MIIX GROUP INC, S-1/A, 1999-01-29

MIIX GROUP INC
S-1/A, 1999-01-29
ACCIDENT & HEALTH INSURANCE

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 29, 1999.

REGISTRATION NO. 333-59371
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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549
------------------------

AMENDMENT NO. 6

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------

THE MIIX GROUP, INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

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DELAWARE 6719 22-3586492
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>

TWO PRINCESS ROAD
LAWRENCEVILLE, NEW JERSEY 08648
(609) 896-2404
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------

DANIEL GOLDBERG
PRESIDENT AND CHIEF EXECUTIVE OFFICER
THE MIIX GROUP, INCORPORATED
TWO PRINCESS ROAD
LAWRENCEVILLE, NJ 08648
(609) 896-2404, EXT. 1274
(NAME, ADDRESS INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)

WITH COPIES TO:

<TABLE>
<S> <C>
JAMES J. MARINO, ESQ. ALLAN G. SPERLING, ESQ.
CHRISTOPHER G. KARRAS, ESQ. CLEARY, GOTTLIEB, STEEN & HAMILTON
DECHERT PRICE & RHOADS ONE LIBERTY PLAZA
997 LENOX DRIVE NEW YORK, NY 10006
BUILDING #3, SUITE 210 (212) 225-2260
LAWRENCEVILLE, NJ 08648
(609) 620-3200
</TABLE>

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the conditions to the consummation of the reorganization of
the Registrant are satisfied.
------------------------

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]

If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.

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<PAGE> 2

[MEDICAL INTER-INSURANCE EXCHANGE LOGO]
MEDICAL INTER-INSURANCE
EXCHANGE OF NEW JERSEY
TWO PRINCESS ROAD
LAWRENCEVILLE, NEW JERSEY 08648

PROPOSED PLAN OF REORGANIZATION -- YOUR VOTE IS VERY IMPORTANT

The Board of Governors of the Medical Inter-Insurance Exchange of New
Jersey (the "Exchange") and the New Jersey Department of Banking and Insurance
have approved a Plan of Reorganization of the Exchange (the "Plan"). Pursuant to
the Plan:

- The Exchange will be converted from a reciprocal insurer to a new stock
company, MIIX Insurance Company ("MIIX Insurance").

- The MIIX Group, Incorporated ("The MIIX Group"), a stock company, will be
the holding company for MIIX Insurance and all the other MIIX companies.

- The MIIX Group stock (or cash) will be distributed to eligible Exchange
members, resulting in tangible value for their membership interests,
value that could not be realized through the Exchange's current structure
as a reciprocal insurer.

Be assured that the Plan will have no impact on your current premium and
all policies currently in effect will remain in force in accordance with their
terms.

Following member approval of the Plan, The MIIX Group intends to conduct an
Initial Public Offering ("IPO"). The MIIX Group intends to list The MIIX Group
stock on The New York Stock Exchange under the symbol "MHU."

YOUR PROMPT VOTE IS VERY IMPORTANT. IN ORDER FOR THE PLAN TO BE APPROVED
AND THE IPO TO TAKE PLACE, TWO-THIRDS (2/3) OF THE VOTES CAST MUST BE FOR THE
ADOPTION OF THE PLAN. THE MANAGEMENT TEAM JOINS THE BOARD OF GOVERNORS IN
RECOMMENDING THAT YOU VOTE FOR APPROVAL OF THE PLAN.

This Prospectus provides you with detailed information about the Plan. I
encourage you to read this entire document carefully. If you have any questions,
please call the MIIX Conversion Information Center at 1-888-359-8644.
Daniel Goldberg signature
Daniel Goldberg

President
Chief Executive Officer

Dated: January 29, 1999

<PAGE> 3

[MEDICAL INTER-INSURANCE EXCHANGE LOGO]
MEDICAL INTER-INSURANCE
EXCHANGE OF NEW JERSEY
TWO PRINCESS ROAD
LAWRENCEVILLE, NEW JERSEY 08648

NOTICE OF SPECIAL MEETING OF MEMBERS

TO BE HELD MARCH 17, 1999

TO THE MEMBERS OF THE MEDICAL INTER-INSURANCE EXCHANGE:

NOTICE IS HEREBY GIVEN that a special meeting (the "Special Meeting") of
the members of the Medical Inter-Insurance Exchange of New Jersey (the
"Exchange") will be held at the offices of New Jersey State Medical
Underwriters, Inc., Two Princess Road, Lawrenceville, New Jersey, on March 17,
1999 at 10:00 a.m., to consider and vote upon a proposal to approve:

- An amendment to the Rules and Regulations of the Exchange to permit
the dissolution of the Exchange, and

- A Plan of Reorganization (the "Plan of Reorganization") pursuant to
which the Exchange will be dissolved and certain current and former members
("Distributees") of the Exchange will receive:

- publicly traded common stock ("Common Stock") of The MIIX Group,
Incorporated ("The MIIX Group"), a newly formed Delaware
corporation that is currently a wholly owned subsidiary of the
Exchange, or

- cash, in the case of Distributees who would otherwise receive
fewer than 100 shares of Common Stock or whose address as shown
on the records of the Exchange is outside the United States of
America or is an address to which mail is undeliverable.

The MIIX Group owns all the outstanding common stock of MIIX Insurance
Company, a newly formed stock insurer that, upon consummation of the
Reorganization, will assume all the assets and liabilities of the Exchange
(except for the Common Stock and cash to be distributed pursuant to the Plan of
Reorganization). In addition, as part of the Plan of Reorganization, The MIIX
Group will purchase all the outstanding common stock of New Jersey State Medical
Underwriters, Inc. from the Medical Society of New Jersey in exchange for Common
Stock and cash.

Each Distributee shall be allocated a pro rata share of the 12,000,000
shares of Common Stock to be allocated to Distributees pursuant to the Plan of
Reorganization in the proportion that direct premiums earned by the Exchange
attributable to such Distributee, less return premiums, over the three years
prior to October 15, 1997, bear to direct premiums earned by the Exchange
attributable to all Distributees, less return premiums, over the same period.
The total amount of direct premiums earned by the Exchange attributable to all
Distributees, less return premiums, over the three years prior to October 15,
1997 was approximately $350 million.

Members who were named insureds on policies that were in force on October
15, 1997, are entitled to notice of, and to vote at, the Special Meeting. Each
such member is entitled to one vote. Approval of the Plan of Reorganization and
the related amendment to the Rules and Regulations of the Exchange requires the
affirmative vote of two-thirds of the votes cast in person or by proxy.

Whether or not you plan to attend the Special Meeting, please sign and date
the enclosed proxy card and return it in the postage-paid envelope that has been
enclosed for your convenience.

Hillel Ben-Asher signature

Hillel Ben-Asher, M.D.
Chairman of the Board of Governors

Dated: January 29, 1999

<PAGE> 4

PROSPECTUS SUBJECT TO COMPLETION, DATED JANUARY 29, 1999

[MEDICAL INTER-INSURANCE EXCHANGE LOGO]
12,000,000 SHARES

THE MIIX GROUP, INCORPORATED

COMMON STOCK

This Prospectus is being furnished to Members (as defined in the "Glossary
of Reorganization Terms") of the Medical Inter-Insurance Exchange of New Jersey,
a New Jersey reciprocal insurer (the "Exchange"), in connection with the
proposed Plan of Reorganization (the "Plan of Reorganization," and together with
the transactions contemplated thereby, the "Reorganization") of the Exchange.
Pursuant to the Plan of Reorganization, the Exchange will be dissolved, and
Distributees (as defined below) will collectively receive up to 12,000,000
shares (the "Reorganization Shares") of common stock, par value $.01 per share
("Common Stock"), of The MIIX Group, Incorporated, a Delaware corporation ("The
MIIX Group"). The MIIX Group is currently a wholly owned subsidiary of the
Exchange and owns all the outstanding common stock of MIIX Insurance Company
("MIIX Insurance"), a newly formed New Jersey stock insurer. Upon consummation
of the Reorganization, MIIX Insurance will assume all the assets and liabilities
of the Exchange, except for the Common Stock and cash to be distributed in the
Reorganization. In consideration of the foregoing assignments by the Exchange,
The MIIX Group will issue the Reorganization Shares to the Exchange. All
policies issued by the Exchange will be included in such assumption and will
continue in force after the Reorganization. In addition, as part of the
Reorganization, The MIIX Group will purchase all the outstanding common stock of
New Jersey State Medical Underwriters, Inc., a New Jersey corporation (the
"Attorney-in-Fact"), from the Medical Society of New Jersey (the "Medical
Society") in exchange for Common Stock and cash. If the Reorganization is
consummated, each Distributee will receive (i) a pro rata share of the
Reorganization Shares in the proportion that direct premiums earned by the
Exchange attributable to such Distributee, less return premiums, over the three
years prior to October 15, 1997, bear to direct premiums earned by the Exchange
attributable to all Distributees, less return premiums, over the same period, or
(ii) cash, in the case of Distributees who would otherwise receive fewer than
100 shares of Common Stock or whose address as shown on the records of the
Exchange is outside the United States of America or is an address to which mail
is undeliverable. The total amount of direct premiums earned by the Exchange
attributable to all Distributees, less return premiums, over the three years
prior to October 15, 1997, was approximately $350 million. Distributees who
receive cash in lieu of Common Stock will receive an amount of cash equal to the
product of (i) the number of shares of Common Stock which they would otherwise
be entitled to receive and (ii) the Conversion Value. The "Conversion Value"
means either (i) the price per share at which the Common Stock is offered to the
public in the event an initial public offering is consummated simultaneously
with the Reorganization, or (ii) if no such initial public offering is
consummated simultaneously with the Reorganization, then the economic value of
one share of Common Stock as determined in good faith by the Board of Governors
of the Exchange. See "Glossary of Selected Insurance Terms" and "Glossary of
Reorganization Terms" for the definition of certain terms used in this
Prospectus.

Concurrently with the consummation of the Reorganization, but as a separate
transaction, The MIIX Group intends to sell Common Stock through an underwritten
initial public offering (the "Public Offering"). The consummation of the
anticipated Public Offering is conditioned on the consummation of the
Reorganization. However, the consummation of the Reorganization is not
conditioned on the consummation of the Public Offering. This Prospectus relates
solely to the Reorganization and does not constitute an offer to sell, or a
solicitation of an offer to buy, Common Stock in the anticipated Public
Offering. Common Stock to be offered in the anticipated Public Offering will be
offered only by means of a separate prospectus.

Consummation of the Reorganization is subject to certain conditions,
including the affirmative vote of not less than two-thirds of the Members
present in person or by proxy at a special meeting scheduled to be held on March
17, 1999 (the "Members' Meeting"). Only Members are entitled to notice of, and
to vote at, the Members' Meeting. A proxy card is being delivered to Members
along with this Prospectus. See "The Members' Meeting." In addition, a share
allocation card is being sent to all Members. The share allocation card shows
each Member the estimated whole number of shares of Common Stock that such
Member will receive if the Reorganization is approved and consummated.

IF THE REORGANIZATION IS NOT APPROVED, NO COMMON STOCK WILL BE DISTRIBUTED
AND THE EXCHANGE WILL CONTINUE TO DO BUSINESS AS A RECIPROCAL INSURER.

The listing of the Common Stock on the New York Stock Exchange (the "NYSE")
under the symbol "MHU" has been approved, subject to official notice of
issuance.

SEE "RISK FACTORS" COMMENCING ON PAGE 13 HEREIN FOR A DISCUSSION OF CERTAIN
FACTORS WHICH SHOULD BE CONSIDERED BEFORE VOTING.

THE SECURITIES TO BE ISSUED HEREUNDER HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.

The date of this Prospectus is , 1999

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE> 5

TABLE OF CONTENTS

<TABLE>
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PAGE
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<S> <C>
ADDITIONAL INFORMATION................ 3
FORWARD-LOOKING STATEMENTS............ 4
PROSPECTUS SUMMARY.................... 5
The Company...................... 5
Business Strategy................ 6
Overview of the Transactions..... 7
The Reorganization and
Distribution................... 7
Interest of Distributees in The
MIIX Group..................... 10
Risk Factors..................... 10
Regulatory Approvals............. 10
Summary Financial and Operating
Data........................... 12
RISK FACTORS.......................... 13
THE MEMBERS' MEETING.................. 22
THE REORGANIZATION.................... 23
General.......................... 23
Purpose.......................... 24
Transfer of Assets and
Liabilities to MIIX
Insurance...................... 24
Shares of Common Stock Issued to
Distributees................... 25
Interest of Distributees in The
MIIX Group..................... 26
Acquisition of the
Attorney-in-Fact............... 26
Conditions to Consummation of the
Reorganization................. 26
Background of the
Reorganization................. 27
Recommendation of the Board of
Governors; Reasons for the
Reorganization................. 28
Opinion of Financial Advisor..... 29
Accounting Treatment.............
Regulatory Approvals............. 32
Federal Tax Consequences......... 33
Possible Alternative Treatment of
the Reorganization............. 34
DIVIDEND POLICY....................... 34
CAPITALIZATION........................ 35
SELECTED FINANCIAL AND OPERATING
DATA................................ 36
</TABLE>

<TABLE>
<CAPTION>
PAGE
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS....................... 37
BUSINESS.............................. 48
COMPARISON OF RIGHTS.................. 70
Liquidity/Marketability.......... 70
Distributions.................... 71
Meetings and Actions............. 71
Voting........................... 71
Preferred Stock.................. 72
Limited Liability................ 72
Removal of Governors/Directors... 72
Business Combinations............ 72
Anti-takeover Provisions......... 73
Action by Written Consent........ 73
Miscellaneous.................... 73
MANAGEMENT............................ 74
OWNERSHIP OF COMMON STOCK............. 85
DESCRIPTION OF CAPITAL STOCK.......... 87
SHARES ELIGIBLE FOR FUTURE SALE....... 90
STABILIZATION AND OTHER ACTIVITIES IN
CONNECTION WITH THE ANTICIPATED
PUBLIC OFFERING..................... 90
LEGAL MATTERS......................... 90
EXPERTS............................... 91
GLOSSARY OF SELECTED INSURANCE
TERMS............................... 92
GLOSSARY OF REORGANIZATION TERMS...... 96
INDEX TO COMBINED FINANCIAL
STATEMENTS.......................... F-1
Annexes
A. Plan of Reorganization............. A-1
B. Order of the Commissioner.......... B-1
C. Opinion of Salomon Smith
Barney Inc. ....................... C-1
</TABLE>

2
<PAGE> 6

FOR NORTH CAROLINA INVESTORS: THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE COMMISSIONER OF INSURANCE FOR THE STATE OF NORTH CAROLINA,
NOR HAS THE COMMISSIONER OF INSURANCE PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS DOCUMENT.

STATE INSURANCE HOLDING COMPANY LAWS AND REGULATIONS APPLICABLE TO THE MIIX
GROUP IN GENERAL PROVIDE THAT NO PERSON MAY ACQUIRE CONTROL OF THE MIIX GROUP,
AND THUS INDIRECT CONTROL OF ITS INSURANCE SUBSIDIARIES, UNLESS SUCH PERSON HAS
PROVIDED CERTAIN REQUIRED INFORMATION TO, AND SUCH ACQUISITION IS APPROVED (OR
NOT DISAPPROVED) BY, THE APPROPRIATE INSURANCE REGULATORY AUTHORITIES.
GENERALLY, ANY PERSON ACQUIRING BENEFICIAL OWNERSHIP OF 10% OR MORE OF THE
COMMON STOCK WOULD BE PRESUMED TO HAVE ACQUIRED SUCH CONTROL, UNLESS THE
APPROPRIATE INSURANCE REGULATORY AUTHORITIES UPON ADVANCE APPLICATION DETERMINE
OTHERWISE.

IN CONNECTION WITH THE ANTICIPATED PUBLIC OFFERING, THE UNDERWRITERS
THEREOF MAY ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT
THE PRICE OF THE COMMON STOCK, INCLUDING BY OVER-ALLOTMENT, ENTERING INTO
STABILIZING BIDS, EFFECTING SYNDICATE COVERING TRANSACTIONS OR IMPOSING PENALTY
BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "STABILIZATION AND OTHER
ACTIVITIES IN CONNECTION WITH THE ANTICIPATED PUBLIC OFFERING."

THIS PROSPECTUS RELATES SOLELY TO THE MEMBERS' MEETING AND DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, COMMON STOCK
IN THE ANTICIPATED PUBLIC OFFERING. COMMON STOCK TO BE OFFERED IN THE
ANTICIPATED PUBLIC OFFERING WILL BE OFFERED ONLY BY MEANS OF A SEPARATE
PROSPECTUS.

ADDITIONAL INFORMATION

The MIIX Group has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement (together with all amendments, exhibits,
schedules, and supplements thereto, the "Registration Statement"), on Form S-1
(Registration No. 333-59371) under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the shares of Common Stock to be issued in
the Reorganization. As permitted by the rules and regulations of the Commission,
this Prospectus, which constitutes a part of the Registration Statement, does
not contain all information set forth in the Registration Statement. For further
information, please refer to the Registration Statement, including exhibits and
schedules thereto, which can be inspected without charge at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the regional offices of the Commission located at
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661 and Seven World Trade Center, Suite 1300, New York, New York
10048. Copies of such material can be obtained from the Commission at prescribed
rates from the Public Reference Section of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549. Additionally, material filed by The MIIX Group can
be inspected at the offices of the NYSE, 20 Broad Street, New York, New York
10005. In addition, the Commission maintains a Web site (http://www.sec.gov)
that contains registration statements, reports, proxy and information
statements, and other information regarding registrants that file electronically
with the Commission, including The MIIX Group. Statements contained in this
Prospectus relating to the contents of any contract or other document referred
to herein are not necessarily complete, and reference is made to the copy of
such contract or other document filed as an exhibit to the Registration
Statement or such other document, each such statement being qualified by such
reference.

No person is authorized to give any information or to make any
representation with respect to the matters described in this Prospectus other
than those contained herein and, if given or made, such information or
representation should not be relied upon as having been authorized by The MIIX
Group or any other person.

3
<PAGE> 7

This Prospectus does not constitute an offer to sell, or a solicitation of an
offer to purchase, the securities offered by this Prospectus, or make a
solicitation of a proxy, in any jurisdiction in which, or to or from any person
to or from whom, it is unlawful to make such an offer or solicitation. Neither
the delivery of this Prospectus nor any distribution of securities hereunder
shall under any circumstances be deemed to imply that there has been no change
in the assets, properties or affairs of The MIIX Group or the Exchange since the
date hereof or that the information set forth herein is correct as of any time
subsequent to the date hereof.

To date, The MIIX Group has not been subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). Following the completion of the Reorganization, The MIIX Group intends to
furnish its stockholders with annual reports containing audited consolidated
financial statements reported upon by its independent auditors.

FORWARD-LOOKING STATEMENTS

This Prospectus contains certain forward-looking statements. Discussions
concerning such forward-looking statements may be found in the material set
forth under "Prospectus Summary," "Risk Factors," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business," as
well as the Prospectus generally. These forward-looking statements include the
plans and objectives of management for future operations, including plans and
objectives relating to the products and future economic performance of the
Company (as defined under "Prospectus Summary" below). The forward-looking
statements set forth in this Prospectus include or relate to, but are not
limited to: (i) the Company having sufficient liquidity and working capital;
(ii) the Company's strategy to seek consistent profitable growth; (iii) the
Company's ability to increase its market share; (iv) the Company's ability to
diversify its product lines; (v) the Company's ability to expand into additional
states; (vi) the Company's avoidance of any material loss on collection of
reinsurance recoverables; and (vii) the continued adequacy of the Company's loss
and LAE reserves.

The forward-looking statements included herein are based on current
expectations that involve a number of risks and uncertainties. These
forward-looking statements are based on assumptions that the Company will
competitively price and market its insurance products, appropriately reserve for
losses and LAE and successfully handle claims; that competitive conditions will
not change materially or adversely; that demand for the Company's products will
be strong; that the market will accept the Company's new products and services;
that the Company will retain existing agents and key management personnel; that
the Company's reinsurers will remain solvent; and that there will be no material
adverse change in the Company's operations or business. Assumptions relating to
the foregoing involve judgments with respect to, among other things, future
economic, competitive and market conditions and future business decisions, all
of which are difficult or impossible to predict accurately and many of which are
beyond the control of the Company. Although the Company believes that the
assumptions underlying the forward-looking statements are reasonable, any of the
assumptions could prove inaccurate and, therefore, there can be no assurance
that the results contemplated in forward-looking statements will be realized.
Budgeting, reserving and other management decisions are subjective in many
respects and thus susceptible to interpretations and periodic revisions based on
actual experience and business developments, the impact of which may cause the
Company to alter its marketing, capital expenditures or other budgets, which may
in turn affect the Company's results of operations. In light of the significant
uncertainties inherent in the forward-looking information included herein, the
inclusion of such information should not be regarded as a representation by the
Company or any other person that the objectives or plans of the Company will be
achieved.

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<PAGE> 8

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial statements
appearing elsewhere in this Prospectus. Financial data and ratios set forth in
this Prospectus have been presented in accordance with generally accepted
accounting principles ("GAAP"), unless otherwise indicated. Except as otherwise
specified, all information in this Prospectus assumes that the over-allotment
option to be granted in connection with the anticipated Public Offering is not
exercised. See "Glossary of Selected Insurance Terms" and "Glossary of
Reorganization Terms" for definitions of certain terms used in this Prospectus.

As explained below, the Attorney-in-Fact carries out all the Exchange's
operations pursuant to a management agreement. Upon the consummation of the
Reorganization, the assets and liabilities of the Exchange (except for the
Common Stock and cash to be distributed in the Reorganization) will be assumed
by MIIX Insurance, and MIIX Insurance and the Attorney-in-Fact will become
wholly-owned subsidiaries of The MIIX Group. Therefore, for purposes of
discussing business, strategies, risk factors, and other operational issues,
throughout this Prospectus, the term "Company" refers (i) at all times prior to
the closing date of the Reorganization (the "Closing Date"), to the Exchange and
its subsidiaries and the Attorney-in-Fact and its subsidiaries, collectively,
and (ii) at all times after the Closing Date, to The MIIX Group and its
subsidiaries. However, the Exchange and the Attorney-in-Fact are currently
distinct entities. When discussing historical financial information, throughout
this Prospectus, the term "Company" includes the Exchange and its subsidiaries
but excludes the Attorney-in-Fact and its subsidiaries. The historical financial
results of the Attorney-in-Fact are not significant in relation to the
historical financial results of the Exchange.

For purposes of this Prospectus, the term "Insurance Subsidiaries" refers,
at all times prior to the Closing Date, to Lawrenceville Property and Casualty
Co., Inc. ("LP&C"), MIIX Insurance Company of New York ("MIIX New York") and
Lawrenceville Re, Ltd. ("Lawrenceville Re") and, at all times on or after the
Closing Date, to MIIX Insurance, LP&C, Lawrenceville Re and MIIX New York. The
structure of the Company before and after the Reorganization is set forth on
page 9.

THE COMPANY

Based on direct premiums written in 1997, the Company is the leading
provider of medical professional liability insurance in New Jersey and is ranked
10th among medical professional liability insurers in the United States. The
Company currently insures approximately 15,800 physicians and other medical
professionals who practice alone, in medical groups, clinics or in other health
care organizations. The Company also insures more than 80 hospitals, extended
care facilities, health maintenance organizations ("HMOs") and other managed
care organizations (collectively, "health care institutions"). The Company's
business has historically been concentrated in New Jersey but has expanded to
other states in recent years. The Company currently writes policies in 19 states
and the District of Columbia. For the nine months ended September 30, 1998,
approximately 46% of the Company's total direct premiums written were generated
outside of New Jersey. In addition to the Company's medical malpractice
insurance operations, the Company also offers a broad range of complementary
insurance products to its insureds and operates several fee-based consulting and
other businesses.

Medical professional liability insurance, also known as medical malpractice
insurance, insures the physician, other medical professional or health care
institution against liabilities arising from the rendering of, or failure to
render, professional medical services. Under the typical medical professional
liability policy, the insurer also is obligated to defend the insured against
alleged claims.

In 1997, total medical professional liability direct premiums written in
the United States were approximately $5.9 billion, of which $299.3 million were
written in New Jersey, according to data compiled by A.M. Best Company, Inc.
("A.M. Best"), an insurance rating agency. The Company's market share of such
direct premiums written was 2.8% in the United States and 40% in New Jersey
according to A.M. Best. In 1997, medical malpractice insurance accounted for
approximately 98% of the Company's direct premiums written.

5
<PAGE> 9

The Company had total revenues and net income of $190.4 million and $29.1
million, respectively, for 1997 and $197.4 million and $23.4 million,
respectively, for the nine months ended September 30, 1998. As of September 30,
1998, the Company had total assets of $1.6 billion and total equity of $327.2
million.

BUSINESS STRATEGY

The Company has adopted a strategy that it believes will allow it to
compete effectively and create long-term growth. To maximize the strategy's
effectiveness, the Company has adopted the Plan of Reorganization to convert
from a reciprocal insurer to a stock insurer, which will provide the Company
with greater flexibility and access to capital. See "-- The Reorganization and
Distribution." The Company's strategy is to:

- continue to expand geographically by increasing the number of states in
which the Company writes policies;

- enhance product offerings to facilitate "one-stop shopping" for the
Company's extensive customer base;

- expand distribution channels;

- maintain underwriting discipline to seek to assure that profitability,
rather than premium volume, is emphasized;

- take advantage of strategic acquisition opportunities; and

- maintain the Company's historically close relationship with the medical
community.

This strategy is designed to capitalize on the Company's strengths that have
enabled it to achieve its current market position, including (i) its experience
with, commitment to and focus on medical professional liability insurance, (ii)
its history of providing a stable premium environment to its customers, (iii)
the high level of service it delivers to insureds, including the aggressive
defense of claims on their behalf, (iv) its "A (Excellent)" rating by A.M. Best,
(v) its capacity on a per insured basis, (vi) its ability to customize product
features and programs to fit the needs of different customers and (vii) its
close relationship with the medical community.

Expand Geographically. From its inception in 1977 through 1990, all of the
Company's business was written in New Jersey. In 1991, the Company began to
write business in Pennsylvania and in 1996 began its expansion to other states.
Since 1996, the Company has expanded its operations significantly and currently
writes policies in 19 states and the District of Columbia. As a result of this
expansion, the proportion of the Company's direct business written in states
other than New Jersey has grown from approximately 11% in 1996 to 46% in the
nine months ended September 30, 1998. In order to facilitate continued
geographic expansion, the Company is in the process of obtaining authority to
write medical professional liability policies in 10 other states. Over time, the
Company intends to become licensed to write insurance in all 50 states, although
the Company may choose not to write insurance in certain states based on market
or regulatory conditions. In addition, the Company has opened four regional
sales and customer support offices to assist its marketing efforts outside of
New Jersey.

Enhance Product Offerings. In addition to its core medical professional
liability insurance products, the Company has developed other products and
services for health care institutions. Additional products currently offered
include comprehensive liability coverage for medical offices, directors and
officers, managed care errors and omissions, employment practices, fiduciary,
property and worker's compensation. Most of these coverages are underwritten by
the Company; several products are marketed by the Company and underwritten by
other insurance carriers with which the Company has developed strategic
alliances. The Company has also introduced the option for large health care
institutions to purchase excess insurance coverage on a multi-year basis for a
guaranteed prepaid premium. The Company intends to continue to increase the
number of products it offers to its customer base in order to be able to provide
them with a full range of coverages.

6
<PAGE> 10

Expand Distribution Channels. The Company has traditionally written
insurance on a direct basis in New Jersey. In connection with the Company's
expansion outside New Jersey, the Company has increasingly utilized brokers. In
1997, 43% of the Company's direct premiums written were generated through
brokers. By increasing its use of this distribution channel, the Company will be
better positioned to achieve growth. In order to expand further its distribution
channels, the Company intends to develop additional brokerage relationships with
selected brokers who have demonstrated expertise in the medical malpractice
insurance market.

Maintain Underwriting Discipline. The Company's experience with,
commitment to and focus on medical professional liability insurance for over 20
years has allowed it to develop strong knowledge of the market and to build an
extensive database of medical malpractice claims experience. The Company takes
advantage of this specialized expertise in medical professional liability
insurance to set premiums that it believes are appropriate for exposures being
insured. As the Company expands its business, the Company intends to maintain
underwriting discipline and emphasize profitability over premium growth.

Take Advantage of Strategic Acquisition Opportunities. The Company
believes that the Reorganization will better position the Company to make
strategic acquisitions by providing greater access to capital as a source of
financing and creating an attractive stock acquisition currency. The Company
believes that consolidation will continue in the medical professional liability
insurance industry and that opportunities to make a strategic acquisition may
arise, thus providing an effective way to expand the Company's business, product
offerings and geographic scope.

Maintain Close Relationship with the Medical Community. Since its founding
in 1977, the Company has maintained a close relationship with the medical
community. In addition to the active involvement of practicing physicians on
several of the Company's advisory committees, the Company and the medical
professional liability insurance that it offers have the endorsements of
different medical associations. The Company will continue to utilize practicing
physicians on advisory committees to provide management with input on medical
practice patterns, claims, customer needs and other relevant matters. In
addition, the Company will endeavor to maintain its endorsements.

The Company's principal executive offices are located at Two Princess Road,
Lawrenceville, New Jersey 08648. The telephone number of the Company's principal
executive offices is (609) 896-2404.

OVERVIEW OF THE TRANSACTIONS

The Company is contemplating two different transactions -- the
Reorganization and the Public Offering.

- Reorganization. Pursuant to the Plan of Reorganization, the Exchange
will reorganize from a reciprocal insurer to a stock corporation. If the
Reorganization is consummated, Distributees will receive Common Stock or,
in certain cases, cash. The Reorganization will not be consummated
unless, among other things, it is approved at the Members' Meeting. See
"-- The Reorganization and Distribution."

- Public Offering. If the Reorganization is approved at the Members'
Meeting, the Company intends to conduct the Public Offering. Common Stock
to be offered in the anticipated Public Offering will be offered only by
means of a separate prospectus. The Company intends to consummate the
Reorganization and the anticipated Public Offering simultaneously;
however, the Reorganization could be consummated without the anticipated
Public Offering being consummated.

These transactions are described in greater detail below.

THE REORGANIZATION AND DISTRIBUTION

7
<PAGE> 11

Board of Governors of the Exchange (the "Board of Governors"). On October 15,
1997, the Board of Governors adopted the Plan of Reorganization. The key
components of the Plan of Reorganization are set forth below.

- The Exchange has formed a new subsidiary, The MIIX Group. The purpose of
The MIIX Group is to act, if the Reorganization is consummated, as a
holding company for MIIX Insurance and the Exchange's other subsidiaries,
and the Attorney-in-Fact and its subsidiaries. The MIIX Group is the
entity that will issue Common Stock in the Reorganization and the
anticipated Public Offering.

- The MIIX Group has formed a new subsidiary, MIIX Insurance. MIIX
Insurance was formed to assume, if the Reorganization is consummated, all
of the Exchange's assets and liabilities (except for the Common Stock and
cash to be distributed pursuant to the Reorganization), including
insurance policies written by the Exchange. After consummation of the
Reorganization, MIIX Insurance will continue the Exchange's business of
writing insurance policies and the Exchange will be dissolved. In
consideration of the foregoing assignments by the Exchange to MIIX
Insurance, The MIIX Group will issue the Reorganization Shares to the
Exchange.

- The MIIX Group will acquire the Attorney-in-Fact from the Medical Society
for $11 million worth of Common Stock and $100,000 in cash.

- When the Exchange is dissolved, the Reorganization Shares will be
distributed to the Distributees. The distribution of the Reorganization
Shares is registered under the Registration Statement of which this
Prospectus forms a part.

- The Reorganization Shares will be allocated to Distributees in the
proportion that direct premiums earned by the Exchange attributable to
each Distributee, less return premiums, over the three years prior to
October 15, 1997, bear to direct premiums earned by the Exchange
attributable to all Distributees, less return premiums, over the same
period. The total amount of direct premiums earned by the Exchange
attributable to all Distributees, less return premiums, over such
period, was approximately $350 million.

- If a Distributee is allocated fewer than 100 shares of Common Stock, or
if such Distributee's address as shown on the records of the Exchange
is outside the United States or is an address to which mail is
undeliverable, such Distributee will receive cash in lieu of Common
Stock. Distributees who receive cash in lieu of Common Stock will
receive an amount of cash equal to the product of (i) the number of
shares of Common Stock which they would otherwise be entitled to
receive and (ii) the Conversion Value. If a Distributee's address as
shown on the records of the Exchange is an address to which mail is
undeliverable, the Company will hold such Distributee's cash
distribution and will endeavor to contact such Distributee using any
other information in the Company's possession. If the Company is unable
to contact such Distributee, the Company will continue to hold the cash
for the Distributee, subject to any escheat laws that may apply.

- To the extent that a Distributee receives cash in lieu of Common Stock,
the Common Stock otherwise distributable to such Distributee will not
be distributed to other Distributees. Thus, fewer than 12,000,000
shares of Common Stock will be distributed to the Distributees pursuant
to the Reorganization. The Company currently estimates that
approximately 11,900,000 shares of Common Stock will be distributed to
the Distributees pursuant to the Reorganization. Assuming that the
Conversion Value is equal to $15.50 per share, approximately $1.6
million will be distributed to Distributees in lieu of Common Stock.
Cash payments will be made from the Company's existing cash reserves.

Thus, if the Reorganization is consummated, (i) the Exchange will be
dissolved, (ii) the Distributees will receive Common Stock or cash, (iii) MIIX
Insurance will assume the assets and liabilities of the Exchange (except for the
Common Stock and cash to be distributed pursuant to the Reorganization), and
(iv) The MIIX Group will be the holding company for MIIX Insurance and the other
subsidiaries of the Exchange, and for the Attorney-in-Fact and its subsidiaries.
These steps will occur simultaneously and are described in greater detail below
under "The Reorganization."
8
<PAGE> 12

Set forth below is an illustration of the Company's structure both before
and after the proposed Reorganization:

[THE MIIX GROUP FLOW CHART]
- ---------------
* Includes LP&C and MIIX New York.
** Includes Hamilton National Leasing Corporation, Pegasus Advisors, Inc., MIIX
Healthcare Group, Inc., Lawrenceville Re and certain other subsidiaries.

9
<PAGE> 13

On March 5, 1998, the Commissioner (the "Commissioner") of the New Jersey
Department of Banking and Insurance (the "New Jersey Department") approved the
Plan of Reorganization, subject to certain conditions. See "-- Regulatory
Approvals." The consummation of the Reorganization is also subject to certain
other conditions precedent, including that the Exchange receive an opinion from
its tax advisors substantially to the effect that the Reorganization shall
constitute a tax-free reorganization for federal income tax purposes. While such
opinion has been obtained, Distributees are urged to consult their tax advisors
as to the consequences to them of their receipt of Common Stock or cash in
connection with the Reorganization. See "The Reorganization -- Conditions to
Consummation of the Reorganization" and "The Reorganization -- Federal Tax
Consequences."

A share allocation card will accompany each copy of this Prospectus
delivered to Members. The share allocation card shows the estimated whole number
of shares of Common Stock that the applicable Member will receive pursuant to
the Reorganization if the Reorganization is approved and consummated.

INTEREST OF DISTRIBUTEES IN THE MIIX GROUP

The percentage interest in The MIIX Group that Distributees will own if the
Reorganization is consummated will depend on several factors, including whether
or not the anticipated Public Offering is consummated, the price at which Common
Stock may be sold in the anticipated Public Offering, the number of shares of
Common Stock to be issued to the Medical Society in connection with the purchase
of the Attorney-in-Fact, and the number of shares to be sold to certain members
of the Company's management pursuant to the Stock Purchase and Loan Agreements
(as defined below). See "Management -- Stock Purchase and Loan Agreements."
Assuming that the anticipated Public Offering is not consummated simultaneously
with the consummation of the Reorganization, that the number of shares to be
issued in connection with the acquisition of the Attorney-in-Fact is based on an
average trading price of $15.50 per share of Common Stock, and that 11,900,000
shares are distributed to Distributees in connection with the Reorganization,
then Distributees will own approximately 94% of the outstanding Common Stock
immediately after the consummation of the Reorganization. Assuming that the
anticipated Public Offering is consummated simultaneously with the
Reorganization, that Common Stock is sold in the anticipated Public Offering at
a price of $15.50 per share, that 3,000,000 shares of Common Stock are sold in
the anticipated Public Offering, and that 11,900,000 shares are distributed to
Distributees in connection with the Reorganization, then Distributees will own
approximately 76% of the outstanding Common Stock immediately after the
consummation of the Reorganization and the anticipated Public Offering.

RISK FACTORS

Members should carefully consider the factors set forth herein under "Risk
Factors" commencing on page 12, as well as other information contained in this
Prospectus.

REGULATORY APPROVALS

The consummation of the Reorganization requires the approval of the
Commissioner. This approval was granted on March 5, 1998, subject to two
conditions. First, the Commissioner must approve the formation of MIIX
Insurance. This approval was obtained on August 3, 1998. Second, the
Reorganization must be approved by the affirmative vote of not less than
two-thirds of those Members voting in person or by proxy. An appeal has been
filed that challenges the validity of the Commissioner's approval of the
Reorganization. See "Risk Factors -- Actions Opposing the Plan of
Reorganization." On January 14, 1999, the New Jersey Department approved an
amendment to the Plan of Reorganization extending the time for its completion to
September 5, 1999.

Pursuant to the Plan of Reorganization, MIIX Insurance is to assume all the
assets of the Exchange (except for the Common Stock and cash to be distributed
in the Reorganization). However, insurance licenses cannot be transferred.
Accordingly, MIIX Insurance must obtain regulatory approval to become an
admitted carrier in each of the eight states other than New Jersey in which the
Exchange is currently licensed.
10
<PAGE> 14

These states are Connecticut, Delaware, Kentucky, Maryland, Michigan,
Pennsylvania, Vermont and West Virginia. MIIX Insurance has obtained such
approval in Pennsylvania. These states must also approve MIIX Insurance's rates,
rules and policy forms, which the Company expects initially will be a
continuation of those currently used by the Exchange. In addition, Virginia,
which is LP&C's state of domicile, must approve the change in LP&C's ultimate
parent from the Exchange to The MIIX Group, and New York, which is MIIX New
York's state of domicile, must approve the change in the ultimate parent of MIIX
New York from the Exchange to The MIIX Group. Such approval has been obtained in
Virginia. See "Business -- Regulation." Finally, Connecticut and Delaware
approvals and the consent of the reinsurers will be required in connection with
the assignment to MIIX Insurance of the various reinsurance agreements under
which the Exchange cedes risk. Such approval has been obtained in Connecticut.
Other miscellaneous approvals may be required in a number of states.

11
<PAGE> 15

SUMMARY FINANCIAL AND OPERATING DATA

The following table sets forth selected consolidated financial and
operating data for the Company. The income statement data set forth below for
each of the years in the three year period ended December 31, 1997 and the
balance sheet data as of December 31, 1997 and 1996 are derived from the
consolidated financial statements of the Company audited by Ernst & Young LLP,
independent auditors, included elsewhere herein and should be read in
conjunction with, and are qualified by reference to, such statements and the
related notes thereto. The income statement data for the years ended 1993 and
1994 and for the nine months ended September 30, 1997 and 1998, and the balance
sheet data as of December 31, 1993, 1994 and 1995 and as of September 30, 1997
and 1998, are derived from unaudited consolidated financial statements of the
Company which management believes incorporate all of the adjustments necessary
for the fair presentation of the financial condition and results of operations
for such periods. All selected financial data are presented in accordance with
GAAP, except for the item entitled "statutory surplus," which is presented in
accordance with Statutory Accounting Principles ("SAP"). See "Glossary of
Selected Insurance Terms." The statutory surplus amounts are derived from the
audited statutory financial statements of the Company (except with respect to
the information provided for the nine months ended September 30, 1997 and 1998,
which is derived from unaudited statutory financial statements) and, in the
opinion of management, fairly reflect the specified data for the periods
presented.

<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
FOR THE NINE MONTHS
FOR THE YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
------------------------------------------------------------ -----------------------
1993(1) 1994 1995 1996 1997 1997 1998
-------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Direct premiums written................ $115,999 $ 127,647 $ 137,291 $ 143,218 $ 162,430 $ 154,707 $ 198,833
======== ========== ========== ========== ========== ========== ==========
Net premiums earned.................... $ 78,363 $ 85,992 $ 105,256 $ 107,887 $ 123,330 $ 92,170 $ 114,666
Net investment income.................. 48,223 47,765 51,896 49,135 53,892 40,666 47,623
Realized investment gains (losses)..... 29,891 (11,030) 13,149 5,832 10,296 873 33,563
Other revenue.......................... 1,767 2,385 2,807 3,164 2,884 2,231 1,526
-------- ---------- ---------- ---------- ---------- ---------- ----------
Total revenues....................... 158,244 125,112 173,108 166,018 190,402 135,940 197,378
-------- ---------- ---------- ---------- ---------- ---------- ----------
Losses and loss adjustment expenses.... 65,780 55,687 107,889 110,593 120,496 92,709 113,050
Underwriting expenses.................. 11,739 12,777 14,743 17,553 25,415 19,719 27,738
Funds held charges..................... 2,052 4,669 6,996 10,273 13,361 10,595 11,885
Impairment of capitalized system
development
costs................................ -- -- -- -- -- -- 12,656
-------- ---------- ---------- ---------- ---------- ---------- ----------
Total expenses....................... 79,571 73,133 129,628 138,419 159,272 123,023 165,329
-------- ---------- ---------- ---------- ---------- ---------- ----------
Income before income taxes and
cumulative effect of change in
accounting principle................. 78,673 51,979 43,480 27,599 31,130 12,917 32,049
Income tax expense..................... 26,865 16,327 11,402 10,004 2,006 1,451 8,621
-------- ---------- ---------- ---------- ---------- ---------- ----------
Income before cumulative effect of
change in accounting principle....... 51,808 35,652 32,078 17,595 29,124 11,466 23,428
Cumulative effect of change in
accounting principle, net of tax
benefit of ($21,420)................. 39,780 -- -- -- -- -- --
-------- ---------- ---------- ---------- ---------- ---------- ----------
Net income........................... $ 12,028 $ 35,652 $ 32,078 $ 17,595 $ 29,124 $ 11,466 $ 23,428
======== ========== ========== ========== ========== ========== ==========
BALANCE SHEET DATA (AT END OF PERIOD):
Total investments...................... $801,043 $ 788,465 $ 895,146 $ 916,330 $1,026,971 $1,002,523 $1,194,560
Total assets........................... 949,185 1,003,823 1,168,449 1,288,504 1,441,302 1,398,033 1,648,484
Total liabilities...................... 756,744 816,818 913,818 1,026,192 1,131,328 1,106,638 1,321,297
Total equity........................... 192,441 187,005 254,631 262,312 309,974 291,395 327,187
ADDITIONAL DATA:
GAAP ratios:
Loss ratio............................. 83.9% 64.8% 102.5% 102.5% 97.7% 100.6% 98.6%
Expense ratio.......................... 15.0% 14.9% 14.0% 16.3% 20.6% 21.4% 24.2%
-------- ---------- ---------- ---------- ---------- ---------- ----------
Combined ratio......................... 98.9% 79.7% 116.5% 118.8% 118.3% 122.0% 122.8%
======== ========== ========== ========== ========== ========== ==========
Statutory surplus........................ $147,803 $ 156,246 $ 184,651 $ 208,478 $ 242,395 $ 234,228 $ 249,087
======== ========== ========== ========== ========== ========== ==========
Earnings per share (pro forma)(2)........ $ 2.43 $ 0.96 $ 1.95
========== ========== ==========
Book value per share (pro forma)(2)...... $ 25.83 $ 24.28 $ 27.27
========== ========== ==========
</TABLE>

- ---------------

(1) In 1993 the Company eliminated the practice of discounting its liabilities
for unpaid losses and loss adjustment expenses. The cumulative effect of
this change amounted to approximately $61.2 million before income taxes and
had the effect of reducing net income by approximately $39.8 million.

(2) Gives effect to the assumed aggregate issuance of approximately 12,000,000
shares of Common Stock to Distributees. Does not give effect to the sale of
Common Stock in the anticipated Public Offering, to the issuance of Common
Stock to the Medical Society in connection with the acquisition of the
Attorney-in-Fact, or to the sale of Common Stock to certain officers of the
Company pursuant to the Stock Purchase and Loan Agreements.

12
<PAGE> 16

RISK FACTORS

The following risk factors, in addition to other information set forth in
this Prospectus, should be carefully considered by Members in making an
investment decision regarding the Common Stock.

CONCENTRATION OF BUSINESS

Substantially all of the Company's direct premiums written are generated
from medical malpractice insurance policies issued to physicians, medical groups
and health care entities. As a result, negative developments in the economic,
competitive, or regulatory conditions affecting the medical malpractice
insurance industry, particularly as such developments might affect medical
malpractice insurance for physicians, could have a material adverse effect on
the Company's financial condition and results of operations.

For the nine months ended September 30, 1998, approximately 54% of the
Company's 1998 direct premiums were written in New Jersey. The revenues and
profitability of the Company are therefore subject to prevailing regulatory,
economic, competitive and other conditions in New Jersey. See "-- Competition"
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Results of Operations."

There can be no assurance that the Company will be successful in
implementing its strategy to expand and diversify its geographic market. See
"-- Expansion into New Markets."

MEDICAL MALPRACTICE INSURANCE INDUSTRY FACTORS

Many factors influence the financial results of the medical malpractice
insurance industry, some of which are beyond the control of the Company and can
adversely affect the Company's results of operations. These factors include,
among other things, (i) aggressive pricing by competitors, pricing cycles and
overcapacity that result in downward pressure on rates, (ii) greater than
expected severity and frequency of claims, (iii) regulatory actions that reduce
the Company's discretion with respect to the pricing of its products, (iv)
changes in inflation and interest rates that make it difficult for the Company
to make adequate provision for loss and LAE reserves, and (v) judicial and
legislative decisions relating to insurance coverage issues and the amount of
compensation payable with respect to injuries that undermine insurers'
expectations with respect to the level of risk being assumed in a number of
ways, including expansive coverage interpretations, eliminating coverage
exclusions, multiplying limits of coverage, and creating rights for
policyholders not set forth in the insurance contract.

The availability of medical malpractice insurance, or the industry's
underwriting capacity, is determined principally by the industry's level of
capitalization, historical underwriting results, returns on investment and
perceived premium rate adequacy. Historically, the financial performance of the
medical malpractice industry has tended to fluctuate in cyclical patterns
characterized by periods of greater competition in pricing and underwriting
terms and conditions (a "soft insurance market") followed by periods of capital
shortage and lesser competition (a "hard insurance market"). In a soft insurance
market, competitive conditions could result in premium rates and underwriting
terms and conditions which may be below profitable levels. For a number of
years, the medical malpractice insurance industry in New Jersey and in many
other states has experienced a soft insurance market. There can be no assurance
as to whether or when industry conditions will improve or the extent to which
any improvement in industry conditions may improve the Company's results of
operations.

LOSS AND LAE RESERVES

The reserves for losses and loss adjustment expenses ("LAE") established by
the Company represent management's best estimates of the remaining costs of
settling all incurred claims. The estimates are based on assumptions related to
the ultimate cost of settling such claims based on facts and interpretation of

13
<PAGE> 17

circumstances then known, predictions of future events, estimates of future
trends in claims frequency and severity, judicial theories of liability,
legislative activity, and other factors. Establishment of appropriate reserves
is, however, an inherently uncertain process involving estimates of future
losses, and there can be no assurance that currently established reserves will
prove adequate in light of subsequent actual experience. The outcome and
frequency of clusters of cases, such as breast implant or "Fen-Phen" cases,
cannot be predicted by the Company. In addition, the Company's recent expansion
into states other than New Jersey and its utilization of new distribution
channels together with changes in the practice of medicine and healthcare
delivery, such as the emergence of new, larger medical groups that do not have
an established claims history and additional claims resulting from restrictions
on treatment by managed care organizations, may require the Company to adjust
its underwriting and reserving practices. See "-- Changes in Health Care."

