GENERAL STAR MANAGEMENT CO.

695 E. Main Street, P.O. Box 10354, Stamford, Conn. 06904-2354; 203-328-5700; fax: 203-328-6131; www.genre.com

1997 1996

Premium volume $361,513,554 $354,000,781

Gross revenues NM NM

Employees 247 262

Commercial lines 99% 99%

Admitted business 10.8% 15.5%

Non-admitted 89.2% 84.5%

General Star Management Co. is following the fortunes of its primary market, General Star Indemnity Co., as soft market conditions take a toll on the volume of business.

Premium growth slowed to 2.1% in 1997, rising to $361.5 million in premiums, compared with 17.4% growth in 1996.

The underwriting manager is the exclusive management arm of two subsidiaries of General Reinsurance Corp.: General Star Indemnity Co., a non-admitted insurer, and General Star National Insurance Co., an admitted insurer.

All General Star Management's premiums are written for these insurers. It derives no revenues from underwriting services to other companies.

The company was hit by growing capacity and dropping prices for Southeast windstorm property coverage, which once was a leading component of its growth.

The combination has hurt this once thriving area by reducing rates on existing accounts while driving others to seek lower prices elsewhere.

General Star had entered the field when many admitted insurers pulled out after Hurricane Andrew in 1992. But in 1997, many admitted and non-admitted insurers returned, adding to overcapacity.

"I think the pricing suddenly started to tail off, making that business just slightly less attractive than it had been," said Kevin Brooks, chairman and president of the underwriting manager.

For example, the company lost one Southeastern account when a competitor undercut General Star's price by 30% while doubling the policy limit to $50 million.

"From an underwriter's standpoint, it's a very easy decision," Senior Vp Patricia Roberts said of the decision to walk away from an underpriced account. "You don't agonize over those."

Another factor slowing growth was the decision to withdraw from the long-haul trucking business. This was predominantly written by General Star National. As a result, the percentage of General Star Management's premiums written for the admitted insurer dropped to 10.8% last year from 15.5% in 1996.

To pull itself out of the soft market, General Star looks to new products where there is less competition and expanding existing products to satisfy policyholders' needs.

Earlier this year, General Star launched a new general liability and professional liability policy for nursing home operators. It covers home care providers, assisted living facilities and full nursing homes, Ms. Roberts said.

As part of the program, General Star will provide a risk management inspection of the insured facility when writing the policy. The policy, currently available only in Florida and Louisiana, offers primary limits of $2 million with excess limits up to $25 million.

A new product for municipalities is designed to cover losses that fall within their large self-insured retentions, as well as providing high excess coverage. The policy covers general liability, professional liability and auto liability for police, fire, school and other public officials.

Launched last year, General Star has written $2 million to $3 million in premiums under the program to date. Limits are $25 million, and up to $30 million can be provided with reinsurance.

General Star also expanded an existing product for storage tank contractors by adding the option of an occurrence-based policy, in addition to its existing claims-made coverage. The manager hopes the new policy will stem the loss of policyholders moving to insurers that already offer an occurrence-based policy.

The coverage is designed for firms that install or remove underground storage tanks and offers primary limits of $10 million with no excess coverage, while the claims-made policy also has a $10 million excess option.

This year General Star formed a partnership with Swett & Crawford to market an employment practices product for midsize companies. It is a claims-made policy with primary limits up to $1 million and excess limits up to $25 million.

A London-based sister company started operations Jan. 1, providing General Star an avenue into Europe. For the first half of this year the company, General Star International Indemnity Ltd., wrote $5.9 million in premiums while posting an underwriting loss of $557,000. It is staffed by four underwriters.

Mr. Brooks said he is satisfied with the London operation's results to date and expects the insurer to grow.

"By and large, there are a lot more opportunities on the unusual side there," he said.

General Star National, which is admitted in all 50 states, reported a 30.9% reduction in gross premium volume in 1997 to $38.8 million.

The staff of General Star management dropped to 247 in 1997 from 262 the prior year.

In addition to Mr. Brooks and Ms. Roberts, the principal officers are Senior Vp Sam Anderson; and Vps William Murray, Craig Ott and Adin Tooker.

General Star Management is a member of AAMGA and NAPSLO.