NYM Nymagic, Inc.

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2009

OR

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission file number: 1-11238

NYMAGIC, INC.

(Exact name of registrant as specified in its charter)

New York		13-3534162
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

919 Third Avenue		10022
(Address of principal executive offices)		(Zip Code)

212 551-0600

(Registrant’s telephone number, including area code)

None
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o		Accelerated filer þ		Non-accelerated filer o		Smaller reporting company o
				(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class		Outstanding at May 1, 2009
Common Stock, $1.00 par value per share		8,422,738 shares

 

 

FORWARD—LOOKING STATEMENTS

This report contains certain forward-looking statements concerning the Company’s operations, economic performance and financial condition, including, in particular, the likelihood of the Company’s success in developing and expanding its business. Any forward-looking statements concerning the Company’s operations, economic performance and financial condition contained herein, including statements related to the outlook for the Company’s performance in 2009 and beyond, are made under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are based upon a number of assumptions and estimates which inherently are subject to uncertainties and contingencies, many of which are beyond the control of the Company. Some of these assumptions may not materialize and unanticipated events may occur which could cause actual results to differ materially from such statements. These include, but are not limited to, the cyclical nature of the insurance and reinsurance industry, premium rates, investment results, hedge fund results, the estimation of loss reserves and loss reserve development, uncertainties associated with asbestos and environmental claims, including difficulties with assessing latent injuries and the impact of litigation settlements, bankruptcies and potential legislation, the uncertainty surrounding the loss amounts related to the attacks of September 11, 2001, and hurricanes Katrina, Rita and Ike, the occurrence and effects of wars and acts of terrorism, net loss retention, the effect of competition, the ability to collect reinsurance receivables and the timing of such collections, the availability and cost of reinsurance, the possibility that the outcome of any litigation or arbitration proceeding is unfavorable, the ability to pay dividends, regulatory changes, changes in the ratings assigned to the Company by rating agencies, failure to retain key personnel, the possibility that our relationship with Mariner Partners, Inc. could terminate or change, and the fact that ownership of our common stock is concentrated among a few major stockholders and is subject to the voting agreement, as well as assumptions underlying any of the foregoing and are generally expressed with words such as “intends,” “intend,” “intended,” “believes,” “estimates,” “expects,” “anticipates,” “plans,” “projects,” “forecasts,” “goals,” “could have,” “may have” and similar expressions. These risks could cause actual results for the 2009 year and beyond to differ materially from those expressed in any forward-looking statements. The Company undertakes no obligation to update publicly or revise any forward-looking statements.

NYMAGIC, INC.
INDEX

		Page No.
Part I. Financial Information
Item 1. Financial Statements			2
Consolidated Balance Sheets — March 31, 2009 and December 31, 2008			2
Consolidated Statements of Operations — Three months ended March 31, 2009 and March 31, 2008			3
Consolidated Statements of Cash Flows — Three months ended March 31, 2009 and March 31, 2008			4
Notes to Consolidated Financial Statements			5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			19
Item 3. Quantitative and Qualitative Disclosures About Market Risk			31
Item 4. Controls and Procedures			31
Part II. Other Information
Item 1. Legal Proceedings			32
Item 1A. Risk Factors			32
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			32
Item 3. Defaults Upon Senior Securities			32
Item 4. Submission of Matters to a Vote of Security Holders			32
Item 5. Other Information			32
Item 6. Exhibits			33
EX-31.1: CERTIFICATION
EX-31.2: CERTIFICATION
EX-32.1: CERTIFICATION
EX-32.2: CERTIFICATION

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

NYMAGIC, INC.

CONSOLIDATED BALANCE SHEETS

		March 31,				December 31,
		2009				2008
		(unaudited)
ASSETS
Investments:
Fixed maturities:
Held to maturity at amortized cost (fair value $38,010,391 and $42,329,432)		$	60,380,813			$	61,246,212
Available for sale at fair value (amortized cost $206,169,634 and $149,402,001)			207,087,830				144,978,426
Trading at fair value (amortized cost $15,048,511 and $22,203,883)			13,236,400				17,399,090
Equity securities — trading at fair value (cost $0 and $15,159,200)			—				11,822,620
Commercial loans at fair value (amortized cost $6,804,466 and $6,907,368)			2,593,554				2,690,317
Limited partnerships at equity (cost $85,871,127 and $98,101,553)			113,653,278				122,927,697
Short-term investments			145,781,524				110,249,779
Cash and cash equivalents			40,231,853				75,672,102
Total cash and investments			582,965,252				546,986,243
Accrued investment income			2,655,280				4,978,920
Premiums and other receivables, net			34,587,548				23,426,525
Receivable for investments disposed			10,244,257				25,415,261
Reinsurance receivables on unpaid losses, net			214,735,813				213,906,569
Reinsurance receivables on paid losses, net			23,468,952				28,429,945
Deferred policy acquisition costs			18,478,515				14,663,710
Prepaid reinsurance premiums			22,354,796				19,225,185
Deferred income taxes			31,759,889				35,514,597
Property, improvements and equipment, net			11,046,594				10,033,489
Other assets			24,893,551				23,895,902
Total assets		$	977,190,447			$	946,476,346
LIABILITIES
Unpaid losses and loss adjustment expenses		$	552,449,162			$	548,749,589
Reserve for unearned premiums			99,379,385				83,364,396
Ceded reinsurance payable			27,298,402				23,809,871
Notes payable			100,000,000				100,000,000
Dividends payable			336,670				671,059
Other liabilities			26,572,454				25,808,669
Total liabilities			806,036,073				782,403,584
SHAREHOLDERS’ EQUITY
Common stock			15,750,715				15,742,215
Paid-in capital			49,981,616				49,539,886
Accumulated other comprehensive income (loss)			614,727				(2,875,317	)
Retained earnings			192,843,907				189,702,569
			259,190,965				252,109,353
Treasury stock, at cost, 7,333,977 shares			(88,036,591	)			(88,036,591	)
Total shareholders’ equity			171,154,374				164,072,762
Total liabilities and shareholders’ equity		$	977,190,447			$	946,476,346

The accompanying notes are an integral part of these consolidated financial statements.

NYMAGIC, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

		Three months ended March 31,
		2009				2008
Revenues:
Net premiums earned		$	40,129,597			$	44,904,978
Net investment income (loss)			6,551,912				(13,016,622	)
Net realized investment (loss)			(416,698	)			(32,247,889	)
Commission and other income			5,198				59,161
Total revenues			46,270,009				(300,372	)
Expenses:
Net losses and loss adjustment expenses incurred			20,682,328				26,020,614
Policy acquisition expenses			9,296,480				9,835,229
General and administrative expenses			10,044,249				8,766,454
Interest expense			1,680,213				1,676,738
Total expenses			41,703,270				46,299,035
Income (loss) before income taxes			4,566,739				(46,599,407	)
Income tax provision:
Current			(786,715	)			(210,318	)
Deferred			1,875,451				(16,641,282	)
Total income tax expense (benefit)			1,088,736				(16,851,600	)
Net income (loss)		$	3,478,003			$	(29,747,807	)
Weighted average number of shares of common stock outstanding-basic			8,411,121				8,707,275
Basic earnings (loss) per share		$	.41			$	(3.42	)
Weighted average number of shares of common stock outstanding-diluted			8,590,238				8,707,275
Diluted earnings (loss) per share		$	.40			$	(3.42	)
Dividends declared per share		$	.04			$	.08

The accompanying notes are an integral part of these consolidated financial statements.

NYMAGIC, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

		Three months ended March 31,
		2009				2008
Cash flows used in operating activities:
Net income (loss)		$	3,478,003			$	(29,747,807	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Provision for deferred taxes			1,875,450				(16,641,282	)
Net realized investment loss			416,698				32,247,889
Equity in (earnings) loss of limited partnerships			(1,212,026	)			3,028,051
Net amortization from bonds and commercial loans			80,034				41,066
Depreciation and other, net			293,149				236,594
Trading portfolio activities			15,974,640				(93,809,262	)
Commercial loan activities			107,619				(7,301,555	)
Changes in:
Premiums and other receivables			(11,161,023	)			(22,903,085	)
Reinsurance receivables paid and unpaid, net			4,131,749				7,825,534
Ceded reinsurance payable			3,488,531				(183,253	)
Accrued investment income			2,323,640				222,592
Deferred policy acquisition costs			(3,814,805	)			(4,620,878	)
Prepaid reinsurance premiums			(3,129,611	)			(425,947	)
Other assets			(997,649	)			(433,371	)
Unpaid losses and loss adjustment expenses			3,699,573				(746,867	)
Reserve for unearned premiums			16,014,989				15,438,244
Other liabilities			763,785				(6,157,440	)
Total adjustments			28,854,743				(94,182,970	)
Net cash provided by (used in) operating activities			32,332,746				(123,930,777	)
Cash flows from investing activities:
Held to maturity fixed maturities matured, repaid and redeemed			1,428,122				—
Available for sale fixed maturities acquired			(152,809,442	)			—
Available for sale fixed maturities sold			95,147,313				11,230,349
Available for sale fixed maturities matured, repaid and redeemed			—				—
Capital contributed to limited partnerships			—				(15,000,000	)
Distributions and redemptions from limited partnerships			10,486,447				19,180,662
Net (purchase) sale of short-term investments			(35,669,356	)			—
Receivable for investments disposed and not yet settled			15,171,004				9,805,945
Acquisition of property & equipment, net			(1,306,254	)			(934,403	)
Net cash (used in) provided by investing activities			(67,552,166	)			24,282,553
Cash flows from financing activities:
Proceeds from stock issuance and other			450,230				167,854
Cash dividends paid to stockholders			(671,059	)			(701,881	)
Net purchase of treasury stock			—				(466,380	)
Payable for treasury stock purchased and not yet settled			—				(1,490,714	)
Net cash used in financing activities			(220,829	)			(2,491,121	)
Net increase (decrease) in cash			(35,440,249	)			(102,139,345	)
Cash and cash equivalents at beginning of period			75,672,102				204,913,343
Cash and cash equivalents at end of period		$	40,231,853			$	102,773,998
Supplemental disclosures:
Interest paid		$	3,250,031			$	3,250,031
Federal income tax paid		$	—			$	—

The accompanying notes are an integral part of these consolidated financial statements.

