OUTLINE

• Policy year review and financial highlights at 20th February 2006

• Financial year surplus of $11m

• Investment returns above target at 6 per cent.

• Free reserves up five per cent to $217m

• Encouraging 2005 policy year claims experience compared to the 2004 policy year

TO THE MEMBERS

Dear Sirs

POLICY YEAR REVIEW AND FINANCIAL HIGHLIGHTS AT 20TH FEBRUARY 2006

Review of Open Policy Years

2003 policy year

This policy year, already one of the lightest years for claims in recent years, has improved still further. At their meeting in May 2006, the Directors decided to close the 2003 policy year with no supplementary premium being required.

2004 policy year

After two years development, the claims on the 2004 policy year now exceed those on the 2002 policy year, which previously had the highest claims experience in recent years. Notified claims on the Pool by all clubs in the International Group are running at a record level in 2004.

No supplementary premium is estimated for this policy year and the Board expects to close the year in May 2007.

2005 policy year

A number of large claims in the first quarter of the 2005 year raised concerns that the trend of the 2004 year's heavy claims experience was continuing. The claims experience of subsequent quarters improved considerably, albeit with a brief pick up just before the year end. No supplementary premium is estimated for this year.

Financial Year Highlights

The Directors approved the Report and Financial Statements for the year ended 20th February 2006.

A surplus for the financial year of $11 million has increased the free reserves by five per cent to $217 million (2004: $206 million).

The positive result for the year to February 2006 was driven by two main factors: a more favourable claims experience during the 2005 policy year, in contrast to 2004 which was one of the heaviest claims years on record; and, a 6 per cent return on investments producing income of $49 million.

In the period up to 20th February 2006, the Club has again seen a steady net growth in its tonnage of over six per cent.

The total Club entry of mutual owned tonnage is more than 104 million gross tons.

The Club's full financial statements, together with the Directors' Report and Review of the Year will be published, as usual, in July. The key financial figures are reproduced in the table below.

Reinsurance

The increase in reinsurance premium for the year arises from the operation of the Swiss Re contract. In 2005 the Club accounted for the return of the accrued commutation premium under this contract as a reduction in reinsurance costs for that year, (commutation premium is the value of the premium returned if no claims are made under the contract).

At 20th February 2006, the ratio of total funds to outstanding claims has enabled the club to make a claim of $55.9 million under this contract. This reinsurance recovery reduces both the incurred claims for the year and the net outstanding claims.

The accrued commutation premium asset lost as a result of making this claim (in an equivalent amount of $55.9 million) is accounted for as additional reinsurance premium for the current year. The impact of these movements in the current financial year is therefore neutral. The surplus of $11 million remains unaffected. Further claims can be made under the contract in future years both under the part of the policy which is triggered by the ratio of funds to outstanding claims, and also under a new section in the policy covering individual policy years where there are significant claims. The annual premium for both parts of the contract remains fixed for the remaining four years of its duration and does not vary with the claims experience.

Yours faithfully

THOMAS MILLER (BERMUDA) LTD.