There are significant inherent uncertainties in estimating ultimate losses
in the casualty insurance business and these uncertainties are increased in
periods when a company is expanding into new markets with new distribution
channels. The uncertainties are even greater for companies writing long-tail
casualty insurance, such as medical malpractice insurance, and in particular the
occurrence or occurrence-like coverages that make up nearly all of the Company's
current reserves. These additional uncertainties are due primarily to the longer
period of time during which an insured may seek coverage for a claim in respect
of an occurrence or occurrence-like policy as opposed to a claims made policy.
The Company offered traditional occurrence coverage from 1977 through 1986 and
has offered a form of occurrence-like coverage, "modified claims made," from
1987 to the present. The Company's modified claims made policy is called the
Permanent Protection Plan (the "PPP"). Under the PPP, coverage is provided for
claims reported to the Company during the policy period arising from incidents
since inception of the policy. The PPP includes "tail coverage" for claims
reported after expiration of the policy for occurrences during the policy period
and thus is reserved on an occurrence basis. Loss and LAE reserves carried for
this policy and traditional occurrence policies constitute more than 90% of the
Company's gross loss and LAE reserves. See "Business -- Product Offerings." With
the longer claim reporting and development period associated with occurrence and
occurrence-like coverages, loss and LAE reserves are more likely to be impacted
by, among other factors, changes in judicial liability standards and
interpretation of insurance contracts, changes in the rate of inflation and
changes in the propensities of individuals to file claims. See "Business -- Loss
and LAE Reserves."

The Company's reserves are evaluated quarterly and annually and are
adjusted thereafter as circumstances warrant. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Loss and LAE
Reserves." There can be no assurance that management will accurately interpret
claim data in evaluating its loss and LAE Reserves.

There can be no assurance that the Company's ultimate losses and LAE will
not deviate, perhaps substantially, from the estimates reflected in the
Company's financial statements. If the Company's reserves should prove
inadequate, the Company would be required to increase its loss and LAE reserves,
which would cause a corresponding reduction in earnings in the period that such
reserves are increased. This could have a material adverse effect on the
Company's results of operations and financial condition. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations -- Loss
and LAE Reserves" and "Business -- Loss and LAE Reserves."

INVESTMENT PORTFOLIO RISKS AND FLUCTUATIONS OF RESULTS

The Company's investment portfolio consists substantially of fixed maturity
securities. The fair value of these assets fluctuates depending on general
economic and market conditions. With respect to the Company's investments in
fixed maturity securities, the market value of such investments generally
increases or decreases in an inverse relationship with fluctuations in interest
rates. Because all of the Company's fixed maturities are classified as available
for sale, changes in the market or fair value of the Company's fixed maturities
and equity securities are reflected in the Company's financial statements.
Similar treatment is not available for liabilities. If interest rates rise, this
will cause GAAP equity and total comprehensive income to be adversely affected.

ACTIONS OPPOSING THE PLAN OF REORGANIZATION

Challenge to the New Jersey Insurance Commissioner's Order. A group of
current and previous policyholders of the Company retained a law firm that filed
a motion for rehearing with the New Jersey

14
<PAGE> 18

Department and the Commissioner, an action designed to rescind regulatory
approval of the Plan of Reorganization. The motion challenged the authority of
the Commissioner to approve the actions contemplated under the Reorganization,
the fairness of the proposed allocation of Common Stock, and other key elements
of the Reorganization. The New Jersey Department denied the motion, and the
group filed a notice of appeal (the "Appeal") with the Appellate Division of the
Superior Court of New Jersey (the "Appellate Court"). The issues raised by the
Appeal are (i) whether the Commissioner had the authority to approve the Plan of
Reorganization in the absence of any statute expressly permitting reciprocal
insurers to engage in the type of transaction contemplated by the Plan of
Reorganization, (ii) whether adequate notice was given to members of the
Exchange regarding the Reorganization, (iii) whether sufficient evidence was
presented to the Commissioner to support the terms of the Plan of
Reorganization, including the fairness of the proposed allocation of Common
Stock and (iv) whether the New Jersey Department should have granted the request
for a rehearing. The group also filed with the New Jersey Department a motion to
stay (i) the Commissioner's order approving the Plan of Reorganization and (ii)
the denial of the group's motion for rehearing, pending disposition of the
Appeal. The New Jersey Department denied this motion. Following the denial of
the group's motion to stay the effectiveness of the order approving the Plan of
Reorganization, the group filed a motion with the Appellate Court to stay the
order and for a remand of the proceeding to the New Jersey Department for
rehearing. This motion was opposed by the Company and by the Medical Society,
which was allowed to intervene in the Appeal, and both the Company and the
Medical Society filed motions with the Appellate Court for summary disposition
of the Appeal. The group subsequently filed a motion with the Appellate Court to
(i) name certain additional current or former policyholders as appellants, (ii)
allow certain additional current or former policyholders to intervene as
appellants, (iii) declare the appellants to be representatives of a class of New
Jersey physicians who were long-time insureds of the Company, who were members
of the Exchange during the three year look-back period for determining the
eligibility of former members of the Exchange to participate in the
Reorganization, and whose interests are aligned with those of appellants, (iv)
permit notice to be given by the appellants to the members of the proposed
class, at the Company's expense or as otherwise ordered by the Appellate Court
and (v) grant other relief. All of these motions were denied by the Appellate
Court. The appeal of the Commissioner's order approving the Plan of
Reorganization currently remains pending as to the three named appellants that
initially filed the Appeal with the Appellate Court.

Other Pending Actions. Five current members of the Exchange have filed an
action against the Company and others in the Superior Court of New Jersey,
Chancery Division. Those five individual members claim that they should be
certified to represent a class of persons who were members of the Exchange
during both the three-year look back period and prior to the three-year look
back period, and who allegedly would benefit from a formula to allocate stock in
a manner proposed by the plaintiffs. To date, the plaintiffs have not been
certified to represent such a class. Four of the five plaintiffs previously
moved to intervene in the Appeal from the Commissioner's order approving the
Plan of Reorganization. That motion was denied by the Appellate Court. The
plaintiffs are challenging, among other things, the formula adopted by the Board
of Governors to allocate stock to Distributees, the valuation of the
Attorney-in-Fact, certain contractual benefits of key officers (including stock
options, secured loans, long-term incentives, and potential severance benefits),
and actions taken by the Board of Governors and key officers that allegedly
violated such persons' fiduciary duties. The plaintiffs also contend that the
surplus of the Company is greater than the Company has reported. In addition to
their request to be certified to represent a class of members, the plaintiffs
seek to enjoin the vote of Members on the Plan of Reorganization, to require
that the Company provide them priority subscription rights, to compel the
payment of dividends by the Exchange, to enjoin the anticipated Public Offering
and to award non-specified compensatory and punitive damages and attorney fees.
The Company intends to defend vigorously against each of the plaintiffs' claims.
However, no assurance can be given that the Company will prevail on the merits
of plaintiffs' claims or that a court will not grant relief that the plaintiffs
have requested or other relief. Damages that could be awarded if the plaintiffs
were to prevail cannot be predicted and could have a material adverse effect on
the Company. Any injunctive relief that delays the vote of the Members on the
Plan of Reorganization or the completion of the Plan of Reorganization or other
injunctive relief requested by the plaintiffs could have a material adverse
effect on the Company.

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<PAGE> 19

Other Potential Actions. Other persons could bring actions against the
Company for a variety of reasons, including but not limited to the relative
allocation of Common Stock among Distributees, the method by which the Company
determined which members of the Exchange would be Distributees, or the absence
of any applicable statute or published court decision expressly permitting a
reciprocal insurer to reorganize as a stock company. Final adjudication of any
such case could take a number of years and the parties could appeal any final
judgment. Such appeals, if made, could require a number of years to be decided.
If any such action is brought, the Company intends to vigorously defend the
Reorganization. However, no assurance can be given that a court would not enjoin
the holding of the Members' Meeting or the distribution of Common Stock pursuant
to the Plan of Reorganization, or that the Company will ultimately prevail on
the merits. Damages awarded under any such suit cannot be predicted and could
have a material adverse effect on the Company. If the Reorganization is
completed, but the authority of the New Jersey Department to approve conversion
from a reciprocal insurer to a stock company is overturned, the remedy a court
might grant is uncertain. Such remedy could have a material adverse effect on
the Company and its stockholders.

COMPETITION

The physician professional liability insurance market in the United States
is highly competitive. According to A.M. Best, in 1996 there were 357 companies
nationally that wrote medical professional liability insurance and, of those,
112 were writing in New Jersey. In New Jersey, where approximately 54% of the
Company's 1998 direct premiums were written for the nine months ended September
30, 1998, the Company's principal competitor is Princeton Insurance Companies.
In New Jersey and other states, the Company's principal competitors include CNA
Insurance Group, Frontier Insurance Group, Inc., PHICO Insurance Company and St.
Paul Companies. These companies rank among the top 20 medical malpractice
insurers nationally and are actively engaged in soliciting insureds in the
states in which the Company writes insurance. In addition, as the Company
expands into new states, it may face strong competition from local carriers that
are closely focused on narrow geographic markets. The Company expects to
encounter such competition from doctor-owned insurance companies and commercial
companies in other states as it carries out its expansion plans. Many of the
Company's current and potential competitors may have greater financial resources
than the Company and may seek to acquire market share by decreasing pricing for
their products below prevailing market rates, thereby reducing profitability.
Several insurance companies that have greater financial resources than the
Company have started to write medical malpractice insurance in New Jersey. There
can be no assurance that the Company will be able to compete effectively against
these potential and existing competitors.

The hospital professional liability insurance market is also extremely
competitive. Most of the Company's principal insurance company competitors for
physicians and medical groups also now actively compete in the hospital
professional liability insurance market. Moreover, the Company's primary
competitor in New Jersey was founded to provide professional liability coverage
to hospitals, while the Company traditionally served the individual physician
market. The Company also believes that the number of health care entities that
insure their affiliated physicians through self-insurance may increase, reducing
the market for physician professional liability insurance. These competitive
factors may adversely affect the Company's results of operations.

As the Company expands into new product lines and new geographic markets,
it will compete with established companies in such markets, many of which will
have existing relationships with the physicians, medical groups, hospitals, and
other health care providers that the Company will seek to insure. Competitors
may also have existing relationships with insurance brokers or other
distribution channels. These factors may adversely affect the Company's
financial condition and results of operations. See "Business -- Competition."

CHANGES IN HEALTH CARE

In recent years, a number of factors related to the emergence of "managed
care" have negatively impacted or threaten to impact the medical practice and
economic independence of physicians. Physicians have found it more difficult to
conduct a traditional fee-for-service practice and many have been forced to join
or affiliate with managed care organizations, health care delivery systems or
practice management organizations. This consolidation has begun to reduce the
role of the physician and the medical group in the medical malpractice insurance
purchasing decision. In addition, the consolidation could reduce primary medical

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<PAGE> 20

malpractice insurance premiums paid by doctors and hospitals, as larger health
care systems generally retain more risk by accepting higher deductibles and
self-insured retentions or form their own captive insurance companies.
Furthermore, larger health care systems may possess sufficient bargaining power
to negotiate discounted rates. These factors could have a material adverse
effect on the Company's profitability.

EXPANSION INTO NEW MARKETS

The Company's strategy includes expanding and diversifying its product
lines and geographic markets to meet the insurance needs of the changing health
care market, while maintaining its traditional personalized service for
physicians and medical groups, and customized products for health care
institutions. Such expansion and diversification are contingent on various
factors, including, among others, the availability of adequate capital,
marketing success, the ability to profitably underwrite such expanded and
diversified business, and applicable regulatory requirements. The Company's
business expansion may also occur through the acquisition of, or combination
with, other medical professional liability insurers or other entities. There can
be no assurance that any such acquisition or combination will be profitable for
the Company. There can be no assurance that the Company's expansion will be
successful.

As the Company expands and diversifies its product lines into new areas,
the Company will be required to retain qualified personnel with the requisite
experience in such areas. Competition for such personnel may be intense, and
there can be no assurance that the Company will be able to attract and retain
such personnel. In addition, the Company will have to seek distribution channels
for its new products. This may increase the Company's dependence on insurance
brokers and other intermediaries. There can be no assurance that the Company
will be able to develop such distribution channels or maintain satisfactory
relationships with insurance brokers and other intermediaries.

A.M. BEST RATINGS

Ratings have become an increasingly important factor in establishing the
competitive position of insurance companies. The Company is rated "A
(Excellent)" by A.M. Best, the third highest rating of 16 ratings assigned by
A.M. Best. A.M. Best's ratings reflect its opinion of an insurance company's
financial strength, operating performance, strategic position, and ability to
meet its obligations to policyholders, and are not evaluations directed to
purchasers of an insurance company's securities. In March 1998, A.M. Best
reaffirmed the Company's "A (Excellent)" rating. The Company's rating is subject
to periodic review by A.M. Best and cannot be assured. If the Company's rating
is reduced from its current level by A.M. Best, the Company's results of
operations could be adversely affected. See "Business -- A.M. Best Ratings."

REINSURANCE

The amount and cost of reinsurance available to companies specializing in
medical professional liability insurance are subject, in large part, to
prevailing market conditions beyond the control of the Company. The Company's
ability to provide professional liability insurance at competitive premium rates
and coverage limits on a continuing basis will depend in part on its ability to
secure adequate reinsurance in amounts and at rates that are commercially
reasonable. Moreover, the Company must obtain the consents of its current
reinsurers to assign the reinsurance contracts written with the Exchange to MIIX
Insurance. There can be no assurance that the Company will be able to obtain its
reinsurers' consents or to secure adequate reinsurance, and any failure to
obtain such consents or reinsurance could have a material adverse effect on the
Company. Furthermore, the Company is subject to a credit risk with respect to
its reinsurers because reinsurance does not relieve the Company of liability to
its insureds for the risks ceded to reinsurers. A significant reinsurer's
inability to make payment under the terms of a reinsurance treaty could have a
material adverse effect on the Company. See "Business -- Reinsurance."

HOLDING COMPANY STRUCTURE; LIMITATION ON DIVIDENDS

The MIIX Group is an insurance holding company whose assets after the
Reorganization will consist primarily of all the outstanding capital stock of
MIIX Insurance, the Attorney-in-Fact, and downstream subsidiaries of those
companies. As an insurance holding company, The MIIX Group's ability to meet its

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<PAGE> 21

obligations and to pay dividends, if any, will largely depend on the receipt of
sufficient funds from its subsidiaries. The payment of dividends to The MIIX
Group by the Insurance Subsidiaries is subject to general limitations imposed by
applicable insurance laws. See "Business -- Regulation -- Holding Company
Regulation" and "Business -- Regulation -- Regulation of Dividends from
Insurance Subsidiaries."

ANTI-TAKEOVER PROVISIONS

The MIIX Group's certificate of incorporation and by-laws include
provisions that may be deemed to have anti-takeover effects and may delay,
defer, or prevent a takeover attempt that stockholders may consider to be in
their best interests. These provisions include: a Board of Directors consisting
of three classes with staggered terms; authorization to issue up to 50,000,000
shares of preferred stock, par value $.01 per share (the "Preferred Stock"), in
one or more series, with such rights, obligations, powers, and preferences as
The MIIX Group Board of Directors ("The MIIX Group Board") may provide; a
limitation which permits only The MIIX Group Board, the Chairman or Vice
Chairman of The MIIX Group Board or the Chief Executive Officer (or in the event
of his or her absence or disability, any Vice President) of The MIIX Group, to
call a special meeting of stockholders; a prohibition against stockholders
acting by written consent; provisions allowing directors to be removed only for
cause and only by the affirmative vote of a majority of holders of the
outstanding shares of voting securities; provisions allowing The MIIX Group
Board to increase the size of the Board and fill vacancies and newly created
directorships; and certain advance notice procedures for nominating candidates
for election to The MIIX Group Board and for proposing business before a meeting
of stockholders. In addition, state insurance holding company laws that will be
applicable to The MIIX Group generally provide that no person may acquire
control of The MIIX Group without the prior approval of appropriate insurance
regulatory authorities. See "Management," "Description of Capital
Stock -- Delaware Law and Certain Charter and Bylaw Provisions," and
"Business -- Regulation -- Holding Company Regulation."

REGULATORY AND RELATED MATTERS

Insurance companies are subject to supervision and regulation by the state
insurance authority in each state in which they transact business. Such
supervision and regulation relate to numerous aspects of an insurance company's
business and financial condition, including limitations on lines of business,
underwriting limitations, the setting of premium rates, the establishment of
standards of solvency, statutory surplus requirements, the licensing of insurers
and agents, concentration of investments, levels of reserves, the payment of
dividends, transactions with affiliates, changes of control, and the approval of
policy forms. Such regulation is concerned primarily with the protection of
policyholders' interests rather than stockholders' interests. See
"Business -- Regulation."

State regulatory oversight and various proposals at the federal level may
in the future adversely affect the Company's results of operations. In recent
years the state insurance regulatory framework has come under increased federal
scrutiny, and certain state legislatures have considered or enacted laws that
alter and, in many cases, increase state authority to regulate insurance
companies and insurance holding company systems. Furthermore, the National
Association of Insurance Commissioners (the "NAIC") and state insurance
regulators are reexamining existing laws and regulations, which in many states
has resulted in the adoption of certain laws that specifically focus on
insurance company investments, issues relating to the solvency of insurance
companies, risk-based capital ("RBC") guidelines, interpretations of existing
laws, the development of new laws and the definition of extraordinary dividends.
See "Business -- Regulation -- Risk-Based Capital,"
"Business -- Regulation -- NAIC-IRIS Ratios," and
"Business -- Regulation -- Regulation of Investments." Changes in or the
adoption of laws or regulations regarding such issues or other matters,
including the rates charged for insurance coverage, could have a material
adverse effect on the operations of the Company. State agencies and officials
responsible for administering such laws and regulations have broad powers, which
they exercise primarily for the protection of policyholders.

STATE INSURANCE REGULATORY APPROVALS

Because New Jersey's statutory scheme does not have an explicit process for
converting a reciprocal insurance exchange into a stock company, the conversion
will be accomplished through two assumption

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<PAGE> 22

agreements by which the Exchange will transfer its ongoing business, assets and
liabilities (except for the Common Stock and cash to be distributed pursuant to
the Reorganization) to MIIX Insurance. However, insurance licenses cannot be
transferred. Accordingly, it will be necessary for MIIX Insurance to gain state
regulatory approval to become an admitted carrier in each of the eight states
other than New Jersey in which the Exchange is currently licensed. These states
are Connecticut, Delaware, Kentucky, Maryland, Michigan, Pennsylvania, Vermont
and West Virginia. MIIX Insurance has obtained such approval in Pennsylvania.
These states must also approve MIIX Insurance's rates, rules and policy forms,
which the Company expects will initially be a continuation of those currently
used by the Exchange. In addition, Virginia, which is LP&C's state of domicile,
must approve the change in LP&C's ultimate parent from the Exchange to The MIIX
Group, and New York, which is MIIX New York's state of domicile, must approve
the change in the ultimate parent of MIIX New York from the Exchange to The MIIX
Group. Such approval has been obtained in Virginia. See
"Business -- Regulation." Finally, Connecticut and Delaware approvals and the
consent of the reinsurers will be required in connection with the assignment to
MIIX Insurance of the various reinsurance agreements under which the Exchange
cedes risk. Such approval has been obtained in Connecticut. Other miscellaneous
approvals may be required in a number of states. If these approvals are not
granted prior to the Closing Date, it may prevent the consummation of the
Reorganization as currently contemplated and, because MIIX Insurance will not be
authorized to write new business in such states, may have an adverse effect on
the Company.

SHARES ELIGIBLE FOR FUTURE SALE

All of the shares of Common Stock issued in the Reorganization and the
anticipated Public Offering (except for the shares issued to the Medical Society
pursuant to the Plan of Reorganization, the directors and officers of the
Company and other affiliates of the Company) will be eligible for immediate sale
in the public market. No prediction can be made as to the effect, if any, that
future sales of shares, or the availability of shares for future sale, will have
on the market price of the Common Stock prevailing from time to time. Sales of
substantial amounts of such shares of Common Stock in the public market
following the consummation of the Reorganization and the anticipated Public
Offering or the perception that such sales could occur could adversely affect
the market price of the Common Stock and could impair the Company's future
ability to raise capital through an offering of its equity securities. See
"Shares Eligible for Future Sale."

LACK OF PRIOR PUBLIC MARKET FOR COMMON STOCK

Prior to the Reorganization and the anticipated Public Offering, there has
been no public market for the Common Stock and there can be no assurance that an
active trading market will develop or be sustained. The Common Stock has been
approved for listing on the NYSE, subject to official notice of issuance.
However, there can be no assurance as to the price at which Common Stock will
trade on the NYSE. In addition, factors such as the variations in the Company's
financial results or other developments affecting the Company could cause the
market price of the Common Stock to fluctuate significantly after the
anticipated Public Offering.

Completion of the anticipated Public Offering is not a condition to the
effectiveness of the Plan of Reorganization. If the Plan of Reorganization
becomes effective, but the anticipated Public Offering does not occur, the
Company nevertheless expects to list the Common Stock on the NYSE. However, in
the absence of the anticipated Public Offering, there can be no assurance that
an active or orderly trading market for the Common Stock will develop. The
absence of an active or orderly trading market could have an adverse effect on
the market price of the Common Stock subsequent to the Closing Date and the
ability of the Company to raise additional capital in the equity markets in the
future.

FAILURE TO CONSTITUTE A TAX-FREE REORGANIZATION

PricewaterhouseCoopers LLP (the "Tax Advisor") has delivered an opinion
(the "Tax Opinion") stating that consummation of the Plan of Reorganization
shall constitute a tax-free reorganization within the meaning of Section 368(a)
of the Internal Revenue Code of 1986, as amended. The Internal Revenue Service
(the "IRS") and the courts have not previously considered the treatment of a
transaction in the form described

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<PAGE> 23

herein. The Tax Opinion represents the Tax Advisor's best judgment of how a
court would rule. However, the opinion is not binding upon either the IRS or any
court. A ruling has not been, and will not be, sought from the IRS with respect
to the U.S. federal income tax consequences of the consummation of the Plan of
Reorganization. Accordingly, the IRS and/or a court could reach a conclusion
that differs from the conclusions in the Tax Opinion. In that event, it is
possible that the consummation of the Plan of Reorganization would be treated as
a taxable transaction, in which case the Exchange and Members receiving Common
Stock would recognize taxable gain. See "The Reorganization -- Federal Tax
Consequences."

DEPENDENCE ON KEY PERSONNEL

The Company's success since 1990 has been significantly dependent on the
contributions of Daniel Goldberg, the Company's President and Chief Executive
Officer, and the loss of his services could have a material adverse effect on
the Company's business, results of operations and financial condition. The
Company's success also depends to a significant extent on a number of other key
employees of the Company and the loss of their services could also have a
material adverse effect on the Company. In addition, the Company believes that
its future success will depend in part on its ability to attract and retain
additional highly skilled professional, managerial, sales, and marketing
personnel. Competition for such personnel is intense. There can be no assurance
that the Company will be successful in attracting and retaining the personnel
that it requires for its business and planned growth.

GUARANTY FUND ASSESSMENTS AND OTHER LIABILITIES

Property and casualty insurers like the Company are subject to assessments
in most states where they are licensed for the provision of funds necessary for
the settlement of covered claims under certain policies of impaired, insolvent
or failed insurance companies. Maximum contributions required by law in any one
year vary by state, and have historically been between 1% and 2% of annual
premiums written. The Company cannot predict with certainty the amount of future
assessments. Significant assessments could have a material adverse effect on the
Company's financial condition or results of operations.

In addition to guaranty fund assessments, there is a possibility that the
Company could be required to pay some portion of the estimated $2 billion
liability of Pennsylvania's Medical Professional Liability Catastrophe (CAT)
Loss Fund. This fund provides a level of malpractice coverage above that of
primary carriers. A study is currently under way to assess the level of unfunded
liability and recommend legislative solutions. Options include a bond issue;
primary carriers assuming some of the fund's liability; major reinsurers funding
the liability; or continuing current surcharges until the liability is
eliminated. A determination that primary carriers are to share the fund's
liability could have a material adverse effect on the Company.

YEAR 2000; INFORMATION TECHNOLOGY

Because certain computer software programs have historically been designed
to use a two-digit code to identify the year for date-sensitive material, such
programs may not properly recognize post twentieth century dates. This could
result in system failures and improper information processing that could disrupt
the Company's business operations.

The Company began evaluating this issue in 1996 in connection with an
overall evaluation of the Company's systems and during 1997 assigned a project
manager to study the Company's information systems and computers to determine
whether they will appropriately handle post-1999 date codes. The identification
of compliance issues included the Company's internal systems and processes, as
well as exposure from service providers, brokers and other external business
partners. Software applications, hardware and information technology ("I/T")
infrastructure and non I/T systems such as the Company's telephone, security and
heating and ventilating systems have been reviewed to identify those requiring
upgrading or replacement to improve current computing capabilities and to ensure
that they are Year 2000 compliant. In the course of evaluating the Year 2000
readiness of its internal systems, the Company determined that its claims
administration system is not Year 2000 compliant. The Company has purchased a
replacement system that the vendor has represented to be Year 2000 compliant and
is expected to be operational in 1999. There can be

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<PAGE> 24

no assurance that the replacement claims administration system will function as
represented by the vendor or that the installation itself will not cause
disruption to the Company's operations that could have a material adverse effect
on its results of operations.

The Company has not completed its review of its I/T and non I/T systems or
its investigation of whether its service providers, brokers and other external
business partners may experience Year 2000 problems that could affect the
Company. The Company expects to complete its Year 2000 compliance efforts in
1999. However, there can be no assurance that the Company will not experience
failure of its I/T or non I/T systems (including, without limitation, the
replacement claims administration system), which may result in business
interruption, financial loss, reputational loss or liability. There can be no
assurance that the Company's service providers, brokers and other external
business partners will not experience Year 2000 problems. Such problems may
disrupt important services upon which the Company depends, such as
telecommunications or electrical power. As the Company continues its Year 2000
compliance efforts, it may discover unforeseen problems that could require
costly remedies. Any of these circumstances could have a material adverse effect
on the Company's operations. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Year 2000."

The Company is significantly dependent upon effective I/T systems. Any
failure in, or failure to timely update, the Company's I/T systems could have a
material adverse effect on the Company's results of operations or financial
condition. The Company is in the process of upgrading its computer systems that
relate to policy administration, billing, claims, and other aspects of the
Company's business. There can be no assurance that such upgrades will be
implemented without causing significant disruption to the Company's operations.
Any such disruptions could have a material adverse effect on the Company's
ability to conduct its operations and could increase administrative expenses.

The Company may be adversely affected if Year 2000 issues result in
additional claims being made against the Company's insureds. Such claims could
have a material adverse effect on the Company. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Year 2000."

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THE MEMBERS' MEETING

TIME, DATE AND PLACE

The Members' Meeting will be held at the offices of the Attorney-in-Fact,
Two Princess Road, Lawrenceville, New Jersey on March 17, 1999 at 10:00 am. At
the Members' Meeting, Members will consider and vote upon a proposal to approve
(i) an amendment to the Rules and Regulations of the Exchange to permit the
dissolution of the Exchange (the "Amendment") and (ii) the Plan of
Reorganization.

ADOPTION DATE, QUORUM AND VOTE REQUIRED

Only persons who were Members of the Exchange on October 15, 1997, the date
on which the Board of Governors adopted the Plan of Reorganization, are entitled
to vote at the Members' Meeting. There are approximately 10,700 such Members.
Each such Member is entitled to one vote at the Members' Meeting.

The presence, either in person or by proxy, of 101 Members is necessary to
constitute a quorum at the Members' Meeting. The affirmative vote of not less
than two-thirds of the Members present in person or by proxy at the Members'
Meeting is required to approve and adopt the Amendment and the Plan of
Reorganization.

THE AMENDMENT

As part of the Plan of Reorganization, the Exchange will dissolve. At the
time of the adoption of the Plan of Reorganization, the Exchange's Rules and
Regulations did not contain any provision expressly authorizing such
dissolution. Therefore, the Board of Governors has approved an amendment to the
Rules and Regulations to permit such dissolution, and the Company is seeking the
Members' approval of such amendment.

RECOMMENDATION OF THE BOARD OF GOVERNORS

The Board of Governors believes that the Plan of Reorganization is fair to,
and in the best interests of, the Exchange and its members. The Board of
Governors has unanimously adopted the Plan of Reorganization and recommends that
Members vote FOR the proposal to approve and adopt the Amendment and the Plan of
Reorganization. See "The Reorganization -- Recommendation of the Board of
Governors; Reasons for the Reorganization."

INTERESTS OF MEMBERS OF THE BOARD OF GOVERNORS IN THE REORGANIZATION

Each member of the Board of Governors is a Member who will be entitled to
vote upon the Amendment and the Reorganization and to receive Common Stock
pursuant to the Reorganization. The estimated number of shares that each member
of the Board of Governors will receive pursuant to the Reorganization is set
forth below. See "Management" and "Ownership of Common Stock."

PROXIES

All proxies that are properly executed and returned to the Exchange will be
voted at the Members' Meeting or any adjournments and postponements thereof in
accordance with the instructions thereon, or if no instructions are given, will
be voted for approval and adoption of the Amendment and the Plan of
Reorganization. Members are urged to mark the boxes on the proxy to indicate how
they wish to vote. A Member may revoke a proxy at any time before it is voted by
submitting a later dated proxy, by appearing in person at the Members' Meeting
and voting thereat, or by delivering a written notice to the Secretary of the
Exchange stating that the proxy is revoked.

PROXY SOLICITATION

The Exchange will bear the cost of soliciting proxies. In addition to
solicitation by mail, proxies may be solicited by the directors, officers and
employees of the Attorney-in-Fact, who will not be specifically

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<PAGE> 26

compensated for such services, by personal interview, telephone or other
telecommunication. In addition, the Exchange has retained D.F. King & Co. to
assist in soliciting proxies for the Members' Meeting at a fee of approximately
$7,500 plus certain expenses.

THE REORGANIZATION

The following discussion of the Reorganization is qualified in its entirety
by reference to the Plan of Reorganization, a copy of which is attached as Annex
A hereto.

GENERAL

The Exchange is currently organized as a New Jersey reciprocal insurer, and
accordingly has no stockholders. Since the Exchange's inception, the business of
the Exchange has been managed by the Attorney-in-Fact, which is a wholly owned
subsidiary of the Medical Society, under the supervision of the Board of
Governors. On October 15, 1997, the Board of Governors adopted the Plan of
Reorganization. The key components of the Plan of Reorganization are set forth
below.

- The MIIX Group will acquire the Attorney-in-Fact from the Medical Society
for $11 million worth of Common Stock and $100,000 in cash.

- When the Exchange is dissolved, the Reorganization Shares will be
distributed to Distributees. The distribution of the Reorganization
Shares is registered under the Registration Statement of which this
Prospectus forms a part.

- If a Distributee is allocated fewer than 100 shares of Common Stock,
or if such Distributee's address as shown on the records of the
Exchange is outside the United States or is an address to which mail
is undeliverable, such Distributee will receive cash in lieu of Common
Stock. Distributees who receive cash in lieu of Common Stock will
receive an amount of cash equal to the product of (i) the number of
shares of Common Stock which they would otherwise be entitled to
receive and (ii) the Conversion Value. If a Distributee's address as
shown on the records of the Exchange is an address to which mail is
undeliverable, the Company will hold such Distributee's cash
distribution and will endeavor to contact such Distributee using any
other information in the Company's possession. If the Company is
unable to contact such Distributee, the Company will continue to hold
the cash for the Distributee, subject to any escheat laws that may
apply.

- To the extent that a Distributee receives cash in lieu of Common
Stock, the Common Stock otherwise distributable to such Distributee
will not be distributed to other Distributees. Thus,

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<PAGE> 27

fewer than 12,000,000 shares of Common Stock will be distributed to
the Distributees pursuant to the Reorganization. The Company currently
estimates that 11,900,000 shares of Common Stock will be distributed
to the Distributees pursuant to the Reorganization. Assuming that the
Conversion Value is equal to $15.50, approximately $1.6 million will
be distributed to Distributees in lieu of Common Stock. Cash payments
will be made from the Company's existing cash reserves.

Thus, if the Reorganization is consummated, (i) the Exchange will be
dissolved, (ii) the Distributees will receive Common Stock or cash, (iii) MIIX
Insurance will assume the assets and liabilities of the Exchange (except for the
Common Stock and cash to be distributed pursuant to the Reorganization), and
(iv) The MIIX Group will be the holding company for MIIX Insurance and other
subsidiaries of the Exchange, and for the Attorney-in-Fact and its subsidiaries.
These steps will occur simultaneously and are described in greater detail below.

On March 5, 1998, the Commissioner approved the Plan of Reorganization
subject to two conditions. First, the Commissioner must approve the formation of
MIIX Insurance. This approval was obtained on August 3, 1998. Second, in
accordance with the terms of the Plan of Reorganization, the Members must
approve the Plan of Reorganization by the affirmative vote of not less than
two-thirds of those Members voting in person or by proxy. A copy of the
Commissioner's Order Approving the Plan of Reorganization is attached as Annex B
hereto. An appeal has been filed that challenges the validity of the
Commissioner's approval of the Reorganization. See "Risk Factors -- Actions
Opposing the Plan of Reorganization." On January 14, 1999, the New Jersey
Department approved an amendment to the Plan extending the time for its
completion to September 5, 1999.

PURPOSE

The principal purposes of the Reorganization are to enhance the Company's
strategic and financial flexibility and to provide Distributees with marketable
stock in The MIIX Group. As a reciprocal insurer, the Company can increase its
capital primarily through retained surplus. The Company believes that in the
long term this source will not be sufficient to meet its business objectives. As
a stock company, the Company will have greater access to the capital markets.
The Company believes that such access will enhance the Company's ability to
expand its existing business and to develop new business opportunities. In
addition, as a stock company the Company will have a well-recognized and
flexible organizational form that may facilitate strategic acquisitions.

TRANSFER OF ASSETS AND LIABILITIES TO MIIX INSURANCE

Pursuant to an Assumption Reinsurance and Administration Agreement to be
entered into among the Exchange, The MIIX Group and MIIX Insurance (the
"Reinsurance Assignment"), all the rights and obligations under policies written
by the Exchange, and all instruments of reinsurance ceded by the Exchange in
respect of such policies, will be transferred to MIIX Insurance in consideration
of the transfer by the Exchange to MIIX Insurance of invested assets, premium
receivables, reinsurance recoverables and other assets having a value equal to
the liabilities transferred under the Reinsurance Assignment. Following the
effectiveness of the Reinsurance Assignment, MIIX Insurance will become directly
liable under the assumed direct written policies and will service and administer
those policies. The Reinsurance Assignment's effectiveness is conditioned upon
the approval of the Commissioner and the commissioners of insurance of the
states of Connecticut and Delaware. Such approval has been obtained in
Connecticut. The Commissioner's approval was obtained in connection with the
approval of the Plan of Reorganization. As promptly as possible following the
effectiveness of the Reinsurance Assignment, MIIX Insurance will mail to each
policyholder of the Exchange (and to former policyholders with claims
outstanding on the Closing Date or arising after the Closing Date) a certificate
of assumption notifying them that their policies have been transferred to MIIX
Insurance. Pursuant to an Assignment and Assumption Agreement to be entered into
among the Exchange, The MIIX Group and MIIX Insurance (the "Asset Assignment"
and, with the Reinsurance Assignment, the "Assumption Agreements"), MIIX
Insurance will assume all the non-insurance liabilities of the Exchange, and the
Exchange will transfer to MIIX Insurance all of the non-insurance operating
assets and properties

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<PAGE> 28

used or held for use in connection with, necessary for, or material to, the
business and operations currently conducted by the Exchange. Common Stock and
cash to be distributed to Distributees is excluded from such transfer. In
consideration of the foregoing assignments by the Exchange, The MIIX Group will
issue the Reorganization Shares to the Exchange. See "-- General." The Asset
Assignment is conditioned upon the approval of the Commissioner, which has
already been obtained in connection with the Commissioner's approval of the Plan
of Reorganization.

The transfer of assets and liabilities from the Exchange to MIIX Insurance
will be accounted for on a historical cost basis, with no gain or loss
recognition resulting from the transfer.

SHARES OF COMMON STOCK ISSUED TO DISTRIBUTEES

In connection with the Reorganization, 12,000,000 shares of Common Stock
will be available for allocation to Distributees. "Distributees" are Persons who
were Named Insureds (regardless of the person or group who paid the premiums) in
one or more Policies that were In Force on the Adoption Date and Persons who
were at any time during the three-year period prior to the Adoption Date Named
Insureds in one or more Policies. Corporate policyholders and other
policyholders who are not natural persons are not Distributees. See "Glossary of
Reorganization Terms."

Distributees will be allocated shares of Common Stock if the Plan of
Reorganization is approved by the Members at the Members' Meeting, and the other
conditions to the consummation of the Reorganization are met. See "-- Conditions
to Consummation of the Reorganization." Each Distributee will be allocated a pro
rata share of the 12,000,000 shares of Common Stock available for allocation to
Distributees, in the proportion that direct premiums earned by the Exchange
attributable to such Distributee, less return premiums, over the three years
prior to October 15, 1997, bear to direct premiums earned by the Exchange
attributable to all Distributees, less return premiums, over the same period.
The number of shares allocated will be rounded to the nearest integer, with
one-half share allocation being rounded upward. Therefore, the actual number of
shares so allocated will not precisely equal each Distributee's pro rata share
of the Exchange's earned premiums over the three years prior to October 15,
1997. The total amount of direct premiums earned by the Exchange attributable to
all Distributees, less return premiums, over the three years prior to October
15, 1997 was approximately $350 million. Distributees who (i) have as their
address for mailing purposes shown on the records of the Company an address
outside the United States of America or an address to which mail is
undeliverable, or (ii) are allocated a number of shares of Common Stock fewer
than 100, will be paid cash in lieu of such shares. The gross amount of cash
paid in consideration for each such share shall equal the Conversion Value. If a
Distributee's address as shown on the records of the Exchange is an address to
which mail is undeliverable, the Company will hold such Distributee's cash
distribution and will endeavor to contact such Distributee using any other
information in the Company's possession. If the Company is unable to contact
such Distributee, the Company will continue to hold the cash for the
Distributee, subject to any escheat laws that may apply. To the extent that a
Distributee receives cash in lieu of Common Stock, the Common Stock otherwise
distributable to such Distributee will not be distributed to other Distributees.
Thus, fewer than 12,000,000 shares of Common Stock will be distributed to the
Distributees pursuant to the Reorganization. The Company currently estimates
that 11,900,000 shares of Common Stock will be distributed to the Distributees
pursuant to the Reorganization. Assuming that the Conversion Value is equal to
$15.50 per share, approximately $1.6 million will be distributed to Distributees
in lieu of Common Stock. Cash payments will be made from the Company's existing
cash reserves.

Following the Closing Date, the Company will mail to each Distributee
(other than Distributees receiving cash) a stock certificate representing the
shares of Common Stock distributed to such Distributee. Distributees will not be
able to sell such shares until they receive their stock certificate.

The par value of the Common Stock distributed to Distributees will be
accounted for as a reallocation among the equity components of the Company from
retained earnings to additional paid in capital, and will have no impact on the
total equity of the Company. The amount distributed to Distributees in lieu of
Common Stock will be accounted for as a reduction to retained earnings.

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<PAGE> 29

INTEREST OF DISTRIBUTEES IN THE MIIX GROUP

The percentage interest in The MIIX Group that Distributees will own if the
Reorganization is consummated will depend on several factors, including whether
or not the anticipated Public Offering is consummated, the price at which Common
Stock may be sold in the anticipated Public Offering, the number of shares of
Common Stock to be issued to the Medical Society in connection with the purchase
of the Attorney-in-Fact, and the number of shares to be sold to certain members
of the Company's management pursuant to the Stock Purchase and Loan Agreements.
See "Management -- Stock Purchase and Loan Agreements." Assuming that the
anticipated Public Offering is not consummated simultaneously with the
consummation of the Reorganization, that the number of shares to be issued in
connection with the acquisition of the Attorney-in-Fact is based on an average
trading price of $15.50 per share of Common Stock, and that 11,900,000 shares
are distributed to Distributees in connection with the Reorganization, then
Distributees will own approximately 94% of the outstanding Common Stock
immediately after the consummation of the Reorganization. Assuming that the
anticipated Public Offering is consummated simultaneously with the
Reorganization, that Common Stock is sold in the anticipated Public Offering at
a price of $15.50 per share, that 3,000,000 shares of Common Stock are sold in
the anticipated Public Offering, and that 11,900,000 shares are distributed to
Distributees in connection with the Reorganization, then Distributees will own
approximately 76% of the outstanding Common Stock immediately after the
consummation of the Reorganization and the anticipated Public Offering.

ACQUISITION OF THE ATTORNEY-IN-FACT

Pursuant to a Stock Purchase Agreement dated as of October 15, 1997,
between The MIIX Group and the Medical Society, as amended (the "Stock Purchase
Agreement"), on the date on which the Reorganization is consummated, The MIIX
Group will purchase all the outstanding common stock of the Attorney-in-Fact
from the Medical Society in exchange for (i) $100,000 in cash and (ii) that
number of shares of Common Stock with a value equal to $11 million based on the
price per share of Common Stock in the anticipated Public Offering (the "Public
Offering Price"), or if the anticipated Public Offering is not consummated, on
the average trading price (based upon the mean of the daily high and low share
price) for the first 60 days of trading of the Common Stock on any nationally
recognized securities exchange. Based on an assumed price of $15.50 per share,
approximately 709,700 shares of Common Stock will be paid to the Medical
Society. All subsidiaries of the Attorney-in-Fact are included in the purchase.
The Common Stock received by the Medical Society pursuant to the Stock Purchase
Agreement may not be transferred by the Medical Society for a period of 10 years
following October 15, 1997 except to the Company or its affiliates at fair
market value or to another party if The MIIX Group Board approves such transfer.

The acquisition of the Attorney-in-Fact will be accounted for as a
purchase. As a result, the assets and liabilities of the Attorney-in-Fact will
be adjusted to reflect their fair market values on the date of the consummation
of the Reorganization and any difference between the purchase price and the fair
market value of the net assets will be recorded as goodwill.

CONDITIONS TO CONSUMMATION OF THE REORGANIZATION

The consummation of the Reorganization is subject to the conditions that
(i) the Exchange has received an opinion from a nationally-recognized investment
banking firm as to the fairness of the Plan of Reorganization; (ii) the Exchange
has received an opinion from its tax advisors substantially to the effect that
the transfer of the Exchange's assets to, and assumption of its liabilities by,
MIIX Insurance, and the dissolution of the Exchange, shall qualify as a tax-free
reorganization; (iii) the Members of the Exchange shall have approved the Plan
of Reorganization by the affirmative vote of not less than two-thirds of those
Members voting; (iv) the Attorney-in-Fact shall have canceled all powers of
attorney entered into with any applicant for insurance with the Exchange; (v)
all requisite approvals of the Reinsurance Assignment shall have been obtained;
(vi) the Exchange shall have filed with the Commissioner certain certificates as
to the satisfaction of the conditions to the consummation of the Plan of
Reorganization; (vii) the Commissioner shall have issued a certificate of
authority to MIIX Insurance to do business for the same lines of insurance
currently permitted of the Exchange and shall have granted MIIX Insurance any
required rate and form approvals; and (viii) the order of the Commissioner
approving the Plan of Reorganization shall have become

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<PAGE> 30

final. The order approving the Plan of Reorganization was issued on March 5,
1998. On August 3, 1998, the Commissioner granted a certificate of authority to
MIIX Insurance authorizing it to do business in the same lines of insurance
currently permitted of the Exchange. The Exchange has received the opinion of
the Tax Advisor that the Reorganization qualifies as a tax-free Reorganization.
See "-- Federal Tax Consequences." In addition, the Exchange has received a
fairness opinion from Salomon Smith Barney Inc. See "-- Opinion of Financial
Advisor." The consummation of the anticipated Public Offering is conditioned on
the consummation of the Reorganization. However, the consummation of the
Reorganization is not conditioned on the consummation of the anticipated Public
Offering.

BACKGROUND OF THE REORGANIZATION

The Company has historically relied upon premium payments as its primary
source of capital. However, the Company believes that in the long term this
source will be insufficient to meet the Company's business objectives. On
January 28, 1997, representatives of the Company met with representatives of
Salomon Smith Barney Inc. (together with its predecessors, the "Financial
Advisor"), the successor to Salomon Brothers Inc and Smith Barney Inc., to
discuss various capital raising alternatives. Such alternatives included
reorganizing as a stock insurer.

The strategic planning committees of the Board of Governors and the Board
of Directors of the Attorney-in-Fact held meetings on May 29, 1997 and May 30,
1997. At these meetings, representatives of the Financial Advisor made a
presentation regarding trends in the medical malpractice insurance and health
care industries, an overview of the Exchange's business, and various capital
raising alternatives. At the conclusion of these presentations, the strategic
planning committees of the Board of Governors and the Board of Directors of the
Attorney-in-Fact authorized management to continue to explore the capital
raising alternatives discussed at the meeting.

On June 18, 1997, representatives of the Financial Advisor met with the
strategic planning committees of the Board of Governors and the Board of
Directors of the Attorney-in-Fact to explore further the strategic alternatives
discussed on May 29, 1997 and May 30, 1997. In particular, the Financial
Advisor's representatives discussed with the committees a proposed plan by which
the Exchange would reorganize as a stock insurer, acquire the Attorney-in-Fact,
and raise capital through an initial public offering. Upon the conclusion of
this meeting, the Financial Advisor was asked to make a formal presentation to
the Board of Governors and the Board of Directors of the Attorney-in-Fact.

On July 30, 1997, representatives of the Financial Advisor joined a special
meeting of the Board of Governors and the Board of Directors of the
Attorney-in-Fact. At this meeting, representatives of the Financial Advisor
discussed various capital raising alternatives, including the key features of a
proposed plan by which the Exchange would reorganize as a stock insurer, acquire
the Attorney-in-Fact, and raise capital through an initial public offering.
After discussing the various alternatives and certain issues relating to the
reorganization of the Exchange as a stock insurer, the Board of Governors and
the Board of Directors of the Attorney-in-Fact directed their respective
managements to develop a plan for the reorganization of the Exchange as a stock
insurer.

On July 8, 1997, August 14, 1997, September 5, 1997, September 12, 1997,
September 26, 1997, and October 6, 1997, representatives of the Company met with
representatives of the New Jersey Department to discuss the proposed
reorganization. The New Jersey Department, in conjunction with its legal
counsel, determined the procedures governing the reorganization process. At
these meetings, representatives of the New Jersey Department reviewed and
discussed drafts of the Company's proposed plan of reorganization and
accompanying documents. All elements of the proposed plan were evaluated,
including but not limited to the formation of the successor company, the
purchase of the Attorney-in-Fact, the distribution of Common Stock and cash, the
dissolution of the Exchange, and reinsurance implications.

On September 17, 1997, meetings were held to update the Board of Governors
and the Board of Directors of the Attorney-in-Fact as to the status of the
proposed reorganization. Representatives of the Financial Advisor made a
presentation to the Board of Governors and the Board of Directors of the
Attorney-in-Fact regarding the structure and other details of the proposed plan
of reorganization.