NYMAGIC, INC.

Notes to Consolidated Financial Statements March 31, 2009 and 2008

(1) Basis of Presentation and Accounting Policies:

Basis of presentation

The interim consolidated financial statements are prepared in conformity with U.S. generally accepted accounting principles (GAAP) and are unaudited. In the opinion of management, all material adjustments necessary for a fair presentation of results have been reflected for such periods. Adjustments to financial statements consist of normal recurring items. The results of operations for any interim period are not necessarily indicative of results for the full year. These financial statements and related notes should be read in conjunction with the financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008.

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and claims and expenses during the reporting period. Actual results could differ from those estimates.

Reclassification

Certain accounts in the prior year’s financial statements have been reclassified to conform to the 2009 presentation.

Adoption of new accounting pronouncements

In December 2008, the FASB issued Statement of Financial Accounting No. 160, Non-controlling Interests in Consolidated Financial Statements (“SFAS 160”), which requires non-controlling interests (previously referred to as minority interests) to be treated as a separate component of equity, not as a liability or other item outside of permanent equity. SFAS 160 is effective for fiscal years beginning on or after December 15, 2008. The adoption of SFAS 160 did not have an impact on the Company’s financial condition, results of operations or liquidity.

In February 2008, the FASB issued FSP FAS 157-2, Effective Date of FASB Statement No. 157, which permits a one-year deferral of the application of SFAS 157, Fair Value Measurements, for all non-financial assets and non-financial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). The Company adopted SFAS 157 for non-financial assets and non-financial liabilities on January 1, 2009 and its adoption did not have an impact on the Company’s financial condition, results of operations or liquidity.

In March 2008, the FASB issued Statement of Financial Accounting Standards No. 161, Disclosures about Derivative Instruments and Hedging Activities, an Amendment of FASB Statement No. 133 (“SFAS 161”). SFAS 161 changes the disclosure requirements for derivative instruments and hedging activities and specifically requires qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of, and gains and losses on, derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements. The adoption of SFAS 161 did not have an impact on the Company’s financial condition, results of operations or liquidity.

In May 2008, the FASB issued Statement of Financial Accounting Standards No. 163, Accounting for Financial Guarantee Insurance Contracts (“SFAS 163”). SFAS 163 clarifies how FASB Statement No. 60, Accounting and Reporting by Insurance Enterprise, applies to financial guarantee insurance contracts issued by insurance enterprises, including the recognition and measurement of premium revenue and claim liabilities. It also requires expanded disclosures about financial guarantee insurance contracts. The provisions of SFAS 163 are effective for financial statements issued for fiscal years beginning after December 15, 2008 and all interim periods within those fiscal years, except for disclosures about the insurance enterprise’s risk-management activities, which are effective the first period (including interim periods) beginning after May 23, 2008. The adoption of SFAS 163 did not have an impact on the Company’s financial condition, results of operations or liquidity.

On June 16, 2008, the FASB issued FSP Emerging Issues Task Force Issues No. 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities (“EITF 03-6-1”). EITF 03-6-1 provides that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method. EITF 03-6-1 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those years. The adoption of EITF 03-6-1 did not have a material impact on the Company’s financial condition, results of operations or liquidity.

In December 2008, the FASB issued Statement of Financial Accounting No. 141(R), Business Combinations (“ SFAS 141(R)”), which requires most identifiable assets, liabilities, non-controlling interests, and goodwill acquired in a business combination to be recorded at full fair value. Under SFAS 141(R), all business combinations will be accounted for by applying the acquisition method (referred to as the purchase method in SFAS 141, Business Combinations). SFAS 141(R) is effective for fiscal years beginning on or after December 15, 2008 and is to be applied to business combinations occurring after the effective date. The adoption of SFAS 141(R) did not have an impact on the Company’s operations, financial position or liquidity unless an acquisition occurs after the effective date of SFAS 141(R).

NYMAGIC, INC.
Notes to Consolidated Financial Statements March 31, 2009 and 2008

(1) Basis of Presentation and Accounting Policies (continued):

Future adoption of new accounting pronouncements

In April 2009, the FASB issued FSP FAS 157-4, Determining the Fair Value When the Volume and Level of Activity for the Asset and Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly. The FSP is effective for interim and annual reporting periods ending after June 15, 2009, and shall be applied prospectively. Early adoption is permitted for periods ending after March 15, 2009. FSP FAS 157-4 provides additional guidance for estimating fair value in accordance with FASB 157, Fair Value Measurements, when the volume and level of activity of the asset or liability have significantly decreased and on identifying circumstances that indicate a transaction is not orderly. The Company will adopt FSP FAS 157-4 during the second quarter 2009 and has not yet determined the impact adoption will have on its results of operations, financial position or liquidity.

In April 2009, the FASB issued FSP FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments. The FSP is effective for interim and annual reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. FSP FAS 115-2 and FAS 124-2 modifies the requirements for recognizing other-than-temporarily impaired debt securities, the presentation of other-than-temporary impairment losses and increases the frequency of and expands the required disclosures about other-than-temporary impairment for debt and equity securities. The Company will adopt FSP FAS 115-2 and FAS 124-2 during the second quarter, 2009 and has not yet determined the impact adoption will have on its results of operations, financial position or liquidity.

In April 2009, the FASB issued FSP FAS 107-1 and ABP 28-1, Interim Disclosures about Fair Value of Financial Instruments. The FSP is effective for interim reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. FSP FAS 107-1 and APB 28-1 requires disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies as well as in annual financial statements. The Company has not yet determined the impact on its disclosures, if any, of adopting FSP FAS 107-1 and ABP 28-1.

In December 2008, the FASB issued FSP FAS 132(R)-1, Employers’ Disclosures about Postretirement Benefit Plan Assets. The FSP requires an employer to provide certain disclosures about plan assets of its defined benefit pension or other postretirement plans. The disclosures required include the investment policies and strategies of the plans, the fair value of the major categories of plan assets, the inputs and valuation techniques used to develop fair value measurements and a description of significant concentrations of risk in plan assets. The FSP is effective for fiscal years ending after December 15, 2009. The adoption of FSP FAS 132(R)-1 will not have an impact on the Company’s operations, financial position or liquidity.

NYMAGIC, INC.
Notes to Consolidated Financial Statements March 31, 2009 and 2008

(2) Investments:

A summary of the Company’s investment components at March 31, 2009 and December 31, 2008 is presented below:

		March 31, 2009				Percent				December 31, 2008				Percent
Fixed maturities held to maturity (amortized cost):
Mortgage-backed securities		$	60,380,813				10.36	%		$	61,246,212				11.20	%
Total fixed maturities held to maturity		$	60,380,813				10.36	%		$	61,246,212				11.20	%
Fixed maturities available for sale (fair value):
U.S. Treasury securities		$	40,418,176				6.93	%		$	40,783,969				7.46	%
Municipal obligations			125,653,607				21.55	%			90,483,461				16.54	%
Corporate securities			41,016,047				7.04	%			13,710,996				2.51	%
Total fixed maturities available for sale		$	207,087,830				35.52	%		$	144,978,426				26.51	%
Fixed maturities trading (fair value):
Municipal obligations		$	13,236,400				2.27	%		$	17,399,090				3.18	%
Total fixed maturities trading		$	13,236,400				2.27	%		$	17,399,090				3.18	%
Total fixed maturities		$	280,705,043				48.15	%		$	223,623,728				40.89	%
Equity securities trading (fair value):
Preferred stock		$	—				0.00	%		$	11,822,620				2.16	%
Total equity securities		$	—				0.00	%		$	11,822,620				2.16	%
Cash and short-term investments			186,013,377				31.91	%			185,921,881				33.99	%
Total fixed maturities, equity securities, cash and short-term investments		$	466,718,420				80.06	%		$	421,368,229				77.04	%
Commercial loans (fair value)			2,593,554				0.44	%			2,690,317				0.49	%
Limited partnership hedge funds (equity)			113,653,278				19.50	%			122,927,697				22.47	%
Total investment portfolio		$	582,965,252				100.00	%		$	546,986,243				100.00	%

As of March 31, 2009, 97.50% of the carrying value of the Company’s fixed income and short-term investment portfolios were considered investment grade by S&P. As of March 31, 2009, the Company invested approximately $11.7 million in fixed maturities that were below investment grade.

