STATUTORY INFORMATION:

The Company and its insurance subsidiaries are subject to regulation by the insurance departments of the states of domicile and other states in which the companies are licensed to operate and file financial statements using statutory accounting practices prescribed or permitted by the respective Departments of Insurance. Prescribed statutory accounting practices include a variety of publications of the National Association of Insurance Commissioners, as well as state laws, regulations and general administrative rules. Permitted statutory accounting practices encompass all accounting practices not so prescribed. Statutory practices vary in certain respects from generally accepted accounting principles. The principal variances are as follows:


(1)	Certain assets are designated as “non-admitted assets” and charged to policyholders’ surplus for statutory accounting purposes (principally certain agents’ balances and office furniture and equipment).


(2)	Equity in net income of subsidiaries and affiliates is credited directly to shareholders’ equity for statutory accounting purposes.


(3)	Fixed maturity securities are carried at amortized cost.


(4)	Loss and loss adjustment expense reserves and unearned premiums are reported net of the impact of reinsurance for statutory accounting purposes.

The following table includes unaudited information for the Company’s insurance subsidiaries reported on a statutory basis as of and for each of the three years ended December 31, 2011 (in thousands):



	2011		2010		2009
Physicians Insurance Company of Ohio:
Policyholders’ surplus	$	31,352	$	43,113	$	50,823
Statutory net income (loss)	$	6,232	$	322	$	(4,302	)
Citation Insurance Company:
Policyholders’ surplus	$	20,025	$	20,207	$	20,109
Statutory net income (loss)	$	1,462	$	1,651	$	(1,200	)

Both Citation and Physicians meet the minimum risk based capital requirements under the applicable insurance regulations.