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<PAGE> 31

The terms of the acquisition of the Attorney-in-Fact were initially
proposed pursuant to a term sheet that was reviewed and commented upon by
representatives of the Company and the Medical Society during the period that
the Plan of Reorganization was being developed. In a negotiating session held on
October 6, 1997, representatives of the Company and the Medical Society
negotiated final terms of the Stock Purchase Agreement for the acquisition of
all the stock of the Attorney-in-Fact and its subsidiaries.

On October 15, 1997, a regular meeting of the Board of Governors was held.
At this meeting, Mr. Kenneth Koreyva, Vice President and Chief Financial Officer
of the Attorney-in-Fact, reviewed with the Board of Governors the terms and
structure of the proposed plan of reorganization. The Exchange's counsel
discussed certain legal aspects of the proposed plan of reorganization.
Representatives of the Financial Advisor discussed the terms of the proposed
plan of reorganization and delivered a written opinion to the Board of Governors
that, based upon the assumptions and limitations set forth therein, as of
October 15, 1997 (i) the consideration to be received by the Distributees, as a
group, in the Reorganization pursuant to the Plan of Reorganization is fair,
from a financial point of view, to the Distributees, as a group and (ii) the
consideration to be paid for all the outstanding common stock of the
Attorney-in-Fact and its subsidiaries is fair, from a financial point of view,
to the Exchange. The Board of Governors asked various questions during the
course of these presentations. The Board of Governors then approved the Plan and
authorized management to file the Plan with the New Jersey Department.

On October 16, 1997, the Plan of Reorganization was filed with the New
Jersey Department. On December 22, 1997, the New Jersey Department conducted a
public hearing regarding the Plan of Reorganization. On March 5, 1998, the
Commissioner approved the Plan of Reorganization, subject to certain conditions.
See "The Reorganization -- Regulatory Approvals."

RECOMMENDATION OF THE BOARD OF GOVERNORS; REASONS FOR THE REORGANIZATION

The Board of Governors has concluded that the terms of the Reorganization
are fair to, and in the best interests of, the Exchange and its members. In
reaching this conclusion the Board of Governors considered a variety of factors,
including but not limited to the following:

- The Board of Governors' belief that the Company must be able to grow
in order to maximize the Company's ability to realize continued
success and to provide a high level of service to its insureds.

- The Board of Governors' belief that such growth requires access to
capital, and that the Company must take on a corporate form in order
to gain access to capital markets.

- The Board of Governors' belief that other insurers that are
organized as stock companies possess a competitive advantage over
the Company, because stock companies (i) have access to capital
markets, (ii) operate under corporate statutes that provide greater
certainty and greater flexibility than the New Jersey statute
governing reciprocal insurers as to the types of activities in which
the Company may engage, and (iii) are better recognized and more
accepted in the business community than reciprocal insurers.

- The opinion of the Financial Advisor that (i) the consideration to
be received by the Distributees, as a group, in the Reorganization
pursuant to the Plan of Reorganization is fair, from a financial
point of view, to the Distributees, as a group, and (ii) the
consideration to be paid for all the outstanding common stock of the
Attorney-in-Fact and its subsidiaries is fair, from a financial
point of view, to the Exchange.

- The expected treatment of the Reorganization as a tax-free
reorganization.

- The fact that Distributees will receive publicly traded Common Stock
in the Reorganization, in contrast to the illiquid nature of
Membership Interests (as defined below).

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<PAGE> 32

The Board of Governors also considered certain potential risks of the
Reorganization, including but not limited to the following:

- The fact that stockholders of The MIIX Group might have interests
that are not aligned with the interests of insureds, and that such
stockholders would have ultimate control over The MIIX Group.

- The fact that as a public company, The MIIX Group would be subject
to a heightened degree of scrutiny and market pressures.

In making the determination that only Distributees would receive Common
Stock, the Board of Governors considered, in the absence of governing law in New
Jersey, expert commentary and the many analogous state laws that maintain a
"look-back" approach to the demutualization of mutual insurers in order to
reflect members' and recent former members' respective recent contributions
(measured in terms of premiums). Among the states that have adopted such a
look-back approach, a three-year look-back period is the most frequently used
methodology.

The foregoing discussion of the information and factors considered by the
Board of Governors is not intended to be exhaustive, but the Company believes it
includes all of the material factors considered by the Board of Governors. In
making its determination, the Board of Governors did not find it practicable to
and did not quantify or otherwise assign relative weights to the specific
factors considered in reaching its determination. The Board of Governors did not
classify the various factors according to whether they were favorable,
unfavorable or neutral to its conclusions. In addition, individual members of
the Board of Governors may have given different weights to different factors.

OPINION OF FINANCIAL ADVISOR

On June 27, 1997, the Exchange retained the Financial Advisor to assist it
in the investigation and possible execution of the Reorganization. In connection
with the engagement, the Exchange instructed the Financial Advisor to evaluate
the fairness, from a financial point of view, (i) to the Distributees, as a
group, of the consideration to be received by the Distributees in the
Reorganization pursuant to the Plan of Reorganization and (ii) to the Exchange
of the consideration to be paid for all of the stock of the Attorney-in-Fact and
its subsidiaries.

The total amount of consideration to be received by the Distributees as a
group pursuant to the Reorganization is the value of the Company before the
consummation of the anticipated Public Offering, less the $11.1 million dollars
in cash and Common Stock that the Medical Society will receive in connection
with the acquisition of the Attorney-in-Fact. The number of shares to be
received by the Medical Society will be based on the Public Offering Price ($11
million / Public Offering Price) or, if the Public Offering is not consummated,
based on the average trading price (based upon the mean of the daily high and
low share price) for the first sixty days of trading of the Common Stock on any
nationally recognized securities exchange ($11 million / average trading price).

The Exchange imposed no limitations on the Financial Advisor with respect
to the investigation made, or the procedures followed, by it in rendering its
opinion. The Exchange selected the Financial Advisor because of its reputation
and expertise as an internationally recognized investment banking firm. The
Financial Advisor, as part of its investment banking services, is regularly
engaged in the valuation of businesses and securities in connection with stock
repurchases, mergers, acquisitions, underwritings, sales and distributions of
listed and unlisted securities, private placements and valuations for estate,
corporate and other purposes.

The Financial Advisor delivered its written opinion, dated October 15,
1997, to the Board of Governors stating that, as of the date of such opinion,
and based upon the procedures and subject to the assumptions and qualifications
described in such opinion, (i) the consideration to be received by the
Distributees, as a group, in the Reorganization pursuant to the Plan of
Reorganization is fair, from a financial point of view, to the Distributees, as
a group, and (ii) the consideration to be paid for all the outstanding common
stock of the Attorney-in-Fact and its subsidiaries is fair, from a financial
point of view, to the Exchange. The Financial

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<PAGE> 33

Advisor has confirmed its opinion dated October 15, 1997 by delivery of a
written opinion dated (the "Bring-Down Opinion"). In connection
with the Bring-Down Opinion, the Financial Advisor updated the analysis
performed in connection with its opinion delivered on October 15, 1997 and
reviewed the assumptions on which such analysis was based and the factors
considered in connection therewith. The Exchange imposed no limitations on the
Financial Advisor with respect to the investigation made, or the procedures
followed, by it in rendering the Bring-Down Opinion.

THE FULL TEXT OF THE BRING-DOWN OPINION, WHICH SETS FORTH THE MATTERS
REVIEWED, ASSUMPTIONS MADE, FACTORS CONSIDERED, RELIANCE UPON OTHERS AND
LIMITATIONS AS TO THE REVIEW UNDERTAKEN BY IT, IS ATTACHED AS ANNEX C HERETO AND
IS INCORPORATED BY REFERENCE HEREIN. MEMBERS ARE URGED TO READ CAREFULLY THE
BRING-DOWN OPINION IN ITS ENTIRETY. ANY DESCRIPTION OF OR REFERENCE TO THE
BRING-DOWN OPINION IS SUBJECT TO, AND QUALIFIED IN ITS ENTIRETY BY REFERENCE TO,
THE FULL TEXT OF SUCH OPINION. THE BRING-DOWN OPINION IS DIRECTED TO THE BOARD
OF GOVERNORS AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY MEMBER AS TO
WHETHER SUCH MEMBER SHOULD VOTE TO APPROVE THE PLAN OF REORGANIZATION OR A
RECOMMENDATION TO THE COMPANY OF WHETHER TO CONDUCT THE ANTICIPATED PUBLIC
OFFERING. THE BRING-DOWN OPINION IS BASED ON CONDITIONS AS THEY EXISTED ON THE
DATE THEREOF AND THE FINANCIAL ADVISOR DOES NOT ASSUME RESPONSIBILITY TO UPDATE
OR REVISE SUCH OPINION BASED UPON CIRCUMSTANCES OR EVENTS OCCURRING AFTER THE
DATE THEREOF.

The Bring-Down Opinion does not address the Exchange's underlying business
decision to effect the Reorganization or the anticipated Public Offering. In
addition, the Financial Advisor's opinion expressly excludes any opinion as to:
(i) which of the Exchange's policyholders are to be included among the
Distributees; (ii) the fairness of the proposed consideration to be paid to any
Distributee, individually, or to any class of Distributees in connection with
the Reorganization, including any provisions of the Plan of Reorganization
relating to which Distributees receive Common Stock, the allocation of such
Common Stock among Distributees and any other provisions of the Plan of
Reorganization that distinguish among Distributees; and (iii) the anticipated
Public Offering, including the effect thereof, or of any decision not to proceed
with the anticipated Public Offering, on the Reorganization, or the price at
which Common Stock may be sold in the anticipated Public Offering, if
consummated, or the fair market value of any shares of Common Stock to be issued
pursuant to the Plan of Reorganization or the price at which Common Stock issued
in connection with the Plan of Reorganization or pursuant to the anticipated
Public Offering, if consummated, will trade. The Financial Advisor noted that
the Public Offering Price, if the Reorganization and the anticipated Public
Offering are consummated, will be a function of market conditions and the recent
performance of and outlook for the Exchange at that time. Further, the Financial
Advisor noted its belief that trading in the Common Stock for a period following
the completion of a distribution of the Common Stock, including the anticipated
Public Offering, if consummated, would be characterized by a redistribution of
the Common Stock among Distributees and other investors and that the Common
Stock may trade during such periods of redistribution below the prices at which
it would trade on a fully distributed basis.

In conducting its analysis and in arriving at its opinion, the Financial
Advisor reviewed, analyzed and relied upon material bearing upon the financial
and operating condition and prospects of the Exchange and material prepared in
connection with the Reorganization. The Financial Advisor considered such
financial and other factors it deemed appropriate under the circumstances,
including, among other things, the following: (i) the historical and
then-current financial position and results of operations of the Exchange and
the Attorney-in-Fact; (ii) the business prospects of the Exchange and the
Attorney-in-Fact; (iii) the historical relationship between the Exchange and the
Attorney-in-Fact; (iv) the historical and current market for the equity
securities of certain other companies that it believed to be comparable to the
Exchange, The MIIX Group or the Attorney-in-Fact; (v) the nature and terms of
certain other transactions that it believed to be relevant; (vi) the fact that
the Exchange had advised the Financial Advisor that growth is extremely
important

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<PAGE> 34

to remain an effective and competitive insurer in the future; (vii) the fact
that the Exchange had advised the Financial Advisor that it is of significant
strategic importance that it have broader access to external capital to finance
such growth; (viii) the Exchange's "A (Excellent)" rating by A.M. Best and the
considerations on which such rating is based; (ix) the fact that, in its present
form as a reciprocal insurer, the Exchange has limited access to capital markets
for new capital; (x) the fact that, following the Reorganization, the Exchange
would have a capital structure potentially enabling it to access the capital
markets for new capital; and (xi) the illiquidity of Membership Interests. In
addition, the Financial Advisor took into account its assessment of general
economic, market and financial conditions and its experience in connection with
similar transactions and securities valuation generally. The nature and terms of
the transactions that the Financial Advisor believed to be relevant included the
demutualizations or conversions of the following companies: Allmerica Financial
Corp., Amerus Life Holdings, Inc., Farm Family Holdings, Inc., Guarantee Life
Companies, Inc., Old Guard Group, Inc., SCPIE Holdings Inc. and Trigon
Healthcare, Inc.

In preparing its opinion, the Financial Advisor assumed, at the Exchange's
instruction, that: (i) the Reorganization will meet all applicable legal and
regulatory requirements and that all necessary action will have been taken to
comply with all applicable laws and requirements, including the receipt of all
required approvals by policyholders, regulators and otherwise; (ii) the
Reorganization will qualify as a tax-free reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986; (iii) any credit facility
entered into by the Exchange or The MIIX Group and any borrowings thereunder
will not have a material adverse impact on the Exchange's business operations or
performance or ratings by A.M. Best; (iv) the terms of the anticipated Public
Offering will not affect the legal or tax treatment of the Reorganization; and
(v) the anticipated Public Offering, which, if consummated, may close
simultaneously with the Reorganization, is a separate and distinct transaction
from the Reorganization. The Financial Advisor was advised as to certain legal
matters by counsel to the Exchange and as to certain tax matters by the
Exchange's tax advisor and, with respect to such matters, it relied upon such
counsel and tax advisor.

In connection with rendering its opinion, the Financial Advisor reviewed
and analyzed, among other things, the following: (i) a copy of the Plan of
Reorganization; (ii) drafts dated July 15, 1998 of the Assumption Agreements;
(iii) a copy of the Stock Purchase Agreement dated as of October 15, 1997, a
copy of Amendment No. 1 to Stock Purchase Agreement dated as of September 20,
1998, and a copy of Amendment No. 2 to Stock Purchase Agreement dated as of
December 21, 1998; (iv) the statutory annual statements provided by the Exchange
for the years 1993 through 1997; (v) certain GAAP financial data provided by the
Exchange, including the income statement and balance sheet of each of the
Exchange and the Attorney-in-Fact for the years 1993 through 1997 and the nine
month period ending September 30, 1998; (vi) certain other internal information,
primarily financial in nature, including projections, concerning the business
and operations of the Exchange and the Attorney-in-Fact furnished to it by the
Exchange for purposes of its analysis; (vii) certain publicly available
information with respect to certain other companies that it believed to be
comparable to the Exchange and the trading markets for certain of such other
companies' securities; and (viii) certain publicly available information
concerning the nature and terms of certain other transactions that it considered
relevant to its inquiry. In addition, the Financial Advisor considered such
other information, financial studies, analyses, investigations and financial,
economic and market criteria that it deemed relevant and it discussed the
foregoing, as well as other matters it believed relevant to its inquiry, with
the management of the Exchange and the Attorney-in-Fact. The Financial Advisor
compared publicly available financial information and market data of comparable
companies of the Exchange (including FPIC Insurance Group, Inc., Medical
Assurance, Inc., MMI Companies, Inc., Professionals Group Inc. and SCPIE
Holdings Inc.) with certain financial data of the Exchange not for the purposes
of comparative valuation but primarily to determine that The MIIX Group would
have an appropriate capital structure and the requisite financial performance
and size to be viable as a publicly traded company upon the consummation of the
Reorganization.

In its review and analysis and in arriving at its opinion, the Financial
Advisor assumed and relied upon the accuracy and completeness of all of the
financial and other information that was provided to it or was publicly
available and did not attempt to independently verify the same and further
relied upon the assurances of management of the Exchange that they were not
aware of any facts that would make such information

31
<PAGE> 35

inaccurate or misleading. The Financial Advisor, upon the advice and consent of
management of the Exchange, assumed that projections provided by the Exchange
were reasonably prepared on bases reflecting the best currently available
estimates and judgments of the management of the Exchange as to the future
financial performance of the Exchange and the Attorney-in-Fact, and noted that
it expressed no opinion with respect to such projections or the assumptions on
which they were based. In addition, the Financial Advisor did not make or obtain
any evaluations or appraisals of the properties and facilities of the Exchange
or the Attorney-in-Fact nor did it make a physical inspection of such properties
and facilities. Further, the Financial Advisor assumed that neither the Plan of
Reorganization nor the Stock Purchase Agreement will, after the date thereof, be
amended to contain any terms or conditions that differ materially from the terms
and conditions contained in the executed copies of such documents it reviewed,
the Assumption Agreements, when executed, will not contain any terms or
conditions that differ materially from the terms and conditions contained in the
drafts of such documents it reviewed, the conditions precedent to the
Reorganization contained in the Plan of Reorganization and to the purchase of
all of the stock of the Attorney-in-Fact and its subsidiaries contained in the
Stock Purchase Agreement will be satisfied, without any waiver thereof, and the
Reorganization and the acquisition of the Attorney-in-Fact will be consummated
in accordance with the terms of the Plan of Reorganization and the Stock
Purchase Agreement.

The preparation of financial analyses and fairness opinions is a complex
process involving subjective judgments and is not necessarily susceptible to
partial analysis or summary description. The Financial Advisor made no attempt
to assign specific weights to the relevance of the factors considered.
Accordingly, the Financial Advisor believes that the summary set forth above
must be considered as a whole, and that selecting certain of the factors
considered by the Financial Advisor, without considering all of such factors,
could create a misleading or incomplete view of the processes underlying the
analysis conducted by the Financial Advisor and its opinion.

The Exchange retained the Financial Advisor pursuant to an engagement
letter dated June 27, 1997. The Exchange paid the Financial Advisor an aggregate
fee of $400,000 pursuant to such engagement letter. The Exchange also agreed to
reimburse the Financial Advisor for all reasonable out-of-pocket expenses,
including fees and expenses of counsel, in connection with rendering such
services as contemplated in the engagement letter. The foregoing fees and
expenses were payable whether or not the Financial Advisor gave the Exchange a
favorable fairness opinion. The Company has agreed to indemnify the Financial
Advisor and its affiliated entities, directors, officers, employees, legal
counsel, agents and controlling persons against certain costs, expenses and
liabilities to which they may become subject arising out of or in connection
with their engagement. In addition, the Financial Advisor or its affiliates have
previously rendered certain investment banking and financial advisory services
to the Exchange, for which it or such affiliates have received, or will receive,
customary compensation. The Financial Advisor and its affiliates (including
Citigroup Inc. and The Robinson-Humphrey Company, LLC) may have other business
relationships with the Company, the Medical Society and the Attorney-in-Fact.

REGULATORY APPROVALS

Consummation of the Reorganization requires the approval of the
Commissioner. This approval was granted on March 5, 1998, subject to two
conditions. First, the Commissioner must approve the formation of MIIX
Insurance. This approval was obtained on August 3, 1998. Second, the
Reorganization must be approved by the affirmative vote of at least two-thirds
of those Members voting in person or by proxy. An appeal has been filed that
challenges the validity of the Commissioner's approval of the Reorganization.
See "Risk Factors -- Actions Opposing the Plan of Reorganization."

Pursuant to the Plan of Reorganization, MIIX Insurance is to assume all the
assets of the Exchange except for the Common Stock and cash to be distributed in
the Reorganization. However, insurance licenses cannot be transferred.
Accordingly, MIIX Insurance must obtain regulatory approval to become an
admitted carrier in each of the eight states other than New Jersey in which the
Exchange is currently licensed. These states are Connecticut, Delaware,
Kentucky, Maryland, Michigan, Pennsylvania, Vermont and West Virginia. MIIX
Insurance has obtained such approval in Pennsylvania. These states must also
approve MIIX Insurance's rates, rules and policy forms, which the Company
expects will initially be a continuation of those currently used by the
Exchange. In addition, Virginia, which is LP&C's state of domicile, must approve
the

32
<PAGE> 36

change in LP&C's ultimate parent from the Exchange to The MIIX Group, and New
York, which is MIIX New York's state of domicile, must approve the change in the
ultimate parent of MIIX New York from the Exchange to The MIIX Group. Such
approval has been obtained in Virginia. See "Business -- Regulation." Finally,
Connecticut and Delaware approvals and the consent of the reinsurers will be
required in connection with the assignment to MIIX Insurance of the various
reinsurance agreements under which the Exchange cedes risk. Such approval has
been obtained in Connecticut. Other miscellaneous approvals may be required in a
number of states.

FEDERAL TAX CONSEQUENCES

The following is a description of the principal United States federal
income tax consequences to the Company and to Members receiving Common Stock or
cash in the Reorganization. This discussion is based on the advice of
PricewaterhouseCoopers LLP (the "Tax Advisor"). The description is based on the
Internal Revenue Code of 1986, as amended (the "Code"), its legislative history,
existing and proposed regulations thereunder, judicial decisions and published
rulings and other administrative interpretations issued by the IRS, as currently
in effect, all of which are subject to change at any time, possibly with
retroactive effect. This discussion does not address all aspects of federal
taxation that may be relevant to particular Members. Thus, for example, the
discussion is addressed only to a Member who is a citizen or resident of the
United States who is subject to United States federal income tax on a net income
basis in respect of the Reorganization, and the discussion may not be applicable
to Members who, for United States federal income tax purposes, are subject to
special rules, such as persons whose functional currency is not the U.S. dollar
or persons who do not hold their Membership Interests as capital assets.
Further, the discussion that follows, and the advice upon which it is based, are
not binding on the IRS or any court. See "Risk Factors -- Failure to Constitute
a Tax-Free Reorganization."

This discussion does not address any federal estate tax or any state, local
or foreign tax considerations arising in connection with the Reorganization.
Each Member should consult his or her tax advisor to determine the federal,
state, local and any applicable foreign tax consequences of the Reorganization,
in their particular circumstances, including the effects of any changes in tax
laws or regulations after the date of this Prospectus.

Subject to the foregoing, and assuming that the Reorganization takes place
as described in the Plan of Reorganization and this Prospectus, and based on
certain representations made by the Exchange, it is the opinion of the Tax
Advisor that the federal tax consequences to the Company and to Members shall be
as follows:

Reorganization Treatment -- Consequences to the Company. The transfer of
the assets of the Exchange to, and the assumption of the Exchange's liabilities
by, MIIX Insurance, followed by the dissolution of the Exchange shall constitute
a reorganization within the meaning of Section 368(a) of the Code. Accordingly,
neither the Exchange, MIIX Insurance nor The MIIX Group will recognize any
taxable income as a result of the consummation of the Reorganization.

Consequences to Members -- In General. The distribution of Common Stock
and cash to Members in connection with the Reorganization shall be treated as
made in exchange for their existing Membership Interests, which shall be treated
as stock for purposes of Section 368(a) of the Code.

Consequences to Members Receiving Solely Common Stock. Members who receive
solely Common Stock in the Reorganization shall not recognize any gain or loss
for federal income tax purposes on the receipt of such Common Stock. The tax
basis of the Common Stock received shall be equal to the tax basis of the
Membership Interest surrendered, which is deemed to be zero. The holding period
of the Common Stock received by a Member shall include the period that the
Member held his or her Membership Interest in the Exchange.

Consequences to Members Receiving Solely Cash. A Member who receives
solely cash shall be treated as having received such cash as a distribution in
exchange for his or her Membership Interest. Members are deemed to have a tax
basis of zero in their Membership Interests and they shall recognize a capital
gain equal

33
<PAGE> 37

to the amount of the cash received. The treatment of such capital gain
(long-term or short-term) will depend upon the period that the Member held his
or her Membership Interest in the Exchange. Under recently enacted legislation,
long-term capital gain recognized by an individual generally is subject to a
maximum tax rate of 20% in respect of property held for more than one year.

POSSIBLE ALTERNATIVE TREATMENT OF THE REORGANIZATION.

The IRS and the courts have not previously considered the treatment of a
transaction in the form described herein. The Tax Opinion represents the Tax
Advisor's best judgment of how a court would rule. However, the opinion is not
binding upon either the IRS or any court. A ruling has not been, and will not
be, sought from the IRS with respect to the United States federal income tax
consequences of the consummation of the Plan of Reorganization. Accordingly, the
IRS and/or a court could reach a conclusion that differs from the conclusions in
the Tax Opinion.

If the consummation of the Plan of Reorganization were not treated as a
tax-free reorganization within the meaning of Section 368(a) of the Code, then a
Member exchanging a Membership Interest for Common Stock would recognize taxable
gain on such exchange in an amount equal to the fair market value of the Common
Stock received by the Member less its tax basis in the exchanged Membership
Interest (which, as discussed above, would be zero). The tax basis of the Common
Stock received pursuant to the Plan of Reorganization would generally be equal
to the fair market value of that stock on the date of consummation of the
Reorganization, and the holding period of the exchanged Membership Interest
would not be included in the holding period of the Common Stock received. In
addition, if the consummation of the Plan of Reorganization were not treated as
a tax-free reorganization, the Exchange would recognize taxable gain on the
transfer of its assets to MIIX Insurance in an amount equal to the fair market
value of the consideration received by the Exchange in exchange for the assets
less the Exchange's aggregate tax basis in those assets.

DIVIDEND POLICY

The MIIX Group currently intends to pay regular quarterly cash dividends.
The MIIX Group initially expects to pay a quarterly cash dividend of $.05 per
share commencing with the first full calendar quarter following the Closing
Date. The declaration and payment of dividends to holders of Common Stock will
be at the discretion of The MIIX Group Board and will be dependent upon the
Company's financial condition, results of operations, cash requirements, future
prospects, regulatory restrictions on the payment of dividends to The MIIX Group
by the Insurance Subsidiaries and other factors deemed relevant by The MIIX
Group Board. There can be no assurance that The MIIX Group will declare and pay
any dividends. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources."

The MIIX Group, upon consummation of the Reorganization, will be an
insurance holding company whose business will be conducted through MIIX
Insurance, the Attorney-in-Fact, and downstream subsidiaries of those companies.
The MIIX Group's ability to pay dividends to its stockholders and meet its other
obligations, including operating expenses and any debt service, will depend
primarily on the receipt of sufficient funds from the Insurance Subsidiaries.
The payment of dividends by the Insurance Subsidiaries to The MIIX Group will be
restricted by applicable insurance law. See "Risk Factors -- Holding Company
Structure; Limitation on Dividends," "Business -- Regulation -- Regulation of
Dividends from Insurance Subsidiaries," and "Description of Capital Stock."

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<PAGE> 38

CAPITALIZATION

The information set forth in the table presented below is derived from the
unaudited consolidated financial statements and the related notes thereto
included elsewhere in this Prospectus. The table presents the capitalization at
September 30, 1998 of: (i) the Exchange and its subsidiaries, (ii) The MIIX
Group, As Adjusted, to reflect the Reorganization (after deducting estimated
reorganization costs) and (iii) The MIIX Group, As Further Adjusted, to reflect
the sale of 3,000,000 shares of Common Stock in the anticipated Public Offering
at an assumed Public Offering Price of $15.50 per share after deducting
estimated underwriting discounts and expenses of the anticipated Public
Offering. See "The Reorganization." The table should be read in conjunction with
the historical financial statements and the related notes thereto appearing
elsewhere in this Prospectus.

<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1998
------------------------------------
AS AS FURTHER
ACTUAL ADJUSTED(1) ADJUSTED(2)
-------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Total debt.................................................. $ -- $ 21,368 $ 21,368
-------- -------- --------
Equity:
Preferred stock, $.01 par value, 50,000,000 shares
authorized, no shares issued and outstanding........... -- -- --
Common stock, $.01 par value, 100,000,000 shares
authorized, no shares issued and outstanding;
approximately 12,609,700 shares issued and outstanding,
as adjusted; approximately 15,609,700 shares issued and
outstanding, as further adjusted....................... -- 126 156
Additional paid-in capital................................ -- 8,293 50,608
Surplus/retained earnings................................. 305,787 304,118 304,118
Unrealized appreciation of invested assets, net of
deferred taxes......................................... 21,400 21,400 21,400
-------- -------- --------
Total equity.............................................. 327,187 333,937 376,282
======== ======== ========
Total capitalization...................................... $327,187 $355,305 $397,650
======== ======== ========
</TABLE>

- ---------------
(1) The As Adjusted column gives effect to the assumed aggregate issuance of (i)
11,900,000 shares of Common Stock to Distributees and (ii) 709,700 shares of
Common Stock to the Medical Society in connection with the purchase of the
Attorney-in-Fact for $11 million in Common Stock and $100,000 in cash, and
also gives effect to the assumption of debt of the Attorney-in-Fact and/or
its subsidiaries in connection with the purchase of the Attorney-in-Fact,
and is reduced by $2.7 million to reflect the estimated expenses related to
transactions which would be charged to operations at consummation of the
Reorganization if it is determined that the anticipated Public Offering will
not occur. Cash issued to Distributees in lieu of Common Stock will reduce
equity by approximately $1.6 million, assuming a Conversion Value equal to
$15.50 per share.

(2) The As Further Adjusted column reflects the sale of 3,000,000 shares of
Common Stock at an assumed Public Offering Price of $15.50 per share in the
anticipated Public Offering less the estimated underwriting discounts of the
anticipated Public Offering of $3.3 million and additional estimated
expenses of $0.9 million. The As Further Adjusted column does not reflect
the purchase of 150,968 shares of common stock by certain officers of the
Company pursuant to the Stock Purchase and Loan Agreements.

35
<PAGE> 39

SELECTED FINANCIAL AND OPERATING DATA

The following table sets forth selected consolidated financial and
operating data for the Company. The income statement data set forth below for
each of the years in the three year period ended December 31, 1997 and the
balance sheet data as of December 31, 1997 and 1996 are derived from the
consolidated financial statements of the Company audited by Ernst & Young LLP,
independent auditors, included elsewhere herein and should be read in
conjunction with, and are qualified by reference to, such statements and the
related notes thereto. The income statement data for the years ended 1993 and
1994 and for the nine months ended September 30, 1997 and 1998, and the balance
sheet data as of December 31, 1993, 1994 and 1995 and as of September 30, 1997
and 1998, are derived from unaudited consolidated financial statements of the
Company which management believes incorporate all of the adjustments necessary
for the fair presentation of the financial condition and results of operations
for such periods. All selected financial data are presented in accordance with
GAAP, except for the item entitled "statutory surplus" which is presented in
accordance with SAP. The statutory surplus amounts are derived from the audited
statutory financial statements of the Company (except with respect to the
information provided for the nine months ended September 30, 1997 and 1998,
which is derived from unaudited statutory financial statements) and, in the
opinion of management, fairly reflect the specified data for the periods
presented.

<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
FOR THE NINE MONTHS
FOR THE YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
------------------------------------------------------------ -----------------------
1993(1) 1994 1995 1996 1997 1997 1998
-------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Direct premiums written................ $115,999 $ 127,647 $ 137,291 $ 143,218 $ 162,430 $ 154,707 $ 198,833
======== ========== ========== ========== ========== ========== ==========
Net premiums earned.................... $ 78,363 $ 85,992 $ 105,256 $ 107,887 $ 123,330 $ 92,170 $ 114,666
Net investment income.................. 48,223 47,765 51,896 49,135 53,892 40,666 47,623
Realized investment gains (losses)..... 29,891 (11,030) 13,149 5,832 10,296 873 33,563
Other revenue.......................... 1,767 2,385 2,807 3,164 2,884 2,231 1,526
-------- ---------- ---------- ---------- ---------- ---------- ----------
Total revenues....................... 158,244 125,112 173,108 166,018 190,402 135,940 197,378
-------- ---------- ---------- ---------- ---------- ---------- ----------
Losses and loss adjustment expenses.... 65,780 55,687 107,889 110,593 120,496 92,709 113,050
Underwriting expenses.................. 11,739 12,777 14,743 17,553 25,415 19,719 27,738
Funds held charges..................... 2,052 4,669 6,996 10,273 13,361 10,595 11,885
Impairment of capitalized system
development costs.................... -- -- -- -- -- -- 12,656
-------- ---------- ---------- ---------- ---------- ---------- ----------
Total expenses....................... 79,571 73,133 129,628 138,419 159,272 123,023 165,329
-------- ---------- ---------- ---------- ---------- ---------- ----------
Income before income taxes and
cumulative effect of change in
accounting principle................. 78,673 51,979 43,480 27,599 31,130 12,917 32,049
Income tax expense..................... 26,865 16,327 11,402 10,004 2,006 1,451 8,621
-------- ---------- ---------- ---------- ---------- ---------- ----------
Income before cumulative effect of
change in accounting principle....... 51,808 35,652 32,078 17,595 29,124 11,466 23,428
Cumulative effect of change in
accounting principle, net of tax
benefit of ($21,420)................. 39,780 -- -- -- -- -- --
-------- ---------- ---------- ---------- ---------- ---------- ----------
Net income........................... $ 12,028 $ 35,652 $ 32,078 $ 17,595 $ 29,124 $ 11,466 $ 23,428
======== ========== ========== ========== ========== ========== ==========
BALANCE SHEET DATA (AT END OF PERIOD):
Total investments...................... $801,043 $ 788,465 $ 895,146 $ 916,330 $1,026,971 $1,002,523 $1,194,560
Total assets........................... 949,185 1,003,823 1,168,449 1,288,504 1,441,302 1,398,033 1,648,484
Total liabilities...................... 756,744 816,818 913,818 1,026,192 1,131,328 1,106,638 1,321,297
Total equity........................... 192,441 187,005 254,631 262,312 309,974 291,395 327,187
ADDITIONAL DATA:
GAAP ratios:
Loss ratio........................... 83.9% 64.8% 102.5% 102.5% 97.7% 100.6% 98.6%
Expense ratio........................ 15.0% 14.9% 14.0% 16.3% 20.6% 21.4% 24.2%
-------- ---------- ---------- ---------- ---------- ---------- ----------
Combined ratio....................... 98.9% 79.7% 116.5% 118.8% 118.3% 122.0% 122.8%
======== ========== ========== ========== ========== ========== ==========

Statutory surplus...................... $147,803 $ 156,246 $ 184,651 $ 208,478 $ 242,395 $ 234,228 $ 249,087
======== ========== ========== ========== ========== ========== ==========
Earnings per share (pro forma)(2)...... $ 2.43 $ 0.96 $ 1.95
========== ========== ==========
Book value per share (pro forma)(2).... $ 25.83 $ 24.28 $ 27.27
========== ========== ==========
</TABLE>

- ---------------

36
<PAGE> 40

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the financial
statements and the related notes thereto appearing elsewhere in this Prospectus.

GENERAL

The Exchange was organized as a New Jersey reciprocal insurance exchange in
1977. A New Jersey reciprocal insurance exchange is an entity that may be formed
by persons seeking a particular type of insurance coverage. In the case of the
Exchange, medical and osteopathic physicians formed the Exchange to provide
medical malpractice insurance. Under New Jersey law, the business of a
reciprocal insurance exchange must be conducted by a separate entity acting as
the attorney-in-fact of such exchange.

The Attorney-in-Fact is a corporation that is wholly owned by the Medical
Society and was originally formed to fulfill the statutory role of
attorney-in-fact for the Exchange. In recent years the Attorney-in-Fact has
diversified its business, but its principal activity continues to be managing
the Exchange. The Attorney-in-Fact manages the Exchange, subject to the
supervision of the Board of Governors, pursuant to a management contract that
requires the Exchange to reimburse the costs of the Attorney-in-Fact. In
addition to the power of attorney contained in such management contract, each
member of the Exchange is required to execute a power of attorney in favor of
the Attorney-in-Fact to affirm the Attorney-in-Fact's power to act on behalf of
the Exchange pursuant to the management contract.

The rights of a member of the Exchange are similar to the rights of a
policyholder of other types of insurance companies. Because members of the
Exchange are accorded certain voting rights, members' rights are more closely
analogous to the rights of a person insured by a mutual insurance company than
the rights of a person insured by a stock insurance company. Members' rights are
described under the section entitled "Comparison of Rights." Members' rights
include the right to elect the Board of Governors, which has supervisory
authority over the Attorney-in-Fact. Therefore, while the day-to-day affairs of
the Exchange are managed by the Attorney-in-Fact, the Exchange is ultimately
controlled by its members through their power to elect the Board of Governors.

The Exchange has been operated to generate profits. Such profits are part
of the Exchange's surplus account, and the application of such profits is in the
Exchange's discretion. Neither the Attorney-in-Fact nor the Medical Society owns
the Exchange or has any right to profits generated by the Exchange.

The Exchange is permitted by law to engage in any line of insurance
permitted by its rules and regulations, its certificate of authority, and
applicable New Jersey laws. All aspects of the Exchange's operations are
regulated by state regulatory authorities, particularly the regulatory
authorities of New Jersey, which is the state in which the Exchange is
domiciled. State laws regulate the process of soliciting insurance, the
underwriting of insurance, the rates charged, the nature of insurance products
sold, the financial accounting methods of the insurer, the amount of money
required to be maintained by the insurer to guard against insolvency, and many
other aspects of the day-to-day operations of the Exchange. See "Business --
Regulation."

Because the Exchange and the Attorney-in-Fact are currently distinct
entities, the historical financial statements and financial information included
throughout this Prospectus reflect the consolidated financial information of the
Exchange and its subsidiaries but exclude the results of the Attorney-in-Fact
and its subsidiaries. The historical financial results of the Attorney-in-Fact
and its subsidiaries are not significant in relation to the historical financial
results of the Exchange and its subsidiaries. If the consolidated financial
information for the Exchange and its subsidiaries for the nine months ended
September 30, 1998 were combined with the consolidated financial information for
the Attorney-in-Fact and its subsidiaries for the same period, revenue for the
nine month period ended September 30, 1998 would increase by $7.5 million (or
3.8%), and total assets and total equity as of September 30, 1998 would increase
by $32.4 million (or 1.9%) and $2.8 million (or 0.9%) respectively. Refer to
page 9 for an organizational chart of the Company before and after the
Reorganization.

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<PAGE> 41

The medical malpractice insurance industry is cyclical in nature. Many
factors influence the financial results of the medical malpractice insurance
industry, several of which are beyond the control of the Company. These factors
include, among other things, changes in severity and frequency of claims;
changes in applicable law; regulatory reform; and changes in inflation, interest
rates and general economic conditions.

Management periodically reviews the Company's guidelines for premiums,
premium surcharges, discounts, cancellations and non-renewals and other related
matters. As part of this review, rates and rating classifications for its
physicians, medical groups and other insureds are evaluated based on current and
historical loss, LAE and other actuarially significant data. This process may
result in changes in rates for certain exposure classes.

Currently, the majority of the Company's policies have January 1 effective
dates. Premium is recognized as written in the quarter the policy is effective,
yet the premiums are earned ratably throughout the year. As the Company expands
geographically, new policies are being written with effective dates other than
January 1.

Reinsurance. The Company reinsures its risks primarily under two
reinsurance contracts, a specific excess of loss treaty ("Specific Contract")
and an aggregate excess of loss treaty ("Aggregate Contract"). Under the
Specific Contract, the Company's retentions for casualty business range from $2
million to $3 million per loss per policy. Coverage on casualty business is
provided in layers up to $48 million per loss per policy above the retentions.
Coverage for casualty business under the Specific Contract is limited by an
aggregate deductible, aggregate limits by layer, and required Company
participation in upper layer losses. Property coverage is also provided under
the Specific Contract in the amount of $14.5 million in excess of a Company
retention of $500,000 per loss per policy and is subject to an aggregate limit.
The Company has maintained specific excess of loss reinsurance coverage
generally similar to that just described for several years.

The Aggregate Contract provides several coverages on an aggregate excess of
loss, specific excess of loss, and quota share basis. The primary coverage
afforded under the Aggregate Contract attaches above a Company retention
measured as a 75% loss and allocated loss adjustment expense ratio ("loss and
ALAE ratio"). Reinsurers provide coverage for an additional 75% loss and ALAE
ratio, with an aggregate annual limit of $130 million. The Company has
maintained aggregate excess of loss coverage substantially similar to that just
described since 1993.

The Company's aggregate reinsurance contracts are maintained on a funds
withheld basis whereby the Company holds the ceded premiums in a funds withheld
account for purposes of paying losses and related loss adjustment expenses.
Interest charges are credited on funds withheld at predetermined contractual
rates.

Loss and LAE Reserves. The determination of loss and LAE reserves involves
the projection of ultimate losses through an actuarial analysis of the claims
history of the Company and other professional liability insurers, subject to
adjustments deemed appropriate by the Company due to changing circumstances.
Included in the Company's claims history are losses and LAE paid by the Company
in prior periods, and case reserves for anticipated losses and ALAE developed by
the Company's Claim Department as claims are reported and investigated.
Management relies primarily on such historical loss experience in determining
reserve levels on the assumption that historical loss experience provides a good
indication of future loss experience despite the uncertainties in loss trends
and the delays in reporting and settling claims. As additional information
becomes available, the estimates reflected in earlier loss reserves may be
revised. Any increase in the amount of aggregate reserves reported in the
financial statements, including reserves for insured events of prior years,
could have a material adverse effect on the Company's results of operations for
the period in which the adjustments are made.

38
<PAGE> 42

insurance, such as medical malpractice insurance, and in particular the
occurrence or occurrence-like coverages that make up nearly all of the Company's
current reserves. These additional uncertainties are due primarily to the longer
period of time during which an insured may seek coverage for a claim in respect
of an occurrence or occurrence-like policy as opposed to a claims made policy.
With the longer claim reporting and development period, reserves are more likely
to be impacted by, among other factors, changes in judicial liability standards
and interpretation of insurance contracts, changes in the rate of inflation and
changes in the propensities of individuals to file claims.

The Company offered traditional occurrence coverage from 1977 through 1986
and has offered a form of occurrence-like coverage, "modified claims made," from
1987 to the present. The Company's modified claims made policy is the PPP. Under
the PPP, coverage is provided for claims reported to the Company during the
policy period arising from incidents since inception of the policy. The PPP
includes "tail coverage" for claims reported after expiration of the policy for
occurrences during the policy period and thus is reserved on an occurrence
basis. Loss and LAE reserves carried for this policy and traditional occurrence
policies constitute more than 90% of the gross loss and LAE reserves.

With the additional uncertainties associated with occurrence business, as
discussed above, incurred but not reported ("IBNR") reserves have consistently
represented a majority of the gross reserves recorded by the Company.

The Company uses a disciplined approach to setting and adjusting financial
statement loss and LAE reserves that begins with the claims adjudication
process. Claims examiners establish case reserves by a process that includes
extensive development and use of statistical information that allows for
comparison of individual claim characteristics against historical patterns and
emerging trends. This process also provides critical information for use in
pricing of products and establishing the IBNR component of the financial
statement reserves.

Initially, the Company establishes its best estimate of loss and LAE
reserves using pricing assumptions. The reserves are evaluated every quarter and
annually and are adjusted thereafter as circumstances warrant. These periodic
evaluations include a variety of loss development techniques that incorporate
various data accumulated in the claims settlement process including paid and
incurred loss data, accident year development statistics, and loss ratio
analyses. Important in these analyses are considerations of the amounts for
which claims have settled in comparison to the case reserves held at settlement.
Case reserves are eliminated upon settlement of related claims. Actual
settlement amounts above or below case reserves are then regularly evaluated to
determine whether estimated ultimate losses by accident year, including IBNR
reserves, should be adjusted. Changes to aggregate reserves reported in the
financial statements are made based upon the extent and nature of these
variances over the long claim development period together with changes in
estimates of the total number of claims to be settled. As a final test of
management's determination as to whether it believes that aggregate reserves
reported in the financial statements are adequate and appropriate, management
considers the detailed analysis performed by the actuarial staff of its
independent auditors in connection with the audit of the Company's financial
statements.

Given the profile of the Company's reserves as discussed above and the
results of the periodic actuarial analyses described, the Company has not made
any significant adjustments to aggregate reserves reported in the financial
statements in the calendar years since 1995 as these analyses did not indicate
any changes in loss emergence or other trends that would support such
adjustments.

The Company is currently expanding its operations into a number of states,
and the Company expects that the majority of the policies issued in such states
will be on a claims made basis. See "Business -- Product Offerings." As a
result, the Company believes that as claims made reserves begin to comprise a
greater percentage of aggregate reserves it is likely that more frequent
adjustments to aggregate reserves recorded in the financial statements will
become necessary because the reporting period for claims made policies is
shorter, which facilitates the ability of the Company to more quickly determine
ultimate losses.

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<PAGE> 43

Underwriting Expenses. The Company's continued expansion into other states
and markets will most likely increase underwriting expenses. The Company
believes that its plan of expansion via broker distribution channels will
increase its marketing expenses, but it also believes that this relationship
will reduce the need to make other significant expenditures in order to expand
into other states. Commissions for policies sold on a brokerage basis typically
range from 2.0% to 12.5% of premiums, whereas the Company does not incur
commissions on products it sells directly. To the extent that brokered business
represents an increased percentage of the Company's business in the future,
expense ratios will increase.

RESULTS OF OPERATIONS

NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO THE NINE MONTHS ENDED SEPTEMBER
30, 1997

Direct premiums written. Direct premiums written were $198.8 million for
the nine months ended September 30, 1998, a 28.5% increase over the $154.7
million for the nine months ended September 30, 1997. $23.2 million, or 52.6%,
of this increase was due to several new large institutional policies written in
Pennsylvania and Connecticut during the third quarter of 1998. Two of these new
institutional policies represented approximately $8.2 million and $5.1 million
in new premiums in Pennsylvania and Connecticut, respectively. Increased
premiums in Ohio and Kentucky amounted to $13.2 million, or 29.9%, of the net
increase in net premiums written for the nine months ended September 30, 1998
compared to the same period in 1997. A significant contributing factor which
enabled this increase was that near the end of 1997, PIE Mutual Insurance
Company ("PIE Mutual"), an insurer with a significant portion of its business in
Ohio and Kentucky, ceased writing insurance policies and the Company was
successful in marketing to the former PIE Mutual policyholders. In other states,
mainly Maryland, Texas, Massachusetts, Michigan and Illinois, premiums grew by
$15.0 million compared to the same period in 1997, representing 34.0% of the net
increase in premiums written for the nine months ended September 30, 1998. This
new and increased business written outside of New Jersey more than offset a $7.3
million decrease in New Jersey written premium for the nine months ended
September 30, 1998 as compared to the nine months ended September 30, 1997.
Approximately $4.5 million of the decrease in New Jersey business is related to
policies that normally would have renewed January 1, 1998, but which were
accelerated to November, 1997, as part of the Company's competitive strategy.
The Company's decision to accelerate the renewal of such policies reduced the
concentration of premium renewals, which substantially exposed the Company's
book of business to market competition in one time period. Additional written
premium was therefore recognized in 1997 which would have otherwise been
recognized in 1998 but for this change. The acceleration of premiums written had
no impact on net premiums earned in 1997 or 1998. The Company's geographic
expansion is continuing to reduce the concentration of business in New Jersey
which comprised 54% of direct written premiums for the nine months ended
September 30, 1998, as compared to approximately 73% in 1997 and 89% in 1996.

Net premiums earned. Net premiums earned increased approximately $22.5
million, or 24.4% to $114.7 million, for the nine months ended September 30,
1998 from $92.2 million for the same period in 1997. This increase is generally
consistent with the increase in direct premiums written.

Net investment income. Net investment income increased approximately $7.0
million or 17.1% to $47.6 million for the nine months ended September 30, 1998
from $40.7 million for the same period in 1997. Average invested assets
increased to approximately $1.1 billion during the nine months ended September
30, 1998 compared to approximately $959 million for the same period last year.
The average annualized pre-tax yield on the investment portfolio increased to
5.8% for the nine months ended September 30, 1998 from 5.7% for the same period
in 1997, primarily as a result of changes in asset allocation with an increased
concentration in higher pre-tax yielding securities and a corresponding decrease
in government and tax exempt security holdings.

Realized investment gains. Net realized investment gains increased
approximately $32.7 million to $33.6 million for the nine months ended September
30, 1998 compared to $0.9 million for the same period in 1997. Approximately
$24.4 million of the net gains realized during 1998 resulted from the
liquidation of the Company's equity portfolio during the third quarter of 1998.
This net gain was comprised of a gain of

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<PAGE> 44

approximately $38.4 million on the disposition of the equities, which was
partially offset by a $14.0 million loss realized (since gains were capped at 5%
by the equity collar and any gains above the equity collar are treated as a
realized loss to be offset against the gross realized gains) on the expiration
of the Company's equity collar position on July 13, 1998. In July 1998, the
Company liquidated its equity portfolio as part of a medium term portfolio
strategy which the Company believes will increase investment yield. Following
liquidation, the proceeds were reinvested in fixed income securities. The
remaining $9.2 million of gains recognized during 1998 pertain to the sale of
government and tax exempt bonds in a generally falling interest rate
environment.