NYMAGIC, INC.
Notes to Consolidated Financial Statements March 31, 2009 and 2008

(2) Investments (continued):

Details of the mortgage-backed securities portfolio as of March 31, 2009, including publicly available qualitative information, are presented below:

														Weighted				Average
														Average				FICO								Credit
														Loan to				Credit				Delinquency				Support		S&P		Moody’s
Security description		Issue date				Amortized cost				Fair value				Value % (1)				Score (2)				Rate (3)				Level (4)		Rating		Rating
AHMA 2006-3			7/2006			$	12,168,950			$	7,342,288				86.0				704				37.3			45.2		AAA		Caa1
CWALT 2005-69			11/2005				7,704,248				5,736,343				82.1				697				42.7			49.4		AAA		Ba3
CWALT 2005-76			12/2005				7,654,266				5,200,636				82.7				700				45.0			50.3		AAA		B2
RALI 2005-QO3			10/2005				7,778,661				4,801,528				82.0				705				36.7			48.4		AAA		B1
WaMu 2005-AR17			12/2005				6,608,981				4,291,127				75.3				714				23.6			51.7		AAA		A1
WaMu 2006-AR9			7/2006				9,109,824				5,234,951				75.7				730				24.6			26.8		B		Ba1
WaMu 2006-AR13			9/2006				9,355,883				5,403,518				76.4				728				22.3			27.5		AAA		B3
						$	60,380,813			$	38,010,391

The Company has investments in residential mortgage-backed securities (“RMBS”) amounting to $60.4 million at March 31, 2009. These securities are classified as held to maturity after the Company transferred these holdings from the available for sale portfolio effective October 1, 2008. The adjusted cost basis of these securities is based on a determination of the fair value of these securities on the date they were transferred.

The fair value of each RMBS investment is determined under SFAS 157. Fair Value is determined by estimating the price at which an asset might be sold on the measurement date. There has been a considerable amount of turmoil in the U.S. housing market since 2007, which has led to market declines in such securities. Because the pricing of these investments is complex and has many variables affecting price including, projected delinquency rates, projected severity rates, estimated loan to value ratios, vintage year, subordination levels, projected prepayment speeds and expected rates of return required by prospective purchasers, the estimated price of such securities will differ among brokers depending on these facts and assumptions. While many of the inputs utilized in pricing are observable, many other inputs are unobservable and will vary depending upon the broker. During periods of market dislocation, such as the current market conditions, it is increasingly difficult to value such investments because trading becomes less frequent and/or market data becomes less observable. As a result, valuations may include inputs and assumptions that are less observable or require greater estimation and judgment as well as valuation methods that are more complex. For example, assumptions regarding projected delinquency and severity rates have become increasingly pessimistic due to uncertainties associated with the residential real estate markets. Additionally, there are only a limited number of prospective purchasers of such securities that demand high expected returns in the current market. This has resulted in lower quotes from securities dealers, who are, themselves, reluctant to position such securities because of financing uncertainties. Accordingly, the dealer quotes used to establish fair value may not be reflective of the expected future cash flows from a security and, therefore, not reflective of its intrinsic value. Additionally, there are government sponsored programs that may affect the performance of the Company’s residential mortgage-backed securities. The Company is uncertain as to the impact these programs will have on fair value on its residential mortgage backed securities. The fair value of such securities at March 31, 2009 was approximately $38 million.

NYMAGIC, INC.
Notes to Consolidated Financial Statements March 31, 2009 and 2008

(2) Investments (continued):

The Company performs a cash flow analysis for each of these securities, which attempts to estimate the likelihood of any future impairment. While the Company does not believe there are any other-than-temporary impairments (“OTTI”) currently, future estimates may change depending upon the actual performance statistics reported for each security to the Company. This may result in future charges based upon revised estimates for delinquency rates, severity or prepayment patterns. These changes in estimates may be material. These securities are collateralized by pools of “Alt-A” mortgages, and receive priority payments from these pools. The Company’s securities rank senior to subordinated tranches of debt collateralized by each respective pool of mortgages. The Company has collected all applicable interest and principal repayments on such securities to date. As of April 25, 2009, the levels of subordination ranged from 27% to 52% of the total debt outstanding for each pool. Delinquencies within the underlying mortgage pools ranged from 22% to 45% of total amounts outstanding. In March 2008, delinquencies ranged from 3.4% to 21.2%. Delinquency rates are not the same as severity rates, or actual loss, but are an indication of the potential for losses of some degree in future periods. In each case, pool subordination levels by individual security remain in excess of pool delinquency rates as of April 25, 2009.

The Company has both the ability and the intent to hold such securities until maturity. Prior to the transfer to the held to maturity classification, the Company incurred cumulative write-downs from OTTI declines in the fair value of these securities, amounting to $40.7 million in 2008. The collection of principal repayments on these securities through March 31, 2009 resulted in approximately $545,000 in realized investment gains.

These RMBS investments, as of December 31, 2008 were rated AAA/Aaa by S&P/Moody’s. As of March 31, 2009, these securities are rated B to AAA by S&P and Caa1 to A1 by Moody’s.

The gross unrealized gains and losses on fixed maturities held to maturity and available for sale at March 31, 2009 and December 31, 2008 are as follows:

		2009
						Gross				Gross
		Amortized				Unrealized				Unrealized				Fair				Carrying
		Cost				Gains				Losses				Value				Value
Mortgage-backed securities held to maturity		$	60,380,813			$	—			$	(22,370,422	)		$	38,010,391			$	60,380,813
U.S. Treasury securities available for sale			38,894,722				1,523,454				—				40,418,176				40,418,176
Municipal obligations available for sale			126,799,975				1,061,987				(2,208,355	)			125,653,607				125,653,607
Corporate securities available for sale			40,474,936				595,644				(54,533	)			41,016,047				41,016,047
Totals		$	266,550,446			$	3,181,085			$	(24,633,310	)		$	245,098,221			$	267,468,643

		2008
						Gross				Gross
		Amortized				Unrealized				Unrealized				Fair				Carrying
		Cost				Gains				Losses				Value				Value
Mortgage-backed securities held to maturity		$	61,246,212			$	—			$	(18,916,780	)		$	42,329,432			$	61,246,212
U.S. Treasury securities available for sale			38,917,878				1,866,091				—				40,783,969				40,783,969
Municipal obligations available for sale			97,166,677				220,718				(6,903,934	)			90,483,461				90,483,461
Corporate securities available for sale			13,317,446				395,344				(1,794	)			13,710,996				13,710,996
Totals		$	210,648,213			$	2,482,153			$	(25,822,508	)		$	187,307,858			$	206,224,638

NYMAGIC, INC.
Notes to Consolidated Financial Statements March 31, 2009 and 2008

(2) Investments (continued):

Net investment income (loss) from each major category of investments for the periods indicated is as follows:

		(in millions)
		Three months ended March 31,
		2009				2008
Fixed maturities held to maturity		$	0.6			$	—
Fixed maturities available for sale			2.0				2.0
Trading securities			3.1				(10.8	)
Commercial loans			0.1				(1.1	)
Equity in earnings (loss) of limited partnerships			1.2				(3.0	)
Short-term investments			0.2				1.0
Total investment income (loss)			7.2				(11.9	)
Investment expenses			(0.6	)			(1.1	)
Net investment income(loss)		$	6.6			$	(13.0	)

Details related to investment income (loss) from commercial loans and trading activities presented in the preceding table are as follows:

		(in millions)
		Three months ended March 31,
		2009				2008
Interest and dividends earned		$	0.5			$	2.6
Net realized losses			(0.3	)			(2.9	)
Net unrealized depreciation			3.0				(11.6	)
Total investment income (loss) from commercial loans and trading activities		$	3.2			$	(11.9	)

Proceeds from redemptions in investments held to maturity or disposals of investments available for sale for the three months ended March 31, 2009 and 2008 were $96,575,435 and $11,230,349, respectively. Gross gains of $545,363 were realized on repayments of held to maturity investments for the three months ended March 31, 2009. Gross gains of $786,025 and $148,547 and gross losses of $1,610,475 and $0 were realized on sales, maturities, repayments and/or redemptions of available for sale investments for the three months ended March 31, 2009 and 2008, respectively. The Company recorded declines in values of investments considered to be other-than-temporary of $0 and $32,396,436 for the three months ended March 31, 2009 and 2008, respectively. Substantially all of the other-than-temporary declines recorded during the first quarter of 2008 were from the residential mortgage-backed securities portfolio. The decision to write down such securities was based upon the Company’s uncertainty at March 31, 2008 that such securities would be held until the fair value decline recovered.

(3) Fair Value Measurements:

The Company’s estimates of fair value for financial assets and financial liabilities are based on the framework established in SFAS 157. The framework is based on the inputs used in valuation and gives the highest priority to quoted prices in active markets and requires that observable inputs be used in the valuations when available. The disclosure of fair value estimates in the SFAS 157 hierarchy is based on whether the significant inputs into the valuation are observable. In determining the level of the hierarchy in which the estimate is disclosed, the highest priority is given to unadjusted quoted prices in active markets and the lowest priority to unobservable inputs that reflect the Company’s significant market assumptions. The standard describes three levels of inputs that may be used to measure fair value and categorize the assets and liabilities within the hierarchy:

Level 1 —Fair value is based on unadjusted quoted prices in active markets that are accessible to the Company for identical assets or liabilities. These prices generally provide the most reliable evidence and are used to measure fair value whenever available. Active markets are defined as having the following for the measured asset/liability: i) many transactions, ii) current prices, iii) price quotes not varying substantially among market makers, iv) narrow bid/ask spreads and v) most information publicly available.

