356130--3/14/2008--EMC_INSURANCE_GROUP

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{capital, credit, financial}

{stock, price, share}

{provision, law, control}

{debt, indebtedness, cash}

{loan, real, estate}

{operation, natural, condition}

{financial, litigation, operation}

{control, financial, internal}

{competitive, industry, competition}

{loss, insurance, financial}

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Risks Relating to the Company and Its Business The Company s operations are integrated with those of Employers Mutual, the parent corporation, and potential and actual conflicts exist between the best interests of the Company s stockholders and the best interests of the policyholders of Employers Mutual. The Company relies on Employers Mutual to provide employees, facilities and information technology systems to conduct its operations. The Company s results of operations could suffer if the pool participants were to forecast future losses inaccurately, experience unusually severe or frequent losses or inadequately price their insurance products. The Company s business may not continue to grow and may be adversely affected if it cannot retain existing, and attract new, independent agents or if insurance consumers increase their use of other insurance delivery systems. The failure of the pool participants to maintain their current financial strength rating could materially and adversely affect the Company s business and competitive position. The insolvency of Employers Mutual or one of its subsidiaries or affiliate could result in additional liabilities for the Company s insurance subsidiaries participating in the pooling agreement. The Company is dependent on dividends from its subsidiaries for the payment of its operating expenses and dividends to stockholders; however, its subsidiaries may be unable to pay dividends to the Company. The Company s investment portfolio is subject to economic loss, principally from changes in the market value of financial instruments. The pool participants currently conduct business in all 50 states, with a concentration of business in the Midwest. The occurrence of catastrophes, or other conditions affecting losses in this region, could adversely affect the Company s business, financial condition or results of operations. The continuation of significant hurricane activity could adversely affect the Company s business, financial condition or results of operations. Losses related to a terrorist attack could have a material adverse impact on the Company s business, financial condition or results of operations. The profitability of the Company s reinsurance subsidiary is dependent upon the experience of Employers Mutual, and changes to this relationship may adversely affect the reinsurance subsidiary s operations. The Company may not be successful in reducing its risks and increasing its underwriting capacity through reinsurance arrangements, which could adversely affect its business, financial condition or results of operations. The Company s business is highly cyclical and competitive, which may make it difficult for it to market its products effectively and profitably. New pricing, claims and coverage issues and class action litigation are continually emerging in the property and casualty insurance industry, and these new issues could adversely impact the Company s revenues or its methods of doing business. The Company is subject to comprehensive regulation that may restrict its ability to earn profits. The Company relies on Employer Mutual s information technology and telecommunication systems, and the failure of these systems could materially and adversely affect its business. Risks Relating to the Company s Common Stock Employers Mutual has the ability to determine the outcome of all matters submitted to the Company s stockholders for approval. The price of the Company s common stock may be adversely affected because of Employers Mutual s ownership of its common stock. Employers Mutual s ownership of the Company s common stock and provisions of certain state laws make it unlikely anyone could acquire control of the Company or replace or remove its management unless Employers Mutual were in favor of such action, which could diminish the value of the Company s common stock. Although the Company has consistently paid cash dividends in the past, it may not be able to pay cash dividends in the future.

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356130--3/14/2008--EMC_INSURANCE_GROUP_INC