Other revenue. Other revenue decreased approximately $0.7 million or 31.6%
to $1.5 million for the nine months ended September 30, 1998 from $2.2 million
for the same period last year and is composed primarily of finance charge income
associated with the Company's financing of policyholder premiums, which declined
slightly as the Company outsourced its installment payment plans in the second
quarter of 1998.

Losses and loss adjustment expenses (LAE). The provision for losses and
LAE increased $20.3 million or 21.9% to $113.1 million for the nine months ended
September 30, 1998 from $92.7 million for the same period in 1997. As a
percentage of earned premiums, incurred losses and LAE decreased to 98.6% for
the nine months ended September 30, 1998 from 100.6% for the same period in
1997. The decrease in the loss ratio is principally attributable to an
increasing portion of the Company's business being written on a claims made
basis which resulted from the Company's geographic expansion. The provision for
losses and LAE for the nine months ended September 30, 1998 and 1997 included no
development relating to prior years. At September 30, 1998 and December 31,
1997, reserves for gross losses and allocated loss adjustment expenses on
incurred but not reported claims amounted to $623.9 million and $593.2 million
respectively, of which $469.4 million and $430.3 million related to prior years.
While certain individual cases were settled during the nine months ended 1998
and 1997 at values more or less than specific case reserve amounts established
in prior years, there were no overall indications that prior established
financial statement reserves, including the significant portion of reserves for
incurred but not reported claims, should be adjusted. Medical malpractice
business, particularly occurrence or occurrence-like coverage, has a very long
development period. Cases may take years to be reported, and as a rule, take
several years to adjust, settle or litigate. The provision for losses and LAE is
net of $59.4 million and $40.6 million for the nine months ended September 30,
1998 and 1997, respectively, of incurred losses and LAE ceded to reinsurers,
primarily on a funds withheld basis.

Additionally, the aggregate excess reinsurance contracts, in place since
1993, provide coverage for losses and allocated loss adjustment expenses above
aggregate retentions. The aggregate excess reinsurance contracts, therefore,
have the effect of holding net incurred losses and allocated loss adjustment
expenses at a constant level as long as losses and allocated loss adjustment
expenses remain within the coverage limits, which was the case for the nine
months ended September 30, 1998 and 1997.

Underwriting expenses. Underwriting expenses increased $8.0 million or
40.7% to $27.7 million for the nine months ended September 30, 1998, from $19.7
million for the nine months ended September 30, 1997. The expense ratio was
24.2% for the nine months ended September 30, 1998 compared to 21.4% for the
same period in 1997. Approximately $2.7 million of this increase was
attributable to the cost of acquiring new business, primarily through a broker
distribution network, and an additional $4.3 million related to the expansion of
both facilities and staff necessary to service this business. Also in 1998, the
Company recognized approximately $1.0 million in connection with guaranty fund
assessments associated with insurance company insolvencies, primarily in
Pennsylvania and Ohio.

Funds held charges. Funds held charges increased $1.3 million or 12.2% to
$11.9 million for the nine months ended September 30, 1998 from $10.6 million
for the nine months ended September 30, 1997 and relate primarily to the
interest credited on amounts held under ceded aggregate excess reinsurance
contracts since 1993. This increase is the result of the net effect of the
increase in interest expense accrued on funds held under those reinsurance
contracts, consistent with the increase in the related funds held balances,
reduced by increases in offsetting profit sharing accruals on the 1993 aggregate
excess reinsurance contract. Profit sharing was accrued on this contract in the
amount of $1.6 million for the nine months ended September 30, 1998 as this was
the first period in which the funds held liability exceeded carried ceded
reserves associated with this contract. Profit sharing is provided for under the
aggregate excess reinsurance contracts and is recorded by the

41
<PAGE> 45

Company after the funds held balance related to an aggregate excess reinsurance
contract exceeds the related ceded reserves.

Impairment of capitalized system development costs. Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed of" ("SFAS No. 121") requires
recognition of impairment losses for long-lived assets whenever events or
changes in circumstances result in the carrying amount of an asset to exceed the
sum of the expected future cash flow associated with the asset. During 1998
management replaced its policy administration system and accordingly recognized
a $12.7 million pre-tax charge which represents the net book value of
capitalized costs associated with the old computer system, which is no longer
being used for the Company's operations.

Income taxes. Income tax expense increased approximately $7.2 million to
$8.6 million for the nine months ended September 30, 1998, compared to $1.5
million for the same period in 1997. The difference between the effective tax
rate and the statutory rate relates primarily to tax exempt interest. The
effective tax rate was 26.9% for the nine months ended September 30, 1998, an
increase from 11.2% for the same period in 1997. This increase was primarily
attributable to lower tax-exempt interest and its deduction from a higher
pre-tax income, which was $32.0 million for the nine months ended September 30,
1998 compared to $12.9 million for the same period in 1997, before applying the
35% statutory tax rate. For more information, refer to the effective rate
reconciliation at page F-9.

Net income. Net income was $23.4 million for the nine months ended
September 30, 1998, a 104.3% increase from the $11.5 million for the same period
in the prior year. This increase was the net result of a number of factors, but
is primarily due to higher realized gains and net investment income, partially
offset by higher underwriting costs and income taxes and the one time charge of
$12.7 million for the impairment of capitalized system development costs.

YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996

Direct premiums written. Direct premiums written were $162.4 million for
the year ended December 31, 1997, a $19.2 million or 13.4% increase over the
$143.2 million for the year ended December 31, 1996, as the Company
significantly accelerated its geographic expansion. An almost three-fold
increase (to $44.1 million) in premiums written outside of New Jersey more than
offset a 7.3% decrease (to $118.3 million) in New Jersey business, which was
primarily attributable to policies that were not renewed due to rate increases
for certain exposure classes that resulted from the Company's annual
underwriting process.

Net premiums earned. Net premiums earned were $123.3 million for the year
ended December 31, 1997, an increase of 14.3% over the $107.9 million for the
year ended December 31, 1996. This increase is generally consistent with the
increase in direct premiums written.

Net investment income. Net investment income was $53.9 million for the
year ended December 31, 1997, an increase of 9.7% over the $49.1 million for the
year ended December 31, 1996. Cash flow from operations of $65.9 million for the
year ended December 31, 1997 provided the majority of the increase in the
Company's invested asset base which totaled approximately $1 billion at December
31, 1997. Although the invested asset base increased, the pre-tax book yield on
invested assets remained comparable at 5.61%.

Realized investment gains. Net realized investment gains were
approximately $10.3 million for the year ended December 31, 1997 compared to
$5.8 million for the year ended December 31, 1996. Substantially all of these
gains resulted from the sale of equity securities during 1997 and from the sale
of bonds in 1996.

Other revenue. Other revenue was $2.9 million for the year ended December
31, 1997, a decrease of 8.8% from the $3.2 million for the year ended December
31, 1996 and is composed primarily of finance charge income associated with the
Company's financing of policyholder premiums.

Losses and loss adjustment expenses (LAE). The provision for losses and
LAE was $120.5 million for the year ended December 31, 1997, an increase of 9.0%
over the $110.6 million for the year ended December 31, 1996. The loss and LAE
ratio was 97.7% for the year ended December 31, 1997 compared to 102.5% for
1996. The decrease in the loss and LAE ratio is primarily attributed to changes
in the Company's

42
<PAGE> 46

business mix with an increasing amount of policies being issued on a claims made
basis. The provision for net losses and LAE for the years ended December 31,
1997 and 1996 included no development relating to prior years. Gross loss and
loss adjustment expenses incurred related to prior years increased by $.2
million for the year ended December 31, 1997 and did not change for the year
ended December 31, 1996. Reviews of gross losses and loss adjustment expenses
conducted as of December 31, 1996 and 1997 did not indicate a basis to further
revise prior estimates at December 31, 1997 or December 31, 1996. At December
31, 1996 and 1997, reserves for gross losses and allocated loss adjustment
expenses on incurred but not reported claims amounted to $500.0 million and
$593.2 million, respectively, of which $350.9 million and $430.3 million related
to prior years. While certain individual cases were settled during 1996 and 1997
at values more or less than specific case reserve amounts established in prior
years, there were no overall indications that prior established financial
reserves, including the significant portion of reserves for incurred but not
reported claims, should be adjusted. Medical malpractice business, particularly
occurrence or occurrence-like coverage, has a very long development period.
Cases may take years to be reported, and as a rule, take several years to
adjust, settle or litigate. The provision for losses and LAE is net of $68.9
million for the year ended December 31, 1997 and $56.8 million for the year
ended December 31, 1996 of incurred losses and LAE ceded to reinsurers.

Additionally, the aggregate excess reinsurance contracts, in place since
1993, provide coverage for losses and allocated loss adjustment expenses above
aggregate retentions. The aggregate excess reinsurance contracts, therefore,
have the effect of holding net incurred losses and allocated loss adjustment
expenses at a constant level as long as losses and allocated loss adjustment
expenses remain within the coverage limits, which occurred for the years ended
December 31, 1996 and 1997.

Underwriting expenses. Underwriting expenses were $25.4 million for the
year ended December 31, 1997, an increase of 44.8% over the $17.6 million for
the year ended December 31, 1996. The expense ratio was 20.6% for the year ended
December 31, 1997 compared to 16.3% for the year ended December 31, 1996.
Approximately $5.0 million of the increase is attributable to staffing,
commissions, premium taxes and facilities costs related to the Company's
geographic expansion and increases in direct premiums earned. Additional
increases of approximately $1.6 million are related to various consulting
projects geared towards business process enhancements and approximately $0.6
million relates to an increase in the reserve for uncollectible accounts
receivable with the remaining increases attributable to the Company's geographic
expansion.

Funds held charges. Funds held charges of $13.4 million for the year ended
December 31, 1997 increased by $3.1 million or 30.1% over the $10.3 million for
the year ended December 31, 1996 and relate to the interest credited on amounts
held under certain ceded aggregate excess reinsurance contracts. This increase
is the result of the net effect of the increase in interest expense accrued on
funds held under these contracts, consistent with the increase in the related
funds held balances.

Income taxes. Income taxes were $2.0 million for the year ended December
31, 1997, a decrease of 79.9% from the $10.0 million for the year ended December
31, 1996. The effective tax rate was 6.4% for the year ended December 31, 1997
compared to 36.2% for 1996, primarily due to the reversal of reserves for
potential tax contingencies, the majority of which were provided for in 1996 and
which were resolved in the Company's favor in 1997.

Net income. Net income was $29.1 million for the year ended December 31,
1997, a 65.5% increase from the $17.6 million for the year ended December 31,
1996, principally as a result of higher investment income and realized
investment gains and lower income taxes.

YEAR ENDED DECEMBER 31, 1996, COMPARED TO YEAR ENDED DECEMBER 31, 1995

Direct premiums written. Direct premiums written were $143.2 million for
the year ended December 31, 1996, a 4.3% increase over the $137.3 million for
the year ended December 31, 1995. The majority of this increase was due to the
addition of a number of large physician groups and hospitals primarily in New
Jersey and Pennsylvania.

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<PAGE> 47

Net premiums earned. Net premiums earned were $107.9 million for the year
ended December 31, 1996, a 2.5% increase over the $105.3 million for the year
ended December 31, 1995. For the most part, this increase correlates with the
increase in direct premiums written.

Net investment income. Net investment income was $49.1 million for the
year ended December 31, 1996, a 5.3% decrease from $51.9 million for the year
ended December 31, 1995. While cash flow from operations of $41.5 million for
the year ended December 31, 1996 increased the asset base which aggregated
$916.3 million as of December 31, 1996, the pre-tax book yield on invested
assets fell from 6.20% in 1995 to 5.68% in 1996 primarily due to the Company's
decision to allocate $50 million to the lower book yielding equity market as
part of its total return portfolio strategy.

Realized investment gains. Net realized investment gains were
approximately $5.8 million for the year ended December 31, 1996 compared to
$13.1 million for the year ended December 31, 1995. Substantially all of these
gains resulted from the sale of bonds in a generally falling interest rate
environment.

Other revenue. Other revenue was $3.2 million for the year ended December
31, 1996, a 12.7% increase from the $2.8 million for the year ended December 31,
1995 and is primarily composed of finance charge income associated with the
Company's financing of policyholder premiums, which increased in proportion to
the increase in direct premiums written.

Losses and loss adjustment expenses (LAE). The provision for losses and
LAE was $110.6 million for the year ended December 31, 1996, a 2.5% increase
over the $107.9 million for the year ended December 31, 1995. The loss and LAE
ratio was 102.5% for each of the years ended December 31, 1996 and 1995. The
provision for losses and LAE for the years ended December 31, 1996 and 1995
included no development relating to prior years. Reviews of gross losses and
loss adjustment expenses conducted as of December 31, 1996 and 1995 did not
indicate a basis to revise prior best estimates at December 31, 1996 or December
31, 1995. At December 31, 1996 and 1995, reserves for direct losses and loss
adjustment expenses on incurred but not reported claims amounted to $500.0
million and $477.0 million, respectively, of which $350.9 million and $330.0
million related to prior years. While certain individual cases were settled
during 1996 and 1995 at values more or less than specific case reserve amounts
established in prior years, there were no overall indications that prior
established best estimates, including the significant portion of reserves for
incurred but not reported claims, should be adjusted. Medical malpractice
business, particularly occurrence or occurrence-like coverage, has a very long
development period. Cases may take years to be reported, and as a rule, take
several years to adjust, settle or litigate. The provision for losses and LAE
was net of $56.8 million for the year ended December 31, 1996, and $53.4 million
for the year ended December 31, 1995 of incurred losses and LAE ceded to
reinsurers.

The aggregate excess reinsurance contracts, in place since 1993, provide
coverage for losses and allocated loss adjustment expenses above aggregate
retentions. The aggregate excess reinsurance contracts, therefore, have the
effect of holding net incurred losses and allocated loss adjustment expenses at
a constant level as long as losses and allocated loss adjustment expenses remain
within the coverage limits, which occurred for the years ended December 31, 1995
and 1996.

Underwriting expenses. Underwriting expenses were $17.6 million for the
year ended December 31, 1996, an increase of 19.1% over the $14.7 million for
the year ended December 31, 1995. The expense ratio was 16.3% for the year ended
December 31, 1996 compared to 14.0% for 1995. This increase was principally
attributable to costs related to ongoing enhancements to various computer
systems.

Funds held charges. Funds held charges of $10.3 million for the year ended
December 31, 1996 increased $3.3 million or 46.8% over the $7.0 million for the
year ended December 31, 1995 and relate to the interest credited on amounts held
under certain ceded aggregate excess reinsurance contracts. This increase is the
result of the net effect of the increase in interest expense accrued on funds
held under these contracts, consistent with the increase in the related funds
held balances.

Income Taxes. Income taxes were $10.0 million for the year ended December
31, 1996, a decrease of 12.3% from the $11.4 million for the year ended December
31, 1995. The effective tax rate was 36.2% for the year ended December 31, 1996,
an increase from 26.2% for 1995, due primarily to the establishment of

44
<PAGE> 48

reserves for potential tax contingencies in 1996 offset in part by an increase
in tax exempt investment income in 1996.

Net income. Net income was $17.6 million for the year ended December 31,
1996, a 45.1% decrease from the $32.1 million for the year ended December 31,
1995, principally as a result of higher operating expenses and lower investment
income and realized investment gains.

FINANCIAL CONDITION

Cash and invested assets. Aggregate invested assets, including cash and
short term investments, were $1,194.9 million at September 30, 1998 and $1,026.6
million and $920.9 million at December 31, 1997 and 1996, respectively. The
increase in invested assets between December 31, 1996 and September 30, 1998
resulted primarily from cash flow from operations generated during the period
and net realized and unrealized investment gains.

Fixed maturities available for sale, including short-term investments,
aggregated approximately $1.2 billion, or 99.7% of the investment portfolio of
the Company as of September 30, 1998. At that date, the average credit quality
of the fixed income portfolio was "AA-," as defined by Standard & Poor's, while
the total portfolio effective duration (including short-term investments) was
4.8 years.

In 1997, the Company implemented an "equity collar" around its equity
securities of $81.6 million. An "equity collar" is an option position created
with the simultaneous purchase and sale of an equal number of put and call
options. This resulting option position establishes, for a specified time
period, both a ceiling and a floor with respect to the financial performance of
the underlying asset upon which the equity collar is established. The collar
transaction was executed on July 8, 1997 and expired on January 2, 1998. The
purpose of the collar was to reduce equity market volatility and to stabilize
unassigned surplus. The collar was constructed using European-style S&P 500
options, and as of December 31, 1997, the collar had no unrealized gain or loss.
A "European-style" option is an option contract that may be exercised only upon
expiration of the contract whereas an "American-style" option may be exercised
at any time prior to the expiration of the contract. The reference to "S&P 500"
refers to the underlying asset upon which the option contract's value will be
based. To minimize loss exposure due to credit risk, the Company utilized
intermediaries with a Standard and Poor's rating of "AA" or better.

In 1998, another equity collar was implemented with a notional value of $85
million around the equity portfolio. The purpose of the collar was to reduce
equity market volatility and to stabilize unassigned surplus. The collar was
constructed using European style S&P 500 options. The collar transaction was
executed on January 13, 1998 and expired on July 13, 1998.

Since the expiration of the equity collar mentioned above, the Company has
not held any derivative investments.

In July, 1998 the Company liquidated its equity portfolio as part of a
medium term portfolio strategy that the Company believes will increase
investment yield. Following liquidation, the proceeds were reinvested in fixed
income securities.

Unpaid losses and LAE, reinsurance recoverable on unpaid losses and LAE and
funds held under reinsurance treaties. Gross unpaid losses and LAE were $937.1
million at September 30, 1998 and $876.7 million and $795.4 million at December
31, 1997 and 1996, respectively. The increases in these amounts were consistent
with the continued growth in the Company's book of business. Reinsurance
recoverable on unpaid losses and LAE was $311.9 million at September 30, 1998
and $270.7 million and $221.7 million at December 31, 1997 and 1996,
respectively. Funds held under reinsurance treaties, which are unrestricted,
collateralize a significant portion of reinsurance recoverable on unpaid losses
and LAE and were $206.8 million at September 30, 1998, and $182.6 million and
$154.5 million at December 31, 1997 and 1996, respectively.

Equity. Total equity was $327.2 million at September 30, 1998 and $310.0
million and $262.3 million at December 31, 1997 and 1996, respectively. The
increases were attributable to net income and changes in unrealized net
appreciation of investments.

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<PAGE> 49

LIQUIDITY AND CAPITAL RESOURCES

The MIIX Group, Incorporated. The MIIX Group is a holding company whose
only material assets immediately after the Reorganization will be the capital
stock of MIIX Insurance and the Attorney-in-Fact. The net proceeds of the
anticipated Public Offering will be used for general corporate purposes, which
may include, without limitation, capitalizing The MIIX Group's subsidiaries in
order to support their continued growth and for financing potential
acquisitions. The MIIX Group's ongoing cash flow will consist primarily of
dividends and other permissible payments from its subsidiaries. The MIIX Group
will depend upon such payments for funds for general corporate purposes and for
the payment of dividends on the Common Stock.

The payment of dividends to The MIIX Group by MIIX Insurance will be
subject to limitations imposed by the New Jersey Holding Company Act. Based upon
these limitations, the maximum amount that will be available for payment of
dividends to The MIIX Group by MIIX Insurance in 1998 without the prior approval
of regulatory authorities is subject to restrictions related to surplus and net
income. MIIX Insurance's future cash flow available to The MIIX Group may be
influenced by a variety of factors, including cyclical changes in the medical
malpractice insurance market, MIIX Insurance's financial results, insurance
regulatory changes, including changes in the limitations imposed by the New
Jersey Holding Company Act on the payment of dividends by MIIX Insurance, and
changes in general economic conditions. The MIIX Group expects that the current
limitations that will be imposed on MIIX Insurance should not affect its ability
to declare and pay dividends sufficient to support The MIIX Group's initial
dividend policy. See "Risk Factors -- Holding Company Structure; Limitation on
Dividends," "Dividend Policy" and "Business -- Regulation -- Regulation of
Dividends from Insurance Subsidiaries."

MIIX Insurance. The primary sources of MIIX Insurance's liquidity, on both
a short- and long-term basis, will be funds provided by insurance premiums
collected, net investment income, recoveries from reinsurance and proceeds from
the maturity or sale of invested assets. Funds are generally used to pay claims,
LAE, operating expenses, reinsurance premiums and taxes. The Company's net cash
flow from operating activities was approximately $96.4 million and $55.2 million
for the nine months ended September 30, 1998 and 1997, respectively, and $65.9
million and $41.5 million for the years ended 1997 and 1996, respectively. The
higher amount of cash flow from operations in 1998 compared to 1997 was
principally due to higher payments of losses and LAE in 1997 as well as
accelerated collections of premiums as the Company outsourced its installment
payment plans in the second quarter of 1998. Because of the inherent
unpredictability related to the timing of the payment of claims, it is not
unusual for cash flow from operations for a medical malpractice insurance
company to vary, perhaps substantially, from year to year.

The Company held collateral of $182.6 million and $154.5 million at
December 31, 1997 and 1996 respectively, in the form of funds withheld, for
recoverable amounts on ceded unpaid losses and loss adjustment expenses under
certain reinsurance agreements. Under the contracts, reinsurers may require that
a trust fund be established to hold the collateral should one or more triggering
events occur, such as a downgrade in the Company's A.M. Best rating to B+ or
lower, or a reduction in statutory capital and surplus to less than $20 million.
Otherwise, no restrictions are placed on investments held in support of the
funds withheld. In accordance with the provisions of the reinsurance contracts,
the funds withheld are credited with interest at contractual rates ranging from
7.50% to 8.60%, which is recorded as an expense in the year incurred.

The Company invests its positive cash flow from operations in fixed
maturity securities. The current investment strategy, which will be continued by
MIIX Insurance immediately after the Reorganization, seeks to maximize after-tax
income through a high quality, diversified, duration sensitive, taxable bond and
tax-preferenced municipal bond portfolio, while maintaining an adequate level of
liquidity.

Based on historical trends, market conditions and its business plans, the
Company believes that its sources of funds will be sufficient to meet its
liquidity needs over the next 18 months and beyond. However, because economic,
market, and regularity conditions may change, there can be no assurance that the
Company's funds will be sufficient to meet these liquidity needs.

The Attorney-in-Fact currently leases the Company's headquarters in
Lawrenceville, New Jersey from the Medical Society, a related party. The Company
is considering purchasing this building. An independent

46
<PAGE> 50

appraisal firm has been retained by the Company to determine the fair market
value of the property to assist both parties in negotiating the transaction.

YEAR 2000

During 1997 and 1998 the Company upgraded all its I/T systems to improve
their performance and efficiency. As part of this process, the Company obtained
certifications from the vendors of such new systems that such systems would be
Year 2000 compliant. The Company has conducted internal tests of its new systems
to ensure that they are Year 2000 compliant and continues to conduct such tests.
To date, such tests have not revealed any Year 2000 issues other than in
connection with the claims administration system discussed above. However, the
Company has retained an outside expert to independently evaluate the Year 2000
readiness of the Company's internal systems. The Company may also be adversely
affected if Year 2000 issues result in additional claims being made against the
Company's insureds. The Company's liability for such claims, if any, is not
clearly established. A number of companies who underwrite liability coverage in
the healthcare industry have submitted applications to various state regulators
requesting that policy exclusions for such liability, if any, be approved. Other
carriers have advised their clients of their intent to deny coverage in certain
circumstances. The Company has not yet taken a formal position and is still
conducting research on the matter.

The Company is in the process of sending inquiries to its service
providers, brokers and other external business partners to determine whether
they may experience Year 2000 problems that could affect the Company. Management
is currently evaluating alternative contingency plans that could become
necessary if its own or its significant external business partners' Year 2000
remediation efforts fail. Such alternatives will most likely involve the
assignment of internal and external resources to process business manually
during the duration of any non-compliance. It is not possible at this time to
estimate the cost, if any, of such contingency plans or system failures.

Remediation costs to date (including expenditures associated with
replacement systems) have been approximately $390,000 and are estimated to be
less than $1 million through the completion of remediation, which is expected in
1999. These costs have been considered in preparing the Company's capital and
operating budgets. There can be no assurance, however, that remediation efforts
will be completed within these estimated costs and time periods. See "Risk
Factors -- Year 2000; Information Technology."

RECENT DEVELOPMENTS

During the second quarter of 1998, the Company purchased MIIX New York for
approximately $2.6 million. These assets are included in the consolidated
financial statements. MIIX New York wrote no business during 1997 or 1998.

47
<PAGE> 51

BUSINESS

Based on direct premiums written in 1997, the Company is the leading
provider of medical professional liability insurance in New Jersey and is ranked
10th among medical professional liability insurers in the United States. The
Company currently insures approximately 15,800 physicians and other medical
professionals who practice alone, in medical groups, clinics or in other health
care organizations. The Company also insures more than 80 hospitals, extended
care facilities, HMOs and other managed care organizations. The Company's
business has historically been concentrated in New Jersey but has expanded to
other states in recent years. The Company currently writes policies in 19 states
and the District of Columbia. For the nine months ended September 30, 1998,
approximately 46% of the Company's total direct premiums written were generated
outside of New Jersey. In addition to the Company's medical malpractice
insurance operations, the Company also offers a broad range of complementary
insurance products to its insureds and operates several fee-based consulting and
other businesses.

In 1997, total medical professional liability direct premiums written in
the United States were approximately $5.9 billion, of which $299.3 million were
written in New Jersey, according to data compiled by A.M. Best, an insurance
rating agency. The Company's market share of such direct premiums written was
2.8% in the United States and 40% in New Jersey according to A.M. Best. In 1997,
medical malpractice insurance accounted for approximately 98% of the Company's
direct premiums written.

48
<PAGE> 52

The wholly owned subsidiaries of the Attorney-In-Fact offer a wide range of
reinsurance products, healthcare and financial consulting services to the
medical profession, healthcare institutions and other parties unrelated to the
Company.

Hamilton National Leasing is a middle-market leasing company for medical
and other equipment primarily to parties unrelated to the Company. Pegasus
Advisors, Inc. is a reinsurance consultant/broker specializing in the design and
placement of customized reinsurance programs for the Company and other unrelated
insurance and reinsurance companies. Medical Brokers, Inc., fully licensed in
New Jersey, provides insurance broker services and sells other insurance not
underwritten by the Exchange. MIIX Healthcare Group, Inc. provides comprehensive
consulting services designed to assist physicians, institutions and
organizations in the healthcare industry. Lawrenceville Re is a reinsurance
company domiciled in Bermuda designed to provide customized reinsurance
solutions to large health care institutions.

The Exchange was initially capitalized through the issuance of
non-interest-bearing subordinated loan certificates in an aggregate principal
amount of $22.9 million. These certificates were issued in varying principal
amounts to many of the physicians who were initial members. The loan
certificates have been redeemed, with the last such redemption occurring in
1995. As an insurer, the Exchange is required to maintain levels of capital and
surplus as determined by the insurance regulators of certain states. See
"Business -- Regulation -- Insurance Company Regulation." The Exchange has been
operated to generate profits. Such profits are part of the Exchange's surplus
account, and the application of such profits is in the Exchange's discretion.
The profits from the Exchange's operations are retained in a surplus account.

American Medical Mutual, Inc., a Vermont domiciled risk retention group
("AMM"), is an underwriter of professional liability insurance for physicians.
AMM is managed by the Attorney-in-Fact through an insurance services agreement.
All medical professional liability coverage written by AMM is reinsured by the
Exchange under a quota share contract and two excess of loss contracts.

BUSINESS STRATEGY

The Company has adopted a strategy which it believes will allow it to
compete effectively and create long-term growth. To maximize the strategy's
effectiveness, the Company has adopted the Plan of Reorganization to convert
from a reciprocal insurer to a stock insurer, which will provide the Company
with greater flexibility and access to capital. See "The Reorganization." The
Company's strategy is to:

- continue to expand geographically by increasing the number of states
in which the Company writes policies;

- enhance product offerings to facilitate "one-stop shopping" for the
Company's extensive customer base;

- expand distribution channels;

- maintain underwriting discipline to seek to assure that profitability,
rather than premium volume, is emphasized;

- take advantage of strategic acquisition opportunities; and

- maintain the Company's historically close relationship with the
medical community.

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<PAGE> 53

Expand Geographically. From its inception in 1977 through 1990, all of the
Company's business was written in New Jersey. In 1991, the Company began to
write business in Pennsylvania and in 1996 began its expansion to other states.
Since 1996, the Company has expanded its operations significantly and currently
writes policies in 19 states and the District of Columbia. As a result of this
expansion, the proportion of the Company's business written in states other than
New Jersey has grown from approximately 11% in 1996 to 46% in the nine months
ended September 30, 1998. In order to facilitate continued geographic expansion,
the Company is in the process of obtaining authority to write medical
professional liability policies in 10 other states. Over time, the Company
intends to become licensed to write insurance in all 50 states, although the
Company may choose not to write insurance in certain states based on market or
regulatory conditions. In addition, the Company has opened four regional sales
and customer support offices to assist its marketing efforts outside of New
Jersey.

50
<PAGE> 54

practicing physicians on several of the Company's advisory committees, the
Company and the medical professional liability insurance that it offers have the
endorsements of different medical associations. The Company will continue to
utilize practicing physicians on advisory committees to provide management with
input on medical practice patterns, claims, customer needs and other relevant
matters. In addition, the Company will endeavor to maintain its endorsements.

PRODUCT OFFERINGS

The Company has developed a variety of insurance products to cover the
professional liability exposure of individual and institutional health care
providers. The Company's core products include medical professional liability
insurance for individual providers, medical groups and health care institutions
on a "claims made," "modified claims made" or "occurrence" basis. See "Glossary
of Selected Insurance Terms."

In New Jersey, the Company offered physicians traditional occurrence
coverage from 1977 through 1986 and has offered a form of occurrence-like
coverage, "modified claims made," from 1987 to the present. The Company's
modified claims made policy is called the PPP. Under the PPP, coverage is
provided for claims reported to the Company during the policy period arising
from incidents since inception of the policy. The PPP includes "tail coverage"
for claims reported after the expiration of the policy for occurrences during
the policy period. The premium for tail coverage is included as part of the
annual premium, and the insured physician automatically receives tail coverage
when the policy is terminated for any reason. The automatic provision for tail
coverage in effect results in occurrence-like coverage provided under the PPP.

Traditional claims-made coverage is offered to institutions in New Jersey.
In Pennsylvania traditional occurrence coverage is primarily offered to
physicians and traditional claims made coverage is primarily offered to
institutions. In other states, the Company issues policies primarily on a claims
made coverage basis to physicians and institutions. Tail coverage may be offered
as an endorsement to those accounts written on a pure claims made basis to
extend the period when losses could be reported to the Company. Additional
premium is collected at the time such endorsement is purchased by the insured.
In a number of states, the Company offers policy limits up to $10,000,000 per
incident and $12,000,000 in the aggregate for individual physicians. Policy
limits of up to $60,000,000 per incident and in the aggregate are offered to
institutions and medical groups.

In addition to its core medical professional liability insurance products,
the Company has developed other products and services for health care
institutions. Expanded products offered include comprehensive liability coverage
for medical offices, directors and officers, managed care errors and omissions,
employment practices, fiduciary, property and worker's compensation.

For premises liability and property exposures of medical offices, the
Company offers the Medical Office Policy written on an occurrence basis.
Commercial general liability coverage is offered on an occurrence basis only.
Excess/umbrella liability covers excess of underlying policies or self-insured
retentions. Directors and officers coverage and errors and omissions coverage
are offered on a claims made basis. The Company has also introduced the option
for large health care institutions to purchase excess insurance coverage on a
multi-year basis for a guaranteed prepaid premium. Such coverages are also
available with reinstatement options, combined with the ability to pre-purchase
such options at the inception of the policy. The Company underwrites most of
these coverages, and the remaining coverages are marketed by the Company and
underwritten by other insurance carriers with which the Company has developed
strategic alliances.

Substantially all of the Company's policies are offered for periods of one
year, with renewal occurring on the anniversary date of the policy inception.
Premiums are recorded as earned over the life of the policy period. The PPP
policy provides occurrence-like coverage, and accordingly the premiums are
earned in the period the policy is written consistent with the recording of the
expected ultimate loss and LAE reserves on an occurrence basis. A profile of the
Company's direct written premiums is summarized in the table below.

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<PAGE> 55

<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------------------------------
1995 1996 1997
----------------- ----------------- -----------------
(IN THOUSANDS)
% OF % OF % OF
$ TOTAL $ TOTAL $ TOTAL
-------- ----- -------- ----- -------- -----
<S> <C> <C> <C> <C> <C> <C>
Professional Liability Products
Occurrence/Occurrence-like........ $121,172 88% $131,565 92% $127,610 79%
Claims Made....................... 10,975 8% 9,660 7% 31,195 19%
Other Products...................... 5,144 4% 1,993 1% 3,625 2%
-------- --- -------- --- -------- ---
Direct Written Premium.............. $137,291 100% $143,218 100% $162,430 100%
======== === ======== === ======== ===
</TABLE>

As the Company expands its operations into additional states beyond New
Jersey and Pennsylvania, the Company expects that the majority of the policies
issued in such additional states will be on a claims made basis. As a result,
the Company expects the profile of its direct written premiums to be
significantly different in the future. When claims made coverage is more
significant as a percentage of the Company's business, loss reserves may develop
more rapidly. See "-- Loss and LAE Reserves."

MARKETING AND POLICYHOLDER SERVICES

The Company employs various strategies for marketing its products and
providing policyholder services. In New Jersey, the Company markets its products
to physicians and physician groups principally though medical associations,
referrals by existing policyholders, advertisements in medical journals,
seminars on health care topics for physicians, and direct mail solicitation. The
Company's professional liability program has the endorsement of different
medical associations. In addition to these direct marketing channels, the
Company sells its products through independent brokers and agents who currently
produce approximately 20% of the Company's direct premiums written in New
Jersey. Health care institutions frequently prefer brokers over direct
solicitation when they purchase professional liability insurance, and the
Company believes that its broker relationships in New Jersey are important to
its ability to grow in that market segment. To provide localized marketing and
policyholder services in New Jersey and nationally, the Company has established
five regional offices. See "-- Business Strategy -- Maintain Close Relationship
with the Medical Community."

Outside New Jersey, the Company markets its products exclusively through
independent brokers and agents. In 1997, 95 independent brokers and agents
actively marketed the Company's products in 13 states and produced approximately
43% of the Company's direct written premiums on a national basis. No national
broker or regional agency accounted for more than 8% of the Company's year-end
direct premiums written. The Company selects brokers and agents that it believes
have demonstrated growth and stability in the medical malpractice insurance
industry, strong sales and marketing capabilities, and a focus on selling
medical professional liability insurance. Brokers and agents receive market rate
commissions and other incentives based on the business they produce. The Company
strives to maintain relationships with those brokers and agents who are
committed to promoting the Company's products and are successful in producing
business for the Company. See "-- Business Strategy -- Expand Distribution
Capabilities."

The Company also provides risk management services through its home office
and regional offices. In addition to supplementing the Company's marketing
efforts, these services are designed to reduce potential loss exposures by
educating policyholders on ways to improve medical practice and implement risk
reduction measures. The Company conducts surveys for hospitals and large medical
groups to review their practice procedures and to focus on specific areas in
which concerns arise. The Company prepares reports that identify areas of the
insured's medical practice that may need attention and provides recommendations
to the policyholder. The Company also presents periodic seminars for medical
societies and other groups to educate physicians on risk management techniques.
These educational programs are designed to increase risk awareness and to reduce
the risk of injury to patients and third parties.

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<PAGE> 56

UNDERWRITING

The Company maintains a dual underwriting function at its home office and
at each regional office. The home office Underwriting Department is responsible
for the underwriting and servicing of all institutional accounts and individual
providers that exceed the regional office underwriting authority. In addition,
the home office Underwriting Department is responsible for the issuance,
establishment and implementation of underwriting standards for all of the
coverages underwritten by the Company.

The Company's regional office underwriting staff have the authority to
evaluate, approve and issue medical professional liability coverage for
individual providers and medical groups with annual premiums up to a threshold
amount.

The Company follows consistent and strict procedures with respect to the
issuance of all professional liability insurance policies. Individual providers
are required to submit an application for coverage along with supporting claims
history and proof of licensure. The individual provider applications provide
information regarding the medical training, current practice and claims history
of the applicant. Institutions are required to submit an application for
coverage, hard copy loss runs, proof of accreditation, financial statements,
copies of contracts with medical providers, information on employed
professionals and other information. An account analysis form is completed for
each submission and, if coverage is approved, the coverage recommendation and
the pricing methodology is added.

Risk management surveys may be performed prior to quoting a large account
to ascertain the insurability of the risk. All written accounts are referred to
the Risk Management Department to schedule risk management services.
Representatives from the Risk Management Department meet with the insured
institution to develop programs to control and reduce risk.

The Underwriting Department meets periodically with the Underwriting
Committee to review the guidelines for premium surcharges, cancellations and
non-renewals and any candidate for cancellation or non-renewal. The Underwriting
Committee is composed solely of physicians who are members of either the Board
of Governors or the Board of Directors of the Attorney-in-Fact and are insured
by the Company. Members of the Underwriting Committee are not employees of the
Company.

The Company maintains quality control through periodic audits at the
underwriting and processing levels. Renewal accounts are underwritten as
thoroughly as new accounts. Insureds who no longer meet underwriting guidelines
are identified as non-renewal candidates. All non-renewal candidates are
referred to the home office Underwriting Department and discussed with the
Underwriting Committee to approve the Underwriting Department's recommendations.

PRICING

The Company establishes, through its own actuarial staff and independent
consulting actuaries, rates and rating classifications for its insureds based on
loss and LAE experience it has developed and on other relevant information. The
Company has various rating classifications based on practice location, medical
specialty and other factors. The Company applies various discounts, including
discounts for part-time practice, physicians just entering medical practice,
large medical groups and claims experience. The Company has established its
premium rates and ratings classifications for hospitals and managed care
organizations using actuarially significant data filed publicly by other
insurers.

CLAIMS

The Company's Claim Department is responsible for claims investigation,
establishment of appropriate case reserves for loss and ALAE, defense planning
and coordination, supervision of attorneys engaged by the Company to defend a
claim, and negotiation of the settlement or other disposition of a claim. All of
the Company's primary policies require it to defend its insureds. Medical
malpractice claims often involve the evaluation of highly technical medical
issues, severe injuries, and conflicting medical opinions. In almost all

53
<PAGE> 57

cases, the person bringing the claim against the insured is already represented
by legal counsel when the claim is reported to the Company.

Litigation defense is provided almost exclusively by private law firms with
lawyers whose primary focus is defending malpractice cases. The Company also
maintains a staff counsel office located in New Jersey to defend malpractice
cases.

The claims representatives at the Company have on average 10 years of
experience handling medical professional liability cases. The Company limits the
average number of cases handled per claims representative to ensure personal
attention to each case.

The claims operation is assisted in its efforts by its technical unit,
which is responsible for training and educating the claims staff. The technical
unit manages the Company's relationship with defense counsel and helps control
ALAE associated with claims administration. The unit also is responsible for
tracking developments in case law and coordinating mass tort litigation.

A major resource for the Company's claims function is its database built
over a 20-year period. The database provides comprehensive details on each
claim, from incident to resolution, coupled with a document file relating to
each claim. The database enables the Company's claims professionals to analyze
trends in claims by specialty, type of injury, precipitating causes, frequency
and severity, plaintiffs' counsel, expert witnesses, and other factors. The
Company also uses the data to identify and analyze trends and to develop
seminars to educate individual physicians, physician groups, hospital staff, and
other insureds on risk management to control and reduce their exposure to
claims.

LOSS AND LAE RESERVES

Loss reserves recorded by the Company include estimates of amounts owed for
losses and for LAE. LAE consists of two types of costs, allocated loss
adjustment expenses ("ALAE") and unallocated loss adjustment expenses ("ULAE").
ALAE are settlement costs that can be allocated to a specific claim such as
attorney fees and court costs. ULAE consists of costs that are general in nature
and cannot be allocated to any specific claim, primarily including salaries and
overhead associated with the Company's Claim Department. ULAE reserves recorded
by the Company represent management's best estimate of the internal costs
necessary to settle all incurred claims, including IBNR claims.

The determination of loss and LAE reserves involves the projection of
ultimate losses through an actuarial analysis of the claims history of the
Company and other professional liability insurers, subject to adjustments deemed
appropriate by the Company due to changing circumstances. Included in the
Company's claims history are losses and LAE paid by the Company in prior
periods, and case reserves for anticipated losses and ALAE developed by the
Company's Claim Department as claims are reported and investigated. Actuaries
rely primarily on such historical loss experience in determining reserve levels
on the assumption that historical loss experience provides a good indication of
future loss experience despite the uncertainties in loss trends and the delays
in reporting and settling claims. As additional information becomes available,
the estimates reflected in earlier loss reserves may be revised. Any increase in
the amount of aggregate reserves reported in the financial statements, including
reserves for insured events of prior years, could have an adverse effect on the
Company's results of operations for the period in which the adjustments are
made.

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<PAGE> 58

The Company offered traditional occurrence coverage from 1977 through 1986
and has offered a form of occurrence-like coverage, "modified claims made," from
1987 to the present. The Company's modified claims made policy is the PPP. See
"-- Product Offerings." Under the PPP, coverage is provided for claims reported
to the Company during the policy period arising from incidents since inception
of the policy. The PPP includes "tail coverage" for claims reported after
expiration of the policy for occurrences during the policy period and thus is
reserved on an occurrence basis. Loss and LAE reserves carried for this policy
and traditional occurrence policies constitute more than 90% of the gross loss
and LAE reserves.

The following table provides a summary of gross loss and LAE reserves by
policy type.

GROSS LOSS AND LOSS ADJUSTMENT EXPENSE RESERVES BY POLICY TYPE
(IN THOUSANDS)

<TABLE>
<CAPTION>
PROFESSIONAL LIABILITY
-------------------------------------
OCCURRENCE/ % OF % OF % OF TOTAL GROSS
OCCURRENCE-LIKE TOTAL CLAIMS MADE TOTAL OTHER TOTAL RESERVES
--------------- ----- ----------- ----- ------- ----- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
GROSS RESERVES HELD AS OF:
December 31, 1995.............. $721,878 96.4% $17,062 2.3% $ 9,720 1.3% $748,660
December 31, 1996.............. 759,324 95.4% 21,338 2.7% 14,787 1.9% 795,449
December 31, 1997.............. 818,129 93.4% 42,423 4.8% 16,169 1.8% 876,721
</TABLE>

Since a significant portion of the Company's reserves are recorded on an
occurrence basis, and given the long time that typically elapses between the
coverage incident and the resolution of the claim, IBNR reserves have
consistently represented a majority of the gross reserves recorded by the
Company. The following table summarizes the components of gross loss and LAE
reserves including ULAE reserves, and indicates that IBNR reserves constitute a
majority of gross reserves on a consistent basis:

COMPONENTS OF GROSS LOSS AND LOSS ADJUSTMENT EXPENSE RESERVES
(IN THOUSANDS)

<TABLE>
<CAPTION>
LOSS AND ALAE LOSS AND ALAE TOTAL
CASE % OF IBNR % OF ULAE % OF GROSS
RESERVES TOTAL RESERVES TOTAL RESERVES TOTAL RESERVES
------------- ----- ------------- ----- -------- ----- --------
<S> <C> <C> <C> <C> <C> <C> <C>
GROSS RESERVES HELD
AS OF:
December 31, 1995.... $250,563 33.5% $477,044 63.7% $21,053 2.8% $748,660
December 31, 1996.... 272,570 34.2% 500,037 62.9% 22,842 2.9% 795,449
December 31, 1997.... 260,779 29.8% 591,158 67.4% 24,784 2.8% 876,721
</TABLE>

The Company has issued occurrence policies since 1977 and occurrence-like
policies since 1987. There is a significant lag in reporting of incidents or
occurrences inherent in the medical malpractice insurance industry. As a result
the Company continues to experience reported claims that are alleged to have
occurred as far back as 1977. As of November 1998, 113 claims related to
accident years 1977-1981 are still outstanding, the majority of which have been
reported to the Company over the last five years.

The following table illustrates the amount and percentage of gross loss and
LAE reserves held by the Company at December 31, 1997 categorized by accident
year.

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<PAGE> 59

GROSS LOSS AND LOSS ADJUSTMENT EXPENSE RESERVES BY ACCIDENT YEAR
AS OF DECEMBER 31, 1997
(IN THOUSANDS)

<TABLE>
<CAPTION>
GROSS % OF
ACCIDENT YEAR RESERVES TOTAL
------------- -------- ------
<S> <C> <C>
1977-81......................................... $ 3,671 .4%
1982............................................ 1,212 .1%
1983............................................ 2,112 .2%
1984............................................ 2,816 .3%
1985............................................ 3,207 .4%
1986............................................ 4,722 .5%
1987............................................ 7,670 .9%
1988............................................ 9,236 1.0%
1989............................................ 18,405 2.1%
1990............................................ 31,559 3.6%
1991............................................ 40,103 4.6%
1992............................................ 50,469 5.8%
1993............................................ 105,822 12.1%
1994............................................ 114,795 13.1%
1995............................................ 133,847 15.3%
1996............................................ 164,793 18.8%
1997............................................ 182,282 20.8%
-------- ------
Total Gross Reserves held by the Company........ $876,721 100.0%
======== ======
</TABLE>

As shown in the above tables, over 93% of the reserves held at December 31,
1997 are occurrence based, of which over 67% constitute IBNR reserves, and over
80% relate to the most recent five accident years, which are the most immature
in terms of loss development.

Initially, the Company establishes its best estimate of loss and LAE
reserves using pricing assumptions. The reserves are evaluated every quarter and
annually and are adjusted thereafter as circumstances warrant. These periodic
evaluations include a variety of loss development techniques that incorporate
various data accumulated in the claims settlement process including paid and
incurred loss data, accident year development statistics, and loss ratio
analyses. Important in these analyses are considerations of the amounts for
which claims have settled in comparison to case reserves held at settlement.
Case reserves are eliminated upon settlement of related claims. Actual
settlement amounts above or below case reserves are then regularly evaluated to
determine whether estimated ultimate losses by accident year, including IBNR
reserves, should be adjusted. Changes to aggregate reserves reported in the
financial statements are made based upon the extent and nature of these
variances over the long claim development period together with changes in
estimates of the total number of claims to be settled. As a final test of
management's determination as to whether it believes that aggregate reserves
reported in the financial statements are adequate and appropriate, management
considers the detailed analysis performed by the actuarial staff of its
independent auditors in connection with the audit of the Company's financial
statements.

Given the profile of the Company's reserves as discussed above and the
results of the periodic analyses described, the Company has not made any
significant adjustments to aggregate reserves reported in the

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<PAGE> 60

financial statements in the calendar years since 1995 as these analyses did not
indicate any changes in loss emergence or other trends that would support such
adjustments.

Recorded loss and LAE reserves represent management's best estimate of the
remaining costs of settling all incurred claims. While the Company believes that
its reserves for losses and LAE are adequate, there can be no assurance that the
Company's ultimate losses and LAE will not deviate, perhaps substantially, from
the estimates reflected in the Company's financial statements. If the Company's
reserves should prove inadequate, the Company will be required to increase
reserves, which could have a material adverse effect on the Company's financial
condition or results of operations. "See Risk Factors -- Loss and LAE Reserves."