NYMAGIC, INC.
Notes to Consolidated Financial Statements March 31, 2009 and 2008

(3) Fair Value Measurements (continued):

The Company’s Level 1 assets are comprised of U.S. Treasury securities, which are highly liquid and traded in active exchange markets.

The Company uses the quoted market prices as fair value for assets classified as Level 1. The Company receives quoted market prices from a third party, a nationally recognized pricing service. Prices are obtained from available sources for market transactions involving identical assets. For the majority of Level 1 investments, the Company receives quoted market prices from an independent pricing service. The Company validates primary source prices by back testing to trade data to confirm that the pricing service’s significant inputs are observable. The Company also compares the prices received from the third party service to alternate third party sources to validate the consistency of the prices received on securities.

Level 2 —Fair value is based on significant inputs, other than Level 1 inputs, that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset through corroboration with observable market data. Level 2 inputs include quoted market prices in active markets for similar assets, non-binding quotes in markets that are not active for identical or similar assets and other market observable inputs (e.g., interest rates, yield curves, prepayment speeds, default rates, loss severities, etc.).

The Company’s Level 2 assets include municipal debt obligations and corporate debt securities.

The Company generally obtains valuations from third party pricing services and/or security dealers for identical or comparable assets or liabilities by obtaining non-binding broker quotes (when pricing service information is not available) in order to determine an estimate of fair value. The Company bases all of its estimates of fair value for assets on the bid price as it represents what a third party market participant would be willing to pay in an arm’s length transaction. Prices from pricing services are validated by the Company through comparison to prices from corroborating sources and are validated by back testing to trade data to confirm that the pricing service’s significant inputs are observable. Under certain conditions, the Company may conclude the prices received from independent third party pricing services or brokers are not reasonable or reflective of market activity or that significant inputs are not observable, in which case it may choose to over-ride the third-party pricing information or quotes received and apply internally developed values to the related assets or liabilities. In such cases, those valuations would be generally classified as Level 3. Generally, the Company utilizes an independent pricing service to price its municipal debt obligations and corporate debt securities. Currently, these securities are exhibiting low trade volume. The Company considers such investments to be in the Level 2 category.

Level 3 —Fair value is based on at least one or more significant unobservable inputs that are supported by little or no market activity for the asset. These inputs reflect the Company’s understanding about the assumptions market participants would use in pricing the asset or liability.

The Company’s Level 3 assets include its RMBS(which are held to maturity) and commercial loans, as they are illiquid and trade in inactive markets. These markets are considered inactive as a result of the low level of trades of such investments.

All prices provided by primary pricing sources are reviewed for reasonableness, based on the Company’s understanding of the respective market. Prices may then be determined using valuation methodologies such as discounted cash flow models, as well as matrix pricing analyses performed on non-binding quotes from brokers or other market-makers. As of March 31, 2009, the Company utilized cash flow models, matrix pricing and non-binding broker quotes obtained from the primary pricing sources to determine the fair value of its RMBS and commercial loan investments. Because pricing of these investments is complex and has many variables affecting price including, delinquency rate, severity rate, loan to value ratios, vintage year, discount rate, subordination levels and prepayment speeds, the price of such securities will differ by broker depending on the weight given to the various inputs. While many of the inputs utilized in pricing are observable, some inputs are unobservable and the weight given these unobservable inputs will vary depending upon the broker. During periods of market dislocation, such as the current market conditions, it is increasingly difficult to value such investments because trading becomes less frequent and/or market data becomes less observable. As a result, valuations may include inputs and assumptions that are less observable or require greater estimation and judgment as well as valuation methods that are more complex. For example, prepayment speeds and severity rates have become increasingly stressed by brokers due to market uncertainty connected with these types of investments resulting in lower quoted prices. These inputs are used in pricing models to assist the broker in determining a current price for these investments. After considering all of the relevant information at March 31, 2009, the Company adjusted the price received for two commercial loan investments. As such, because the establishment of fair valuation is significantly reliant upon unobservable inputs, the Company considers such investments to be in the Level 3 category.

NYMAGIC, INC.
Notes to Consolidated Financial Statements March 31, 2009 and 2008

(3) Fair Value Measurements (continued):

The following are the major categories of assets measured at fair value on a recurring basis for the period ended March 31, 2009, using quoted prices in active markets for identical assets (Level 1); significant other observable inputs (Level 2); and significant unobservable inputs (Level 3):

		Level 1:
		Quoted
		Prices in				Level 2:
		Active				Significant				Level 3:
		Markets for				Other				Significant				Total at
		Identical				Observable				Unobservable				March 31,
		Assets				Inputs				Inputs				2009
Fixed maturities available for sale		$	40,418,176			$	166,669,654			$	—			$	207,087,830
Fixed maturities trading			—				13,236,400				—				13,236,400
Commercial loans			—				—				2,593,554				2,593,554
Total		$	40,418,176			$	179,906,054			$	2,593,554			$	222,917,784

The investments classified as Level 3 in the above table consist of commercial loans, for which the Company has determined that quoted market prices of similar investments are not determinative of fair value. Since the broker quotes do not reflect current market information from actual transactions, the Company has elected to deviate from quoted prices using a matrix pricing analysis. The following table presents a reconciliation of the beginning and ending balances for all investments measured at fair value using Level 3 inputs during the quarter ended March 31, 2009.

		Three months ended
		March 31, 2009
		Commercial
		Loans				Total
Beginning balance		$	2,690,317			$	2,690,317
Total gains or losses (realized/unrealized):
Included in earnings (or changes in net assets)			(96,763	)			(96,763	)
Included in other comprehensive income			—				—
Purchases, sales, maturities, repayments, redemptions and amortization			—				—
Transfers from Level 3			—				—
Transfers to Level 3
Ending balance		$	2,593,554			$	2,593,554

There were no investments classified as Level 3 for the period ending March 31, 2008.

NYMAGIC, INC.
Notes to Consolidated Financial Statements March 31, 2009 and 2008

(3) Fair Value Measurements (continued):

The Company elected the fair value option for approximately $8.3 million in commercial loans upon its adoption of SFAS 159 effective January 1, 2008. The adoption of SFAS 159 did not have an impact on the Company’s results of operations, financial position or liquidity. The Company utilized the fair value election under SFAS 159 for all of its $10.3 million of commercial loan purchases during the first three months of 2008. Management believes that the use of the fair value option to record commercial loan purchases was consistent with its trading objective for such investments. As such, the entire commercial loan portfolio of $2.6 million at March 31, 2009 was recorded at fair value. The amortized cost of the commercial loan portfolio at March 31, 2009 was $6.8 million. All loans are current with respect to interest payments. The Company did not utilize the fair value election under SFAS 159 for any investment purchases during the first three months of 2009.

The changes in the fair value of these debt instruments were recorded in investment income. Investment income for the three months ended March 31, 2009 reflected net realized losses from sales and repayments of $0, unrealized losses from fair value changes of $6,139 and interest income earned of $111,185. Investment income for the three months ended March 31, 2008 reflected realized losses from repayments of $0, unrealized losses from fair value changes of $1,426,934 and interest income earned of $417,977.

(4) Income Taxes:

The Company files tax returns subject to the tax regulations of federal, state and local tax authorities. A tax benefit taken in the tax return but not in the financial statements is known as an “unrecognized tax benefit.” The Company had no unrecognized tax benefits at either March 31, 2009 or March 31, 2008. The Company’s policy is to record interest and penalties related to unrecognized tax benefits to income tax expense. The Company did not incur any interest or penalties related to unrecognized tax benefits for each of the three-month periods ended March 31, 2009 and 2008.

The Company is subject to federal, state and local examinations by tax authorities for tax year 2005 and subsequent. The Company had federal, state and local deferred tax assets amounting to potential future tax benefits of approximately $31.8 million and $35.5 million at March 31, 2009 and December 31, 2008, respectively. As of March 31, 2009, the Company has recorded a valuation allowance of $17.6 million with respect to the uncertainty in the realization of capital loss carryforwards. The Company considered various tax planning strategies to support the recoverability of existing deferred income taxes for capital loss carryforwards. This included an analysis of the timing and availability of unrealized positions in the fixed income maturity portfolio. Management believes the deferred tax asset, net of the recorded valuation allowance account, as of March 31, 2009 will more-likely-than-not be fully realized.

