1273397--3/17/2008--PROCENTURY

related topics

{loss, insurance, financial}

{regulation, government, change}

{capital, credit, financial}

{customer, product, revenue}

{condition, economic, financial}

{acquisition, growth, future}

{system, service, information}

{debt, indebtedness, cash}

{personnel, key, retain}

{control, financial, internal}

{stock, price, share}

{operation, natural, condition}

{loan, real, estate}

Our actual incurred losses may be greater than our loss and loss expense reserves, which could cause our future earnings, liquidity and financial rating to decline. Severe weather conditions and other catastrophes may result in an increase in the number and amount of claims experienced by our insureds. A decline in our financial rating assigned by A.M. Best may result in a reduction of new or renewal business. We may incur increased costs in competing for underwriting revenue. If we are unable to compete effectively with the large number of companies in the insurance industry for underwriting revenues, our underwriting revenues and net income may decline. We distribute our products through a select group of general agents, ten of which account for a significant part of our business, and such relationships could be discontinued or cease to be profitable. We may not be successful in developing our new specialty lines or new classes of insureds through our program unit that could cause us to experience losses. We may not find suitable acquisition candidates or new insurance ventures and even if we do, we may not successfully integrate any such acquired companies or successfully invest in such ventures. Our investment results and, therefore, our financial condition may be impacted by changes in the business, financial condition or operating results of the entities in which we invest, illiquid credit markets, as well as changes in government monetary policies, general economic conditions and overall capital market conditions, all of which impact interest rates. Our investment performance may suffer as a result of adverse capital market developments or other factors, which may affect our financial results and ability to conduct business. If we are not able to renew our existing reinsurance or obtain new reinsurance, either our net exposure would increase or we would have to reduce the level of our underwriting commitment. Our reinsurers may not pay claims made by us on losses in a timely fashion or may not pay some or all of these claims, in each case causing our costs to increase and our revenues to decline. We are subject to extensive regulation, which may adversely affect our ability to achieve our business objectives. In addition, if we fail to comply with these regulations, we may be subject to penalties, including fines and suspensions, which may adversely affect our financial condition and results of operations. We are subject to judicial decisions affecting insurance and tort law, which may adversely affect our ability to achieve our business objectives. As a holding company, we are dependent on the results of operations of our insurance subsidiaries and the regulatory and contractual capacity of our subsidiaries to pay dividends to us. Some states limit the aggregate amount of dividends our subsidiaries may pay to us in any twelve-month period, thereby limiting our funds to pay expenses and dividends. Although we have paid cash dividends in the past, we may not pay cash dividends in the future. If we lose key personnel or are unable to recruit qualified personnel, our ability to implement our business strategies could be delayed or hindered. Managing technology initiatives and meeting new data security requirements present significant risks for us, which could lead to increased costs or business disruptions. Our general agents may exceed their authority and bind us to policies outside our underwriting guidelines, and until we effect a cancellation, we may incur loss and loss expenses related to that policy. Our reliance on our agents subjects us to credit risk. We are exposed to risks relating to evaluations of controls required by Section 404 of the Sarbanes-Oxley Act of 2002.

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1273397--3/17/2008--PROCENTURY_CORP