Activity in the liability for unpaid losses and loss adjustment expenses
gross of reinsurance is summarized as follows:

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
-------------------------------- --------------------
1995 1996 1997 1997 1998
-------- -------- -------- -------- --------
(IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Balance as of January 1, gross of
reinsurance recoverable........... $688,455 $748,660 $795,449 $795,449 $876,721
Incurred related to:
Current year...................... 161,296 167,406 189,163 133,295 162,076
Prior years....................... -- -- 205 -- --
-------- -------- -------- -------- --------
Total incurred...................... 161,296 167,406 189,368 133,295 162,076
-------- -------- -------- -------- --------
Paid related to:
Current year...................... 3,038 4,085 6,879 1,879 2,315
Prior years....................... 98,053 116,532 101,217 75,910 99,410
-------- -------- -------- -------- --------
Total paid.......................... 101,091 120,617 108,096 77,789 101,725
-------- -------- -------- -------- --------
Balance at end of period, gross of
reinsurance recoverable........... 748,660 795,449 876,721 850,955 937,072
Reinsurance recoverable............. 165,729 221,749 270,731 260,478 311,879
-------- -------- -------- -------- --------
Balance at end of period, net of
reinsurance....................... $582,931 $573,700 $605,990 $590,477 $625,193
======== ======== ======== ======== ========
</TABLE>

The aggregate reserves reported in the financial statements represent
management's best estimate of the remaining costs of settling all incurred
claims. Except for minor development recognized on a specific program in 1997,
the Company did not adjust prior year gross reserves in the aggregate for all
periods presented, as management's actuarial analyses performed did not indicate
any changes in loss emergence or other trends that would support such
adjustments. Notwithstanding management's analysis and determination in setting
its best estimate of aggregate reserves reported in the financial statements,
which may or may not require adjustments to aggregate prior year reserves,
management regularly evaluates, and adjusts when appropriate, its estimates of
accident year ultimate losses and LAE (i) as part of its pricing analyses, (ii)
as part of its evaluation of the effectiveness of its reinsurance programs and
(iii) for reporting to regulatory authorities such as the IRS and the state
insurance departments. Accordingly, reserves established for losses and LAE on
individual accident years may experience greater volatility than aggregate
reserves reported in the Company's financial statements. Individual accident
year reserves cover a smaller amount of business over a shorter period of time
than do the aggregate reserves, which are an accumulation of reserves pertaining
to all accident years. Although aggregate reserves reported in the financial
statements were not adjusted except for the minor adjustment in 1997, estimated
ultimate losses and LAE related to individual accident years have been adjusted.
The following table presents the estimated ultimate losses and LAE gross of
reinsurance (including changes in such estimates) by accident year:

57
<PAGE> 61

ACCIDENT YEAR DEVELOPMENT
(IN THOUSANDS)

<TABLE>
<CAPTION>
CHANGES IN ESTIMATED
ULTIMATE LOSSES AND LAE
ESTIMATED ULTIMATE FOR THE YEAR ENDED
LOSSES AND LAE AS OF DECEMBER 31, DECEMBER 31,
------------------------------------------------- ------------------------
ACCIDENT YEAR 1994 1995 1996 1997 1995 1996 1997
------------- ---------- ---------- ---------- ---------- ---- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
1987 and Prior............... $ 680,892 $ 680,896 $ 679,191 $ 677,720 $ 4 $(1,705) $(1,471)
1988......................... 92,418 92,420 86,909 84,827 2 (5,511) (2,082)
1989......................... 105,777 105,775 105,766 102,249 (2) (9) (3,517)
1990......................... 106,936 106,935 116,637 119,545 (1) 9,702 2,908
1991......................... 114,600 114,598 119,310 121,531 (2) 4,712 2,221
1992......................... 121,266 121,265 114,116 113,610 (1) (7,149) (506)
1993......................... 137,318 137,316 137,279 140,304 (2) (37) 3,025
1994......................... 150,525 150,527 150,519 150,613 2 (8) 94
1995......................... 161,296 161,301 156,099 5 (5,202)
1996......................... 167,406 172,141 4,735
1997......................... 189,163
---------- ---------- ---------- ---------- --- ------- -------
Total Estimated Ultimate
Losses and LAE............. $1,509,732 $1,671,028 $1,838,434 $2,027,802 -- -- $ 205
=== ======= =======
Less: Total Paid Loss and
LAE........................ $ 821,277 $ 922,368 $1,042,985 $1,151,081
---------- ---------- ---------- ----------
Gross Loss and LAE Reserves
as of December 31.......... $ 688,455 $ 748,660 $ 795,449 $ 876,721
========== ========== ========== ==========
</TABLE>

The accident year reserve development detailed in the foregoing table that
emerged in 1996 and 1997 is indicative of the potential volatility of accident
year reserve estimates. Management believes that the level of volatility
experienced and reflected therein, which ranged up to plus or minus 8% of the
prior year's recorded reserves, is not unreasonable for the medical malpractice
line of business. The limited development noted for all accident years in
calendar year 1995 is attributable to the significant reserve adjustments made
by the Company in 1994 in recognition of the major trends in loss experience
identified in its actuarial analyses.

Specific factors noted in management's actuarial analyses that gave rise to
the accident year development in 1996 and 1997 included: lower than expected
claim severity for accident years 1989 and prior, which management believes
resulted from the combined effects of tort reform in New Jersey and improvements
made to the internal claims settlement process; greater than expected claim
frequency in accident years 1990 and 1991, primarily resulting from increased
claims filed against physicians practicing in obstetrics and gynecology and
internal medicine specialties, frequency levels not seen in subsequent accident
years; and less than previously expected loss frequency and severity in accident
year 1993. Development in the 1995 and 1996 accident years largely pertained to
adjustment of reserves held on a specific medical professional liability program
with a large hospital group, and to development on other medical professional
liability claims made business once reported claims were known.

Approximately 93% of the Company's December 31, 1997 gross loss and LAE
reserve is related to occurrence or occurrence-like policies. Management
initially establishes its best estimate of reserves based on the underlying
pricing assumptions and adjusts those estimates over time as significant
developments in the legal environment or significant changes in expected
patterns of claim frequency and/or severity become apparent. However, the
Company is currently expanding its operations into a number of states, and the
Company expects that the majority of the policies issued in such states will be
on a claims made basis. As a result, the Company believes that as claims made
reserves begin to comprise a greater percentage of aggregate reserves it is
likely that more frequent adjustments to aggregate reserves recorded in the
financial statements will become necessary because the reporting period for
claims made policies is shorter, which facilitates the ability of the Company to
more quickly determine ultimate losses.

58
<PAGE> 62

On a net of reinsurance basis, the activity in the liability for unpaid
losses and LAE is summarized as follows:

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
-------------------------------- --------------------
1995 1996 1997 1997 1998
-------- -------- -------- -------- --------
(IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Balances as of January 1, net of
reinsurance recoverable........... $575,538 $582,931 $573,700 $573,700 $605,990
Incurred related to:
Current year...................... 107,889 110,593 120,496 92,709 113,050
Prior years....................... -- -- -- -- --
-------- -------- -------- -------- --------
Total incurred...................... 107,889 110,593 120,496 92,709 113,050
Paid related to:
Current year...................... 3,000 3,630 3,930 1,925 2,315
Prior years....................... 97,496 116,194 84,276 74,007 91,532
-------- -------- -------- -------- --------
Total paid.......................... 100,496 119,824 88,206 75,932 93,847
Balance at end of period, net of
reinsurance recoverable........... 582,931 573,700 605,990 590,477 625,193
Reinsurance recoverable............. 165,729 221,749 270,731 260,478 311,879
-------- -------- -------- -------- --------
Balance at end of period, gross of
reinsurance....................... $748,660 $795,449 $876,721 $850,955 $937,072
======== ======== ======== ======== ========
</TABLE>

Net loss and LAE reserves reported in accordance with statutory accounting
principles are lower than the net loss and LAE reserves displayed above. The
differences relate to a 1992 reinsurance contract accounted for using deposit
accounting for GAAP reporting and amount to $173.4 million at December 31, 1995,
December 31, 1996 and September 30, 1997; $167.8 million at December 31, 1997;
and $147.3 million at September 30, 1998.

The following tables reflect the development of reserves for unpaid losses
and LAE, including reserves on assumed reinsurance, for the periods indicated at
the end of that year and each subsequent year. From 1987 through 1992, the
Company had discounted its unpaid losses and LAE, using rates of 5% (1987-1990);
4% (1991) and 2.8% (1992). Discounting of unpaid losses and LAE was discontinued
during 1993 with all unpaid losses and LAE amounts existing at December 31, 1993
and subsequent years recorded at full undiscounted values. For consistency of
presentation, the following tables reflect all years (including 1987 through
1992) on an undiscounted basis. The first line shows the reserves as originally
reported at the end of the stated year. Reserves at each calendar year-end
include the estimated unpaid liabilities for that report or accident year and
for all prior report or accident years. The section under the caption "Liability
reestimated as of" shows the originally reported reserves as adjusted as of the
end of each subsequent year to reflect the cumulative amounts paid and all other
facts and circumstances discovered during each year. The line "Cumulative
redundancy" reflects the difference between the latest reestimated reserves and
the reserves as originally established. The section under the caption
"Cumulative amount of liability paid through" shows the cumulative amounts paid
through each subsequent year on those claims for which reserves were carried as
of each specific year end.

The tables reflect the effect of all changes in amounts of prior periods.
For example, if a loss determined in 1995 to be $100,000 was first reserved in
1987 at $150,000, the $50,000 redundancy (original estimate minus actual loss)
would be included in the cumulative redundancy in each of the years 1987 through
1994 shown below. The tables present development data by calendar year and do
not relate the data to the year in which the claim was reported or the incident
actually occurred. Conditions and trends that have affected the development of
these reserves in the past will not necessarily recur in the future.

59
<PAGE> 63

TABLE I. LOSS AND LAE RESERVES DEVELOPMENT - GROSS
<TABLE>
<CAPTION>
1987 1988 1989 1990 1991 1992 1993 1994
-------- -------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Loss and LAE Reserves........ $395,594 $453,181 $502,928 $554,076 $593,828 $629,064 $667,200 $688,455
LIABILITY REESTIMATED AS OF:
One year later.............. 409,275 448,413 516,113 541,778 583,133 616,042 623,988 688,455
Two years later............. 404,937 468,853 503,199 529,531 570,108 572,831 623,986 688,450
Three years later........... 427,203 455,076 495,663 516,501 532,877 572,831 623,989 689,122
Four years later............ 410,239 444,454 482,667 487,918 532,878 572,871 624,567
Five years later............ 400,253 432,338 463,784 487,921 540,067 570,424
Six years later............. 389,621 417,770 463,788 490,398 538,126
Seven years later........... 380,346 417,776 456,563 486,236
Eight years later........... 380,350 410,560 449,493
Nine years later............ 378,645 407,007
Ten years later............. 377,174
CUMULATIVE REDUNDANCY
(DEFICIENCY)................ 18,420 46,174 53,435 67,840 55,702 58,640 42,633 (667)

<CAPTION>
1995 1996
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Loss and LAE Reserves........ $748,660 $795,449
LIABILITY REESTIMATED AS OF:
One year later.............. 748,660 795,654
Two years later............. 744,130
Three years later...........
Four years later............
Five years later............
Six years later.............
Seven years later...........
Eight years later...........
Nine years later............
Ten years later.............
CUMULATIVE REDUNDANCY
(DEFICIENCY)................ 4,530 (205)
</TABLE>
<TABLE>
<CAPTION>
1987 1988 1989 1990 1991 1992 1993 1994
-------- -------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CUMULATIVE AMOUNT OF
LIABILITY PAID THROUGH:
One year later.............. $ 53,448 $ 58,060 $ 80,959 $ 67,483 $ 79,239 $ 83,837 $ 83,522 $ 98,053
Two years later............. 110,645 137,271 146,137 144,987 161,532 165,737 179,714 212,284
Three years later........... 183,070 196,890 218,676 221,931 238,998 256,860 284,828 293,323
Four years later............ 231,824 254,428 286,181 288,463 318,934 348,868 343,563
Five years later............ 276,103 304,740 335,723 339,121 389,638 395,242
Six years later............. 306,329 339,140 370,225 390,991 413,413
Seven years later........... 324,628 356,697 391,596 401,626
Eight years later........... 338,379 370,850 396,442
Nine years later............ 349,685 372,361
Ten years later............. 351,764

<CAPTION>
1995 1996
-------- --------
(IN THOUSANDS)
<S> <C> <C>
CUMULATIVE AMOUNT OF
LIABILITY PAID THROUGH:
One year later.............. $116,532 $101,217
Two years later............. 214,484
Three years later...........
Four years later............
Five years later............
Six years later.............
Seven years later...........
Eight years later...........
Nine years later............
Ten years later.............
</TABLE>

The Company experienced favorable development on gross financial statement
reserves held at each year end in the table except 1994 and 1996, largely in
reserves first recorded in 1992 and prior years. The Company believes that this
favorable development has resulted from (i) the disciplined approach to
establishing reserves for medical malpractice insurance losses and LAE; and (ii)
the improvements made to the internal claims settlement process. These internal
claims settlement process improvements resulted from: key staffing additions,
including a new Vice President of Claims, in 1990; the building of a detailed
claims database over a 20-year period, which enables the Company's claims
professionals to better evaluate and resolve claims; the addition of staff
counsel in 1993 to defend certain malpractice cases and to control legal costs;
and the expansion and enhancement of the risk management department in 1993 to
provide support to insureds in controlling and reducing their exposure to
claims. It is not possible to quantify the impact that these changes have had on
development of loss reserves. Most of the favorable reserve development
evidenced in the table was recognized during 1993 ($13.0 million) and 1994
($43.2 million). Favorable development was recognized at that time because major
trends in loss experience were first credibly apparent then. The loss experience
in the early 1990's, to some extent resulting from the then recently introduced
internal changes discussed above, suggested that the very conservative reserving
posture maintained by the Company since its inception during the medical
malpractice crisis of the late 1970's was no longer appropriate. Earlier
projections of loss frequencies and severities no longer appeared likely, and
financial statement loss and LAE reserves were adjusted accordingly. Financial
statement loss and LAE reserves established since 1994 have been set based upon
this new understanding. Development, in the aggregate, of reserves first
recorded in 1994 and later years has been slight, as management believes that no
new development trends have yet emerged.

60
<PAGE> 64

TABLE II. LOSS AND LAE RESERVES DEVELOPMENT - NET
<TABLE>
<CAPTION>
1987 1988 1989 1990 1991 1992 1993 1994
-------- -------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Loss and LAE
Reserves-Gross.............. $395,594 $453,181 $502,928 $554,076 $593,828 $629,064 $667,200 $688,455
Reinsurance Recoverable on
Unpaid Losses............... 495 400 400 1,025 8,265 3,037 62,682 112,917
-------- -------- -------- -------- -------- -------- -------- --------
$395,099 $452,781 $502,528 $553,051 $585,563 $626,027 $604,518 $575,538
LIABILITY REESTIMATED AS OF:
One year later.............. 408,745 446,101 513,096 534,087 581,453 600,655 559,518 575,538
Two years later............. 402,495 463,924 494,044 527,847 560,688 555,656 559,518 575,538
Three years later........... 422,144 444,537 491,987 512,867 521,671 555,656 559,518 575,538
Four years later............ 400,819 438,866 477,053 482,498 521,828 555,655 559,518
Five years later............ 394,600 425,224 456,696 482,658 529,008 555,656
Six years later............. 382,810 409,040 457,795 485,125 525,111
Seven years later........... 372,586 409,871 450,860 479,007
Eight years later........... 372,923 403,169 443,028
Nine years later............ 371,541 399,453
Ten years later............. 369,827
CUMULATIVE REDUNDANCY
(DEFICIENCY)................ 25,272 53,328 59,500 74,044 60,452 70,371 45,000

<CAPTION>
1995 1996
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Loss and LAE
Reserves-Gross.............. $748,660 $795,449
Reinsurance Recoverable on
Unpaid Losses............... 165,729 221,749
-------- --------
$582,931 $573,700
LIABILITY REESTIMATED AS OF:
One year later.............. 582,931 573,700
Two years later............. 582,931
Three years later...........
Four years later............
Five years later............
Six years later.............
Seven years later...........
Eight years later...........
Nine years later............
Ten years later.............
CUMULATIVE REDUNDANCY
(DEFICIENCY)................
</TABLE>
<TABLE>
<CAPTION>
1987 1988 1989 1990 1991 1992 1993 1994
-------- -------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CUMULATIVE AMOUNT OF
LIABILITY PAID THROUGH:
One year later.............. $ 53,318 $ 56,148 $ 78,967 $ 67,479 $ 79,239 $ 83,212 $ 82,572 $ 97,496
Two years later............. 108,603 133,367 144,141 144,983 161,532 164,469 178,357 211,426
Three years later........... 179,036 192,982 216,680 221,927 238,998 255,586 283,370 278,571
Four years later............ 227,786 250,520 284,185 288,459 318,928 347,493 328,836
Five years later............ 272,065 300,832 333,727 339,111 389,579 381,408
Six years later............. 302,291 335,232 368,223 390,928 401,000
Seven years later........... 320,590 352,783 389,541 394,999
Eight years later........... 334,335 366,883 390,579
Nine years later............ 345,588 365,144
Ten years later............. 344,417

<CAPTION>
1995 1996
-------- --------
(IN THOUSANDS)
<S> <C> <C>
CUMULATIVE AMOUNT OF
LIABILITY PAID THROUGH:
One year later.............. $116,194 $ 84,276
Two years later............. 197,370
Three years later...........
Four years later............
Five years later............
Six years later.............
Seven years later...........
Eight years later...........
Nine years later............
Ten years later.............
</TABLE>

The aggregate excess reinsurance contracts, in place since 1993, provide
coverage for losses and ALAE above aggregate retentions. The aggregate excess
reinsurance contracts, therefore, have the effect of holding net incurred losses
and ALAE at a constant level as long as losses and ALAE ceded under the
aggregate excess reinsurance contracts remain within the coverage limits. Ceded
losses and ALAE have remained within coverage limits in each year since 1992.
Each of the aggregate excess reinsurance contracts contains a profit sharing
provision whereby a significant portion of the favorable gross loss and ALAE
reserve development may ultimately be returned to the Company once all subject
losses and ALAE have been paid or the contract has been commuted. Profit sharing
is recorded by the Company after the funds withheld balance related to an
aggregate excess reinsurance contract exceeds the related ceded reserves. Profit
sharing is then recorded as an offset to funds held charges and to the funds
withheld liability. Profit sharing has been recorded for the 1993 aggregate
excess contract as an offset to equivalent funds held charges of $1.6 million
for the nine months ended September 30, 1998. There was no net effect on income
arising from the accrual of profit sharing and the recording of funds held
charges on the 1993 aggregate excess contract for the nine months ended
September 30, 1998.

General liability incurred losses have been less than 1.9% of medical
malpractice incurred losses in the last five years. The Company does not have
material reserves for pollution claims and the Company's claims experience for
pollution coverage has been negligible.

While the Company believes that its reserves for losses and LAE are
adequate, there can be no assurance that the Company's ultimate losses and LAE
will not deviate, perhaps substantially, from the estimates

61
<PAGE> 65

reflected in the Company's financial statements. If the Company's reserves
should prove inadequate, the Company will be required to increase reserves,
which could have a material adverse effect on the Company's financial condition
or results of operations. See "Risk Factors -- Loss and LAE Reserves."

REINSURANCE

Reinsurance Ceded. The Company follows customary industry practice by
reinsuring some of its business. The Company typically cedes to reinsurers a
portion of its risks and pays a fee based upon premiums received on all policies
so subject to such reinsurance. Insurance is ceded principally to reduce net
liability on individual risks and to provide aggregate loss and LAE protection.
Although reinsurance does not legally discharge the ceding insurer from its
primary liability for the full extent of the policies reinsured, it does make
the reinsurer liable to the insurer to the extent of the reinsurance ceded. The
Company determines how much reinsurance to purchase based upon its evaluation of
the risks it has insured, consultations with its reinsurance brokers, and market
conditions, including the availability and pricing of reinsurance. The Company's
reinsurance arrangements are generally placed through Pegasus Advisors, Inc., a
reinsurance broker wholly owned by the Attorney-in-Fact and to be acquired by
the Company as part of the acquisition of the Attorney-in-Fact and its
subsidiaries.

The Company reinsures its risks primarily under two reinsurance contracts,
the Specific Contract and the Aggregate Contract. Under the Specific Contract,
the Company's retentions for casualty business range from $2 million to $3
million per loss per policy. Coverage on casualty business is provided in layers
up to $48 million per loss per policy above the retentions. Coverage for
casualty business under the Specific Contract is limited by an aggregate
deductible, aggregate limits by layer and required Company participation in
upper layer losses. Property coverage is also provided under the Specific
Contract in the amount of $14.5 million in excess of a Company retention of
$500,000 per loss per policy and is subject to an aggregate limit. The Company
has maintained specific excess of loss reinsurance coverage generally similar to
that just described for several years.

The Aggregate Contract provides several coverages on an aggregate excess of
loss, specific excess of loss, and quota share basis. The primary coverage
afforded under the Aggregate Contract attaches above a Company retention
measured as a 75% loss and ALAE ratio. Reinsurers provide coverage for an
additional 75% loss and ALAE ratio, with an aggregate annual limit of $130
million. The Company has maintained aggregate excess of loss coverage generally
similar to that just described since 1993.

The major elements of ceded reinsurance activity are summarized in the
following table:

<TABLE>
<CAPTION>
FOR THE NINE MONTHS
FOR THE YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
-------------------------------- --------------------
1995 1996 1997 1997 1998
-------- -------- -------- -------- --------
(IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Ceded premiums earned.................... $31,633 $36,699 $42,337 $22,974 $28,905
Ceded Losses and LAE..................... 53,407 56,813 68,872 40,587 59,423
Funds held charges....................... 6,996 10,273 13,361 10,595 11,885
</TABLE>

Credit risk from reinsurance is controlled by placing the reinsurance with
large, highly rated reinsurers and by collateralizing amounts recoverable from
reinsurers. The following table identifies the Company's most significant
reinsurers, the total amount recoverable from them for unpaid losses, prepaid
reinsurance premiums and other amounts as of December 31, 1997, and collateral
held by the Company primarily in the

62
<PAGE> 66

form of funds withheld and letters of credit as of December 31, 1997. No other
single reinsurer's percentage participation in 1997 exceeded 5% of the total
reinsurance recoverable at December 31, 1997.

<TABLE>
<CAPTION>
AT DECEMBER 31, 1997
--------------------------------
TOTAL AMOUNTS TOTAL AMOUNT OF
REINSURER RECOVERABLE COLLATERAL HELD
- --------- ------------- ---------------
(IN THOUSANDS)
<S> <C> <C>
Hannover Reinsurance (Ireland) Ltd.......................... $108,676 $111,590
Eisen und Stahl Reinsurance (Ireland) Ltd................... 27,831 27,908
Scandinavian Reinsurance Company Ltd........................ 62,675 63,225
London Life and Casualty Reinsurance Corporation............ 48,254 48,365
Underwriters Reinsurance Company (Barbados)................. 27,053 26,827
</TABLE>

The Company analyzes the credit quality of its reinsurers and relies on its
brokers and intermediaries to assist it in such analysis. To date, the Company
has not experienced any material difficulties in collecting reinsurance
recoverables. No assurance can be given, however, regarding the future ability
of any of the Company's reinsurers to meet their obligations. See "Risk
Factors -- Reinsurance."

Reinsurance Assumed. The Company assumed reinsurance in annual amounts of
less than $1 million through 1995. The Company assumed reinsurance under three
programs, with assumed premiums of $2.2 million and $4.6 million in 1996 and
1997, respectively. The Company provides medical professional liability
reinsurance coverage to AMM under a quota share contract and two excess of loss
contracts. AMM is also managed by the Attorney-in-Fact and in 1997 had $3.6
million of premiums written. The Company participated in the IRM Services, Inc.
property pool ("the Pool") with a 5% share in 1996 and 1997. The Pool was
discontinued and placed into runoff on November 30, 1996. Only minimal further
activity beyond 1997 is expected under this arrangement. The Company was also a
participant in quota share reinsurance contracts in 1996 and 1997 with
Underwriters Reinsurance Company, whereby the Company reinsured up to $250,000
per risk on business identified by Underwriters Reinsurance Company as casualty
facultative business. The contract was discontinued on March 1, 1998.

In addition, in 1997 the Company assumed reinsurance under a novation
agreement pertaining to certain policies written for a large hospital group
during 1989 through 1997. Premiums associated with this agreement amounted to
$10.9 million in 1997. Existing ceded reinsurance agreements with the hospital
group's captive insurer covering the novated business remain in effect following
the novation.

The Company believes that as more managed care organizations and integrated
health care delivery systems retain a larger part of their exposure directly or
through captive arrangements, they will need to obtain excess insurance or
reinsurance for the potentially larger losses, and the Company believes that it
is prepared to meet this need through assumed reinsurance arrangements.

INVESTMENT PORTFOLIO

An important component of the operating results of the Company has been the
return on its invested assets. Such investments are made by investment managers
and internal management under policies established and supervised by the
Investment Advisory and Finance Committee of the Board of Governors and Board of
Directors of the Attorney-in-Fact (the "Investment Committee"). The Company's
current investment policy has placed primary emphasis on investment grade, fixed
maturity securities and maximization of after-tax yields while minimizing credit
risk of the portfolio. The Company currently uses three outside investment
managers for fixed maturity securities.

63
<PAGE> 67

The following table sets forth the composition of the investment portfolio
of the Company at the dates indicated. All of the fixed maturity investments are
held as available-for-sale.

<TABLE>
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1997 SEPTEMBER 30, 1998
-------------------- -------------------- -----------------------
COST OR COST OR COST OR
AMORTIZED FAIR AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE COST VALUE
--------- -------- --------- -------- ---------- ----------
(IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Fixed Maturity Investments:
Bonds:
US Government and
Agencies.................. $184,571 $182,506 $188,715 $193,007 $ 109,560 $ 117,820
State, municipalities and
political subdivisions.... 258,775 261,614 202,386 209,605 173,940 183,752
Mortgage-backed securities
and other asset-backed
securities................ 260,849 261,955 311,562 316,795 401,964 411,504
Corporate................... 56,607 56,795 130,159 133,339 363,648 368,957
-------- -------- -------- -------- ---------- ----------
Total Fixed Maturity
Investments................. 760,802 762,870 832,822 852,746 1,049,112 1,082,033
-------- -------- -------- -------- ---------- ----------
Equity Investments............... 55,334 67,230 66,520 89,080 3,159 3,159
-------- -------- -------- -------- ---------- ----------
Total.......................... $816,136 $830,100 $899,342 $941,826 $1,052,271 $1,085,192
======== ======== ======== ======== ========== ==========
</TABLE>

In July 1998, the Company liquidated its equity portfolio as part of a
medium term portfolio strategy that the Company believes will increase
investment yield. Following liquidation, the proceeds were reinvested in fixed
income securities.

The investment portfolio of fixed maturity investments consists primarily
of intermediate-term, investment-grade securities along with a modest allocation
to below investment-grade (i.e. high yield) fixed maturity investments not to
exceed 7.5% of invested assets. The Company's investment policy provides that
all security purchases be limited to rated securities or unrated securities
approved by the Investment Committee.

The table below contains additional information concerning the investment
ratings of the fixed maturity investments at September 30, 1998:

<TABLE>
<CAPTION>
PERCENTAGE OF
S&P RATING OF INVESTMENT(1) AMORTIZED COST FAIR VALUE FAIR VALUE
--------------------------- -------------- ---------- -------------
(IN THOUSANDS)
<S> <C> <C> <C>
AAA (including US Government and Agencies)........... $ 622,979 $ 649,829 60.1%
AA................................................... 59,481 61,880 5.7
A.................................................... 228,304 235,304 21.7
BBB.................................................. 87,258 89,992 8.3
Other Ratings........................................ 50,272 44,305 4.1
Not Rated............................................ 818 723 0.1
---------- ---------- -----
Total...................................... $1,049,112 $1,082,033 100.0%
========== ========== =====
</TABLE>

- ---------------
(1) The ratings set forth above are based on the ratings, if any, assigned by
Standard & Poor's Rating Services ("S&P"). If S&P's ratings were
unavailable, the equivalent ratings supplied by another nationally
recognized ratings agency were used.

64
<PAGE> 68

The following table sets forth certain information concerning the
maturities of fixed maturity investments in the investment portfolio as of
September 30, 1998, by contractual maturity:

<TABLE>
<CAPTION>
PERCENTAGE OF
MATURITY OF INVESTMENT AMORTIZED COST FAIR VALUE FAIR VALUE
---------------------- -------------- ---------- -------------
(IN THOUSANDS)
<S> <C> <C> <C>
Due one year or less................................. $ 24,179 $ 24,328 2.2%
Due after one year through five years................ 102,396 103,858 9.6
Due after five years through ten years............... 168,043 174,524 16.1
Due after ten years.................................. 352,530 367,819 34.0
Mortgage-backed and other asset-backed securities.... 401,964 411,504 38.1
---------- ---------- -----
Totals..................................... $1,049,112 $1,082,033 100.0%
========== ========== =====
</TABLE>

The average effective maturity and the effective duration of the securities
in the fixed maturity portfolio (excluding short-term investments) as of
September 30, 1998, was 10.3 years and 6.5 years, respectively.

The table below provides information about the Company's fixed maturity
investments, showing principal amounts and the average yield applicable thereto
by expected maturity date and type of investment:

<TABLE>
<CAPTION>
EXPECTED MATURITY DATE
------------------------------------------------------------ TOTAL FAIR VALUE
(IN THOUSANDS) PRINCIPAL AS OF
1998 1999 2000 2001 2002 THEREAFTER AMOUNTS DECEMBER 31, 1997
------- ------- ------- ------- ------- ---------- --------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Government & Agency...... $ -- $23,005 $ 9,770 $25,101 $38,800 $ 92,835 $189,511 $193,007
-- Average Yield....... -- 6.21% 5.96% 6.44% 5.76% 6.35% 6.19%
Corporate................ $ 7,150 $10,563 $ -- $ 6,000 $ -- $111,000 $134,713 $133,339
-- Average Yield....... 6.36% 6.73% -- 8.00% -- 6.80% 6.83%
Mortgage-Backed.......... $11,652 $16,396 $42,835 $19,154 $13,638 $169,841 $273,516 $278,574
-- Average Yield....... 8.15% 7.37% 7.17% 6.92% 6.77% 7.09% 7.14%
Asset-Backed............. $ -- $ -- $ 1,906 $ 9,500 $ 4,853 $ 21,601 $ 37,860 $ 38,221
-- Average Yield....... -- -- 6.98% 6.75% 7.30% 7.06% 7.01%
Municipal................ $ 500 $ -- $ -- $12,980 $ 8,045 $171,140 $192,665 $209,605
-- Average Yield....... 3.89% -- -- 5.04% 5.14% 5.12% 5.11%
------- ------- ------- ------- ------- -------- -------- --------
TOTALS................... $19,302 $49,964 $54,511 $72,735 $65,336 $566,417 $828,265 $852,746
</TABLE>

The mortgage-backed portfolio represents approximately 30% of the total
fixed income portfolio, and is allocated equally across "standard" and "more
complex" securities, while the asset-backed portfolio represents approximately
6% of the total fixed income portfolio.

Standard, mortgage-backed securities are issued on and collateralized by an
underlying pool of single-family home mortgages. Principal and interest payments
from the underlying pool are distributed pro rata to the security holders. More
complex mortgage-backed security structures prioritize the distribution of
interest and principal payments to different classes of securities which are
backed by the same underlying collateral mortgages. Regardless of structure,
mortgage-backed securities involve the same risks associated with all fixed
income investments: interest rate risk, reinvestment rate risk, and default or
credit risk. In addition, mortgage-backed securities also possess prepayment
risk, which is the risk that a security's originally scheduled interest and
principal payments will differ considerably due to changes in the level of
interest rates. In a standard pass-through mortgage-backed security, the
inherent risks are identical across all security holders, but as mortgage-
backed security structures become more complex the risk is spread unevenly
across the different securities issued on the same underlying pool of mortgages.
This results in securities having dramatically different credit and/or
prepayment characteristics even though the securities are issued from the same
underlying collateral. The Company takes advantage of this "structural" risk by
purchasing those mortgage-backed securities which, due to this uneven spread of
risk, possess enhanced credit and/or stable prepayment characteristics.

"Other asset backed securities" are classified similarly to mortgage-backed
securities as these types of securities also involve prepayment risk. Assets
other than traditional home mortgages are used to collateralize these types of
securities. Examples include securities backed by home equity loans, lease
receivables, high

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<PAGE> 69

yield bonds, credit card receivables, and auto loan receivables. The Company
only purchases those securities structured to enhance credit quality and/or
provide prepayment stability. The Company continues to use and adopt financial
modeling techniques to monitor and manage the risks associated with its fixed
income portfolio holdings.

Short-term investments are composed of "AAA-rated" and "AA-rated" money
market instruments and money market mutual funds.

Asset and liability matching is an important part of the Company's
portfolio management process. The Company utilizes financial modeling and
scenario analysis to monitor closely the effective modified duration of both
assets and liabilities in order to minimize any "gapping" or "mismatching"
issues with respect to the balance sheet. Any adjustments to portfolio strategy
indicated from such analysis are made to reflect emerging liability pay-out
trends, significant changes in financial markets, and the Company's changing
business. Effective asset/liability management has resulted in the Company's
ability to consistently pay claims from operating funds without disrupting the
Company's long-term investment strategy.

COMPETITION

The physician professional liability insurance market in the United States
is highly competitive. According to A.M. Best, in 1996 there were 357 companies
nationally that wrote medical professional liability insurance and 112 companies
licensed in New Jersey. In New Jersey, where approximately 54% of the Company's
1998 premiums were written for the nine months ended September 30, 1998, the
Company's principal competitor is Princeton Insurance Companies. In New Jersey
and other states, the Company's principal competitors include CNA Insurance
Group, Frontier Insurance Group, Inc., PHICO Insurance Company and St. Paul
Companies. These companies rank among the top 20 medical malpractice insurers
nationally and are actively engaged in soliciting insureds in the states in
which the Company writes insurance. In addition, as the Company expands into new
states, it may face strong competition from local carriers that are closely
focused on narrow geographic markets. The Company expects to encounter such
competition from doctor-owned insurance companies and commercial companies in
other states as it carries out its expansion plans. Many of the Company's
current and potential competitors may have greater financial resources than the
Company and may seek to acquire market share by decreasing pricing for their
products below prevailing market rates, thereby reducing profitability. Several
insurance companies that have greater financial resources than the company have
started to write medical malpractice insurance in New Jersey. The Company
believes that the principal competitive factors, in addition to pricing, include
financial stability and A.M. Best ratings, breadth and flexibility of coverage,
and the quality and level of services provided.

The Company plans to compete by diversifying its products, expanding
geographically, extending its distribution channels, and differentiating itself
through superior claims, risk management, and customer services. All markets in
which the Company now writes insurance and in which it expects to enter have
certain competitors with substantially greater financial and operating resources
than the Company. See "Risk Factors -- Competition."

REGULATION

The Exchange, MIIX Insurance, LP&C and MIIX New York are each subject to
supervisory regulation by their respective states of incorporation, commonly
called the state of domicile. The Exchange and MIIX Insurance are domiciled in
New Jersey, LP&C is domiciled in Virginia and MIIX New York is domiciled in New
York. Therefore, the laws and regulations of these states, including the tort
liability laws and the laws

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<PAGE> 70

relating to professional liability exposures and reports, have the most
significant impact on the operations of the combined company.

Holding Company Regulation. As part of a holding company system, the
Exchange, MIIX Insurance, LP&C and MIIX New York are subject to the Insurance
Holding Company Systems Acts (the "Holding Company Act") of their domiciliary
states. The Holding Company Act requires the domestic company to file
information periodically with the state insurance department and other state
regulatory authorities, including information relating to its capital structure,
ownership, financial condition and general business operations. Certain
transactions between an insurance company and its affiliates, including sales,
loans or investments, are deemed "material" and require prior approval by New
Jersey, Virginia and/or New York insurance regulators. In New Jersey and
Virginia, transactions with affiliates involving loans, sales, purchases,
exchanges, extensions of credit, investments, guarantees, or other contingent
obligations which within any 12 month period aggregate at least 3% of the
insurance company's admitted assets or 25% of its capital and surplus, whichever
is greater, require prior approval. In New York, such transactions which within
any 12 month period aggregate to more than 1% of the insurance company's
admitted assets as of the end of such company's last fiscal year require the
prior approval of the New York Insurance Department. Prior approval is also
required for all management agreements, service contracts, and cost-sharing
arrangements between affiliates. Certain reinsurance agreements or modifications
also require prior approval.

Certain other material transactions, not involving affiliates, must be
reported to the domiciliary regulatory agency within 15 days after the end of
the calendar month in which the transaction occurred (in contrast to prior
approval). These transactions include acquisitions and dispositions of assets
that are nonrecurring, are not in the ordinary course of business, and exceed 5%
of the Company's admitted assets. Similarly, nonrenewals, cancellations, or
revisions of ceded reinsurance agreements, which affect statutorily established
percentages of the Company's business, are also subject to disclosure.

The Holding Company Act also provides that the acquisition or change of
"control" of a domestic insurance company or of any person or entity that
controls such an insurance company cannot be consummated without prior
regulatory approval. In general, a presumption of "control" arises from the
ownership of voting securities and securities that are convertible into voting
securities, which in the aggregate constitute 10% or more of the voting
securities of the insurance company or of a person or entity that controls the
insurance company, such as The MIIX Group. A person or entity seeking to acquire
"control," directly or indirectly, of the Company would generally be required to
file an application for change of control containing certain information
required by statute and published regulations and provide a copy of the
application to the Company. The Holding Company Act also effectively restricts
the Company from consummating certain reorganizations or mergers without prior
regulatory approval.

Regulation of Dividends from Insurance Subsidiaries. The Holding Company
Act of the State of New Jersey will limit the ability of MIIX Insurance to pay
dividends to The MIIX Group. Without prior notice to and approval of the
Commissioner, MIIX Insurance may not declare or pay an extraordinary dividend,
which is defined as any dividend or distribution of cash or other property whose
fair market value together with other dividends or distributions made within the
preceding 12 months exceeds the greater of such subsidiary's statutory net
income of the preceding calendar year or 10% of statutory surplus as of the
preceding December 31. The law further requires that an insurer's statutory
surplus following a dividend or other distribution be reasonable in relation to
its outstanding liabilities and adequate to meet its financial needs. New Jersey
permits the payment of dividends only out of statutory earned (unassigned)
surplus unless the payment out of other funds is approved by the Commissioner.
In addition, a New Jersey insurance company is required to give the New Jersey
Department notice of any dividend after declaration, but prior to payment.

The other United States domiciled Insurance Subsidiaries will be subject to
similar provisions and restrictions under the Holding Company Acts of other
states.

Insurance Company Regulation. The Company is subject to the insurance laws
and regulations in each state in which it is licensed to do business. The
Company is licensed in 31 states and the District of Columbia. In three of such
states, the license currently does not include the authority to write medical
malpractice insurance. In addition, in seven of such states, the Company is in
the process of the rate, rule and form filings

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<PAGE> 71

necessary in order to write medical malpractice policies in such states. The
extent of regulation varies by state, but such regulation usually includes: (i)
regulating premium rates and policy forms; (ii) setting minimum capital and
surplus requirements; (iii) regulating guaranty fund assessments; (iv) licensing
companies and agents; (v) approving accounting methods and methods of setting
statutory loss and expense reserves; (vi) setting requirements for and limiting
the types and amounts of investments; (vii) establishing requirements for the
filing of annual statements and other financial reports; (viii) conducting
periodic statutory examinations of the affairs of insurance companies; (ix)
approving proposed changes of control; and (x) limiting the amounts of dividends
that may be paid without prior regulatory approval. Such regulation and
supervision are primarily for the benefit and protection of policyholders and
not for the benefit of investors.

Insurance Guaranty Associations. Most states, including New Jersey and
Virginia, require admitted property and casualty insurers to become members of
insolvency funds or associations that generally protect policyholders against
the insolvency of such insurers. Members of the fund or association must
contribute to the payment of certain claims made against insolvent insurers.
Maximum contributions required by law in any one year vary by state, and are
usually between 1% and 2% of annual premiums written by a member in that state
during the preceding year. New Jersey and Virginia, the states in which the
Exchange and LP&C are respectively domiciled, and Texas, Pennsylvania, Maryland,
Kentucky, states in which the Company has significant business, permit a maximum
assessment of 2%. Ohio permits a maximum assessment of 1.5%. New Jersey permits
recoupment of guaranty fund payments through future policy surcharges. Virginia
and Texas permit premium tax reductions as a means of recouping guaranty fund
payments. Most other states permit recoupment through future rate increases.

Examination of Insurance Companies. Every insurance company is subject to
a periodic financial examination under the authority of the insurance
commissioner of its state of domicile. Any other state interested in
participating in a periodic examination may do so. The last completed periodic
financial examination of the Exchange, based on December 31, 1993 financial
statements, was completed on March 5, 1995, and a report was issued on June 21,
1995. The Exchange currently is undergoing another periodic examination that
began on November 24, 1997. The last periodic financial examination of LP&C,
based on December 31, 1996 financial statements, was completed on April 25,
1997, and a report was issued on August 4, 1997. Various states also conduct
"market conduct examinations" which are unscheduled examinations designed to
monitor the compliance with state laws and regulations concerning the filing of
rates and forms and company operations in general. The Company has not undergone
a market conduct examination.

Risk-Based Capital. In addition to state-imposed insurance laws and
regulations, insurers are subject to the general statutory accounting practices
and the reporting format of the National Association of Insurance Commissioners
(the "NAIC"). The NAIC's methodology for assessing the adequacy of statutory
surplus of property and casualty insurers includes a risk-based capital ("RBC")
formula that attempts to measure statutory capital and surplus needs based on
the risks in a company's mix of products and investment portfolio. The formula
is designed to allow state insurance regulators to identify potentially
under-capitalized companies. Under the formula, a company determines its RBC by
taking into account certain risks related to the insurer's assets (including
risks related to its investment portfolio and ceded reinsurance) and the
insurer's liabilities (including underwriting risks related to the nature and
experience of its insurance business). The RBC rules provide for different
levels of regulatory attention depending on the ratio of an insurance company's
total adjusted capital to its "authorized control level" of RBC. At December 31,
1997, the Exchange's RBC was 2.75 times greater than the threshold requiring the
least regulatory attention. At December 31, 1997, LP&C's RBC was 17.05 times
greater than the threshold requiring the least regulatory attention.

NAIC-IRIS Ratios. The NAIC Insurance Regulatory Information System
("IRIS") was developed by a committee of state insurance regulators and is
primarily intended to assist state insurance departments in executing their
statutory mandates to oversee the financial condition of insurance companies
operating in their respective states. IRIS identifies 12 ratios for the property
and casualty insurance industry and specifies a range of "usual values" for each
ratio. Departure from the "usual value" range on four or more ratios may lead to
increased regulatory oversight from individual state insurance commissioners. In
1997 LP&C had two ratios (change in net writings and change in surplus) outside
the usual value range, which were triggered from a zero prior year basis since
LP&C was acquired in 1996. In 1996 the Exchange had one ratio (investment yield

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ratio) fall outside of the usual range, which resulted from the lower pre-tax
yields provided by the tax exempt securities in its investment portfolio. The
Exchange also had one ratio (estimated current reserve deficiency to surplus)
fall outside of the usual range in 1995. This occurred primarily as a result of
a reduction in the cost of reinsurance protection in 1995 relative to 1994 and
1993, which increased net premiums but did not result in an increase in net loss
reserves.

Regulation of Investments. The Insurance Subsidiaries are subject to state
laws and regulations that require diversification of their investment portfolios
and limit the amount of investments in certain investment categories such as
below investment grade fixed income securities, real estate and equity
investments. Failure to comply with these laws and regulations would cause
investments exceeding regulatory limitations to be treated as non-admitted
assets for purposes of measuring statutory surplus and, in some instances, would
require divestiture of such non-qualifying investments over specified time
periods unless otherwise permitted by the state insurance authority under
certain conditions. The Company did not have any non-qualifying investments in
1997.

Prior Approval of Rates and Policies. Pursuant to the New Jersey Insurance
Code, a domestic insurer must submit policies and endorsements to the
Commissioner for prior approval, but rating plans and rates are not subject to
review until 30 days after use. Virginia law requires LP&C to submit rating
plans, rates, policies, and endorsements to regulators for prior approval. The
possibility exists that the Company may be unable to implement desired rates,
policies, endorsements, forms, or manuals if such items are not approved by the
applicable regulatory authorities. See "Risk Factors -- Regulatory and Related
Matters." In the past, all of the Company's rate applications have been approved
in the normal course of review. In most other states, policy forms usually are
subject to prior approval by the regulatory agency while rates usually are "file
and use."

Medical Malpractice Tort Reform. Major revisions to New Jersey's statutory
scheme governing medical malpractice took effect in 1995. These revisions
included raising joint and several liability standards, requiring certificates
of merit, eliminating strict liability of health care providers due to defective
products used in their practices, and capping punitive damages at the greater of
five times compensatory damages or $350,000. These changes are bringing
stability to the medical malpractice insurance business in New Jersey by making
it more feasible for insurers to assess certain risks. Legislation passed in
1996 in Pennsylvania provides, among other things, that plaintiffs must prove
causation in informed consent cases, that punitive damages assessed against
individual defendants be capped at twice the compensatory damages, and that the
Pennsylvania Medical Professional Liability Catastrophe Loss Fund (the "Cat
Fund") be responsible for delay damages and post-judgment interest. Texas tort
reform applicable to cases accruing on or after September 1, 1996, bars
plaintiffs from recovery if their own negligence is more than 50% responsible
for their injuries, while defendants shall be jointly and severally liable only
if found to be more than 50% responsible. Exemplary damages shall not exceed the
greater of $200,000, or two times the economic damage plus the non-economic
damage, not to exceed $750,000.

Medical Malpractice Reports. The Exchange and LP&C principally write
medical malpractice insurance and additional requirements are placed upon them
to report detailed information with regard to settlements or judgments against
their insureds. In addition, the Company is required to report to state
regulatory agencies or the National Practitioners Data Bank payments, claims
closed without payments, and actions by the Company, such as terminations or
surcharges, with respect to its insureds. Penalties may attach if the Company
fails to report to either the state agency or the National Practitioners Data
Bank.

Catastrophe Funds. In two states in which the Company writes insurance,
its liability is capped at a level below the Company's typical policyholder
limits of coverage. Pennsylvania's Cat Fund provides coverage for medical
malpractice claims exceeding $400,000 per claim and $1.2 million aggregate per
year. The Cat Fund coverage is limited to $800,000 per claim and $2.4 million in
the aggregate. Similarly, physicians in Indiana are required to purchase
insurance limits of $250,000 per claim and $750,000 in the aggregate. The
Indiana Patient Compensation Fund provides an additional $1 million of coverage
per claim for an insured. A plaintiff's maximum total recovery for medical
malpractice causing injury or death is $1.25 million in Indiana.

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<PAGE> 73

A.M. BEST RATINGS

In 1997 A.M. Best, which rates insurance companies based on factors of
concern to policyholders, rated the Company "A (Excellent)" for the third
consecutive year and reaffirmed the rating in March of 1998. This is the third
highest rating of 16 ratings that A.M. Best assigns. The Company earned its
first rating, a "B+," in 1992 and achieved an "A" rating by 1995.