(5) Comprehensive Income

The Company’s comparative comprehensive income is as follows:

		Three				Three
		Months				Months
		Ended				Ended
		March 31,				March 31,
		2009				2008
		(in thousands)
Net income(loss)		$	3,478			$	(29,748	)
Other comprehensive income (loss), net of deferred taxes:
Unrealized holding gains (losses) on securities, net of deferred tax expense (benefit) of $1,733 and $(11,219)			3,219				(20,836	)
Less : reclassification adjustment for (losses) realized in net income, net of tax benefit of $(146) and $(11,287)			(271	)			(20,961	)
Other comprehensive income			3,490				125
Comprehensive income(loss)		$	6,968			$	(29,623	)

NYMAGIC, INC.
Notes to Consolidated Financial Statements March 31, 2009 and 2008

(6) Common Stock Repurchase Plan:

Under the Common Stock Repurchase Plan, the Company may purchase up to $75 million of the Company’s issued and outstanding shares of common stock on the open market. During the first three months of 2008, there were 20,300 shares repurchased at a total cost of approximately $466,000. There were no repurchases of the Company’s common stock during the first three months of 2009.

(7) Earnings per share:

Reconciliations of the numerators and denominators of the basic and diluted earnings per share (“EPS”) computations for each of the periods reported herein are presented below:

		Three months ended March 31,
		2009												2008
						Weighted												Weighted
						Average												Average
		Net				Shares								Net				Shares
		Income				Outstanding				Per				Loss				Outstanding				Per
		(Numerator)				(Denominator)				Share				(Numerator)				(Denominator)				Share
		(In thousands, except for per share data)
Basic EPS		$	3,478				8,411			$	.41			$	(29,748	)			8,707			$	(3.42	)
Effect of dilutive securities:
Equity awards and purchased options			—				179			$	(.01	)			—				—				—
Diluted EPS		$	3,478				8,590			$	.40			$	(29,748	)			8,707			$	(3.42	)

(8) Share Based Incentive Compensation Plans:

The Company maintains three share-based incentive compensation plans (the “Plans”) for employees and directors. A presentation of awards granted under the Plans at March 31, 2009 follows:

2004 Long-Term Incentive Plan:

						Weighted
						Average
						Grant Date
						Fair Value Per				Aggregate Fair
Restricted and Deferred Share Units		Number of Shares				Share				Value
Outstanding, end of period			257,233			$	26.59			$	3,138,241
Nonvested, end of period			136,400			$	26.92			$	1,664,080

As of March 31, 2009, there was approximately $2,594,000 of unrecognized compensation cost related to restricted and deferred share units, which is expected to be recognized over a remaining weighted-average vesting period of 1.1 years.

NYMAGIC, INC.
Notes to Consolidated Financial Statements March 31, 2009 and 2008

(8) Share Based Incentive Compensation Plans (continued):

1991, 2002 and 2004 Stock Option Plans:

Weighted

Weighted

Average

Average

Contractual

Exercise Price

Life

Aggregate Intrinsic

Shares Under Option

Number of Shares

Per Share

Remaining

Value

Outstanding, end of period

285,950

$

15.96

3.7 years

$

—

Exercisable, end of period

168,450

$

15.83

3.6 years

$

—

As of March 31, 2009, there was approximately $328,000 of unrecognized compensation cost related to stock options, which is expected to be recognized over a remaining weighted-average vesting period of 3.7 years.

The total compensation cost recognized in results of operations for all share-based incentive compensation awards was approximately $710,000 and $506,000 for the three months ended March 31, 2009 and 2008, respectively. The related tax benefit recognized in results of operations was approximately $248,000 and $177,000 for the three months ended March 31, 2009 and 2008, respectively.

Executive Compensation Agreements:

The Company entered into a new employment agreement with A. George Kallop, the Company’s President and Chief Executive Officer, effective January 1, 2009 through December 31, 2010 (the “Kallop Employment Agreement”). Under his new employment agreement, Mr. Kallop is entitled to an annual base salary of $525,000 and a target annual incentive award of $393,750. Mr. Kallop also received two grants of 8,000 restricted share units, which will vest on December 31, 2009 and December 31, 2010, respectively, provided that he continues to be employed by the Company on those dates; a long-term incentive award with maximum, target and threshold awards of 12,000, 6,000 and 3,000 performance units, respectively, in each of two one-year performance periods beginning on January 1, 2009 and January 1, 2010; and, a supplemental performance compensation award in the amount of 25,000 performance units. Under the long term incentive award, the number of performance units eligible to be earned for each of these two one-year performance periods is based on target increases in the market price of the Common Stock in the applicable performance period. The supplemental performance compensation award of 25,000 units is earned if there is a change in control of the Company as defined in the employment agreement. Mr. Kallop’s new employment agreement also includes provisions governing termination for death, disability, cause, without cause and change of control, which include a severance benefit of one year salary, pro rata annual incentive awards at target, and accelerated vesting of stock and performance unit grants in the event of his termination without cause prior to a change of control.

In connection with the Kallop Employment Agreement, the Company entered into a Performance Share Award Agreement (the “Kallop Award Agreement”) with Mr. Kallop on the same date. Under the terms of the Kallop Award Agreement, the aforementioned performance share units will be earned for each of the two one-year performance periods based on predetermined market price targets of the daily closing price of the Company’s common stock in each of the requisite performance periods. The performance share units award is contingent upon the satisfaction of certain market conditions relating to the fair market value of the Company’s stock. Depending on the performance of the Company’s common stock for each of the years ended December 31, 2009 and 2010 an award may be issued up to 12,000 performance share units per year upon the achievement of certain predetermined share closing price requirements. The fair value of the performance share award has been estimated as of the initial grant-date using a Monte Carlo Simulation. The inputs for expected dividends, expected volatility, expected term and risk-free interest rate used in the calculation of the grant-date fair value of this award were 1.67%, 79.6%, 3 years for 2009 performance period and 0.370% and 1.67%, 63.4%, 4 years and 0.76% for 2010 performance period, respectively. Pursuant to the completion of the 2009 and 2010 annual performance periods, performance shares for each year, will vest on the second anniversary of the last day of the applicable performance period, provided that the executive is employed by the Company on that date.

NYMAGIC, INC.
Notes to Consolidated Financial Statements March 31, 2009 and 2008

(9) Nature of Business and Segment Information:

The Company’s subsidiaries include three insurance companies and three insurance agencies. These subsidiaries underwrite commercial insurance in three major lines of business. The Company considers ocean marine, inland marine/fire and other liability as appropriate segments for purposes of evaluating the Company’s overall performance. A final segment includes the runoff operations in the aircraft business. The Company ceased writing any new policies covering aircraft risks subsequent to March 31, 2002. The Company evaluates revenues and income or loss by the aforementioned segments. Revenues include premiums earned and commission income. Income or loss includes premiums earned and commission income less the sum of losses incurred and policy acquisition costs.

The financial information by segment is as follows:

		Three months ended March 31,
		2009								2008
		(in thousands)
						Income								Income
		Revenues				(Loss)				Revenues				(Loss)
Ocean marine		$	13,289			$	7,024			$	17,823			$	7,313
Inland marine/fire			1,182				104				1,645				910
Other liability			25,686				2,762				25,359				1,136
Runoff lines (Aircraft)			(27	)			261				78				(310	)
Subtotal			40,130				10,151				44,905				9,049
Net investment income(loss)			6,552				6,552				(13,016	)			(13,016	)
Net realized investment (loss) gains			(417	)			(417	)			(32,248	)			(32,248	)
Other income			5				5				59				59
General and administrative expenses			—				(10,044	)			—				(8,766	)
Interest expense			—				(1,680	)			—				(1,677	)
Income tax benefit (expense)			—				(1,089	)			—				16,851
Total		$	46,270			$	3,478			$	(300	)		$	(29,748	)

(10) Related Party Transactions:

The Company entered into an investment management agreement with Mariner Partners, Inc. (“Mariner”) effective October 1, 2002, which was amended and restated on December 6, 2002. Under the terms of this agreement, Mariner manages the Company’s and its subsidiaries, New York Marine And General Insurance Company’s and Gotham Insurance Company’s investment portfolios. Fees to be paid to Mariner are based on a percentage of the investment portfolios as follows: .20% of liquid assets, .30% of fixed maturity investments and 1.25% of limited partnership (hedge fund) and equity security investments. Another of the Company’s subsidiaries, Southwest Marine and General Insurance Company, entered into an investment management agreement, the substantive terms of which are identical to those set forth above, with a subsidiary of Mariner, Mariner Investment Group, Inc. (“Mariner Group”) effective March 1, 2007. William J. Michaelcheck, a Director of the Company, is the Chairman and the beneficial owner of a substantial number of shares of Mariner. George R. Trumbull, a Director of the Company, A. George Kallop, a Director and the President and Chief Executive Officer of the Company, and William D. Shaw, Jr., Vice Chairman and a Director of the Company, are also associated with Mariner. Investment fees incurred under the agreements with Mariner were $511,922 and $879,469 for the three months ended March 31, 2009 and 2008, respectively.

NYMAGIC, INC.
Notes to Consolidated Financial Statements March 31, 2009 and 2008

(10) Related Party Transactions (continued):

On April 4, 2008, the Company renewed its consulting agreement (the “Shaw Consulting Agreement”), effective January 1, 2008, with William D. Shaw, Jr., a member of the Company’s Board of Directors and Vice Chairman, pursuant to which Mr. Shaw will provide certain consulting services to the Company relating to the Company’s asset management strategy including (i) participate in meetings with rating agencies; (ii) participate in meetings with research analysts; and (iii) certain other investor relations services. Mr. Shaw’s compensation under the Consulting Agreement was $100,000 per year, payable in four equal quarterly payments of $25,000. From January 1, 2008 through March 31, 2008, he was paid $25,000 under the Shaw Consulting Agreement. The Shaw Consulting Agreement terminated on December 31, 2008 and was not renewed for 2009.

