risk management best practices results in increased patient satisfaction, increased practice site satisfaction and decreased claims.

Your Mutual Directors are committed to keeping our insureds at the center of every decision. Our vision is to ensure that our professional liability insurance solutions are available to sustain and benefit your practice in the years to come. To this end, the Directors diligently work with MedAmerica Mutual’s management team in guiding the company for our mutual success, now and into the future.

Thank you for your trust.

Martin E. Ogle, MD, FACEP Chair of the Board	Gloria H. Everett President & Chief Executive Officer
Our Financials
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