A.M. Best publications indicate that the "A" rating is assigned to those
companies that in A.M. Best's opinion have a strong ability to meet their
obligations to policyholders over a long period of time. In evaluating a
company's financial and operating performance, A.M. Best reviews the company's
profitability, leverage, and liquidity; its book of business; the adequacy and
soundness of its reinsurance; the quality and estimated market value of its
assets; the adequacy of its loss reserves and surplus; its capital structure;
the experience and competence of its management; and its market presence. See
"Risk Factors -- A.M. Best Ratings."

EMPLOYEES

The Company employs 220 persons. None of the Company's employees are
covered by a collective bargaining agreement. The Company believes that its
relations with its employees are good.

PROPERTIES

The Company leases 49,000 square feet of space from the Medical Society in
Lawrenceville, New Jersey, where its home office and Mid-Atlantic Region office
are located. The Company also leases 28,000 square feet of space in a second
Lawrenceville office building, where its Claim Department and a subsidiary are
based. The Company's regional office facilities are located in rented office
space in Indianapolis (5,000 square feet), Boston (3,670 square feet), Atlanta
(4,190 square feet) and Dallas (5,000 square feet). The Company believes that
its office space is adequate for its present needs and that it will be able to
secure additional office space in the future if necessary. The Company is
considering the purchase of its headquarters in Lawrenceville, New Jersey, which
it currently leases from the Medical Society and has retained an independent
appraisal firm to determine its fair market value.

LITIGATION

The Company may be a party to litigation from time to time in the ordinary
course of business. Except as described under "Risk Factors -- Challenge to the
New Jersey Insurance Commissioner's Order," the Company is not currently a party
to any litigation which may have a material adverse effect on the Company.

COMPARISON OF RIGHTS

Members of the Exchange, a reciprocal insurer, have certain rights as
members which are described herein as "Membership Interests." Membership
Interests consist of the rights arising under the Rules and Regulations of the
Exchange (the "Rules and Regulations") or under law. Upon consummation of the
Reorganization, Membership Interests will be extinguished, and Distributees will
become stockholders of The MIIX Group or will receive cash. Holders of Common
Stock will have certain rights under the Certificate of Incorporation and
By-laws of The MIIX Group and under Delaware law.

The following is a comparison of certain rights of Members of the Exchange
and holders of Common Stock. This comparison is not intended to be complete and
is qualified in its entirety by reference to the Rules and Regulations of the
Exchange, copies of which will be sent to Members upon request, and by reference
to the Certificate of Incorporation and By-laws of The MIIX Group, which are
filed as exhibits to the Registration Statement of which this Prospectus forms a
part.

LIQUIDITY/MARKETABILITY

A Membership Interest is not transferable and terminates when the coverage
period or certificate period of the member under the policy issued by the
Exchange terminates by expiration of time, cancellation or

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<PAGE> 74

otherwise. The MIIX Group intends to list the Common Stock on the NYSE under the
symbol "MHU." As a result, The MIIX Group anticipates that there will be a
public market for the shares of Common Stock.

DISTRIBUTIONS

If the Board of Governors, in its reasonable discretion, determines that
the surplus of the Exchange is adequate to meet estimated operating requirements
and provide protection for members and that there is additional surplus
available for distribution to members, the Board of Governors may distribute all
or a portion of this additional surplus to members. Each member's share of such
distribution is determined by the Board of Governors in its reasonable
discretion. When a person ceases to be a member, such person loses rights to
future dividends or other distributions.

There is no statute describing how assets would be distributed upon a
liquidation of the Exchange.

After the Reorganization holders of Common Stock will be entitled to
participate equally in dividends if, as and when declared by The MIIX Group
Board, and in the distribution of assets in the event of dissolution, subject to
the rights of holders of Preferred Stock, if any. See "Dividend Policy."

MEETINGS AND ACTIONS

Any actions required to be taken by the members of the Exchange may be
taken at a duly called annual or special meeting. Special meetings of the
members may be called only by the Chairman of the Board of Governors and shall
be called by him upon the written request of one-third of the total number of
Governors and 20 members of the Exchange. The business transacted at any special
meeting of the members is confined to matters specified in the notice of
meeting. The Rules and Regulations contain an advance notice procedure with
respect to the election of Governors. All nominations for elections of Governors
must be filed with the Attorney-in-Fact at least 10 days before the election. If
nominations are not so filed, the unanimous vote of the members represented in
person or by proxy at the meeting shall be necessary to elect one not so
nominated to the Board of Governors.

Any action required or permitted to be taken by the stockholders of The
MIIX Group must be taken by vote of the stockholders at a duly called annual or
special meeting of stockholders and not by written consent. Special meetings of
stockholders may be called only by the Chief Executive Officer (or, in the event
of his or her absence or disability, by any Vice President) or the Chairman or
Vice Chairman of the Board of Directors, and shall be called by any of them
pursuant to a resolution adopted by a majority of the Board of Directors. The
business transacted at any special meeting of stockholders is confined to
matters specified in the notice of meeting. The MIIX Group By-laws establish an
advance notice procedure with regard to the nomination by stockholders of
candidates for election as directors and with regard to proposals of business to
be brought before an annual meeting of stockholders of The MIIX Group. Notice as
to any such stockholder nomination or other proposal must be received by The
MIIX Group not less than 90 days nor more than 120 days prior to the anniversary
date of the immediately preceding annual meeting. In the event that the date of
the annual meeting is advanced by more than 20 days or delayed by more than 70
days from such anniversary date, however, the By-laws provide additional time
for notice. In addition, such notice must contain certain specified information
concerning the person to be nominated or the matters to be brought before the
meeting as well as the name and address of the stockholder and the class and
number of shares beneficially owned by the stockholder submitting the proposal.

VOTING

Each member of the Exchange is entitled to one vote on all matters
submitted to the members for action or approval. The Rules and Regulations
generally require the affirmative vote of a majority of members to approve
matters submitted to the members unless a higher vote is required by law or the
Rules and Regulations. The Rules and Regulations may be amended by members of
the Exchange upon the affirmative vote of two-thirds of the members represented
in person or by proxy at a meeting.

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Holders of Common Stock are entitled to one vote per share on all matters
with respect to which the holders of Common Stock are entitled to vote
(including the election of directors) and, except as otherwise required by law
or by the terms of any series of Preferred Stock, if any, the holders of Common
Stock will possess all stockholder voting power. The Certificate of
Incorporation of The MIIX Group provides that certain provisions thereof may not
be amended without the affirmative vote of two-thirds of the outstanding stock
entitled to vote in the election of directors. The By-laws may be amended by
stockholders upon the affirmative vote of two-thirds or more of the combined
voting power of The MIIX Group entitled to vote in the election of directors.
There is no right of cumulative voting.

PREFERRED STOCK

The Exchange is not authorized to issue preferred stock.

The MIIX Group Board is authorized, subject to any limitations prescribed
by law, without further action by stockholders, to issue up to 50,000,000 shares
of Preferred Stock from time to time in one or more series and, with respect to
each series, to determine the terms thereof, including the number of shares,
dividend rates, redemption rights, conversion rights, voting rights and rights
on liquidation. See "Description of Capital Stock -- Preferred Stock." Because
The MIIX Group Board has the power to establish the preferences, powers and
rights of each series, it may afford the holders of any particular series of
Preferred Stock preferences, powers and rights (including dividend rights,
voting powers and liquidation preferences) senior to the rights of the holders
of Common Stock. No shares of Preferred Stock will be outstanding immediately
following the Reorganization and the anticipated Public Offering, and The MIIX
Group has no immediate plans to issue any series of Preferred Stock. The
issuance of a series of Preferred Stock could, depending on the terms of such
series, have the effect of discouraging, delaying or preventing a third party
from acquiring or proposing to acquire a majority of the outstanding voting
stock of The MIIX Group. See "Description of Capital Stock -- Delaware Law and
Certain Charter and By-law Provisions."

LIMITED LIABILITY

The liability of a member is generally limited to the premiums paid under
the current policy of insurance issued by the Exchange to such member, so long
as the Exchange held a statutory minimum surplus at the time the related policy
was issued. The liability of holders of Common Stock is generally limited to the
value of the Common Stock held by the holder.

REMOVAL OF GOVERNORS/DIRECTORS

The Exchange's Rules and Regulations are silent as to the removal of
Governors. The MIIX Group's Certificate of Incorporation provides that directors
can be removed from office only for cause by a majority of the voting power of
the then outstanding shares of stock entitled to vote generally in the election
of directors.

BUSINESS COMBINATIONS

The Board of Governors has adopted, subject to member approval, an
amendment to the Rules and Regulations of the Exchange which provides that the
Board of Governors may dissolve the Exchange with the affirmative vote of
two-thirds of the votes cast at a duly called meeting of the members of the
Exchange. The Rules and Regulations are silent with respect to business
combinations such as mergers and consolidations.

The Delaware General Corporation Law (the "DGCL") generally requires that a
majority of the stockholders approve a merger or consolidation or the sale,
lease or exchange of all or substantially all of a corporation's property and
assets. The DGCL contains additional restrictions where such action or
transaction is with, or proposed by or on behalf of, an "Interested Stockholder"
(defined generally as a person owning 15% or more of The MIIX Group's
outstanding voting stock). See "-- Anti-takeover Provisions" and "Description of
Capital Stock -- Delaware Law and Certain Charter and Bylaw Provisions."

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ANTI-TAKEOVER PROVISIONS

The Board of Governors is divided into three classes of directors, serving
staggered three-year terms. As a result, one-third of the Board of Governors is
elected each year. This classified board provision could delay a majority of
members who do not like the policies of the Board of Governors from replacing a
majority of the Board of Governors for two years.

The MIIX Group Board is divided into three classes of directors, serving
staggered terms expiring in 1999, 2000 and 2001 and thereafter three-year terms.
The classified board provisions could have the effect of discouraging a third
party from making a tender offer or otherwise attempting to gain control of The
MIIX Group. The Certificate of Incorporation and By-laws of The MIIX Group also
contain certain provisions that may delay, defer or prevent a change of control
of The MIIX Group and make removal of management more difficult. These
provisions are intended to (i) enhance the likelihood of continuity and
stability in the composition of The MIIX Group Board and in the policies
formulated by The MIIX Group Board, (ii) discourage certain types of
transactions which may involve an actual or threatened change of control of The
MIIX Group, (iii) reduce the vulnerability of The MIIX Group to an unsolicited
proposal for a takeover that does not contemplate the acquisition of all its
outstanding shares or an unsolicited proposal for the restructuring or sale of
all or part of The MIIX Group, and (iv) discourage certain tactics that may be
used in proxy fights.

In addition, the issuance of shares of Preferred Stock by The MIIX Group
(or the issuance of rights to purchase such shares) could be used to discourage
an unsolicited acquisition proposal. For instance, the issuance of a series of
Preferred Stock might impede a business combination by including class voting
rights that would enable the holders to block such a transaction. Also, under
certain circumstances, the issuance of Preferred Stock could adversely affect
the voting power of the holders of Common Stock.

The MIIX Group is a Delaware corporation and is subject to the provisions
of Section 203 of the DGCL. In general, Section 203 prevents an Interested
Stockholder from engaging in a "business combination" (as defined in Section
203) with The MIIX Group for three years following the date that person became
an interested stockholder, subject to certain exceptions.

The provisions described in "-- Meetings and Actions" and "-- Removal of
Governors/Directors," together with the ability of The MIIX Group Board to
authorize the issuance of Preferred Stock without further stockholder action,
could delay or frustrate the removal of incumbent directors or the assumption of
control of The MIIX Group by the holder of a large block of Common Stock. These
provisions could also discourage or make more difficult a merger, tender offer
or proxy contest even if a majority of the stockholders might consider such
event to be in their best interest. See "Description of Capital
Stock -- Delaware Law and Certain Charter and By-law Provisions."

ACTION BY WRITTEN CONSENT

The Rules and Regulations do not state whether members of the Exchange may
act by written consent. Effective as of the time that the Common Stock is
registered pursuant to the Exchange Act, the Certificate of Incorporation and
the By-laws of The MIIX Group will prohibit stockholders from acting by written
consent.

MISCELLANEOUS

Neither Membership Interests in the Exchange nor Common Stock entitle their
holders to any preemptive rights, conversion rights or redemption rights.

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MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth information concerning the individuals who
currently serve as directors of The MIIX Group. The officers set forth below are
all officers of the Attorney-in-Fact. The MIIX Group has only three executive
officers, Messrs. Goldberg, Koreyva and Hudson.

<TABLE>
<CAPTION>
NAME POSITION CLASS
- ---- -------- -----
<S> <C> <C>
Daniel Goldberg.............................. President, Chief Executive Officer and Director III
Joseph J. Hudson............................. Executive Vice President, Marketing and N/A
Business Development
Kenneth Koreyva.............................. Executive Vice President, Chief Financial N/A
Officer and Treasurer
Richard J. Gergasko.......................... Vice President, Underwriting and Actuarial N/A
Services
Lisa Kramer.................................. Vice President, Claims N/A
Angelo S. Agro, M.D. ........................ Director I
Hillel M. Ben-Asher, M.D. ................... Director I
Harry M. Carnes, M.D. ....................... Director I
Andrew Coronato, M.D. ....................... Director I
Palma E. Formica, M.D. ...................... Director II
John S. Garra, M.D. ......................... Director II
Paul J. Hirsch, M.D. ........................ Director II
Louis L. Keeler, M.D. ....................... Director II
Henry R. Liss, M.D. ......................... Director I
Arganey Lucas, Jr., M.D. .................... Director I
S. Stuart Mally, M.D. ....................... Director I
Vincent A. Maressa, Esq. .................... Director II
Murray N. Matez, D.O. ....................... Director I
Robert S. Maurer, D.O. ...................... Director III
A. Richard Miskoff, D.O. .................... Director III
Charles J. Moloney, M.D. .................... Director III
Eileen Marie Moynihan, M.D. ................. Director III
Fred M. Palace, M.D. ........................ Director I
John J. Pastore, M.D. ....................... Director II
Pascal A. Pironti, M.D. ..................... Director II
Carl Restivo, Jr., M.D. ..................... Director II
Joseph A. Riggs, M.D. ....................... Director I
Bernard Robins, M.D. ........................ Director III
Herman M. Robinson, M.D. .................... Director II
Gabriel F. Sciallis, M.D. ................... Director III
Benjamin I. Smolenski, M.D. ................. Director II
Martin L. Sorger, M.D. ...................... Director III
Bessie M. Sullivan, M.D. .................... Director III
Harvey P. Yeager, M.D. ...................... Director III
</TABLE>

The MIIX Group's Certificate of Incorporation provides for a Board of
Directors consisting of at least nine but not more than thirty-five directors.
At each succeeding Annual Meeting of stockholders following such initial
classification and election, the respective successors of each class shall be
elected for three-year terms.

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<PAGE> 78

At a meeting held on September 16, 1998, The MIIX Group Board approved a
proposal to reduce the size of The MIIX Group Board to approximately 12 to 13
members comprised of ten current members, including Mr. Goldberg, and two to
three new members. This reduction would take place over three years. The MIIX
Group Board requested that a transition committee develop a detailed plan for
the implementation of this proposal.

Daniel Goldberg, 51, Director, President and Chief Executive Officer of the
Attorney-in-Fact, has served in each of these capacities since 1990. Mr.
Goldberg is a member of the Board of Directors of ACCRA Holdings Corp. and
American Fidelity & Liberty Insurance Company. He is a member of the Academy of
Hospital Attorneys.

Joseph J. Hudson, 58, Executive Vice President, Marketing and Business
Development has served as Vice President of Marketing and Business Development
of the Attorney-in-Fact since 1994. Prior to that, he was a Vice President at
Alexander & Alexander, Inc. He is a member of the American Society of Hospital
Risk Managers, the Professional Liability Underwriting Society and the Society
of Chartered Property and Casualty Underwriters.

Kenneth Koreyva, 43, Executive Vice President, Chief Financial Officer and
Treasurer has served as Vice President, Chief Financial Officer and Treasurer of
the Attorney-in-Fact since 1997. From 1991 until 1997, he served as Vice
President in various capacities. Prior to that, he was a partner with the
accounting firm of Coopers & Lybrand. He is a member of the American Institute
of Certified Public Accountants.

Richard J. Gergasko, 40, Vice President, Underwriting and Actuarial
Services of the Attorney-in-Fact, has served in this capacity since December
1998. From 1995 to 1998, he was Vice President of Underwriting with American
International Group, Inc. From 1992 to 1994 he provided actuarial consulting
services with MBA Incorporated. He is a Fellow of the Casualty Actuarial Society
and a Member of the American Academy of Actuaries.

Lisa Kramer, 53, Vice President, Claims of the Attorney-in-Fact, has served
in this capacity since 1990. She is a member of the American Bar Association,
the International Association of Defense Counsel and the Philadelphia Bar
Association.

Angelo S. Agro, M.D., 49, Director, has been a member of the Board of
Directors of the Attorney-in-Fact since 1990. He is a physician certified by the
American Board of Otolaryngology. Dr. Agro has practiced in Voorhees, New
Jersey, for more than five years with Professional Otolaryngology Associates. He
is a member of the American Academy of Otolaryngology, the American Medical
Association, the American College of Surgeons, and the Medical Society of New
Jersey. Dr. Agro is a trustee of Camden County College and Secretary of the
Board.

Hillel M. Ben-Asher, M.D., 67, Director, has been Chairman of the Board of
Governors of the Exchange since 1988 and a member of the Board of Governors
since 1977. He has been a board-certified physician in Morristown, New Jersey,
for more than five years with Blair Medical Associates. Dr. Ben-Asher is a
Fellow of the American College of Physicians and a member of the American
Medical Association, the American Society of Internal Medicine, and the New
Jersey Society of Internal Medicine.

Harry M. Carnes, M.D., 66, Director, has been a member of the Board of
Directors of the Attorney-in-Fact since 1989. He has been a physician in
Audubon, New Jersey, for more than five years. Dr. Carnes is a member of the
American Academy of Family Practice, the Camden City Medical Society, and the
Medical Society of New Jersey.

Andrew Coronato, M.D., 58, Director, has been a member of the Board of
Governors of the Exchange since 1991. He has been a board-certified physician in
Westfield, New Jersey, for more than five years with Medical Diagnostic
Associates, P.A. Dr. Coronato is a Fellow of the American College of
Gastroenterology and American College of Physicians. He is a member of the
American Gastroenterologic Association and the Medical Society of New Jersey.

Palma E. Formica, M.D., 70, Director, has been Secretary/Treasurer of the
Board of Directors of the Attorney-in-Fact since 1982. She has been a
board-certified physician in New Brunswick, New Jersey, for

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<PAGE> 79

more than five years with St. Peter's Medical Center and a Professor of Clinical
Family Medicine at the University of Medicine and Dentistry of New Jersey
(UMDNJ) Robert Wood Johnson Medical School. Dr. Formica is a member of the
Academy of Medicine of New Jersey, the American Academy of Family Physicians,
the American College of Physician Executives, the American Medical Association,
the American Medical Political Action Committee, the Medical Society of New
Jersey, the Middlesex County Medical Society, the New Jersey Academy of Family
Physicians, and the Organization of Medical Society Presidents.

John S. Garra, M.D., 58, Director, has been a member of the Board of
Governors of the Exchange since 1992. He has been a board-certified physician in
Collingswood, New Jersey, for more than five years. Dr. Garra is a member of the
American College of Obstetricians and Gynecologists, the American College of
Surgeons, the American Fertility Society, the Medical Society of New Jersey, and
the New Jersey Society of Surgeons.

Paul J. Hirsch, M.D., 61, Director, has been Vice Chair of the Board of
Directors of the Attorney-in-Fact since 1990. He has been a board-certified
physician in Bridgewater, New Jersey, for more than five years with BioSport
Orthopedics & Sports Medicine. Dr. Hirsch is a member of the American Academy of
Orthopedic Surgeons, the American Orthopaedic Association, the American College
of Surgeons, the Arthroscopy Association of North America, the American Medical
Association, and the Medical Society of New Jersey. He currently serves on the
Boards of Trustees for Raritan Valley Community College, the Journal of Bone and
Joint Surgery and the Academy of Medicine of New Jersey. Dr. Hirsch is a
clinical professor of orthopedic surgery at Seton Hall School of Graduate
Medical Education.

Louis L. Keeler, M.D., 66, Director, has been a member of the Board of
Directors of the Attorney-in-Fact since 1994. He has been a board-certified
physician in Haddon Heights, New Jersey, for over five years. Dr. Keeler is a
member of the American Medical Association, the American Urological Association,
and the Medical Society of New Jersey.

Henry R. Liss, M.D., 73, Director, has been a member of the Board of
Governors of the Exchange since 1977. He has been a board-certified physician in
Summit, New Jersey, for more than five years as a neurosurgery consultant. Dr.
Liss is a member of the American Association of Neurological Surgeons, the
American Medical Association, the American Society of Military Surgeons, and the
Congress of Neurosurgeons.

Arganey Lucas, Jr., M.D., 71, Director, has been a member of the Board of
Governors of the Exchange since 1987. He is a retired board-certified
anesthesiologist. Dr. Lucas is a member of the Academy of Medicine, the American
Medical Association, the American Society of Anesthesiologists, the Medical
Society of New Jersey, the National Medical Association, the New Jersey State
Society of Anesthesiologists, the North Jersey Medical Society, and the Morris
County Medical Society.

S. Stuart Mally, M.D., 72, Director, has been a member of the Board of
Governors of the Exchange since 1990. He has been a board-certified physician in
Atlantic City, New Jersey, for more than five years. Dr. Mally is a governor of
the American College of Surgeons and a member of the Medical Society of New
Jersey and the Society of Surgeons of New Jersey. Dr. Mally is a former
President of the New Jersey Society of Surgeons and the New Jersey Chapter,
American College of Surgeons.

Vincent A. Maressa, Esq., 56, Director, has been Chairman of the Board of
Directors of the Attorney-in-Fact since 1990 and a member of the Board of
Directors of the Attorney-in-Fact since 1977. He has been the Executive Director
and General Counsel of the Medical Society of New Jersey since 1973. Mr. Maressa
is a member of the American Bar Association, the American Society of Medical
Executives, and the Mercer County Bar Association.

Murray N. Matez, D.O., 71, Director, has been Secretary of the Board of
Governors of the Exchange since 1979. He has been a board-certified physician in
Camden, New Jersey, for more than five years. Dr. Matez has been a physician at
Lourdes Medical Associates, P.A. since 1996. Prior to that, Dr. Matez was a solo
practitioner. He is a member of the American College of Osteopathic Family
Physicians, the American Osteopathic Association, the Camden County Society of
Osteopathic Physicians and Surgeons and the New

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<PAGE> 80

Jersey Chapter of American College of Osteopathic Family Physicians. Dr. Matez
is also a member and a former President of the New Jersey Association of
Osteopathic Physicians and Surgeons.

Robert S. Maurer, D.O., 65, Director, has been a member of the Board of
Directors of the Attorney-in-Fact since 1977. He has been a board-certified
physician in Stratford, New Jersey, for more than five years. Dr. Maurer has
been an Associate Professor of Clinical Family Medicine at UMDNJ-SOM since 1992.
He is a member of the American Osteopathic Association, the American Osteopathic
College of Family Practitioners, the American Osteopathic College of
Rheumatology, the Middlesex County Osteopathic Society, and the New Jersey
Association of Osteopathic Surgeons and Physicians.

A. Richard Miskoff, D.O., 57, Director, has been a member of the Board of
Governors of the Exchange since 1994. He has been a board-certified physician in
Edison, New Jersey, for more than five years. Dr. Miskoff is a member of the
American Osteopathic Association, the American Society of Clinical Oncologists,
the American Society of Hematology, and the New Jersey Association of
Osteopathic Physicians.

Charles J. Moloney, M.D., 64, Director, has been Assistant Secretary of the
Board of Governors of the Exchange since 1979. He has been a board-certified
physician in Moorestown, New Jersey, for more than five years. Dr. Moloney is a
member of the American Academy of Pediatrics and the Medical Society of New
Jersey.

Eileen Marie Moynihan, M.D., 46, Director, has been a member of the Board
of Governors of the Exchange since 1995. She has been a board-certified
rheumatologist in Woodbury, New Jersey for more than five years. Dr. Moynihan
has also been Medical Director of the Eastern District Office for XACT Medicare
(Highmark Inc.) since 1988. She is a member of the Academy of Medicine of New
Jersey, the American College of Rheumatology, the American Medical Association,
the Camden County Medical Society and the New Jersey Rheumatism Association. Dr.
Moynihan is also a member and treasurer of the Medical Society of New Jersey.

Fred M. Palace, M.D., 63, Director, has been a member of the Board of
Directors of the Attorney-in-Fact since 1990. He has been a board-certified
radiologist in Morristown, New Jersey, for more than five years with Morris
Imaging Assoc., P.A. Dr. Palace is a member of the Medical Society of New
Jersey.

John J. Pastore, M.D., 71, Director, has been a member of the Board of
Governors of the Exchange since 1977. He has been a board-certified physician in
Vineland, New Jersey, for more than five years. Dr. Pastore is a member of the
American Academy of Family Physicians, the American Medical Association, the
Geriatric Society, and the Medical Society of New Jersey.

Pascal A. Pironti, M.D., 64, Director, has been a member of the Board of
Governors of the Exchange since 1982. He has been a board-certified urologist in
Summit, New Jersey, for more than five years. Dr. Pironti is a member of the
American College of Surgeons, the American Medical Association, the American
Urological Association, the Medical Society of New Jersey, and the Society of
Clinical Urologists.

Carl Restivo, Jr., M.D., 52, Director, has been a member of the Board of
Directors of the Attorney-in-Fact since 1997. He has been a board-certified
physician in Jersey City, New Jersey, for more than five years. Dr. Restivo is a
Delegate for the New Jersey Chapter of the American Medical Association and a
past president of the Arthritis Foundation. He is a past president of the
Medical Society of New Jersey.

Joseph A. Riggs, M.D., 65, Director, has been a member of the Board of
Directors of the Attorney-in-Fact since 1990. He has been a board-certified
physician in Haddon Heights, New Jersey, for more than five years. Dr. Riggs is
a member of the American Medical Association, the Camden County Medical Society,
the Medical Society of New Jersey, the New Jersey Obstetrics and Gynecology
Society, and the American College of Obstetricians and Gynecologists.

Bernard Robins, M.D., 70, Director, has been a member of the Board of
Directors of the Attorney-in-Fact since 1990. He has been a board-certified
physician in Tewksbury Township, New Jersey, for more than five years. Dr.
Robins is a member of the Medical Society of New Jersey.

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<PAGE> 81

Herman M. Robinson, M.D., 65, Director, has been a member of the Board of
Directors of the Attorney-in-Fact since 1990. He has been a board-certified
radiologist in Millburn, New Jersey, for more than five years. Dr. Robinson is a
member of the American College of Radiology, the American Medical Association,
the Medical Society of New Jersey, and the Radiology Society of New Jersey.

Gabriel F. Sciallis, M.D., 54, Director, has been Assistant Secretary of
the Board of Governors of the Exchange since 1979. He has been a board-certified
physician in Mercerville, New Jersey, for more than five years. He is a member
of the American Academy of Dermatology, the Dermatology Society of New Jersey,
the Medical Society of New Jersey, and the Mercer County Medical Association.

Benjamin I. Smolenski, M.D., 58, Director, has been Assistant Secretary of
the Board of Governors of the Exchange since 1990. He has been a board-certified
orthopedic surgeon in Mount Laurel, New Jersey, for more than five years with
Smolenski Brill Hagren & Schwartz P.A. Dr. Smolenski is a member of the American
Academy of Orthopedic Surgery, the American College of Surgeons, Eastern
Orthopedic, the Medical Society of New Jersey, and the Philadelphia Orthopaedic
Society.

Martin L. Sorger, M.D., 64, Director, has been a member of the Board of
Governors of the Exchange since 1979. He has been a board-certified orthopedic
physician in Glen Ridge, New Jersey, and a member of the Montclair Orthopedic
Group for more than five years. Dr. Sorger is a member of the Alumni Council
Columbia Medical School, the American Academy of Orthopedic Surgeons, the
American College of Surgeons and a former member of its Board of Councilors, and
the American Medical Association. He is a former president of the New Jersey
Orthopedic Society and a member of its executive committee.

Bessie M. Sullivan, M.D., 57, Director, has been a member of the Board of
Governors of the Exchange since 1992. She has been a board-certified physician
in Edison, New Jersey, for more than five years with the Arthritis, Allergy &
Immunology Center. Dr. Sullivan is a member of the American Medical Association,
the American Rheumatism Association, the New Jersey Medical Society, and the
Union City Medical Society.

Harvey P. Yeager, M.D., 64, Director, has been a member of the Board of
Governors of the Exchange since 1985. He has been a board-certified
otolaryngologist-head and neck surgeon in West Orange, New Jersey, for more than
five years. Dr. Yeager is a member of the American Academy of Otolaryngology,
the American Society of Head and Neck Surgery and the Medical Society of New
Jersey. He is a former president of the New Jersey Academy of Ophthalmology and
Otolaryngology and a former member of the Board of Directors of Physicians
Insurers Associates of American (PIAA).

COMMITTEES OF THE MIIX GROUP, INCORPORATED

The MIIX Group Board has the following standing committees:

Executive Committee. The Executive Committee has the authority to exercise
all powers of The MIIX Group Board between meetings of The MIIX Group Board,
except as provided by the Certificate of Incorporation or the By-laws of The
MIIX Group, or by applicable law. The Executive Committee consists of four
members, Messrs. Goldberg and Maressa, and Drs. Ben-Asher and Hirsch.

Audit Committee. The Audit Committee meets periodically with the Company's
management and independent auditors to discuss the scope of the annual audit,
internal control, and financial reporting matters. The Company's independent
auditors have direct access to the Audit Committee. The Audit Committee consists
of three members, all of whom are independent directors. The members of the
Audit Committee are Drs. Agro, Carnes and Sullivan.

Compensation Committee. The Compensation Committee sets the compensation
of the Company's directors and executive officers. The Compensation Committee
has five members consisting of Mr. Maressa and Drs. Agro, Ben-Asher, Hirsch and
Liss.

Nominating Committee. The Nominating Committee recommends candidates to
fill vacancies on The MIIX Group Board and also recommends candidates for
membership on committees of The MIIX Group Board. The members of the Nominating
Committee are Mr. Goldberg and Drs. Moynihan, Restivo and Sorger.

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Transition Committee. The Transition Committee deals with various aspects
of the Company's conversion to a publicly held stock insurance company. The
members of the Transition Committee are Messrs. Maressa and Goldberg, and Drs.
Ben-Asher, Formica, Hirsch, Liss, Matez, Moloney, Palace, Restivo, Sciallis and
Sorger.

The MIIX Group Board may from time to time establish certain other
committees to facilitate the management of The MIIX Group.

DIRECTOR COMPENSATION

Following the Reorganization, directors will receive the following fees.
The Chairman will receive an annual stipend of $35,000, the Vice-Chairman will
receive an annual stipend of $20,000, the Secretary will receive an annual
stipend of $20,000, the Chairman of the Audit Committee will receive an annual
stipend of $25,000, the Chairman of any other committee will receive an annual
stipend of $16,000, and other members of the Board will receive an annual
stipend of $14,000. Board members will not receive travel expense reimbursement
for meetings held in New Jersey.

In 1991, the Company invested in a number of corporate owned life insurance
policies insuring the lives of members of the Board of Governors, the Board of
Directors of the Attorney-in-Fact and committee members of such Boards. The
proceeds of such policies were payable to the Company. Under a separate Board
Members Plan the beneficiaries of such members were entitled to death benefit
payments from the Company over a ten-year period. On July 15, 1998, the Company
terminated such Board Members Plan.

EXECUTIVE COMPENSATION

The MIIX Group was organized as a Delaware corporation in October, 1997.
Since its organization, it has not paid any cash compensation to its executive
officers. The following Summary Compensation Table sets forth information
concerning the compensation by the Company of (i) the Company's President and
Chief Executive Officer and (ii) the five other most highly compensated
executive officers of the Company (collectively, the "Named Executive
Officers"), for the years ended December 31, 1997 and 1998.

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<PAGE> 83

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
ALL OTHER
NAME AND PRINCIPAL POSITION(S) YEAR SALARY BONUS(1) COMPENSATION(2)
------------------------------ ---- -------- -------- ---------------
<S> <C> <C> <C> <C>
Daniel Goldberg................................. 1998 $479,583(3) $ -- $106,793(4)
President and Chief Executive Officer 1997 433,750(3) 76,000 113,132(4)
Joseph J. Hudson................................ 1998 232,500 -- 14,542(5)
Executive Vice President, Marketing and 1997 200,000 33,000 13,117(5)
Business Development
Kenneth Koreyva................................. 1998 258,667 -- 15,661(6)
Executive Vice President, Chief Financial 1997 225,000 49,500 17,113(6)
Officer and Treasurer
Richard J. Gergasko(7).......................... 1998 83,846 -- 2,068(8)
Vice President, Underwriting and 1997 -- -- --
Actuarial Services
Lisa Kramer..................................... 1998 225,000 -- 16,235(9)
Vice President, Claims 1997 225,000 24,000 16,950(9)
Ronald Wade(10)................................. 1998 188,370 -- 11,128(11)
Vice President, Western Region 1997 179,400 26,000 7,750(11)
</TABLE>

- ---------------
(1) Bonuses for 1998 have not been determined. The Company expects to determine
bonuses for 1998 in March 1999.

(2) The value of certain perquisites or personal benefits is not included in
the amounts disclosed because it did not exceed for any Named Executive
Officer the lesser of either $50,000 or 10% of the total annual salary and
bonus reported for the Named Executive Officer.

(3) Includes $78,750 of deferred compensation paid in each of 1997 and 1998.

(4) Represents 401(k) contributions of $4,750 and $5,000 in 1997 and 1998,
respectively; $10,429 and $3,840 in supplemental health and disability
insurance premiums in 1997 and 1998, respectively; $87,000 in premiums paid
by the Company in each of 1997 and 1998 in respect of a supplemental
executive retirement program; and $10,953 in respect of a Split Dollar Life
Insurance Agreement in each of 1997 and 1998. Under this Agreement, the
Company did not pay any amount attributable to term life insurance coverage
in 1997 or 1998, and the dollar value to Mr. Goldberg of the remainder of
the premiums paid by the Company during each of 1997 and 1998 is $10,953.
See "Employment Agreements."

(5) Represents 401(k) contributions of $4,750 and $5,000 in 1997 and 1998,
respectively; $4,967 and $6,142 in supplemental health and disability
insurance premiums in 1997 and 1998, respectively; and $3,400 in respect of
Split Dollar Life Insurance Agreement in each of 1997 and 1998. Under such
Agreement, the Company did not pay any amount attributable to term life
insurance coverage in 1997 or 1998, and the dollar value to Mr. Hudson of
the remainder of the premiums paid by the Company during each of 1997 and
1998 is $3,400. See "Employment Agreements."

(6) Represents 401(k) contributions of $4,750 and $5,000 in 1997 and 1998,
respectively; $7,113 and $5,411 in supplemental health and disability
insurance premiums in 1997 and 1998, respectively; and $5,250 in respect of
a Split Dollar Life Insurance Agreement in each of 1997 and 1998. Under
such Agreement, the Company did not pay any amount attributable to term
life insurance coverage in 1997 or 1998, and the dollar value to Mr.
Koreyva of the remainder of the premiums paid by the Company during each of
1997 and 1998 is $5,250. See "Employment Agreements."

(7) Mr. Gergasko was not employed by the Company in 1997.

(8) Consists of supplemental health and disability insurance premiums.

(9) Represents 401(k) contributions of $4,750 and $5,000 in 1997 and 1998,
respectively; $5,000 and $4,035 in supplemental health and disability
insurance premiums in 1997 and 1998, respectively; and $7,200 in respect of
a Split Dollar Life Insurance Agreement in each of 1997 and 1998. Under
such Agreement, the Company did not pay any amount attributable to term
life insurance coverage in 1997 or 1998, and

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the dollar value to Ms. Kramer of the remainder of the premiums paid by the
Company during each of 1997 and 1998 is $7,200. See "Employment
Agreements."

(10) Reported pursuant to Item 402(a)(3)(iii) of Regulation S-K.

(11) Represents 401(k) contributions of $4,750 and $5,000 in 1997 and 1998,
respectively; and $3,000 and $6,128 in supplemental health insurance
premiums in 1997 and 1998, respectively.

EMPLOYMENT AGREEMENTS

Each of Messrs. Goldberg, Koreyva and Hudson is party to a separate
employment agreement dated October 9, 1998 (each an "Employment Agreement") with
The MIIX Group and the Attorney-in-Fact. Each Employment Agreement is for an
initial three year term. Mr. Goldberg's Employment Agreement provides for an
initial base salary of $430,000 per annum, Mr. Koreyva's Employment Agreement
provides for an initial base salary of $275,000 per annum and Mr. Hudson's
Employment Agreement provides for an initial base salary of $250,000 per annum.
Bonuses are payable at the discretion of the Board of Directors of The MIIX
Group. In the event of a termination of employment, severance pay including up
to three years' salary (in the case of Mr. Goldberg) or two years' salary (in
the case of Messrs. Koreyva and Hudson) is payable under certain circumstances.
Under the terms of their respective Employment Agreements each of Messrs.
Goldberg, Koreyva, and Hudson is entitled to the grant of stock options. Such
stock options will be granted under The MIIX Group's Long Term Incentive Equity
Plan (as described in more detail below) on or by the date of consummation of
the anticipated Public Offering at an exercise price equal to the fair market
value of the Common Stock as of the date of grant. Mr. Goldberg will be granted
175,000 options, Mr. Hudson will be granted 60,000 options and Mr. Koreyva will
be granted 80,000 options. Twenty five percent of these options will vest upon
grant and an additional twenty five percent will vest upon the first, second and
third anniversaries of the date of grant. Under the terms of each Employment
Agreement, Messrs. Goldberg, Koreyva and Hudson are permitted to participate in
the stock purchase and loan agreements and the compensation plans described
below.

The Attorney-in-Fact is party to an employment agreement dated as of August
1, 1990, with Ms. Kramer. This is currently a year-to-year agreement. Ms.
Kramer's current compensation under such agreement is $225,000 per annum. If Ms.
Kramer's employment is terminated without cause, the Attorney-in-Fact is
required to pay Ms. Kramer's salary and benefits through the end of the term of
the Agreement, reduced by the amount of any compensation received by Ms. Kramer
from other employment.

The Attorney-in-Fact is party to an employment agreement dated as of
November 1, 1997 with Mr. Wade. This agreement is for a two year term. Mr.
Wade's base salary per annum under this agreement is $179,400. Additional
compensation and bonuses are payable at the discretion of the Board of Directors
of the Attorney-in-Fact. If Mr. Wade's employment is terminated without cause,
the Attorney-in-Fact is required to pay Mr. Wade's salary and benefits for 12
months or, if earlier, until Mr. Wade obtains full-time employment with another
employer. If Mr. Wade's employment is terminated prior to November 1, 1999, he
is entitled to receive the greater of (i) the amount determined in accordance
with the preceding sentence and (ii) his salary and benefits payable through
November 1, 1999.

The Attorney-in-Fact provides Mr. Goldberg with a supplemental executive
retirement program through a Restricted Split Dollar Life Insurance Agreement
and a related Collateral Assignment of Split-Dollared Policy dated September 12,
1996. Under the terms of these agreements, the Attorney-in-Fact is responsible
for the payment of all premiums due under a life insurance policy on the life of
Mr. Goldberg with a total face value of $1.4 million. The annual premium under
such policy is $87,000. Mr. Goldberg owns such policy, but upon Mr. Goldberg's
death, the Attorney-in-Fact is entitled to receive (i) if the Attorney-in-Fact
or the Exchange has been declared insolvent, an amount equal to the lesser of
the cash surrender value of the policy or the sum of the premiums paid by the
Attorney-in-Fact, net of previous withdrawals or policy loans made to the
Attorney-in-Fact, and if the Attorney-in-Fact and the Exchange have not been
declared insolvent, zero (the "Insolvency Payment") and (ii) an amount equal to
the proceeds of the policy less the sum of $900,000 and the Insolvency Payment.
If the policy is paid under circumstances other than Mr. Goldberg's death, the

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<PAGE> 85

Attorney-in-Fact is entitled to receive the Insolvency Payment. Mr. Goldberg's
Employment Agreement requires The MIIX Group to maintain this or an equally
favorable arrangement on behalf of Mr. Goldberg.

The Attorney-in-Fact is party to Split Dollar Life Insurance Agreements and
related Collateral Assignments of Split-Dollared Policy with each of Mr.
Goldberg, Mr. Hudson, Mr. Koreyva and Ms. Kramer. Under the terms of such
agreements, the Named Executive Officer owns a life insurance policy, and the
Attorney-in-Fact and the applicable Named Executive Officer share the cost of
such policy's premiums. Upon payment of the proceeds or cash value of each such
policy, the Attorney-in-Fact is entitled to receive the excess of such proceeds
or cash value over the greater of (i) the excess of the proceeds or cash value
of the policy over the sum of total premiums paid by the Attorney-in-Fact, or
(ii) the sum of the applicable Named Executive Officer's premium payments, plus
interest at 5% per annum, compounded annually on the anniversary date of the
applicable policy.

STOCK PURCHASE AND LOAN AGREEMENTS

The MIIX Group is party to separate Stock Purchase and Loan Agreements with
each of Messrs. Goldberg, Koreyva and Hudson (the "Stock Purchase and Loan
Agreements"). The purpose of the Stock Purchase and Loan Agreements is to align
more closely the interests of such officers with the interests of The MIIX
Group's stockholders. Pursuant to such agreements, upon the closing of the
anticipated Public Offering, The MIIX Group will loan $1,290,000 to Mr.
Goldberg, $550,000 to Mr. Koreyva and $500,000 to Mr. Hudson. The proceeds of
such loans will be used to purchase unregistered shares of Common Stock from The
MIIX Group at the Public Offering Price, and the interest rate charged therefor
will be the minimum rate necessary to avoid income imputation under the Code as
of the date of the closing of the Reorganization. Assuming that the Public
Offering Price is $15.50 per share, then Messrs. Goldberg, Hudson and Koreyva
will purchase 83,226, 32,258 and 35,484 shares of Common Stock, respectively.
Although the purchased shares will be pledged to The MIIX Group to secure the
applicable loan, each loan will be made with full recourse against the
applicable executive. Each loan has a five-year term. If the anticipated Public
Offering is not consummated then no loans will be made and no shares will be
purchased pursuant to the Stock Purchase and Loan Agreements.

COMPENSATION PLANS

Long Term Incentive Equity Plan.

The MIIX Group has adopted, and the Exchange as its sole stockholder has
approved, the 1998 Long Term Incentive Equity Plan (the "Incentive Plan"). Any
officer or key employee of The MIIX Group who is nominated by the Chief
Executive Officer of The MIIX Group and approved by the committee designated by
The MIIX Group's Board of Directors to administer the Plan (the "Committee")
will be eligible to receive awards under the Incentive Plan. Awards under the
Incentive Plan may be in the form of incentive stock options, non-qualified
options, stock appreciation rights ("SARs"), performance shares, restricted
stock, dividend equivalents or any combination thereof.

A maximum of 2,250,000 shares of Common Stock will be available for awards
during the term of the Incentive Plan. The maximum number of shares of Common
Stock that may be awarded to any employee under the Incentive Plan during any
calendar year shall not exceed 250,000. These limitations may be adjusted in the
event of a stock split, recapitalization, merger or similar event.

The price per share at which Common Stock may be purchased upon exercise of
an option granted under the Incentive Plan shall not be less than the fair
market value of a share of Common Stock on the date of grant. In the case of an
incentive stock option granted to a person owning more than 10% of the combined
voting power of all classes of stock of The MIIX Group (a "Ten Percent
Stockholder"), the option price per share shall not be less than 110% of the
fair market value of a share of Common Stock on the date of grant. An employee
who has been granted options may, at the discretion of the Committee, be
credited as of dividend payment dates that occur during the option period with
dividend equivalents that may be converted into Common Stock or cash at such
time and subject to such limitations as may be determined by the Committee. The
Committee shall specify when an option may be exercised, but the term shall in
no event be greater than

82
<PAGE> 86

10 years (five years in the case of a Ten Percent Stockholder). The Committee
shall specify the option price and other conditions of exercise. The Company
anticipates that the exercise price of the options will be the fair market value
of a share of Common Stock on the date of grant, or 110% of such fair market
value in the case of a Ten Percent Stockholder. In general, options granted
pursuant to the Incentive Plan terminate upon the earliest to occur of (i) the
full exercise of the option, (ii) the expiration of the option by its terms or
(iii) no more than five years (three months for incentive stock options) after
termination of the option holder's employment with The MIIX Group.

An SAR must be granted in tandem with all or a portion of a related option.
An SAR may be granted either at the time of the grant of the option or at a
later time during the term of the option and shall be exercisable only to the
extent that the underlying option is exercisable. The base price of an SAR shall
be the option price under the related option. An SAR shall entitle the employee
to surrender unexercised the related option (or any portion of such option) and
to receive a payment equal to the excess of the fair market value of the shares
of Common Stock covered by the SAR on the date of exercise over the base price
of the SAR. Such payment may be in cash, in shares of Common Stock, in shares of
restricted stock, or any combination thereof, as the Committee shall determine.
Upon exercise of an SAR, the related option shall be canceled automatically to
the extent of the number of shares of Common Stock covered by such exercise, and
such shares shall no longer be available for purchase under the option.
Conversely, if the related option is exercised as to some or all of the shares
of Common Stock covered by the grant, the related SAR, if any, shall be canceled
automatically to the extent of the number of shares of Common Stock covered by
the option exercise. As a general matter, SARs are governed by the same rules
regarding term and termination as stock options.

An award of restricted stock is a grant by The MIIX Group of a specified
number of shares of Common Stock that are subject to forfeiture upon the
happening of specified events. The Committee may establish the terms of a
restricted stock award. Under certain conditions to be determined by the
Committee, restricted stock is subject to forfeiture upon termination of an
employee's employment.

The Committee may also grant performance awards, which are conditional
grants of Common Stock or cash which vest upon the attainment of certain goals.
An employee who has been granted performance awards may, at the discretion of
the Committee, be credited as of dividend payment dates that occur during the
performance period with dividend equivalents that may be converted into Common
Stock or cash at such time and subject to such limitations as may be determined
by the Committee. Under certain conditions to be determined by the Committee,
performance awards are subject to forfeit upon termination of an employee's
employment.

Upon a change of control of The MIIX Group, unless The MIIX Group Board
determines that awards may be assumed by the successor corporation, (i) at the
discretion of The MIIX Group Board either all options shall become immediately
exercisable or shall be canceled in exchange for a cash payment equal to the
excess of the fair market value of the underlying common stock over the exercise
price of the option and (ii) all restricted stock and performance awards shall
become nonforfeitable and immediately payable in cash.

401(k) Plan. Following the Reorganization, The MIIX Group will assume the
401(k) Plan from the Attorney-in-Fact. The 401(k) Plan offers eligible employees
of the Company an opportunity to contribute to the 401(k) Plan on a regular
basis through payroll deductions in amounts equal to but not greater than 15% of
their compensation. The 401(k) Plan's benefits are based on amounts contributed
and individual account investment performance. All employees of the Company who
are over age 21 years and have completed six months of service with the Company
are eligible to participate in the 401(k) Plan.

The Company matches 50% of an employee's contribution to the 401(k) Plan up
to 6% of such employee's compensation. The amount of matching contributions made
by the Company for the fiscal years ended December 31, 1997, 1996, and 1995 were
$258,324, $256,291 and $238,485, respectively. In addition, the Company may make
discretionary contributions to the 401(k) Plan to be allocated among the
employees' accounts on the basis of their relative levels of compensation.