On May 21, 2008, George R. Trumbull stepped down as Chairman of the Board of Directors. Effective as of that date, the Company entered into a consulting agreement with Mr. Trumbull, pursuant to which the Trumbull Employment Agreement, which was previously filed as Exhibit 10.59 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2007, was novated and the vesting of 5,000 restricted share units granted to Mr. Trumbull on January 1, 2008, was accelerated to May 21, 2008.

The Company entered into the consulting agreement with Mr. Trumbull, a member of the Company’s Board of Directors, on June 16, 2008 (the “Trumbull Consulting Agreement”), which was made effective as of May 21, 2008. Pursuant to the terms of this agreement, Mr. Trumbull will perform consulting services in the form of providing assistance to the Company’s Chairman of the Board of Directors as he may request in connection with Board matters and to the President and Chief Executive Officer of the Company as he may request in connection with various issues that may arise in the Company’s operating and risk bearing subsidiaries. Mr. Trumbull’s compensation under the Trumbull Consulting Agreement is $100,000 per year, payable in four equal quarterly payments of $25,000 each, the first of which was paid on August 21, 2008. From January 1, 2009 through March 31, 2009, he was paid $25,000 under the Trumbull Consulting Agreement. The Company is also obligated to reimburse Mr. Trumbull for all reasonable and necessary expenses incurred in connection with the services he provides under the Trumbull Consulting Agreement. Unless extended by mutual agreement, the Trumbull Consulting Agreement terminates on May 21, 2009. The Trumbull Consulting Agreement is also subject to termination by Mr. Trumbull or the Company on 30 days prior notice. The Company may terminate the Trumbull Consulting Agreement at any time in the event Mr. Trumbull ceases to be a member of the Company’s Board of Directors. The agreement automatically terminates immediately upon the merger or consolidation of the Company into another corporation; the sale of all or substantially all of its assets; its dissolution and/or liquidation; or, the death of Mr. Trumbull.

On July 8, 2008, the Company entered into a three-year engagement agreement with Robert G. Simses, the Company’s current Chairman of the Board of Directors (the “Simses Engagement Agreement”), effective May 21, 2008 through May 21, 2011. Under the terms of the Simses Engagement Agreement, Mr. Simses is entitled to an annual retainer, payable quarterly, beginning on August 21, 2008, of not less than $150,000, subject to review for increase at the discretion of the Human Resource Committee of the Board of Directors. From January 1, 2009 through March 31, 2009 Mr. Simses was paid $37,500 under the Simses Engagement Agreement. Mr. Simses is also entitled to receive a grant of 30,000 restricted share units as of the effective date of the agreement. These shares vest ratably over the term of the agreement, beginning on May 21, 2009. The Simses Engagement Agreement also provides for reimbursement of reasonable expenses incurred in the performance of Mr. Simses’ duties, and includes provisions governing termination for death, disability, cause, without cause and change of control, which includes payment through the end of the term of the agreement and accelerated vesting of stock unit grants in the event of his termination without cause, for good cause or upon a change of control.

NYMAGIC, INC.
Notes to Consolidated Financial Statements March 31, 2009 and 2008

(10) Related Party Transactions (continued):

In 2003, the Company acquired a 100% interest in a limited partnership hedge fund, Mariner Tiptree (CDO) Fund I, L.P. (“Tiptree”), subsequently known as Tricadia CDO Fund, L.P. (“Tricadia”) and since June 2008 known as Altrion Capital, L.P. (“Altrion”). Altrion was originally established to invest in collateralized debt obligation (“CDO”) securities, commercial loan obligation (“CLO”) securities, credit related structured (“CRS”) securities and other structured products, as well as commercial loans, that are arranged, managed or advised by a Mariner affiliated company. In 2003, the Company made an investment of $11.0 million in Altrion. Additional investments of $4.65 million, $2.7 million and $6.25 million were made in 2004, in 2005 and 2007, respectively. On August 18, 2006, the Company entered into an Amended and Restated Limited Partnership Agreement, effective August 1, 2006, with Tricadia Capital, LLC (“Tricadia Capital”), the general partner, and the limited partners named therein (the “Amended Agreement”), to amend and restate the existing Limited Partnership Agreement of Mariner Tiptree (CDO) Fund I, L.P. entered into in 2003 (the “Original Agreement”).

The Company was previously committed to providing an additional $15.4 million, or a total of approximately $40 million, in capital to Altrion by August 1, 2008. Altrion, however, waived its right to require the Company to contribute its additional capital commitment of $15.4 million and accordingly, the Company’s obligation to make such capital contribution has expired. In addition, the Company withdrew $10 million of its capital from Altrion during July 2008. Withdrawals require one year’s prior written notice to the hedge fund manager. The Company has submitted a redemption notice to Altrion for the full value estimated at $34 million, which will be effective December 31, 2009. The Company is uncertain as to whether cash and/or securities will be received as payment of the redemption proceeds.

Under the provisions of both the Original Agreement and the Amended Agreement, the Mariner affiliated company was entitled to 50% of the net profit realized upon the sale of certain investments held by the Company.

Investment expenses incurred under the Amended Agreement for the three months ended March 31, 2009 and 2008 amounted to $0 and $133,607, respectively. These amounts were based upon the fair value of certain investments held as of March 31, 2009 and 2008, respectively, as well as certain investments sold during the three months ended March 31, 2009 and 2008, respectively. The limited partnership agreements also provide for other fees payable to the manager based upon the operations of the hedge fund. There were no other fees incurred for the three months ended March 31, 2009 and 2008, respectively. The Company is the only limited partner in Altrion and reports its investment using the equity method of accounting. The amounts reported in the balance sheet caption “Limited partnerships” related to Altrion at March 31, 2009 and 2008 were $34 million and $42.8 million, respectively.

As of March 31, 2009, the Company held approximately $62.6 million in limited partnership and limited liability company interests in hedge funds, which are directly or indirectly managed by Mariner.

(11) Legal Proceedings:

The Company previously entered into reinsurance contracts with a reinsurer that is now in liquidation. On October 23, 2003, the Company was served with a Notice to Defend and a Complaint by the Insurance Commissioner of the Commonwealth of Pennsylvania, who is the liquidator of this reinsurer, alleging that approximately $3 million in reinsurance claims paid to the Company in 2000 and 2001 by the reinsurer are voidable preferences and are therefore subject to recovery by the liquidator. The claim was subsequently revised by the liquidator to approximately $2 million. The Company filed Preliminary Objections to Plaintiff’s Complaint, denying that the payments are voidable preferences and asserting affirmative defenses. These Preliminary Objections were overruled on May 24, 2005 and the Company filed its Answer in the proceedings on June 15, 2005. On December 7, 2006 the liquidator filed a motion of summary judgment to which the Company responded on December 19, 2006 by moving for a stay, pending the resolution of a similar case currently pending before the Supreme Court of the Commonwealth of Pennsylvania. As of May 1, 2009, the Supreme Court of the Commonwealth of Pennsylvania has issued a ruling in the similar case that supports the Company’s position, but there has been no ruling on the Company’s position, and no trial date has been set for this matter. The Company intends to defend itself vigorously in connection with this lawsuit, and the Company believes it has strong defenses against these claims; however, there can be no assurance as to the outcome of this litigation.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Description of Business

NYMAGIC, INC., a New York corporation (the “Company” or “NYMAGIC”), is a holding company which owns and operates insurance companies, risk bearing entities and insurance underwriters and managers.

Insurance Companies:

New York Marine And General Insurance Company (“New York Marine”)
Gotham Insurance Company (“Gotham”)
Southwest Marine And General Insurance Company (“Southwest Marine”)

Insurance Underwriters and Managers:

Mutual Marine Office, Inc. (“MMO”)
Pacific Mutual Marine Office, Inc. (“PMMO”)
Mutual Marine Office of the Midwest, Inc. (“Midwest”)

New York Marine and Gotham each currently holds a financial strength rating of A (“Excellent”) and Southwest Marine currently holds a financial strength rating of A- (“Excellent”) and an issuer credit rating of “a-” from A.M. Best Company. These are the third and fourth highest of fifteen rating levels in A.M. Best’s classification system. The Company’s insureds rely on ratings issued by rating agencies. Any adverse change in the ratings assigned to New York Marine, Gotham or Southwest Marine may adversely impact their ability to write premiums.

The Company specializes in underwriting ocean marine, inland marine/fire and other liability insurance through insurance pools managed by the Company’s insurance underwriters and managers, MMO, PMMO and Midwest (collectively referred to as “MMO”). The original members of the pools were insurance companies that were not affiliated with the Company. Subsequently, New York Marine and Gotham joined the pools. Over the years, New York Marine and Gotham steadily increased their participation in the pools, while the unaffiliated insurance companies reduced their participation or withdrew from the pools entirely. Since January 1, 1997, New York Marine and Gotham have been the only members of the pools, and therefore we now write 100% of all of the business produced by the pools.

