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U.S. RE Companies Continue to Grow

We took another big step forward into the underwriting management field this summer with the launch of Uni-Ter Underwriting Management Corporation (UUMC) under the leadership of Sterling Shuttleworth serving as President and Chief Executive Officer. Sterling is a widely respected leader in the leader in the field of professional liability and related coverages for health care facilities.

UUMC's initial thrust is in the management of comprehensive property/casualty insurance programs for nursing homes in 11 states and the District of Columbia (see page 1). The Company plans to extend its operations into other regions and offer other coverages to additional health care facilities.

UUMC is a subsidiary of U.S. RE Agencies, Inc., an internal holding company established to house all of our underwriting management and wholesale broking operations. AMG/Quadrant Insurance Managers, the program development and marketing organization in which we acquired a majority interest last year, is also a subsidiary of U.S. RE Agencies, Inc.

Acitvation of U.S. RE Agencies, Inc. reflects our corporate commitment to substantial growth in the wholesale sector. We'll be expanding this line of business significantly in the near future. At the same time our group's reinsurance brokerage activities are now experiencing the greatest growth since our formation over 12 years ago.

Our long term-strategy calls for development of new business opportunities that provide synergy with other unites of the U.S. RE Group. We now offer clients of our underwriting management operations reinsurance through U.S. RE Corporation. We also offer Captive and Rent-a-Captive facilitation and management through Uni-Ter International Insurance Company and Uni-Ter International Management, Ltd.

Commitment to global operations has been a key element of our growth strategy since we launched U.S. RE over 12 years ago. We've long had a significant presence in Japan, the London market, and throughout Northern Europe. Last year, Mark Lucas, Managing Director of U.S. RE-Europe, established a new headquarters in Basel, Switzerland, as the first step toward expansion to Southern and Eastern Europe. This summer we took an important second step. Christopher Lister, an international specialist with outstanding credentials, began assisting Mark Lucas in Europe (see page 8), and it is our intent to expand his services to our group on the international front later on in other geographical areas.

Mark also is teaming up with Applied Insurance Research, Inc. (AIR), the preeminent catastrophe modeling firm, in an AIR-U.S. RE joint venture to bring cat modeling services to insurers in Denmark, Norway, and Sweden (see page 5). The need for these services was dramatically demonstrated by the devastating storms that swept across Northern Europe last winter.

As reported earlier, our merchant banking activity is growing with our latest investment in QualSure Holding Corporation, the Florida Company we launched recently with two other major investors (see page 4). Our merchant banking activity vis-à-vis Fenelon Ventures, Ltd. primarily focuses on passive investments in insurance related properties having their own distinct exit strategies.

These investments are intended to support enterprises that are in a strong growth mode yet provide synergistic income to our group's core activities in reinsurance broking, captive facilitation, and underwriting management. The form of vertical integration, coupled with leading-edge technology in new product development and services we offer, is the cornerstone of our strategy for growth. At the same time we're posed to acquire and consolidate going concerns involved in our core business where the principals may share our vision for success in the new millennium.

Looking ahead, we anticipate growth in all areas in addition to our merchant banking arm (Fenelon Ventures). We will continue to seek out synergistic investments. We expect to grow our brokerage operations both in the U.S. and abroad. Our moves into the underwriting management arena under U.S. RE Agencies, Inc. will increase our presence in this sector.