83
<PAGE> 87

Pension Benefits. Following the Reorganization, The MIIX Group will assume
from the Attorney-in-Fact a retirement plan (the "Retirement Plan") that
provides pensions for substantially all employees of the Company. The Retirement
Plan is an employee non-contributory, tax-qualified defined benefit plan that
provides each covered employee with a basic annual benefit at normal retirement
(age 65) equal to 1.5% of the employee's highest five year average basic
compensation, plus .59% of such average compensation in excess of $10,000, times
years of service (subject to applicable law limitations on the amount of
earnings which may be considered for benefit accrual purposes under tax
qualified plans) with the Company. Covered employees attaining age 21 and having
completed one year of service are eligible to participate in the Retirement
Plan.

The following table sets forth the estimated maximum annual benefits
payable under the Retirement Plan to a Company officer or employee retiring at
age 65 with the specified combination of final average compensation and years of
credited service:

ESTIMATED ANNUAL BENEFIT YEARS OF CREDITED SERVICE AT AGE 65

<TABLE>
<CAPTION>
AVERAGE
COMPENSATION 10 15 20 25 30 35 40
- ------------ ------- ------- ------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
$125,000 $25,535 $38,303 $51,070 $63,838 $76,605 $ 89,373 $ 98,748
150,000 30,760 46,140 61,520 76,900 92,280 107,660 118,910
160,000+* 32,850 49,275 65,700 82,125 98,550 114,975 126,975
</TABLE>

- ---------------
* The Internal Revenue Code does not permit more than $160,000 in annual
compensation to count towards the determination of benefits under the pension
plan.

The amounts shown in the table are straight life annuities payable under
the Retirement Plan without reduction for the joint and survivor annuity.
Retirement benefits listed in the table are not subject to any deduction for
Social Security benefits.

The earnings subject to the retirement plans for each of the executive
officers in the Summary Compensation Table is determined from the compensation
amounts shown under "Salary," but not the amounts shown under "Bonus." As of
December 31, 1998, the years of service of Mr. Goldberg, Mr. Hudson, Mr.
Koreyva, Mr. Gergasko, Ms. Kramer and Mr. Wade are nine years, five years, eight
years, six months, nine years, and two years, respectively.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The Attorney-in-Fact leases 49,000 square feet for its home office and
Mid-Atlantic Region office from the Medical Society pursuant to a lease
agreement dated June 29, 1981 and extended on June 26, 1998. Annual lease
payments are approximately $770,000. The Company held a note receivable of $3.2
million and $3.0 million, included in other assets, at December 31, 1996 and
1997, respectively, from the Medical Society, collateralized by the building in
which the Company maintains its home office. The note provides for monthly
payments of $40,000, which includes interest at 9.05% until September 1, 2004
and reduced payments thereafter until June 1, 2009. Vincent A. Maressa, a
director of the Medical Society, is a director of The MIIX Group.

In addition to the lease mentioned above, the Attorney-in-Fact leases space
pursuant to a lease guaranteed by the Exchange. Such lease expires in May 2001,
with total minimum lease payments remaining of $1.4 million as of September 30,
1998. The Exchange has extended a line of credit to an Attorney-in-Fact
subsidiary in an amount up to $5.0 million, none of which was outstanding as of
September 30, 1998. The Exchange guarantees a bank loan on behalf of the
Attorney-in-Fact, which had an outstanding balance of $1.6 million at September
30, 1998. Mr. Goldberg, the Chief Executive Officer and a director of The MIIX
Group, is a director, the Chief Executive Officer and the President of the
Attorney-in-Fact.

A majority of the members of The MIIX Group Board are also policyholders
and Distributees. Such directors may experience claims requiring coverage under
their respective policies with the Company.

Mr. Goldberg is the Chief Executive Officer of AMM. The Attorney-in-Fact
manages the business of AMM. In 1997, AMM paid the Attorney-in-Fact $360,000 for
such management services.

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<PAGE> 88

OWNERSHIP OF COMMON STOCK

The following table sets forth certain information regarding beneficial
ownership of Common Stock as of the closing of the Reorganization and the
anticipated Public Offering (assuming that 3,000,000 shares of Common Stock are
sold in the anticipated Public Offering at a price of $15.50 per share) by (i)
each person who will own beneficially more than 5% of the outstanding shares of
Common Stock, (ii) each executive officer named in the Summary Compensation
Table and each director of The MIIX Group and (iii) all directors and executive
officers of The MIIX Group as a group. This table does not include any shares
which any director or executive officer may purchase in the anticipated Public
Offering. Except as noted below, each holder listed below will have sole
investment and voting power with respect to the shares beneficially owned by the
holder.

<TABLE>
<CAPTION>
NUMBER OF SHARES
TO BE
BENEFICIALLY PERCENT
ACQUIRED IN THE OF
NAME REORGANIZATION OTHER CLASS
- ---- ---------------- -------- -------
<S> <C> <C> <C>
Daniel Goldberg......................................... 0 126,976(1) *
Joseph J. Hudson........................................ 0 47,258(2) *
Kenneth Koreyva......................................... 0 55,484(3) *
Richard J. Gergasko..................................... 0 1,250(4) *
Lisa Kramer............................................. 0 2,500(5) *
Ronald Wade............................................. 0 1,250(6) *
Angelo S. Agro, M.D. ................................... 2,103 0 *
Hillel M. Ben-Asher, M.D. .............................. 980 0 *
Harry M. Carnes, M.D. .................................. 586 0 *
Andrew Coronato, M.D. .................................. 1,427 0 *
Palma E. Formica, M.D. ................................. 405 0 *
John S. Garra, M.D. .................................... 4,093 0 *
Paul J. Hirsch, M.D. ................................... 3,256 0 *
Louis L. Keeler, M.D. .................................. 1,986 0 *
Henry R. Liss, M.D. .................................... 359 0 *
Arganey Lucas, Jr., M.D. ............................... 766 0 *
S. Stuart Mally, M.D. .................................. 1,727 0 *
Vincent A. Maressa, Esq. ............................... 0 0 *
Murray N. Matez, D.O. .................................. 616 0 *
Robert S. Maurer, D.O. ................................. 95 0 *
A. Richard Miskoff, D.O. ............................... 589 0 *
Charles J. Moloney, M.D. ............................... 588 0 *
Eileen Marie Moynihan, M.D. ............................ 815 0 *
Fred M. Palace, M.D. ................................... 1,291 0 *
John J. Pastore, M.D. .................................. 803 0 *
Pascal A. Pironti, M.D. ................................ 1,758 0 *
Carl Restivo, Jr., M.D. ................................ 451 0 *
Joseph A. Riggs, M.D. .................................. 562 0 *
Bernard Robins, M.D. ................................... 745 0 *
Herman M. Robinson, M.D. ............................... 1,227 0 *
Gabriel F. Sciallis, M.D. .............................. 703 0 *
Benjamin I. Smolenski, M.D. ............................ 3,207 0 *
Martin L. Sorger, M.D. ................................. 3,468 0 *
</TABLE>

85
<PAGE> 89

<TABLE>
<CAPTION>
NUMBER OF SHARES
TO BE
BENEFICIALLY PERCENT
ACQUIRED IN THE OF
NAME REORGANIZATION OTHER CLASS
- ---- ---------------- -------- -------
<S> <C> <C> <C>
Bessie M. Sullivan, M.D. ............................... 1,117 0 *
Harvey P. Yeager, M.D. ................................. 2,287 0 *
All directors and executive officers as a group (34
persons).............................................. 38,010 234,718 1.7%(7)
</TABLE>

- ---------------
* Less than 1%

1. On the Closing Date, Mr. Goldberg will be granted options to purchase 175,000
shares of Common Stock, of which 43,750 options will be immediately
exercisable. In addition, if the anticipated Public Offering is consummated
simultaneously with the Reorganization, Mr. Goldberg will purchase $1,290,000
worth of Common Stock pursuant to a Stock Purchase and Loan Agreement. See
"Management -- Stock Purchase and Loan Agreements." Based on an assumed
Public Offering Price of $15.50 per share, Mr. Goldberg will purchase
approximately 83,226 shares of Common Stock pursuant to such agreement.

2. On the Closing Date, Mr. Hudson will be granted options to purchase 60,000
shares of Common Stock, of which 15,000 options will be immediately
exercisable. In addition, if the anticipated Public Offering is consummated
simultaneously with the Reorganization, Mr. Hudson will purchase $500,000
worth of Common Stock pursuant to a Stock Purchase and Loan Agreement. Based
on an assumed Public Offering Price of $15.50 per share, Mr. Hudson will
purchase approximately 32,258 shares of Common Stock pursuant to such
agreement. See "Management -- Stock Purchase and Loan Agreements."

3. On the Closing Date, Mr. Koreyva will be granted options to purchase 80,000
shares of Common Stock, of which 20,000 options will be immediately
exercisable. In addition, if the anticipated Public Offering is consummated
simultaneously with the Reorganization, Mr. Koreyva will purchase $550,000
worth of Common Stock pursuant to a Stock Purchase and Loan Agreement. Based
on an assumed Public Offering Price of $15.50 per share, Mr. Koreyva will
purchase approximately 35,484 shares of Common Stock pursuant to such
agreements. See "Management -- Stock Purchase and Loan Agreements."

4. On the Closing Date, Mr. Gergasko will be granted options to purchase 5,000
shares of Common Stock, of which 1,250 options will be immediately
exercisable.

5. On the Closing Date, Ms. Kramer will be granted options to purchase 10,000
shares of Common Stock, of which 2,500 options will be immediately
exercisable.

6. On the Closing Date, Mr. Wade will be granted options to purchase 5,000
shares of Common Stock, of which 1,250 options will be immediately
exercisable.

7. Or approximately 1% if the anticipated Public Offering is not consummated,
and the price per share paid in connection with the purchase of the
Attorney-in-Fact is $15.50.

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<PAGE> 90

DESCRIPTION OF CAPITAL STOCK

GENERAL

The authorized capital stock of The MIIX Group as of the completion of the
Reorganization will consist of 100,000,000 shares of Common Stock, $.01 par
value, and 50,000,000 shares of Preferred Stock, $.01 par value. Upon completion
of the Reorganization and the anticipated Public Offering, assuming that
3,000,000 shares of Common Stock are issued in connection with the anticipated
Public Offering at a price of $15.50 per share, there will be approximately
15,760,668 shares (16,210,668 shares if a 15% Underwriters' over-allotment
option is granted and exercised in full) of Common Stock issued and outstanding
and no shares of Preferred Stock issued and outstanding.

The following description of the capital stock of The MIIX Group does not
purport to be complete or to give full effect to Delaware statutory or common
law and is, in all respects, qualified by reference to the applicable provisions
of the DGCL, the Restated Certificate of Incorporation of The MIIX Group (the
"Certificate") and The MIIX Group By-laws (the "By-laws").

COMMON STOCK

Holders of Common Stock are entitled to such dividends and other
distributions as The MIIX Group Board may declare from funds legally available
therefor, subject to the preferential rights of Preferred Stock, if any, and the
requirements of applicable law. Holders of Common Stock are entitled to one vote
per share on any matter subject to stockholder approval, including the election
of directors. The Certificate does not provide for cumulative voting in
connection with the election of directors. No holder of Common Stock will have
any preemptive right to subscribe for any shares of capital stock issued in the
future. The rights, preferences and powers of holders of Common Stock are
subject to the rights of the holders of any series of preferred stock that The
MIIX Group may issue in the future.

Upon any voluntary or involuntary liquidation, dissolution, or winding up
of the affairs of The MIIX Group, the holders of Common Stock are entitled to
share ratably in any distribution of The MIIX Group's net assets remaining after
payment of creditors and subject to preferential rights of the holders of
Preferred Stock, if any. All of the outstanding shares of Common Stock are, and
the shares offered by The MIIX Group will be, fully paid and non-assessable.

PREFERRED STOCK

Pursuant to the Certificate, The MIIX Group Board may by resolution
establish one or more classes or series of Preferred Stock having such number of
shares and relative voting rights, designation, dividend rates, liquidation, and
other rights, preferences, and limitations as may be fixed by The MIIX Group
Board without further stockholder approval. Preferred Stock may be entitled to
preferences over Common Stock with respect to dividends, liquidation,
dissolution, or winding up of The MIIX Group in such amounts as are established
by The MIIX Group Board resolutions issuing such shares. Preferred Stock may
also enjoy redemption or sinking fund rights or voting rights (including the
right to vote as a class with respect to the election of directors, major
corporate transactions, or otherwise) that may limit, qualify, or otherwise
adversely affect the voting rights of the Common Stock.

Such rights, preferences, privileges, and limitations as may be established
for the Preferred Stock could also have the effect of delaying, deferring, or
preventing a change in control of The MIIX Group, making removal of the present
management of The MIIX Group more difficult, restricting the payment of
dividends and other distributions to the holders of Common Stock, diluting the
voting power of the Common Stock to the extent that the Preferred Stock has
voting rights, or diluting the equity interests of the Common Stock to the
extent that the Preferred Stock is convertible into Common Stock. Accordingly,
the issuance of Preferred Stock may be used as an "anti-takeover" device without
further action on the part of the stockholders of The MIIX Group. See
"-- Delaware Law and Certain Charter and By-law Provisions."

87
<PAGE> 91

DELAWARE LAW AND CERTAIN CHARTER AND BY-LAW PROVISIONS

The following is a description of certain provisions of the DGCL, the
Certificate, and the By-laws. This summary does not purport to be complete and
is qualified in its entirety by reference to the DGCL, the Certificate, and the
By-laws.

The MIIX Group is subject to the provisions of Section 203 of the DGCL.
Section 203 of the DGCL prohibits a publicly held Delaware corporation from
engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date of the transaction in which the person
became an "interested stockholder," unless the business combination is approved
in a prescribed manner. A "business combination" includes certain mergers, asset
sales, and other transactions resulting in a financial benefit to the
"interested stockholder." Subject to certain exceptions, an "interested
stockholder" is a person who, together with affiliates and associates, owns, or
within the past three years did own, 15% of the corporation's voting stock.

Certain provisions of the Certificate and the By-laws could have
anti-takeover effects. These provisions are intended to enhance the likelihood
of continuity and stability in the composition of the policies formulated by The
MIIX Group Board. In addition, these provisions also are intended to ensure that
The MIIX Group Board will have sufficient time to act in a manner that The MIIX
Group Board believes to be in the best interests of The MIIX Group and its
stockholders. These provisions also are designed to reduce the vulnerability of
The MIIX Group to an unsolicited proposal for a takeover of The MIIX Group that
does not contemplate the acquisition of all of its outstanding shares or an
unsolicited proposal for the restructuring or sale of all or part of The MIIX
Group. The provisions are also intended to discourage certain tactics that may
be used in proxy fights. These provisions, however, could delay or frustrate the
removal of incumbent directors or the assumption of control of The MIIX Group by
the holder of a large block of Common Stock and could also discourage or make
more difficult a merger, tender offer, or proxy contest, even if such event
would be favorable to the interest of stockholders.

Classified Board of Directors. The Certificate provides for The MIIX Group
Board to be divided into three classes of directors, with each class as nearly
equal in number as possible, serving staggered three-year terms (other than
directors which may be elected by holders of Preferred Stock). As a result,
approximately one-third of The MIIX Group Board will be elected each year. The
classified board provision will help to assure the continuity and stability of
The MIIX Group Board and the business strategies and policies of The MIIX Group
as determined by The MIIX Group Board. The classified board provision could have
the effect of discouraging a third party from making an unsolicited tender offer
or otherwise attempting to obtain control of The MIIX Group without the approval
of the Board. In addition, the classified board provision could delay
stockholders who do not like the policies of The MIIX Group Board from electing
a majority of The MIIX Group Board for two years.

No Stockholder Action by Written Consent; Special Meetings. The
Certificate provides that stockholder action can only be taken at an annual or
special meeting of stockholders and prohibits stockholder action by written
consent in lieu of a meeting. The By-laws provide that special meetings of
stockholders may be called only by The MIIX Group Board, the Chief Executive
Officer (or in the event of his or her absence or disability, by any Vice
President) of The MIIX Group or the Chairman or Vice Chairman of The MIIX Group
Board. Stockholders are not permitted to call a special meeting of stockholders
or to require that The MIIX Group Board call a special meeting.

Advance Notice Requirements for Stockholder Proposals and Director
Nominees. The By-laws establish an advance notice procedure for stockholders to
make nominations of candidates for election as directors or to bring other
business before an annual meeting of stockholders of The MIIX Group (the
"Stockholder Notice Procedure"). The Stockholder Notice Procedure provides that
only persons who are nominated by, or at the direction of, The MIIX Group Board
or its Chairman, or by a stockholder who has given timely written notice to the
Secretary of The MIIX Group prior to the meeting at which directors are to be
elected, will be eligible for election as directors of The MIIX Group. The
Stockholder Notice Procedure also provides that at an annual meeting only such
business may be conducted as has been brought before the meeting by, or at the
direction of, The MIIX Group Board or its Chairman or by a stockholder who has
given timely written notice

88
<PAGE> 92

to the Secretary of The MIIX Group of such stockholder's intention to bring such
business before such meeting. Under the Stockholder Notice Procedure, if a
stockholder desires to submit a proposal or nominate persons for election as
directors at an annual meeting, the stockholder must submit written notice to
The MIIX Group not less than 90 days nor more than 120 days prior to the first
anniversary of the previous year's annual meeting. In the event that the date of
the annual meeting is advanced by more than 20 days or delayed by more than 70
days from such anniversary date, however, the By-laws provide additional time
for notice. In addition, under the Stockholder Notice Procedure, a stockholder's
notice to The MIIX Group proposing to nominate a person for election as a
director or relating to the conduct of business other than the nomination of
directors must contain certain specified information. If the chairman of a
meeting determines that business was not properly brought before the meeting, in
accordance with the Stockholder Notice Procedure, such business shall not be
discussed or transacted.

Number of Directors; Removal; Filling Vacancies. The Certificate and the
By-laws provide that The MIIX Group Board will consist of not less than 9 and
not more than 35 members (other than directors elected by holders of Preferred
Stock), the exact number to be fixed from time to time by resolution adopted by
the directors of The MIIX Group. The MIIX Group Board currently consists of 30
directors. Furthermore, subject to the rights of the holders of any series of
Preferred Stock, if any, the Certificate and By-laws authorize The MIIX Group
Board to elect additional directors under specified circumstances and fill any
vacancies that occur by reason of death, resignation, removal, or otherwise. A
director so elected by The MIIX Group Board to fill a vacancy or a newly created
directorship holds office until his successor is elected and qualified or until
his or her earlier death, resignation or removal. Subject to the rights of the
holders of any series of Preferred Stock, if any, the Certificate and the
By-laws also provide that directors may be removed only for cause and only by
the affirmative vote of holders of a majority of the combined voting power of
the then outstanding stock of The MIIX Group entitled to vote generally in the
election of directors. The effect of these provisions is to preclude a
stockholder from removing incumbent directors without cause and simultaneously
gaining control of The MIIX Group Board by filling the vacancies created by such
removal with its own nominees.

By-laws. The Certificate provides that the By-laws are subject to
adoption, amendment, alteration, repeal, or rescission either by (i) The MIIX
Group Board without the assent or vote of the stockholders or (ii) the
affirmative vote of the holders of not less than two-thirds of the combined
voting power of the outstanding shares entitled to vote generally in the
election of directors. This provision makes it more difficult for stockholders
to make changes in the By-laws by allowing the holders of a minority of the
voting securities to prevent the holders of a majority of voting securities from
amending the By-laws.

Indemnification and Limitations on Liability. The DGCL permits a Delaware
corporation to include in its charter and bylaws certain provisions to eliminate
the personal liability of directors for monetary damages and to indemnify its
directors and officers. The By-laws provide that subject to certain exceptions
in the case of actions by or in the right of The MIIX Group, The MIIX Group
shall indemnify its directors and officers, and may indemnify its agents and
employees, against expenses (including attorney's fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him or her,
incurred by reason of the fact that such person was serving as a director,
officer, employee or agent of The MIIX Group, so long as such person acted in
good faith and in a manner reasonably believed to be in or not opposed to the
best interest of The MIIX Group, and, with respect to any criminal action, so
long as the indemnified party had no reason to believe that his or her conduct
was unlawful. The Certificate provides that directors shall not be liable to The
MIIX Group or The MIIX Group's stockholders for monetary damages for breach of
his or her fiduciary duty as a director, except that liability may not be
eliminated (i) for any breach of such person's duty of loyalty, (ii) for acts or
omissions not in good faith or involving intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the DGCL or (iv) for any
transaction in which such person received an improper personal benefit. Section
145 (a) of the DGCL provides that a corporation may indemnify a director,
officer, employee, or agent if such person acted in good faith and in a manner
reasonably believed to be in, or not opposed to, the best interests of the
corporation and, with respect to any criminal proceeding, had no reasonable
cause to believe the conduct was unlawful. In addition, effective upon
consummation of the

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<PAGE> 93

Reorganization, The MIIX Group will enter into indemnification agreements with
each of its directors and certain of its executive officers that generally
provide for similar indemnification.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Company's Common Stock is First
Chicago Trust Company of New York.

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of the Reorganization and the anticipated Public Offering,
assuming that 3,000,000 shares of Common Stock are issued in connection with the
anticipated Public Offering at a price of $15.50 per share, The MIIX Group will
have approximately 15,760,668 shares (or approximately 16,210,668 shares if a
15% Underwriters' over-allotment option is granted and exercised in full) of
Common Stock issued and outstanding. All such shares of Common Stock will be
freely tradable without restriction or further registration under the Securities
Act, except for the shares issued to the Medical Society pursuant to the
Reorganization, and the directors and officers of the Company and other
affiliates of the Company. It is expected that the Company, and The MIIX Group
Board and executive officers will enter into an agreement with the underwriters
of the Public Offering not to offer, sell, or otherwise dispose of any equity
securities of the Company for a certain number of days after the date of the
Public Offering prospectus without the prior written consent of the
underwriters.

In general, Rule 144 of the Securities Act ("Rule 144"), as currently in
effect, provides that an "affiliate" (as defined in Rule 144) is entitled to
sell, within any three-month period, a number of shares that does not exceed the
greater of (i) the average weekly trading volume of the Common Stock during the
four calendar weeks preceding the sale or (ii) 1% of the shares of Common Stock
then outstanding. Sales under Rule 144 are subject to certain holding periods,
manner of sale restrictions, notice requirements, and availability of current
public information concerning The MIIX Group.

Prior to the Reorganization and the anticipated Public Offering, there has
been no public market for the Common Stock and no prediction can be made as to
the effect, if any, that the sale or availability for sale of shares of Common
Stock will have on the market price of the Common Stock. Sales of substantial
amounts of such shares in the public market could adversely affect the market
price of the Common Stock.

STABILIZATION AND OTHER ACTIVITIES
IN CONNECTION WITH THE ANTICIPATED PUBLIC OFFERING

In connection with the anticipated Public Offering, representatives of the
underwriters thereof (the "Underwriters"), may engage in over-allotment,
stabilizing transactions, syndicate covering transactions and penalty bids in
accordance with Rule 104 of Regulation M under the Exchange Act. Over-allotment
involves syndicate sales in excess of the offering size, which creates a short
position for the Underwriters. Stabilizing transactions permit bids to purchase
the underlying security so long as the stabilizing bids do not exceed a
specified maximum. Syndicate covering transactions involve purchases of the
Common Stock in the open market after the distribution has been completed in
order to cover syndicate short positions. Penalty bids permit the Underwriters
to reclaim a selling concession from an Underwriter or a dealer when the Common
Stock originally sold by such an Underwriter or a dealer are purchased in a
covering transaction to cover syndicate short positions. Such over-allotment,
stabilizing transactions, syndicate covering transactions and penalty bids may
cause the price of the Common Stock to be higher than it would otherwise be in
the absence of such transactions. These transactions, if commenced, may be
discontinued at any time.

LEGAL MATTERS

The validity of the Common Stock to be issued pursuant to the
Reorganization will be passed upon for the Company by Dechert Price & Rhoads,
Philadelphia, Pennsylvania, counsel for the Company.

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<PAGE> 94

EXPERTS

The consolidated financial statements and schedule of the Company at
December 31, 1996 and 1997, and for each of the three years in the period ended
December 31, 1997 appearing in this Prospectus and Registration Statement have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon appearing elsewhere herein and are included in reliance upon such
report given on the authority of such firm as experts in accounting and
auditing.

With respect to the unaudited consolidated interim financial information
for the nine-month periods ended September 30, 1997 and September 30, 1998,
appearing in this Prospectus and Registration Statement, Ernst & Young LLP has
reported that they have applied limited procedures in accordance with
professional standards for a review of such information. However, their separate
report included herein states that they did not audit and they do not express an
opinion on that interim financial information. Accordingly, the degree of
reliance on their report on such information should be restricted considering
the limited nature of the review procedures applied. The independent auditors
are not subject to the liability provisions of Section 11 of the Securities Act
of 1933, as amended (the "Act"), for their report on the unaudited interim
financial information because that report is not a "report" or a "part" of the
Registration Statement prepared or certified by the auditors within the meaning
of Sections 7 and 11 of the Act.

91
<PAGE> 95

GLOSSARY OF SELECTED INSURANCE TERMS

ALLOCATED LOSS ADJUSTMENT EXPENSES ("ALAE")

Loss Adjustment Expenses allocated to a specific claim.

A.M. BEST

An independent rating agency that reports on the financial condition of
insurance companies.

ASSUMED PREMIUMS

Premiums arising from reinsurance policies under which the insurer accepts
a portion of the risk insured by another insurer (the ceding company).

CAPACITY

An insurer's ability to provide coverage up to the stated amount of a
policy through the insurer's reinsurance arrangements.

CEDE

To transfer risk and related premium in connection with a reinsurance
transaction.

CLAIMS MADE (REPORTED) BASIS

A liability insurance policy written on a basis that generally insures only
claims that are reported (made) to the insurer during the policy period, or
reported (made) during any extended reporting period provided in the policy or
any endorsement thereto, but only if the claims arise from incidents that
occurred after a retroactive date stated in the policy. A claims made (reported)
policy is to be distinguished from an "occurrence policy."

COMBINED RATIO

The sum of the loss ratio and the expense ratio, expressed as a percentage.
Generally, a combined ratio below 100% indicates an underwriting profit and a
combined ratio above 100% indicates an underwriting loss.

DIRECT PREMIUMS WRITTEN

Total premiums written by an insurer other than premiums for reinsurance
assumed by an insurer.

EXCESS INSURANCE

Insurance which covers the insured only for losses in excess of a stated
amount or a specific primary policy.

EXCESS OF LOSS REINSURANCE

A generic term describing reinsurance that indemnifies the reinsured
against all or a specified portion of losses on underlying insurance policies in
excess of a specified dollar amount, called a "layer" or "retention."

EXPENSE RATIO

Policy acquisition costs and other underwriting expenses, divided by net
premiums earned under GAAP accounting, expressed as a percentage.

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<PAGE> 96

GAAP

Generally accepted accounting principles in use throughout the United
States in the preparation of financial statements, including the financial
statements presented in this Prospectus.

GROSS PREMIUMS WRITTEN

Total of (i) direct premiums written, plus (ii) reinsurance assumed
premiums.

INCURRED BUT NOT REPORTED ("IBNR") RESERVES

The estimated liabilities for future payments of losses and LAE that have
occurred, but have not yet been reported to the insurer.

LOSS ADJUSTMENT EXPENSES ("LAE")

Expenses incurred in the settlement of claims, including outside adjustment
expenses, legal fees, and internal administration costs associated with the
claims adjustment process, but not including general overhead expenses.

LOSS ADJUSTMENT EXPENSE ("LAE") RESERVES

Liabilities established for LAE. LAE includes an estimated provision for
IBNR.

LOSS RATIO

The ratio of net incurred losses and LAE to net premiums earned. Net
incurred losses include an estimated provision for IBNR.

MODIFIED CLAIMS MADE

A claims made policy called the Permanent Protection Plan ("PPP"), which
includes an automatic reporting endorsement (tail coverage) that is activated
when the policy is terminated for any reason, effectively resulting in
occurrence-like coverage.

NET PREMIUMS WRITTEN

Gross premiums written less premiums ceded.

NOVATION

An agreement of all parties to a contract to substitute a new party and
discharge one of the original parties to the contract.

OCCURRENCE BASIS

A liability insurance policy written on a basis that generally insures
claims that arise from incidents that occurred during the policy period,
irrespective of when the claims are reported.

PERMANENT PROTECTION PLAN ("PPP")

Modified claims made policy which includes an automatic reporting
endorsement (tail coverage) that is activated when the policy is terminated for
any reason, effectively resulting in occurrence-like coverage.

PREMIUMS CEDED

The consideration paid to reinsurers in connection with reinsurance
transactions.

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<PAGE> 97

PREMIUMS EARNED

The portion of premiums written applicable to the expired period of
policies and, accordingly, recognized as revenue during a given period.

QUOTA SHARE BASIS

Reinsurance wherein the insurer cedes an agreed fixed percentage of
liabilities, premiums and losses for each policy covered on a pro rata basis.

REDUNDANCY (DEFICIENCY)

Estimates in reserves change as more information becomes known about the
frequency and severity of claims for each year. A redundancy (deficiency) exists
when the original liability estimate is greater (less) than the reestimated
liability. The cumulative redundancy (deficiency) is the aggregate net change in
estimates over time subsequent to establishing the original liability estimate.

REINSURANCE

A procedure whereby an original insurer cedes a portion of the premium to a
reinsurer as payment for the reinsurer's assumption of a portion of the risk;
referred to as reinsurance ceded by the original insurer and as reinsurance
assumed by the reinsurer.

RESERVES

Liabilities established by insurers to reflect the estimated cost of claims
and the related LAE expenses that the insurer will ultimately be required to pay
in respect of insurance it has written.

RETENTION

The amount or portion of risk that an insurer retains for its own account.
Losses in excess of the retention level are paid by the reinsurer. In quota
share treaties, the retention may be a percentage of the original policy's
limit. In excess of loss reinsurance, the retention is a dollar amount of loss,
a loss ratio or a percentage of loss.

RISK-BASED CAPITAL REQUIREMENTS ("RBC")

Regulatory and rating agency targeted surplus based on the relationship of
statutory surplus, with certain adjustments, to the sum of stated percentages of
each element of a specified list of company risk exposures.

SEVERITY

The average claim cost, statistically determined by dividing dollars of
losses by the number of claims.

STATUTORY ACCOUNTING PRACTICES ("SAP")

The accounting rules and procedures promulgated or permitted by the
National Association of Insurance Commissioners ("NAIC") for financial reporting
by insurers licensed in one or more states of the United States.

STATUTORY SURPLUS

Total assets less total liabilities as determined in accordance with SAP.

TAIL COVERAGE

A provision that offers protection for any incidents that occurred while
insured, even after coverage is discontinued.

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<PAGE> 98

UNALLOCATED LOSS ADJUSTMENT EXPENSE ("ULAE")

Loss adjustment expenses not allocated to a specific claim.

UNDERWRITING

The process whereby an insurer, directly or through its agent, reviews
applications submitted for insurance coverage and determines whether it will
accept all or part of the coverage being requested, and sets the applicable
premium.

UNEARNED PREMIUMS

A reserve account that contains the portion of premium attributable to the
unexpired period of policies that has been written by an insurer but has not
been recognized as net earned premiums and accounted for as revenues.

95
<PAGE> 99

GLOSSARY OF REORGANIZATION TERMS

ADOPTION DATE

October 15, 1997, the date that the Board of Governors adopted the Plan of
Reorganization.

ATTORNEY-IN-FACT

New Jersey State Medical Underwriters, Inc., a New Jersey corporation that
is the Exchange's attorney-in-fact.

BOARD OF GOVERNORS

The Board of Governors of the Exchange.

CERTIFICATE OF AUTHORITY

A certificate issued by the Commissioner to the Stock Insurer to do
business for same lines of insurance currently permitted of the Exchange.

CLOSING DATE

The date on which the closing of the transactions contemplated by the Plan
of Reorganization takes place.

CODE

Internal Revenue Code of 1986, as amended.

COMMISSIONER

The Commissioner of the New Jersey Department, or such governmental
officer, body or authority as may succeed such Commissioner as the primary
regulator of the Company's insurance business under applicable law.

CONVERSION VALUE

Either (i) the price per share at which the Common Stock is offered to the
public in the event an initial public offering is consummated simultaneously
with the Reorganization, or (ii) if no such initial public offering is
consummated simultaneously with the Reorganization, then the economic value of
one share of Common Stock as determined in good faith by the Board of Governors
of the Exchange.

DISTRIBUTEE

A Member or Look-Back Insured.

EARNED PREMIUM

For the applicable period, earned premiums in respect of a Policy.

EFFECTIVE DATE

The date on which the Certificate of Authority issued by the Commissioner
becomes effective, provided that in no event shall the Effective Date be less
than 30 days after the Final Order Date nor more than 18 months after the Final
Order Date, unless such period is extended by the Commissioner. The Plan of
Reorganization shall be deemed to have become effective on the Effective Date at
the time specified in the Certificate of Authority.

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<PAGE> 100

EXCHANGE

The Medical Inter-Insurance Exchange of New Jersey, a New Jersey reciprocal
insurer.

HOLDING COMPANY

The MIIX Group, Incorporated, a newly-formed Delaware corporation that will
be the parent company for all of the MIIX companies upon the consummation of the
Plan of Reorganization.

IN FORCE

A Policy shall be deemed to be In Force as of any date if, as shown on the
Exchange's records, (1)(i) such Policy has been issued and the status of such
Policy has been changed from pending to In Force on the Exchange's records, or
(ii) in the case of an individual Policy, the Exchange's administrative office
has received by such date in respect of such Policy an application, complete on
its face, together with payment of the full initial premium (unless submission
of such premium is precluded by the Exchange's underwriting rules), provided
that any Policy referred to in this clause (ii) is issued as applied for and the
status of such Policy has been changed from pending to In Force on the
Exchange's records within 30 days of such date, and (2) such Policy has not been
surrendered, canceled, or otherwise terminated; provided that a Policy shall be
deemed to be In Force after lapse for nonpayment of premiums until expiration of
any applicable grace period (or other similar period however designated in such
Policy) during which the Policy is in full force for its basic benefits.

INITIAL PUBLIC OFFERING

An initial public offering by the Holding Company of shares of Holding
Company Stock.

INSURANCE SUBSIDIARIES

At all times prior to the Closing Date, LP&C, MIIX New York and
Lawrenceville Re. At all times on or after the Closing Date, MIIX Insurance
Company, MIIX New York, LP&C, and Lawrenceville Re.

LOOK-BACK INSURED

A Person who is not a Member, but who at any time during the three-year
period prior to the Adoption Date was the Named Insured in one or more Policies
issued by the Exchange and who, therefore, was a member of the Exchange during
such period under Article II of the Exchange's Rules & Regulations.

MEMBER

A Person who is the Named Insured in one or more Policies that are In Force
on the Adoption Date and who, therefore, is a member on the Adoption Date under
Article II of the Exchange's Rules & Regulation.

MEMBERS' MEETING

A special meeting of Members held after the Commissioner's approval of the
Plan of Reorganization, at which Members shall be entitled to vote on the
proposal to approve the Plan.

MEMBERSHIP INTERESTS

As of the Effective Date, all the rights or interests of the Members of the
Exchange arising under the Exchange's Rules & Regulations or otherwise by law,
including, but not limited to, any right to vote and any right to a return of
the surplus of the Exchange, which may exist with regard to the surplus of the
Exchange not apportioned or declared prior to the Effective Date by the Board of
Governors for policyholder dividends. For purposes of the Plan of
Reorganization, Membership Interests shall not include any other right expressly
conferred by an insurance policy.

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<PAGE> 101

NAMED INSURED

The Named Insured in any Policy as of any date shall be determined on the
basis of the Exchange's records as of such date in accordance with the following
provisions: (a) the Named Insured in a Policy shall be as shown on the Policy
Declarations page in the Exchange's records; (b) the Named Insured in a Policy
that is a group insurance policy shall be the Person or Persons specified as
Named Insureds; (c) except as otherwise set forth here, the identity of the
Named Insured of a Policy shall be determined without giving effect to any
interest of any other Person in such Policy; (d) in any situation not expressly
covered by the foregoing provisions, the first Named Insured, as reflected on
the records of, and as determined in good faith by, the Exchange, shall
conclusively be presumed to be the Named Insured in such Policy, provided such
Named Insured is a Person, and the Exchange shall not be required to examine or
consider any other facts or circumstances; (e) any dispute as to the identity of
the Named Insured in a Policy or the right to vote or receive consideration
shall be resolved in accordance with the foregoing and such other procedures as
may be acceptable to the Commissioner.

NEW JERSEY DEPARTMENT

The Department of Banking and Insurance of the State of New Jersey.

PERSON

A natural person. A Person who is the Named Insured of Policies in more
than one legal capacity (e.g., a trustee under separate trusts) shall be deemed
to be a separate Person in each such capacity.

PLAN OF REORGANIZATION

The Plan of Reorganization, including all Exhibits thereto.

POLICY

Each insurance policy duly issued by the Exchange.

REORGANIZATION

The reorganization of the Exchange as a stock insurer pursuant to, and the
related transactions contemplated by, the Plan of Reorganization.

REORGANIZATION SHARES

The 12,000,000 shares of Common Stock that may be allocated among
Distributees in the Reorganization.

STOCK INSURER

MIIX Insurance, a newly-incorporated New Jersey domestic stock insurer that
is a wholly-owned subsidiary of the Holding Company and is the successor to the
Exchange.

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<PAGE> 102

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
QUARTERLY CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Report of Independent Auditors -- September 30, 1998
Review.................................................... F-2
Consolidated Balance Sheets as of December 31, 1997 and
September 30, 1998........................................ F-3
Consolidated Statements of Income for the nine months ended
September 30, 1997 and 1998............................... F-4
Consolidated Statement of Equity for the nine months ended
September 30, 1998........................................ F-5
Consolidated Statements of Cash Flows for the nine months
ended September 30, 1997 and 1998......................... F-6
Notes to Consolidated Financial Statements.................. F-7
AUDITED CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Auditors.............................. F-10
Consolidated Balance Sheets as of December 31, 1996 and
1997...................................................... F-11
Consolidated Statements of Income for the years ended
December 31, 1995, 1996 and 1997.......................... F-12
Consolidated Statements of Equity for the three years ended
December 31, 1997......................................... F-13
Consolidated Statements of Cash Flows for the years ended
December 31, 1995, 1996 and 1997.......................... F-14
Notes to Consolidated Financial Statements.................. F-15
Schedule I -- Summary of Investments -- Other than
Investments in Related Parties............................ F-26
</TABLE>

(ALL OTHER SCHEDULES FOR WHICH PROVISION IS MADE IN THE APPLICABLE ACCOUNTING
REGULATION OF THE SECURITIES AND EXCHANGE COMMISSION ARE NOT REQUIRED UNDER THE
RELATED INSTRUCTIONS OR ARE INAPPLICABLE AND THEREFORE HAVE BEEN OMITTED.)

F-1
<PAGE> 103

REPORT OF INDEPENDENT AUDITORS

Board of Governors
Medical Inter-Insurance Exchange

We have reviewed the accompanying consolidated balance sheet of Medical
Inter-Insurance Exchange and subsidiaries as of September 30, 1998, and the
related consolidated statements of income and cash flows for the nine-month
period ended September 30, 1997 and 1998, and the consolidated statement of
equity for the nine-month period ended September 30, 1998. These financial
statements are the responsibility of the Company's management.

We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data, and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, which will be performed
for the full year with the objective of expressing an opinion regarding the
financial statements taken as a whole. Accordingly, we do not express such an
opinion.

Based on our reviews, we are not aware of any material modifications that
should be made to the accompanying consolidated financial statements referred to
above for them to be in conformity with generally accepted accounting
principles.

We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheets of Medical Inter-Insurance Exchange
and subsidiaries as of December 31, 1996 and 1997, and the related consolidated
statements of income, equity, and cash flows for each of the three years in the
period ended December 31, 1997, not presented herein, and in our report dated
March 25, 1998, we expressed an unqualified opinion on those consolidated
financial statements. In our opinion, the information set forth in the
accompanying consolidated balance sheet as of December 31, 1997, is fairly
stated, in all material respects, in relation to the consolidated balance sheet
from which it has been derived.

ERNST & YOUNG LLP

New York, New York
November 23, 1998

F-2
<PAGE> 104

MEDICAL INTER-INSURANCE EXCHANGE

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1997 1998
------------ -------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Securities available-for-sale:
Fixed-maturity investments, at fair value (amortized cost:
1997 -- $832,822; 1998 -- $1,049,112)..................... $ 852,746 $1,082,033
Equity investments, at fair value (cost: 1997 -- $66,520;
1998 -- $3,159)........................................... 89,080 3,159
Short-term investments...................................... 85,145 109,368
---------- ----------
Total investments................................. 1,026,971 1,194,560
Cash........................................................ (380) 362
Reinsurance recoverable on unpaid losses.................... 270,731 311,879
Prepaid reinsurance premiums................................ 19,814 14,061
Deferred income taxes....................................... 17,696 26,288
Premiums receivable......................................... 8,245 6,151
Deferred policy acquisition costs........................... 100 4,359
Due from Attorney-in-Fact................................... 13,347 3,704
Other assets................................................ 84,778 87,120
---------- ----------
Total assets...................................... $1,441,302 $1,648,484
========== ==========
LIABILITIES AND EQUITY
LIABILITIES
Unpaid losses and loss adjustment expenses.................. $ 876,721 $ 937,072
Funds held under reinsurance treaties....................... 182,590 206,827
Premium deposits............................................ 21,024 --
Unearned premiums........................................... 20,886 77,577
Payable for securities...................................... 229 48,025
Other liabilities........................................... 29,878 51,796
---------- ----------
Total liabilities................................. 1,131,328 1,321,297
---------- ----------
Commitments and contingencies (Note 3)
EQUITY
Surplus..................................................... 282,359 305,787
Unrealized appreciation on securities available-for-sale,
net of deferred taxes..................................... 27,615 21,400
---------- ----------
Total equity...................................... 309,974 327,187
---------- ----------
Total liabilities and equity...................... $1,441,302 $1,648,484
========== ==========
</TABLE>

See accompanying notes.
F-3
<PAGE> 105

MEDICAL INTER-INSURANCE EXCHANGE

CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------
1997 1998
-------- --------
(UNAUDITED)
<S> <C> <C>
REVENUES
Net premiums earned......................................... $ 92,170 $114,666
Net investment income....................................... 40,666 47,623
Realized investment gains................................... 873 33,563
Other revenue............................................... 2,231 1,526
-------- --------
Total revenues.................................... 135,940 197,378
EXPENSES
Losses and loss adjustment expenses......................... 92,709 113,050
Underwriting expenses....................................... 19,719 27,738
Funds held charges.......................................... 10,595 11,885
Impairment of capitalized system development costs.......... -- 12,656
-------- --------
Total expenses.................................... 123,023 165,329
Income before income taxes.................................. 12,917 32,049
Provision for income taxes.................................. 1,451 8,621
-------- --------
Net income.................................................. $ 11,466 $ 23,428
======== ========
Earnings per share (pro forma).............................. $ 1.95
</TABLE>

See accompanying notes.
F-4
<PAGE> 106

MEDICAL INTER-INSURANCE EXCHANGE

CONSOLIDATED STATEMENT OF EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(IN THOUSANDS)

<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION
OF INVESTMENTS, TOTAL
SURPLUS NET OF TAXES EQUITY
-------- --------------- --------
(UNAUDITED)
<S> <C> <C> <C>
Balance at December 31, 1997............................ $282,359 $27,615 $309,974
Net income............................................ 23,428 23,428
Other comprehensive income, net of tax:
Unrealized depreciation on securities
available-for-sale, net of deferred taxes.......... -- (6,215) (6,215)
-------- ------- --------
Balance at September 30, 1998........................... $305,787 $21,400 $327,187
======== ======= ========
</TABLE>

See accompanying notes.
F-5
<PAGE> 107

MEDICAL INTER-INSURANCE EXCHANGE

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
---------------------
1997 1998
-------- ---------
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income................................................ $ 11,466 $ 23,428
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation, accretion and amortization............. 1,658 (149)
Realized (gains)..................................... (873) (33,563)
Unpaid losses and loss adjustment expenses, net of
reinsurance recoverable............................. 16,777 19,203
Funds held under reinsurance treaties................ 15,245 24,237
Premium deposits, net of prepaid reinsurance
premiums............................................ (10,320) (5,256)
Deferred income tax provision........................ (3,283) (5,246)
Premiums receivable, net of allowance................ (7,117) 2,094
Unearned premiums, net of prepaid reinsurance
premiums............................................ 32,668 46,676
Deferred policy acquisition costs.................... (875) (4,259)
Due from Attorney-in-Fact............................ (6,658) 9,643
Other assets......................................... 2,252 (2,342)
Other liabilities.................................... 4,299 21,918
-------- ---------
Net cash provided by operating activities................. 55,239 96,384
-------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from fixed-maturity investment sales............. 153,512 546,041
Proceeds from fixed-maturity investments matured, called,
or prepaid............................................. 39,480 80,321
Proceeds from equity investment sales..................... 2,229 102,789
Cost of investments acquired.............................. (252,290) (834,366)
Realized loss on equity collar termination................ -- (14,000)
Payable for securities.................................... -- 47,796
Change in short-term investments, net..................... (2,807) (24,223)
-------- ---------
Net cash used in investing activities..................... (59,876) (95,642)
-------- ---------
Net change in cash........................................ (4,637) 742
Cash at beginning of year................................. 4,532 (380)
-------- ---------
Cash at end of period..................................... $ (105) $ 362
======== =========
</TABLE>

See accompanying notes.
F-6
<PAGE> 108

MEDICAL INTER-INSURANCE EXCHANGE

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION

The consolidated financial statements for the interim periods included
herein, which include the accounts of Medical Inter-Insurance Exchange (the
"Exchange"), and its wholly owned subsidiaries Lawrenceville Property and
Casualty Co., Inc. ("LP&C"), MIIX Insurance Company of New York ("MIIX NY") and
Lawrenceville Holdings, Inc. ("LHI"), (collectively, "the Company"), are
unaudited. However, they have been prepared in accordance with generally
accepted accounting principles for interim financial information and in the
opinion of management, such information reflects all adjustments considered
necessary for a fair presentation. Operating results for the interim period are
not necessarily indicative of the results to be expected for the full year.

These consolidated financial statements and notes should be read in
conjunction with the audited consolidated financial statements and notes of the
Company for the year ended December 31, 1997 included in pages F-10 through
F-24.

2. COMPREHENSIVE INCOME

Statement of Financial Accounting Standard No. 130 -- Reporting
Comprehensive Income, ("SFAS 130") became effective for years beginning after
December 15, 1997 and therefore, is applicable to the Company for the
presentation of quarterly financial statements during 1998. For purposes of
comparison, all previous financial statements presented include the SFAS 130
disclosures. The Company considers its investment portfolio as
available-for-sale and had unrealized gains at each balance sheet date that are
reflected as comprehensive income in the Consolidated Statements of Equity.

The components of comprehensive income, net of related tax, for the periods
ended September 30, 1997 and 1998 were as follows:

<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
------------------
1997 1998
------- -------
(IN THOUSANDS)
<S> <C> <C>
Net income.................................................. $11,466 $23,428
Other comprehensive income:
Unrealized appreciation (depreciation) on securities
available-for-sale, net of deferred taxes.............. 17,617 (6,215)
------- -------
Comprehensive income........................................ $29,083 $17,213
======= =======
</TABLE>

F-7
<PAGE> 109
MEDICAL INTER-INSURANCE EXCHANGE

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

3. NET REALIZED INVESTMENT GAINS

Realized gains and losses from sales of investments are summarized as
follows:

<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------
1997 1998
------ -------
(IN THOUSANDS)
<S> <C> <C>
Fixed maturity investments
Gross realized gains...................................... $1,416 $ 9,492
Gross realized losses..................................... 1,006 287
------ -------
Net realized gains on fixed maturity investments............ 410 9,205
Equity investments
Gross realized gains...................................... 508 38,823
Gross realized losses..................................... 45 465
------ -------
Net realized gains on equity investments.................... 463 38,358
------ -------
Net realized losses on equity collar investments............ -- 14,000
------ -------
Net realized gains on investments........................... $ 873 $33,563
====== =======
</TABLE>

The net realized gains on equity investments for the nine months ended
September 30, 1998 resulted from the Company's decision to liquidate
substantially all of its equity investments during the third quarter of 1998.