In prior years, the Company issued policies covering aircraft insurance; however, the Company ceased writing any new policies covering aircraft risks as of March 31, 2002. The Company decided to exit the commercial aviation insurance business, because it is highly competitive, generated underwriting losses during the 1990s and is highly dependent on the purchase of substantial amounts of reinsurance, which became increasingly expensive after the events of September 11, 2001. This decision has enabled the Company to concentrate on its core lines of business, which include ocean marine, inland marine/fire and other liability.

In 2005, the Company formed Arizona Marine And General Insurance Company, which was renamed Southwest Marine And General Insurance Company (“Southwest Marine”) in July 2006, as a wholly owned subsidiary in the State of Arizona. Its application to the State of Arizona Department of Insurance for authority to write commercial property and casualty insurance in Arizona was approved in May 2006. Southwest Marine writes, among other lines of insurance, excess and surplus lines in New York.

During the three months ended March 31, 2008 the Company acquired a book of professional liability business oriented to insurance brokers and agents and also formed MMO Agencies, which will focus on generating additional premium growth through a network of general agents with binding authority subject to underwriting criteria established and monitored by MMO.

Results of Operations

The Company reported net income for the first quarter ended March 31, 2009 of $3.5 million, or $.40 per share, compared with a net loss of $29.7 million, or $3.42 per diluted share, for the first quarter of 2008. The increase in results of operations for the first quarter of 2009 when compared to the same period of 2008 was primarily attributable to stronger investment results from trading activities and limited partnership income. For the three months ended March 31, 2008 the Company recorded after tax other-than-temporary write downs of $21.0 million from residential mortgage backed securities and losses from limited partnerships and trading portfolio.

Shareholders’ equity increased to $171.2 million as of March 31, 2009 compared to $164.1 million as of December 31, 2008. The increase was primarily attributable to net income for the period and increases in other comprehensive income.

The Company’s gross premiums written, net premiums written and net premiums earned decreased by 6%, 12% and 11%, respectively, for the three months ended March 31, 2009, when compared to the same period of 2008.

Premiums for each segment were as follows:

NYMAGIC Gross Premiums Written By Segment

		Three months ended March 31,
		2009				2008				Change
		(dollars in thousands)
Ocean marine		$	20,084			$	22,241				(10	)%
Inland marine/fire			6,196				3,568				74	%
Other liability			41,300				45,774				(10	)%
Subtotal			67,580				71,583				(6	)%
Runoff lines (Aircraft)			84				45			NM
Total		$	67,664			$	71,628				(6	)%

NYMAGIC Net Premiums Written By Segment

		Three months ended March 31,
		2009				2008				Change
		(dollars in thousands)
Ocean marine		$	14,218			$	17,554				(19	)%
Inland marine/fire			1,907				1,241				54	%
Other liability			36,916				41,044				(10	)%
Subtotal			53,041				59,839				(11	)%
Runoff lines (Aircraft)			(26	)			78			NM
Total		$	53,015			$	59,917				(12	)%

NYMAGIC Net Premiums Earned By Segment

		Three months ended March 31,
		2009				2008				Change
		(dollars in thousands)
Ocean marine		$	13,289			$	17,823				(25	)%
Inland marine/fire			1,182				1,645				(28	)%
Other liability			25,686				25,359				1	%
Subtotal			40,157				44,827				(10	)%
Runoff lines (Aircraft)			(27	)			78			NM
Total		$	40,130			$	44,905				(11	)%

Ocean marine gross premiums written for the three months ended March 31, 2009 decreased by 10%, primarily reflecting reduced volume in the cargo class. The first quarter of 2008 reflected $3.0 million in gross cargo premiums arising from one of the Company’s program management agreements which was terminated at the end of 2007. This compared to no premiums in the same period of 2009. Excluding the decline in cargo premiums, increases were recorded in other ocean marine classes largely due to additional production in the marine liability class and firmer rates in the energy classes. Rates in the other ocean marine classes were slightly down when compared to the prior year’s comparable period.

Ocean marine net premiums written and net premiums earned for the three months ended March 31, 2009 decreased by 19% and 25% respectively, when compared to the same period of 2008. Net written and earned premiums for three months ended March 31, 2009 largely reflected the decline in gross cargo premiums written in addition to declines in hull business earned over the past year.

Effective January 1, 2009, the Company maintained its $5 million per risk net loss retention in the ocean marine line that was in existence during 2008. In addition, the Company’s net retention could be as low as $1 million for certain classes within ocean marine. The 80% quota share reinsurance protection for energy business, which commenced in 2006, also remains in effect for 2009 and the net retention from losses arising from energy business is subject to inclusion within the ocean marine reinsurance program.

Inland marine/fire gross premiums written and net premiums written increased by 74% and 54% for the three months ended March 31, 2009 when compared to the same period of 2008. Net premiums earned for the three months ended March 31, 2009 decreased by 28%. Gross premiums written in the first three months of 2008 reflect increases in production largely relating to two property risks written on a nation wide basis. Partially offsetting this increase were declines in production in certain surety business largely resulting from lower construction activity. Premiums reflect mildly lower market rates when compared to the prior year. The decrease in net premiums earned reflected decreases in surety, inland marine and fire premium production from the prior year.

Other liability gross premiums written and net premiums written each decreased 10%, respectively, for the three months ended March 31, 2009 when compared to the same period in 2008. Net premiums earned for the three months ended March 31, 2009 increased by 1% when compared to the same period in 2008. The decrease in premiums written is primarily due to declines in the excess workers’ compensation, contractors’ liability and commercial auto premiums that were largely the result of declines in production largely as a result of reduced construction and commercial activities.

The Company writes excess workers’ compensation insurance on behalf of certain self-insured workers’ compensation trusts. Gross and net premiums written in the excess workers’ compensation class decreased to $21.6 million and $20.1 million, respectively, in the first three months of 2009 from $24.8 million and $23.0 million, respectively, in the same period of 2008.

Net losses and loss adjustment expenses incurred as a percentage of net premiums earned (the loss ratio) was 51.5% for the three months ended March 31, 2009 as compared to 57.9% for the same period of 2008. The lower loss ratio in 2009 was partly attributable to a lower current accident year loss ratio in the ocean marine and other liability lines of business and partly attributable to larger amounts of favorable reserve development. The lower ocean marine loss ratio was due in part to the non-renewal of certain unprofitable hull business. The lower other liability loss ratio was due in part to lower loss estimates used for contractors liability business. Partially offsetting this was a higher loss ratio in the inland marine/fire segment as the prior year’s first quarter reflected larger amounts of favorable loss reserve development.

The Company reported favorable development of prior year loss reserves of $3.1 million and $1.0 million during the first three months of 2009 and 2008, respectively, as a result of favorable reported loss trends arising from the ocean marine and other liability lines of business in 2009 and favorable reported loss trends in the inland marine and ocean marine lines of business in 2008. Partially offsetting the overall redundancy in 2008 was approximately $400,000 of adverse development in the aviation line.

Policy acquisition costs as a percentage of net premiums earned (the acquisition cost ratio) for the three months ended March 31, 2009 and March 31, 2008 were 23.2% and 21.9%, respectively. The slightly lower 2008 ratio is due in part to lower acquisition cost ratios in the ocean marine line and other liability line of business, largely resulting from the impact of lower excess of loss reinsurance costs on the acquisition cost ratio.

General and administrative expenses increased by 14.6% for the three months ended March 31, 2009 when compared to the same period of 2008. Larger expenses were incurred in 2009 to service the growth in the Company’s business operations, including increased staffing from MMO Agencies personnel as well as computer system implementation expenditures.

The Company’s combined ratio (the loss ratio, the acquisition cost ratio and general and administrative expenses divided by net premiums earned) was 99.7% for the three months ended March 31, 2009 as compared with 99.4% for the same period of 2008.

Interest expense of $1.7 million for the three months ended March 31, 2009 was comparable to the same period of 2008.

Net investment income(loss) for the three months ended March 31, 2009 was $6.6 million as compared to $(13.0) million for the same period of 2008. Net investment income in 2009 reflected increases in income in trading, limited partnerships and commercial loan portfolios. The net investment (loss) in 2008 reflected trading portfolio losses and losses from limited partnerships. Trading portfolio losses of ($10.8) million resulted primarily from the fair value changes in municipal obligations ($2.7) million, preferred stocks ($2.2) million, economic hedged positions ($4.0) million and exchange traded funds ($1.9) million. Income from our investment in Altrion was $0.1 million and $0.2 million for the first quarter of 2009 and 2008, respectively. Limited partnership income for the first quarter of 2009 increased from the prior year’s first quarter as a result of higher returns amounting to 1.0% as compared to (1.6%) for the same period of 2008. For the first quarter of 2009, fixed income hedge fund strategies reported higher returns than the prior year’s comparable period.

Investment income (loss) , net of investment fees, from each major category of investments was as follows:

		Three months ended
		March 31,
		2009				2008
		(in millions)
Fixed maturities, held to maturity		$	0.6			$	—
Fixed maturities, available for sale			2.0				2.0
Fixed maturities, trading securities			3.1				(10.8	)
Short-term investments			0.2				1.0
Equity in earnings of limited partnerships			1.2				(3.0	)
Commercial loans			0.1				(1.1	)
Total investment income (loss)			7.2				(11.9	)
Investment expenses			(0.6	)			(1.1	)
Net investment income (loss)		$	6.6			$	(13.0	)

As of March 31, 2009 and March 31, 2008 investments in limited partnerships amounted to approximately $113.7 million and $181.1 million, respectively. The equity method of accounting is used to account for the Company’s limited partnership hedge fund investments. Under the equity method, the Company records all changes in the underlying value of the limited partnership hedge fund to results of operations.

As of March 31, 2009 and March 31, 2008 investments in the trading and commercial loan portfolios collectively amounted to approximately $15.8 million and $126.3 million, respectively. Net investment income (loss) for the three months ended March 31, 2009 and 2008 reflected approximately $3.2 million and ($11.9) million, respectively, derived from combined trading portfolio and commercial loan activities before investment expenses. These activities primarily include the trading of commercial loans, municipal obligations, preferred stocks and exchange traded funds. The Company’s trading and commercial loan portfolios are marked to market with the change recognized in net investment income during the current period. Any realized gains or losses resulting from the sales of trading and commercial loan investments are also recognized in net investment income.

The Company’s investment income results may be volatile depending upon the level of limited partnerships, commercial loans and trading portfolio investments held. If the Company invests a greater percentage of its investment portfolio in limited partnership hedge funds, and/or if the fair value of trading and/or commercial loan investments held varies significantly during different periods, there may also be a greater volatility associated with the Company’s investment income.

Commission and other income decreased to $5,000 for the three months ended March 31, 2009 from $59,000 for the same period in the prior year.

Net realized investment losses were $417,000 for the three months ended March 31, 2009 as compared to net realized investment losses of $32.2 million for the same period in the prior year. Net realized investment losses in 2009 reflect losses from the sales of municipal bonds that were partially offset by realized gains of $545,000. Net realized investment losses for the three months ended March 31, 2008 include write-downs from other-than-temporary declines in the fair value of securities amounting to $32.4 million. There were no write-downs of investment balances during the three months ended March 31, 2009. The write downs in 2008 was primarily attributable to the decline in the fair value of “super senior” residential mortgage backed securities held by the Company. The Company has collected all applicable interest and principal repayments on such securities to date. The decision to write down such securities as of March 31, 2008 was based upon the uncertainty that we may not hold such securities until the fair value decline is recovered.

Total income tax expense (benefit) amounted to $1.0 million and ($16.9) million, respectively, for the three months ended March 31, 2009 and 2008, respectively. Total income tax expense or benefit as a percentage of income or (loss) before taxes was 23.8% and 36.2% for the three months ended March 31, 2009 and 2008, respectively. The lower percentage in 2009 was largely attributable to greater investments in tax exempt municipal bonds.

Liquidity and Capital Resources

Cash and total investments increased from $547.0 million at December 31, 2008 to $583.0 million at March 31, 2009, principally as a result of the fair value increases of its investments and favorable cash flows from operations. The level of cash and short-term investments of $186.0 million at March 31, 2009 reflected the Company’s high liquidity position.

Cash flows provided by operating activities were $32.3 million for the three months ended March 31, 2009 as compared to cash flows used in operating activities of $123.9 million for the same period in 2008. Trading portfolio and commercial loan activities of $16.0 million favorably affected cash flows for the three months ended March 31, 2009 while such activities adversely affected cash flows by $101.1 million for the three months ended March 31, 2008. Trading portfolio activities include the purchase and sale of preferred stocks, municipal bonds and exchange traded funds. Commercial loan activities include the purchase and sale of middle market loans made to commercial companies. As the Company’s trading and commercial loan portfolio balances may fluctuate significantly from period to period, cash flows from operating activities may also be significantly impacted by such activities. Contributing to an increase in operating cash flows, other than trading and commercial loan activities, during the first quarter of 2009 was the collection of premiums and reinsurance recoverable balances. Contributing to a reduction in operating cash flows, other than trading and commercial loan activities, during the first quarter of 2008 was the payment of gross losses in the ocean marine line of business for hurricane losses in 2005, substantially all of which were reinsured and to be collected from reinsurers in subsequent periods.

Cash flows used in investing activities were $67.6 million for the three months ended March 31, 2009 as compared to cash flows provided by investing activities of $24.3 million for the three months ended March 31, 2008. The cash flows for the three months ended March 31, 2009 were adversely impacted by the net purchase of fixed maturity available for sale investments. Contributing to cash flows from investing activities for the three months ended March 31, 2008 were the net sale of fixed maturity available for sale investments.

Cash flows used in financing activities were $221,000 and $2.5 million for the three months ended March 31, 2009 and 2008, respectively. In 2008, a substantial portion of the use of cash flows was attributable to the repurchase of the Company’s common stock.

On March 10, 2009, the Company declared a dividend to shareholders of four (4) cents per share amounting to $337,000, payable on April 7, 2009 to shareholders of record on March 31, 2009. On March 6, 2008, the Company declared a dividend of eight (8) cents per share amounting to $697,000 to shareholders of record on March 31, 2008, payable on April 3, 2008.

New York Marine and Gotham did not declare any ordinary dividends to the Company during the first three months of 2009 and 2008, respectively.

Under the NYMAGIC, INC. Amended and Restated 2004 Long-Term Incentive Plan (the “LTIP”), the Company granted 8,000 restricted share units, and up to 49,000 performance share units and 100,000 stock options to the President and Chief Executive Officer during the three months ended March 31, 2009. The market price per share and option price per share on the grant date of the stock option were $9.88 and $15.00 per share, respectively. During the three months ended March 31, 2008, 8,000 and 5,000 restricted share units were granted to the President and Chief Executive Officer and the former Chairman of the Board of Directors, respectively.

Under the NYMAGIC, INC. non-qualified 2002 Stock Option Plan, 10,000 stock options were awarded to a Director during the three months ended March 31, 2008.

Under the Common Stock Repurchase Plan, the Company may purchase up to $75 million of the Company’s issued and outstanding shares of common stock on the open market. During the first three months of 2008, there were 20,300 shares repurchased at a total cost of approximately $466,000. There were no repurchases of the Company’s common stock during the first three months of 2009.

Premiums and other receivables, net increased to $34.6 million as of March 31, 2009 from $23.4 million as of December 31, 2008, primarily as a result of excess workers’ compensation gross writings, which are substantially written during the first quarter of the calendar year.

Deferred income taxes at March 31, 2009 decreased to $31.8 million from $35.5 million at December 31, 2008, primarily due to reductions in deferred tax benefits arising from the increase in the fair value of investments. Management believes the Company’s total deferred tax asset, net of the recorded valuation allowance account, as of March 31, 2009 will more-likely-than-not be fully realized.

Reserve for unearned premiums increased to $99.4 million as of March 31, 2009 from $83.4 million as of December 31, 2008, primarily as a result of excess workers’ compensation gross writings, which are substantially written during the first quarter of the calendar year.

Reinsurance receivables on paid balances, net at March 31, 2009, decreased to $23.5 million from $28.4 million at December 31, 2008 largely as a result of the collection of reinsurance balances on gross losses paid on prior year hurricane claims.

Property, improvements and equipment, net at March 31, 2009, increased to $11.0 million from $10.0 million at December 31, 2008 largely as a result of capitalized expenditures relating to information technology infrastructure initiatives.

Other assets at March 31, 2009 increased to $24.9 million from $23.9 million at December 31, 2008 largely as a result of an increase in federal income tax recoverables.

Reinsurance payable at March 31, 2009 increased to $27.3 million from $23.8 million at December 31, 2008 primarily due to the timing of payments of certain reinsurance expense.

Investments

A summary of the Company’s investment components at March 31, 2009 and December 31, 2008 is presented below:

		March 31, 2009				Percent				December 31, 2008				Percent
Fixed maturities held to maturity (amortized cost):
Mortgage-backed securities		$	60,380,813				10.36	%		$	61,246,212				11.20	%
Total fixed maturities held to maturity		$	60,380,813				10.36	%		$	61,246,212				11.20	%
Fixed maturities available for sale (fair value):
U.S. Treasury securities		$	40,418,176				6.93	%		$	40,783,969				7.46	%
Municipal obligations			125,653,607				21.55	%			90,483,461				16.54	%
Corporate securities			41,016,047				7.04	%			13,710,996				2.51	%
Total fixed maturities available for sale		$	207,087,830				35.52	%		$	144,978,426				26.51	%
Fixed maturities trading (fair value):
Municipal obligations		$	13,236,400				2.27	%		$	17,399,090				3.18	%
Total fixed maturities trading		$	13,236,400				2.27	%		$	17,399,090				3.18	%
Total fixed maturities		$	280,705,043				48.15	%		$	223,623,728				40.89	%
Equity securities trading (fair value):
Preferred stock		$	—				0.00	%		$	11,822,620				2.16	%
Total equity securities		$	—				0.00	%		$	11,822,620				2.16	%
Cash and short-term investments			186,013,377				31.91	%			185,921,881				33.99	%
Total fixed maturities, equity securities, cash and short-term investments		$	466,718,420				80.06	%		$	421,368,229				77.04	%
Commercial loans (fair value)			2,593,554				0.44	%			2,690,317				0.49	%
Limited partnership hedge funds (equity)			113,653,278				19.50	%			122,927,697				22.47	%
Total investment portfolio		$	582,965,252				100.00	%		$	546,986,243				100.00	%