On January 13, 1998, the Company implemented an "equity collar" (the
"Collar") with a notional value of $85 million around the Company's equity
portfolio. The purpose of the Collar was to reduce equity market volatility and
to stabilize policyholder's equity. The Collar was constructed using
European-style S&P 500 options. The Collar was accounted for as a hedge
transaction held for purposes other than trading. The Collar expired on July 13,
1998, at which time a realized loss of $14.0 million was recognized on the
Collar.

4. IMPAIRMENT OF CAPITALIZED SYSTEM DEVELOPMENT COSTS

Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed of"
("SFAS No. 121") requires recognition of impairment losses for long-lived assets
whenever events or changes in circumstances result in the carrying amount of an
asset to exceed the sum of the expected future cash flow associated with the
asset. During 1998, management replaced its policy administration system, and
accordingly, recognized a $12.7 million pre-tax charge which represents the net
book value of capitalized system development costs associated with the old
computer system.

5. DEFERRED POLICY ACQUISITION COSTS

The following represents the components of deferred policy acquisition
costs and the amounts that were charged to expense for the nine months ended
September 30, 1998.

<TABLE>
<S> <C>
Balance at beginning of period.............................. $ 100
Cost deferred during the period............................. 11,018
Amortization expense........................................ (6,759)
--------
Balance at end of period.................................... $ 4,359
========
</TABLE>

F-8
<PAGE> 110
MEDICAL INTER-INSURANCE EXCHANGE

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

6. PAYABLE FOR SECURITIES

The payable for securities of $48.0 million as of September 30, 1998
relates to investment transactions for which trades occurred prior to that date
but for which settlement was not finalized until after that date.

7. INCOME TAXES

A reconciliation of income tax computed at the federal statutory tax rate
to total income expense for the periods ended September 30 is as follows:

<TABLE>
<CAPTION>
1997 1998
------------------------------------- -------------------------------------
INCOME TAX % OF INCOME INCOME TAX % OF INCOME
EXPENSE BEFORE INCOME TAXES EXPENSE BEFORE INCOME TAXES
-------------- ------------------- -------------- -------------------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C>
Federal income tax at 35%....... 4,521 35.0% 11,217 35.0%
Decrease in taxes resulting
from:
Tax-exempt interest........... (2,758) (21.4%) (2,135) (6.7%)
Other......................... (312) (2.4%) (461) (1.4%)
------- ------ -------- -----
Total income taxes......... 1,451 11.2% 8,621 26.9%
======= ====== ======== =====
</TABLE>

8. PRO FORMA EARNINGS PER SHARE

The earnings per share reflected on the consolidated statements of income
is calculated on a pro forma basis and gives effect in both periods to the
assumed aggregate issuance of approximately 12,000,000 shares of Common Stock to
Distributees upon consummation of the Reorganization, and does not give effect
to the sale of Common Stock in the anticipated Public Offering or to the
issuance of Common Stock to the Medical Society in connection with the purchase
of the Attorney-in-Fact.

9. ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED

In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities" which is
effective for fiscal years beginning after June 15, 1999. Adoption of this
statement is not expected to have a significant impact on the Company's
financial position or results of operations.

F-9
<PAGE> 111

REPORT OF INDEPENDENT AUDITORS

Board of Governors
Medical Inter-Insurance Exchange

We have audited the accompanying consolidated balance sheets as of December
31, 1996 and 1997, of Medical Inter-Insurance Exchange and subsidiaries and the
related consolidated statements of income, equity, and cash flows for each of
the three years in the period ended December 31, 1997. Our audits also included
the financial statement schedule listed in the index at F-1. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Medical
Inter-Insurance Exchange and subsidiaries at December 31, 1996 and 1997, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1997, in conformity with generally accepted
accounting principles. Also, in our opinion, the related financial statement
schedule when considered in relation to the basic financial statements taken as
a whole, presents fairly, in all material respects, the information set forth
therein.

ERNST & YOUNG LLP

New York, New York
March 25, 1998

F-10
<PAGE> 112

MEDICAL INTER-INSURANCE EXCHANGE

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1996 1997
---------- ----------
<S> <C> <C>
ASSETS
Securities available-for-sale:
Fixed-maturity investments, at fair value (amortized cost:
1996 -- $760,802; 1997 -- $832,822).................... $ 762,870 $ 852,746
Equity investments, at fair value (cost: 1996 -- $55,334;
1997 -- $66,520)....................................... 67,230 89,080
Short-term investments.................................... 86,230 85,145
---------- ----------
Total investments................................. 916,330 1,026,971
Cash........................................................ 4,532 (380)
Reinsurance recoverable on unpaid losses.................... 221,749 270,731
Prepaid reinsurance premiums................................ 28,788 19,814
Deferred income taxes....................................... 26,261 17,696
Due from Attorney-in-Fact................................... 9,660 13,347
Other assets................................................ 81,184 93,123
---------- ----------
Total assets...................................... $1,288,504 $1,441,302
========== ==========

LIABILITIES AND EQUITY
LIABILITIES
Unpaid losses and loss adjustment expenses.................. $ 795,449 $ 876,721
Funds held under reinsurance treaties....................... 154,539 182,590
Premium deposits............................................ 37,248 21,024
Unearned premiums........................................... 8,298 20,886
Other liabilities........................................... 30,658 30,107
---------- ----------
Total liabilities................................. 1,026,192 1,131,328
---------- ----------
Commitments and contingencies (Notes 5 and 6)
EQUITY
Surplus..................................................... 253,235 282,359
Unrealized appreciation on securities available-for-sale,
net of deferred taxes..................................... 9,077 27,615
---------- ----------
Total equity...................................... 262,312 309,974
---------- ----------
Total liabilities and equity...................... $1,288,504 $1,441,302
========== ==========
</TABLE>

See accompanying notes.
F-11
<PAGE> 113

MEDICAL INTER-INSURANCE EXCHANGE

CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
1995 1996 1997
-------- -------- --------
<S> <C> <C> <C>
REVENUES
Net premiums earned........................................ $105,256 $107,887 $123,330
Net investment income...................................... 51,896 49,135 53,892
Net realized investment gains.............................. 13,149 5,832 10,296
Other revenue.............................................. 2,807 3,164 2,884
-------- -------- --------
Total revenues................................... 173,108 166,018 190,402

EXPENSES
Losses and loss adjustment expenses........................ 107,889 110,593 120,496
Underwriting expenses...................................... 14,743 17,553 25,415
Funds held charges......................................... 6,996 10,273 13,361
-------- -------- --------
Total expenses................................... 129,628 138,419 159,272
Income before income taxes................................. 43,480 27,599 31,130
Provision for income taxes................................. 11,402 10,004 2,006
-------- -------- --------
Net income....................................... $ 32,078 $ 17,595 $ 29,124
======== ======== ========
Earnings per share (pro forma)............................. $ 2.43
========
</TABLE>

See accompanying notes.
F-12
<PAGE> 114

MEDICAL INTER-INSURANCE EXCHANGE

CONSOLIDATED STATEMENTS OF EQUITY
FOR THE THREE YEARS ENDED DECEMBER 31, 1997
(IN THOUSANDS)

<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION
SUBORDINATED (DEPRECIATION)
LOAN OF INVESTMENTS, TOTAL
SURPLUS CERTIFICATES NET OF TAXES EQUITY
-------- ------------ --------------- --------
<S> <C> <C> <C> <C>
Balance at January 1, 1995................. $203,562 $ 4,603 $(21,160) $187,005
Net income............................... 32,078 32,078
Unrealized appreciation of investments,
net of tax............................ 40,151 40,151
Redemption of subordinated loan
certificates.......................... (4,603) (4,603)
-------- ------- -------- --------
Balance at December 31, 1995............... 235,640 -- 18,991 254,631
Net income............................... 17,595 17,595
Unrealized depreciation of investments,
net of tax............................ (9,914) (9,914)
-------- ------- -------- --------
Balance at December 31, 1996............... 253,235 -- 9,077 262,312
Net income............................... 29,124 29,124
Unrealized appreciation of investments,
net of tax............................ 18,538 18,538
-------- ------- -------- --------
Balance at December 31, 1997............... $282,359 $ -- $ 27,615 $309,974
======== ======= ======== ========
</TABLE>

See accompanying notes.
F-13
<PAGE> 115

MEDICAL INTER-INSURANCE EXCHANGE

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income............................................ $ 32,078 $ 17,595 $ 29,124
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, accretion and amortization........... 1,473 976 (1,029)
Realized gains..................................... (13,149) (5,832) (10,296)
Unpaid losses and loss adjustment expenses, net of
reinsurance recoverable.......................... 7,393 (9,231) 32,290
Funds held under reinsurance treaties.............. 33,819 60,861 28,051
Premium deposits, net of prepaid reinsurance
premiums......................................... (245) (30,801) (5,064)
Deferred income tax provision...................... 2,219 776 (1,417)
Unearned premiums, net of prepaid reinsurance
premiums......................................... (2,493) 3,644 10,402
Due from Attorney-in-Fact.......................... (5,520) (2,307) (2,687)
Other assets....................................... (13,908) (1,144) (12,939)
Other liabilities.................................. 1,467 6,962 (552)
--------- --------- ---------
Net cash provided by operating activities............. 43,134 41,499 65,883
========= ========= =========
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from fixed-maturity investment sales......... 311,871 606,172 228,005
Proceeds from fixed-maturity investments matured,
called, or prepaid................................. 43,212 97,325 120,034
Proceeds from equity investment sales................. 10 3,386 24,249
Cost of investments acquired.......................... (395,552) (704,486) (444,168)
Change in short-term investments, net................. 6,800 (33,979) 1,085
Acquisition of goodwill............................... -- (1,700) --
--------- --------- ---------
Net cash used in investing activities................. (33,659) (33,282) (70,795)
CASH FLOWS FROM FINANCING ACTIVITIES
Subordinated loan certificates redeemed............... (3,977) (248) --
--------- --------- ---------
Net cash used in financing activities................. (3,977) (248) --
Net change in cash.................................... 5,498 7,969 (4,912)
Cash at beginning of year............................. (8,935) (3,437) 4,532
--------- --------- ---------
Cash at end of year................................... $ (3,437) $ 4,532 $ (380)
========= ========= =========
</TABLE>

See accompanying notes.
F-14
<PAGE> 116

MEDICAL INTER-INSURANCE EXCHANGE

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION AND RELATED MATTERS

The Attorney-in-Fact is a corporation that is wholly owned by the Medical
Society of New Jersey (the "Medical Society") and was originally formed to
fulfill the statutory role of attorney-in-fact for the Exchange. In recent years
the Attorney-in-Fact has diversified its business, but its principal activity
continues to be managing the Exchange. The Attorney-in-Fact manages the
Exchange, subject to the supervision of the Board of Governors, pursuant to a
management contract that requires the Exchange to reimburse the costs of the
Attorney-in-Fact. In addition to the power of attorney contained in such
management contract, each member of the Exchange is required to execute a power
of attorney in favor of the Attorney-in-Fact to affirm the Attorney-in-Fact's
power to act on behalf of the Exchange pursuant to the management contract.

In 1996, the Exchange formed a down-stream holding company, Lawrenceville
Holdings, Inc. ("LHI"). On April 16, 1996, LHI acquired all of the common stock
of a property and casualty insurance company, Lawrenceville Property and
Casualty Co., Inc. ("LP&C"), which is domiciled in Virginia, and is licensed in
twenty-two states in the mid-atlantic and southeast regions of the United
States.

The Exchange, LHI and LP&C (collectively, "the Company") provide a wide
range of insurance products to the medical profession and health care
institutions primarily in the states of New Jersey, Pennsylvania and Texas. The
primary business of the Company is medical professional liability and it issues
claims-made, modified claims made with prepaid extended reporting endorsements
and occurrence policies. The Company currently maintains licenses in twenty-nine
states.

F-15
<PAGE> 117
MEDICAL INTER-INSURANCE EXCHANGE

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

2. SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying consolidated financial statements have been prepared in
conformity with generally accepted accounting principles ("GAAP") which differs
from statutory accounting practices prescribed or permitted by regulatory
authorities. The significant accounting policies followed by the Company that
materially affect financial reporting are summarized below:

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of
the Exchange, LHI and LP&C (from the date of acquisition, April 16, 1996).
During 1996, no business was written by LP&C subsequent to its acquisition. All
significant intercompany transactions and balances have been eliminated in the
consolidation.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes. Such estimates and assumptions
could change in the future as more information becomes known which could impact
the amounts reported and disclosed herein.

Investments

The Company has designated its entire investment portfolio as
available-for-sale. As such, all investments are carried at their fair market
values. The Company has no securities classified as "trading" or "held-to-
maturity." Transfers to these categories are restricted.

Changes in fair values of available-for-sale securities, after adjustment
of deferred income taxes, are reported as unrealized appreciation or
depreciation directly in equity and, accordingly, have no effect on net income.

For the loan-backed bonds, the Company recognizes income using a constant
effective yield based on anticipated prepayments and the estimated economic life
of securities. Prepayment assumptions are obtained from both proprietary and
broker/dealer estimates and are consistent with the current interest rate and
economic environment. When actual prepayments differ significantly from
anticipated prepayments, which are assessed at least annually, the effective
yield is recalculated to reflect actual payments to date and anticipated future
payments. The net investment in the security is adjusted to the amount that
would have existed had the new effective yield been applied since the
acquisition of the security. That adjustment is included in net investment
income.

Derivative financial instruments held are classified as other than trading.
As such, all derivatives are carried at their fair market values. Changes in
fair values, net of deferred taxes, are reported as unrealized appreciation or
depreciation directly in equity and, accordingly, have no effect on net income.

Premiums and discounts on investments are amortized to investment income
using the interest method over the contractual lives of the investments.
Realized investment gains and losses are included as a component of revenues
based on a specific identification of the investment sold.

Short-term investments include investments maturing within one-year and
other cash and cash equivalent balances earning interest.

F-16
<PAGE> 118
MEDICAL INTER-INSURANCE EXCHANGE

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Losses and Loss Adjustment Expenses

Estimates for unpaid losses and loss adjustment expenses are based on the
Company's evaluation of reported claims and actuarial analyses of the Company's
operations since its inception, including assumptions regarding expected
ultimate losses and reporting patterns, and estimates of future trends in claim
severity and frequency. The Company's philosophy is to have a disciplined
process consistently applied in setting and adjusting loss and LAE reserves.
Although variability is inherent in such estimates, recorded loss and LAE
reserves represent management's best estimate of the remaining costs of settling
all incurred claims. Changes in the Company's best estimate of ultimate claim
costs are recognized in the period in which the Company's best estimate of those
ultimate costs is changed. These estimates are reviewed regularly and any
adjustments to prior year reserves are reflected in current year operating
results.

The Company offered pure occurrence coverage from 1977 through 1986 and a
form of occurrence coverage, "modified claims made" from 1987 to the present
through its Permanent Protection Plan ("PPP") policy. The PPP policy provides
coverage for claims reported during the policy period as well as, under the
extended reporting endorsement, claims reported after the termination of the
policy (for any reason), and thus is reserved on an occurrence basis.
Traditional claims-made and occurrence coverages are reserved on a claims-made
or occurrence basis, as appropriate.

Premiums

Premiums are recorded as earned over the life of the policies to which they
apply. Premium deposits represent amounts received prior to the effective date
of the new or renewal policy period. The reserve for unearned premiums is
determined on a monthly pro-rata basis. Gross premiums include both direct and
assumed premiums earned.

Reinsurance

Reinsurance premiums, losses, and loss adjustment expenses are accounted
for on a basis consistent with the accounting for the original policies issued
and the terms of the reinsurance contracts. Premium deposits, unearned premiums,
and unpaid losses and loss adjustment expenses are reported gross of reinsurance
amounts.

All reinsurance contracts are accounted for in accordance with the
provisions of SFAS No. 113, "Accounting and Reporting for Reinsurance of
Short-Duration and Long-Duration Contracts", which provides the criteria for
determining whether the contracts should be accounted for utilizing reinsurance
accounting or deposit accounting. Reinsurance contracts that do not satisfy
certain requirements of SFAS No. 113 are accounted for by the deposit method.
Recorded deposits are adjusted once a loss is incurred that will be reimbursed
under such contracts. At that time, the deposit is measured by the present value
of the expected future cash flows arising from the contract.

Deferred Policy Acquisition Costs

Policy acquisition costs, (primarily commissions, premium taxes and other
selling expenses) which vary with and are directly related to the production of
business, are capitalized and amortized over the effective period of the related
policies. Anticipated investment income is considered in determining if premium
deficiencies exist.

F-17
<PAGE> 119
MEDICAL INTER-INSURANCE EXCHANGE

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Software Development Costs

Costs incurred in the development of software used for Company operations
are capitalized and amortized over a useful life ranging from three to five
years.

Income Taxes

Deferred income taxes arise as a result of applying enacted statutory tax
rates to the temporary differences between the financial statement carrying
value and the tax basis of assets and liabilities.

Reclassification

Certain amounts have been reclassified for the prior years to be comparable
to the 1997 presentation.

Cash Flow Reporting

For purposes of reporting cash-flows, cash consists of amounts held at
banks, cash in money market accounts and time deposits with original maturities
of generally three months or less.

Pro forma Earnings per Share

Recent Accounting Pronouncements

In June 1996, the Financial Accounting Standards Board (FASB) issued SFAS
No. 125, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities." SFAS No. 125 provides new accounting and
reporting standards for transfers of financial assets and extinguishments of
liabilities. The Company adopted this statement on January 1, 1997 with no
significant impact on its financial position or results of operations.

In December 1997, the American Institute of Certified Public Accountants
issued Statement of Position (SOP) 97-3 "Accounting by Insurance and Other
Enterprises for Insurance-Related Assessments." The SOP provides guidance for
determining when a liability for guaranty fund and other insurance-related
assessments should be recognized and how such liability should be measured. The
adoption of this statement is not expected to have a significant impact on the
Company's financial position or results of operations.

F-18
<PAGE> 120
MEDICAL INTER-INSURANCE EXCHANGE

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

3. LIABILITY FOR UNPAID LOSSES AND LOSS ADJUSTMENT EXPENSES

Activity in the liability for unpaid losses and loss adjustment expenses is
summarized as follows:

<TABLE>
<CAPTION>
1995 1996 1997
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Balance as of January 1, net of reinsurance recoverable of
$112.9 million, $165.7 million and $221.7 million,
respectively............................................. $575,538 $582,931 $573,700
Incurred related to:
Current year............................................. 107,889 110,593 120,496
Prior years..............................................
-------- -------- --------
Total incurred............................................. 107,889 110,593 120,496
Paid related to:
Current year............................................. 3,000 3,630 3,930
Prior years.............................................. 97,496 116,194 84,276
-------- -------- --------
Total paid................................................. 100,496 119,824 88,206
-------- -------- --------
Balance as of December 31, net of reinsurance
recoverable.............................................. 582,931 573,700 605,990
Reinsurance recoverable.................................... 165,729 221,749 270,731
-------- -------- --------
Balance, gross of reinsurance.............................. $748,660 $795,449 $876,721
======== ======== ========
</TABLE>

The Company did not adjust prior year gross reserves in the aggregate for
all periods presented, except for minor development in 1997. At December 31,
1995, 1996 and 1997, reserves for gross losses and loss adjustment expenses on
incurred but not reported claims amounted to $477.0 million, $500.0 million and
$593.2 million, respectively, of which $330.0 million, $350.9 million and $430.3
million related to prior years.

Loss and loss adjustment expense reserve estimates have been reviewed
regularly and adjusted where judged prudent to do so. Medical malpractice
business, particularly occurrence or occurrence-like coverage, has a very long
development period. Cases may take years to be reported, and, as a rule, take
several years to adjust, settle or litigate.

The aggregate excess reinsurance contracts provide coverage for losses and
allocated loss adjustment expenses above aggregate retentions. The aggregate
excess reinsurance contracts, therefore, have the effect of holding net incurred
losses and allocated loss adjustment expenses at a constant level as long as
losses and allocated loss adjustment expenses remain within the coverage limits,
which occurred for the years ended December 31, 1995, 1996 and 1997.

In addition, general long term trends impacting ultimate reserve values
such as changes in liability standards and expanding views of contract
interpretation increase the uncertainty. While certain individual cases were
settled during 1995, 1996 and 1997 at values more or less than specific case
reserve amounts established in prior years, there were no overall indications
that prior established best estimates, including the significant portion of
reserves for incurred but not reported claims, should be adjusted.

4. MANAGEMENT SERVICES AGREEMENT

Management services agreements between the Exchange and the
Attorney-in-Fact and LP&C and the Attorney-in-Fact provide, among other things,
that the Attorney-in-Fact is responsible for the administration and management
of the Exchange and LP&C. These agreements have been filed with the insurance
departments of the Exchange's and LP&C's respective domiciliary states. The
agreement between the Exchange and the Attorney-in-Fact empowers the
Attorney-in-Fact to issue, modify, reinsure, or cancel contracts; to adjust and
settle claims; to accept service of process; to collect and have charge of all
funds

F-19
<PAGE> 121
MEDICAL INTER-INSURANCE EXCHANGE

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

coming into the Exchange; to keep the books and accounts of the Exchange; and to
do any and all things necessary to comply with any laws, subject to the control,
supervision and direction of the Board of Governors of the Exchange. This
agreement is automatically renewable each year unless notice of termination by
either party has been provided by December 1 of the preceding year. No such
notice has been given.

The agreement between LP&C and the Attorney-in-Fact provides for similar
services to be performed by the Attorney-in-Fact for LP&C, subject to the
general supervision of the Board of Directors of LP&C. This agreement is
automatically renewable for three-year terms unless notice of termination by
either party has been provided by April 16 of the year preceding the expiration
of the agreement.

In exchange for services provided, fees are paid to the Attorney-in-Fact by
the Exchange and LP&C equal to actual direct expenses of the Attorney-in-Fact
incurred in performing services on behalf of the Exchange and LP&C, plus in the
case of the LP&C agreement, 3 percent of LP&C's revenues of the preceding
calendar year. Expenses of the Attorney-in-Fact reimbursed by the Exchange and
LP&C amounted to $18.6 million in 1996 and $26.2 million in 1997. LP&C was
acquired by the Exchange in 1996 and generated no revenue during such year.
Therefore, 1997 payments to the Attorney-in-Fact under the LP&C agreement were
only in respect of actual direct expenses of the Attorney-in-Fact.

5. INVESTMENTS

The Company's investment strategy focuses primarily on the purchase of
high-quality debt securities, which resulted in the fixed income portfolios
having a Standard and Poor's average quality rating of AA+ at December 31, 1997.
The portfolio does not include any investments in real estate or below
investment grade securities.

The actual or amortized cost and estimated market value of the Company's
available-for-sale securities as of December 31, 1996 and 1997 were as follows:

<TABLE>
<CAPTION>
GROSS UNREALIZED ESTIMATED
AMORTIZED ----------------- MARKET
COST GAINS LOSSES VALUE
--------- ------- ------ ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
1996
U.S. Treasury securities and obligations of U.S
government corporations and agencies............. $184,571 $ 1,179 $3,244 $182,506
Obligations of states and political subdivisions... 258,775 3,268 429 261,614
Corporate securities............................... 56,607 376 188 56,795
Mortgage-backed and other asset backed
securities....................................... 260,849 3,168 2,062 261,955
-------- ------- ------ --------
Total fixed maturity investments................... 760,802 7,991 5,923 762,870
Equity investments................................. 55,334 12,071 175 67,230
-------- ------- ------ --------
Total investments........................ $816,136 $20,062 $6,098 $830,100
======== ======= ====== ========
1997
U.S. Treasury securities and obligations of U.S
government corporations and agencies............. $188,715 $ 4,348 $ 56 $193,007
Obligations of states and political subdivisions... 202,386 7,224 5 209,605
Corporate securities............................... 130,159 3,747 567 133,339
Mortgage-backed and other asset backed
securities....................................... 311,562 5,702 469 316,795
-------- ------- ------ --------
Total fixed maturity investments................... 832,822 21,021 1,097 852,746
Equity investments................................. 66,520 23,154 594 89,080
-------- ------- ------ --------
Total investments........................ $899,342 $44,175 $1,691 $941,826
======== ======= ====== ========
</TABLE>

F-20
<PAGE> 122
MEDICAL INTER-INSURANCE EXCHANGE

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The fair values for fixed maturity investments are based on quoted marked
prices, where available. For fixed maturity investments not actively traded,
fair values are estimated using values obtained from independent pricing
services. The fair values for equity securities are based on quoted market
prices. At December 31, 1996 and 1997, $52.3 million and $69.7, million
respectively, of the Company's equity investments were invested in the Vanguard
Institutional Index Fund.

The amortized cost and estimated fair value of fixed maturity investments
at December 31, 1997, by contractual maturity, are shown below. Actual
maturities will differ from contractual maturities because borrowers may have
the right to call or prepay obligations with or without call or prepayment
penalties.

<TABLE>
<CAPTION>
AMORTIZED ESTIMATED
COST FAIR VALUE
--------- ----------
(IN THOUSANDS)
<S> <C> <C>
Due in one year or less..................................... $ 7,116 $ 7,122
Due after one year through five years....................... 138,800 140,904
Due after five years through ten years...................... 188,114 193,890
Due after ten years......................................... 187,230 194,034
Mortgage-backed and other asset backed securities........... 311,562 316,796
-------- --------
Total............................................. $832,822 $852,746
======== ========
</TABLE>

Major categories of the Company's net investment income are summarized as
follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1995 1996 1997
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Fixed maturity investments............................ $50,624 $46,051 $49,241
Equity investments.................................... 829 2,149 1,678
Other................................................. 3,267 3,172 5,700
------- ------- -------
Subtotal............................................ 54,720 51,372 56,619
Investment expenses................................... 2,824 2,237 2,727
------- ------- -------
Net investment income................................. $51,896 $49,135 $53,892
======= ======= =======
</TABLE>

Realized gains and losses from sales of investments are summarized as
follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1995 1996 1997
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Fixed maturity investments
Gross realized gains................................ $14,806 $11,522 $ 2,803
Gross realized losses............................... 1,657 3,279 1,158
------- ------- -------
Net realized gains on fixed maturity investments...... 13,149 8,243 1,645
Equity investments
Gross realized gains................................ -- 474 8,719
Gross realized losses............................... -- 2,885 68
------- ------- -------
Net realized gains (losses) on equity investments..... -- (2,411) 8,651
------- ------- -------
Net realized gains on investments..................... $13,149 $ 5,832 $10,296
======= ======= =======
</TABLE>

F-21
<PAGE> 123
MEDICAL INTER-INSURANCE EXCHANGE

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The change in the Company's unrealized appreciation (depreciation) on fixed
maturity investments was $59,093, ($24,896), and $17,856 for the years ended
December 31, 1995, 1996 and 1997, respectively. The corresponding amounts for
equity investments were $2,253, $9,643, and $10,664.

At December 31, 1997, investments in fixed maturity investments with a
carrying amount of approximately $6.8 million were on deposit with state
insurance departments to satisfy regulatory requirements.

6. REINSURANCE

Certain premiums, losses and loss adjustment expenses are ceded to other
insurance companies under various reinsurance agreements in-force during 1995,
1996 and 1997. These reinsurance agreements protect the underwriting and
operating results from unexpected increases in frequency, severity, and
acceleration of the payments of losses and loss adjustment expenses, and contain
the following significant terms:

<TABLE>
<CAPTION>
CONTRACT COVERAGE TYPE RETENTION COVERAGE LIMIT OTHER
-------- ------------- --------- -------------- -----
<S> <C> <C> <C> <C>
1995 Specific Excess Per loss $2-$3 million $18 million Aggregate deductible
Aggregate limits
1995 Aggregate Excess Aggregate 75% loss and ALAE ratio 75% loss and ALAE ratio Aggregate limit
1996 Specific Excess Per loss $2-$3 million $28 million Aggregate deductible
Aggregate limits
1996 Aggregate Excess Aggregate 75% loss and ALAE ratio 75% loss and ALAE ratio Aggregate limit
1997 Specific Excess Per loss $2-$3 million $38 million Aggregate deductible
Aggregate limits
1997 Aggregate Excess Aggregate 75% loss and ALAE ratio 75% loss and ALAE ratio Aggregate limit
</TABLE>

In addition, in 1992, the Company entered into a combined aggregate and
specific excess of loss contract to protect statutory underwriting and operating
results from adverse development on those losses and ALAE which occurred on or
before December 31, 1992. This contract is being accounted for using deposit
accounting on a GAAP basis. The net deposit carried related to this contract is
$0 as the initial consideration under this contract was retained by the Company
as an unrestricted funds held liability. The deposit has not been adjusted since
initially recorded in 1992.

The effect of assumed and ceded reinsurance on premiums is summarized in
the following table (dollars in thousands):

<TABLE>
<CAPTION>
1995 1996 1997
-------------------- -------------------- --------------------
WRITTEN EARNED WRITTEN EARNED WRITTEN EARNED
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Direct............... $137,291 $136,544 $143,218 $142,399 $162,430 $150,099
Assumed.............. 775 345 3,550 2,187 15,478 15,568
Ceded................ (35,303) (31,633) (34,890) (36,699) (44,522) (42,337)
-------- -------- -------- -------- -------- --------
Net premiums......... $102,763 $105,256 $111,878 $107,887 $133,386 $123,330
======== ======== ======== ======== ======== ========
</TABLE>

During 1995, 1996 and 1997, approximately $53.4 million, $56.8 million and
$68.9 million, respectively, of losses and loss adjustment expenses were ceded
to reinsurers.

The Company remains liable in the event that amounts recoverable from
reinsurers are uncollectible. To minimize its exposure to losses from reinsurer
insolvencies, the Company enters into reinsurance arrangements with carriers
rated "A" or better by A.M. Best. At December 31, 1996 and 1997, the Company
held collateral under related reinsurance agreements for all unpaid losses and
loss adjustment expenses ceded in the form of funds withheld of $154.5 million
and $182.6 million and letters of credit of $93.9 million and $126.7 million,
respectively.

F-22
<PAGE> 124
MEDICAL INTER-INSURANCE EXCHANGE

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In accordance with the provisions of the reinsurance contracts, the funds
withheld are credited with interest at contractual rates ranging from 7.5% to
8.6%, which is recorded as a period expense in the year incurred. There are no
restrictions on investments held in support of funds withheld.

7. COMMITMENTS, OFF BALANCE SHEET RISK AND OTHER LIABILITIES

Investment securities with an aggregate market value of $131.2 million and
$92.1 million were loaned to various brokers in connection with a securities
lending program at December 31, 1996 and 1997, respectively. These securities
are returnable on demand and collateralized by cash deposits amounting to
approximately 102% of the market value of the securities loaned. Since the
Company may demand that a counterparty return the securities which it has
borrowed at any time, the Company retains effective control of all assets
participating in the securities lending program. The Company receives lending
fees and continues to earn interest on the loaned securities.

In 1997, the Company implemented an "equity collar" (collar) around the
Company's equity securities of $81.6 million. An "equity collar" is an option
position created with the simultaneous purchase and sale of an equal number of
put and call options which serves as a hedge transaction, the purpose of which
is to reduce equity market volatility and to protect surplus from significant
declines in the market value of the Company's equity securities. This resulting
option position establishes both a ceiling and a floor with respect to the
financial performance of the underlying asset, upon which the "equity collar" is
established, for a specified time period. The collar transaction was executed on
July 8, 1997 and expired on January 2, 1998. The collar was constructed using
European-style S&P 500 options and as of December 31, 1997, the collar had no
unrealized gain or loss. A "European-style" option is an option contract that
may be exercised only upon expiration of the contract. To minimize loss exposure
due to credit risk, the Company utilizes intermediaries with a Standard and
Poor's rating of "AA" or better.

The Company currently purchases annuities without recourse on a competitive
basis to fund settlements of indemnity losses. The nature and terms of the
annuities vary according to settlements. The current value of annuities
purchased in prior years from other insurance companies, but with recourse to
the Company, and reflected as an other asset and an other liability in the
consolidated balance sheets, totaled $18.8 million as of December 31, 1996 and
1997, respectively. The Company becomes liable only in the event that an
insurance company cannot meet its obligations under existing agreements and
state guarantee funds are not available. To minimize its exposure to such
losses, the Company only utilizes insurance companies with an A.M. Best rating
of "A+" or better.

As of December 31, 1996 and 1997, the Exchange is guarantor for space
leased by the Attorney-in-Fact. The lease expires in May 2001, with total
minimum lease payments remaining of $1.8 million. Additionally, the Exchange has
extended a line of credit to an Attorney-in-Fact subsidiary in an amount up to
$5.0 million, none of which was outstanding at December 31, 1996 or 1997. The
Exchange guarantees a bank loan on behalf of the Attorney-in-Fact, which had an
outstanding balance of $2.4 million and $1.6 million at December 31, 1996 and
1997, respectively.

8. STATUTORY ACCOUNTING PRACTICES

The Exchange, domiciled in New Jersey and LP&C, domiciled in Virginia,
prepare statutory-basis financial statements in accordance with accounting
practices prescribed or permitted by the New Jersey Department of Banking and
Insurance and the Virginia Department of Insurance, respectively. "Prescribed"
statutory accounting practices include state laws, regulations, and general
administrative rules, as well as a variety of publications of the National
Association of Insurance Commissioners (the "NAIC"). "Permitted" statutory
accounting practices encompass all accounting practices that are not prescribed;
such practices may differ from state to state, may differ from company to
company within a state, and may change in the future. The NAIC currently is in
the process of codifying statutory accounting practices, the result of which is

F-23
<PAGE> 125
MEDICAL INTER-INSURANCE EXCHANGE

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

expected to constitute the only source of "prescribed" statutory accounting
practices. Policyholders' surplus and net income, as reported to the domiciliary
state insurance departments in accordance with its prescribed or permitted
statutory accounting practices for these two companies, are summarized as
follows:

<TABLE>
<CAPTION>
1995 1996 1997
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Statutory net income for the year.................. $ 35,994 $ 20,078 $ 30,302
Statutory surplus at year-end...................... 184,651 208,478 242,395
</TABLE>

The maximum amount of dividends that domestic insurance companies in New
Jersey and Virginia can pay to their policyholders without prior approval of the
respective insurance commissioners of those states is subject to restrictions
relating to statutory surplus and statutory net income. No dividends were paid
or declared in 1995, 1996 or 1997.

9. INCOME TAXES

For federal income tax purposes, the Exchange files a consolidated return
with its subsidiaries.

The components of the income tax provision in the accompanying statements
of income are summarized as follows:

<TABLE>
<CAPTION>
1995 1996 1997
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Current income tax expense............................ $ 9,183 $ 9,228 $ 3,423
Deferred income tax expense/(benefit)................. 2,219 776 (1,417)
------- ------- -------
Total income tax expense.............................. $11,402 $10,004 $ 2,006
======= ======= =======
</TABLE>

A reconciliation of income tax computed at the federal statutory tax rate
to total income tax expense is as follows:

<TABLE>
<CAPTION>
1995 1996 1997
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Federal income tax at 35%............................. $15,218 $ 9,660 $10,896
Increase (decrease) in taxes resulting from:
Tax-exempt interest................................. (3,893) (4,490) (3,583)
Provision for (reversal of) tax contingencies and
other tax matters................................ 0 5,224 (4,217)
Other............................................... 77 (390) (1,090)
------- ------- -------
Total income taxes.......................... $11,402 $10,004 $ 2,006
======= ======= =======
</TABLE>

F-24
<PAGE> 126
MEDICAL INTER-INSURANCE EXCHANGE

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Significant components of the Company's deferred tax assets and liabilities
are summarized as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1996 1997
------- -------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Discounting of loss reserves.............................. $29,290 $30,820
Other..................................................... 2,101 2,186
------- -------
Total deferred tax assets......................... 31,391 33,006
------- -------
Deferred tax liabilities:
Unrealized gains on fixed maturity investments............ 723 6,973
Unrealized gains on equity investments.................... 4,164 7,896
Other..................................................... 243 441
------- -------
Total deferred tax liabilities.................... 5,130 15,310
------- -------
Net deferred tax assets........................... $26,261 $17,696
======= =======
</TABLE>

Deferred tax assets are presently considered by management to be realizable
based on the level of anticipated future taxable income. Net deferred tax assets
and income tax expense in future years can be significantly affected by changes
in enacted tax rates or by unexpected adverse events that would impact
management's conclusions as to the ultimate realizability of deferred tax
assets.

At December 31, 1996 and 1997, the Company had income taxes payable
included in other liabilities of $7.4 million and $2.2 million, respectively.

The amount of income taxes paid in 1995, 1996 and 1997 was $3.9 million,
$3.6 million and $6.0 million, respectively.

As a result of developments during 1996 related to Internal Revenue Service
examinations, the Company established a provision for tax contingencies of $5.2
million. During 1997, the Company reached favorable resolutions and was able to
release $4.2 million of that amount. The federal income tax returns of the
Company have been examined by the Internal Revenue Service through the years
1994. Management believes the Company has adequately provided for any remaining
tax contingencies.

10. NOTES RECEIVABLE

The Company held a note receivable of $3.2 million and $3.0 million,
included in other assets, at December 31, 1996 and 1997, respectively, from the
Medical Society of New Jersey, collateralized by the building in which the
Company maintains its home office. The note provides for monthly payments of
$40,000, which includes interest at 9.05% until September 1, 2004 and reduced
payments thereafter until June 1, 2009.

11. PLAN OF REORGANIZATION

In 1997, the Exchange's Board of Governors unanimously approved a plan to
convert from a reciprocal insurance exchange to a New Jersey domestic stock
insurer. On March 5, 1998, the Commissioner of Banking and Insurance of the
State of New Jersey approved this plan subject to ratification by members of the
Exchange at a special meeting.

F-25
<PAGE> 127

SCHEDULE I

SUMMARY OF INVESTMENTS -- OTHER THAN INVESTMENTS IN RELATED PARTIES
DECEMBER 31, 1997
(IN THOUSANDS)

<TABLE>
<CAPTION>
AMOUNT ON
COST FAIR VALUE BALANCE SHEET
-------- ---------- -------------
<S> <C> <C> <C>
Fixed maturities:
Bonds:
United States government and government agencies and
authorities....................................... $409,356 $ 418,235 $ 418,235
States, municipalities and political subdivisions.... 202,386 209,605 209,605
Public utilities..................................... 948 970 970
All other corporate bonds............................ 218,532 222,336 222,336
Certificates of deposit.............................. 1,600 1,600 1,600
-------- ---------- ----------
Total fixed maturities............................ 832,822 852,746 852,746
-------- ---------- ----------
Equity securities:
Common stock:
Public utilities.................................. 493 668 668
Banks, trust and insurance companies.............. 3,940 4,745 4,745
Industrial, miscellaneous and all other........... 10,107 13,923 13,923
Mutual funds...................................... 51,980 69,744 69,744
-------- ---------- ----------
Total equity securities........................... 66,520 89,080 89,080
-------- ---------- ----------
Short-term investments................................. 85,145 85,145 85,145
-------- ---------- ----------
Total investments...................................... $984,487 $1,026,971 $1,026,971
======== ========== ==========
</TABLE>

F-26
<PAGE> 128

ANNEX A

PLAN OF REORGANIZATION

MEDICAL INTER-INSURANCE EXCHANGE OF NEW JERSEY

AS FILED WITH THE NEW JERSEY
DEPARTMENT OF BANKING AND INSURANCE
ON
OCTOBER 16, 1997
<PAGE> 129

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I: DEFINITIONS...................................... A-1
ARTICLE II: APPROVAL BY THE COMMISSIONER.................... A-3
2.1 Application.......................................... A-3
2.2 Commissioner's Public Hearing........................ A-3
2.3 Approval of Plan..................................... A-3
ARTICLE III: APPROVAL BY MEMBERS............................ A-3
3.1 Member Vote.......................................... A-3
3.2 Notice of Members' Meeting........................... A-3
3.3 Certification........................................ A-4
ARTICLE IV: THE REORGANIZATION.............................. A-4
4.1 Holding Company and Stock Insurer.................... A-4
4.2 Effect of Reorganization............................. A-4
4.3 Conditions to Effectiveness of Plan.................. A-4
4.4 Initial Public Offering.............................. A-5
ARTICLE V: POLICIES......................................... A-5
5.1 Policies............................................. A-5
5.2 Who is a Named Insured............................... A-5
5.3 In Force............................................. A-5
ARTICLE VI: ALLOCATION OF CONSIDERATION TO DISTRIBUTEES..... A-6
6.1 Allocation of Consideration.......................... A-6
6.2 Payment of Consideration............................. A-6
ARTICLE VII: ACQUISITION OF THE UNDERWRITER................. A-7
7.1 Stock Purchase Agreement............................. A-7
7.2 Determination of Consideration for Stock of the
Underwriter............................................ A-7
ARTICLE VIII: ADDITIONAL PROVISIONS......................... A-7
8.1 Assumption Certificates.............................. A-7
8.2 Notices.............................................. A-7
8.3 Adjustment of Share Numbers.......................... A-7
8.4 Authority to Remedy Errors........................... A-7
8.5 Corrections.......................................... A-7
8.6 Amendment of the Plan................................ A-7
8.7 Extension of Time Periods............................ A-7
8.8 Abandonment of Plan.................................. A-7
8.9 Costs and Expenses................................... A-7
8.10 Addresses of Members................................. A-8
8.11 Governing Law........................................ A-8
8.12 Confidentiality...................................... A-8
</TABLE>

<TABLE>
<S> <C> <C>
EXHIBIT A -- Form of Certificate of Incorporation of the Holding Company
(omitted from this copy)
EXHIBIT B -- Form of By-Laws of the Holding Company (omitted from this
copy)
EXHIBIT C -- Form of Certificate of Incorporation of the Stock Insurer
(omitted from this copy)
EXHIBIT D -- Form of By-Laws of the Stock Insurer (omitted from this
copy)
EXHIBIT E -- Form of Assumption Reinsurance and Administration Agreement
between the Company and the Stock Insurer (omitted from this
copy)
EXHIBIT F -- Form of Assignment and Assumption Agreement between the
Company and the Stock Insurer (omitted from this copy)
EXHIBIT G -- Form of Stock Purchase Agreement between and among the
Holding Company and the Medical Society of New Jersey
(omitted from this copy)
</TABLE>

A-i
<PAGE> 130

PLAN OF REORGANIZATION
OF
MEDICAL INTER-INSURANCE EXCHANGE OF NEW JERSEY

This Plan of Reorganization, which has been adopted by the Board of
Governors (the "Board") of Medical Inter-Insurance Exchange of New Jersey (the
"Company"), a reciprocal insurer organized under Chapter 50, Title 17 of the New
Jersey Statutes, at a meeting duly called and held at the offices of the Company
on October 15, 1997 (the "Adoption Date"), provides for the reorganization of
the Company from a reciprocal insurer into a New Jersey stock domestic stock
insurer owned by a Delaware stock holding company.

The principal purposes for the Company's reorganization are to enhance the
Company's strategic and financial flexibility and to provide Distributees with
(i) marketable stock of The MIIX Group, Incorporated (the "Holding Company"), a
newly-formed corporation that upon the effectiveness of this Plan of
Reorganization will become the holding company for MIIX Insurance Company (the
"Stock Insurer"), the successor to the Company, or, (ii) in certain cases, cash.
THE REORGANIZATION WILL NOT IN ANY WAY CHANGE PREMIUMS OR REDUCE POLICY BENEFITS
OR OTHER POLICY OBLIGATIONS PROVIDED UNDER EXISTING POLICIES ISSUED TO THE
COMPANY'S POLICYHOLDERS.

At present, the Company can increase its capital primarily through retained
surplus contributed by its business. The Company's management believes that in
the long term this source will not be sufficient to meet its business
objectives. The Company's business has generated significant contributions to
statutory surplus, but management believes that growth is necessary to remain an
effective, competitive, financially secure insurer in the future and that such
growth requires additional permanent capital beyond that which can be internally
generated. Upon reorganization, the Stock Insurer, the successor to the Company,
will have a corporate structure that will enable it to access the capital
markets through its proposed parent Holding Company. This new corporate
structure will enable the successor to the Company to obtain capital from a
variety of sources, including through an initial public offering of the common
stock of the Holding Company, which may be conducted at the discretion of the
Board concurrent with or at any time after the effectiveness of the
reorganization of the Company as set forth herein. In addition, the new
corporate structure will facilitate potential acquisitions by creating a more
flexible corporate organization which, among other things, will permit the
issuance of stock to consummate such acquisitions. Finally, the reorganization
of the Company pursuant to this Plan of Reorganization will provide Distributees
with marketable shares of Holding Company stock or cash.

The Company and the Board intend that the reorganization, including the
transfer of assets of the Company to the Stock Issuer as described in Section
4.2 below and the distribution of Holding Company Stock to Members, qualify as a
tax-free reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended.

ARTICLE I: DEFINITIONS

As used in this Plan of Reorganization, the following terms have the
following meanings:

"Adoption Date" has the meaning specified in the first paragraph hereof.

"Allocable Shares" means 12 million shares of common stock of the Holding
Company.

"Board" has the meaning specified in the first paragraph hereof.

"Certificate of Authority" has the meaning specified in Section 4.3.

"Code" means the Internal Revenue Code of 1986, as amended.

"Company" has the meaning specified in the first paragraph hereof.

A-1
<PAGE> 131

"Commissioner" means the Commissioner of Banking and Insurance of the State
of New Jersey, or such governmental officer, body or authority as may succeed
such Commissioner as the primary regulator of the Company's insurance business
under applicable law.

"Conversion Value" means the price per share at which Holding Company Stock
is offered to the public in the Initial Public Offering, or, if no Initial
Public Offering shall have been made, the price per share that would reflect the
economic value of the Holding Company Stock as determined in good faith by the
Board.

"Distributee" means a Member or a Look-Back Insured.

"Effective Date" has the meaning specified in Section 4.3.

"Effective Time" has the meaning specified in Section 4.3.

"Final Order Date" has the meaning specified in Section 4.3.

"Holding Company" means The MIIX Group, Incorporated, a corporation
organized under the laws of the State of Delaware.

"Holding Company Stock" means the shares of common stock, par value $.01
per share, of the Holding Company.

"In Force" has the meaning specified in Section 5.3.

"Information Statement" has the meaning specified in Section 3.2.

"Initial Public Offering" means an initial public offering by the Holding
Company of shares of Holding Company Stock.

"Look-Back Insured" means a Person who is not a Member, but who at any time
during the three-year period prior to the Adoption Date was the Named Insured in
one or more Policies issued by the Company and who, therefore, was a member of
the Company during such period under Article II of the Company's Rules &
Regulations.

"Member" means a Person who is the Named Insured in one or more Policies
that are In Force on the Adoption Date and who, therefore, is a member on the
Adoption Date under Article II of the Company's Rules & Regulations.

"Members' Meeting" has the meaning specified in Section 3. 1.

"Membership Interests" means, as of the Effective Date, all the rights or
interests of Members of the Company at such time arising under the Rules and
Regulations of the Company or otherwise by law, including, but not limited to,
any right to vote and any right to a return of the surplus of the Company, which
may exist with regard to the surplus of the Company not apportioned or declared
prior to the Effective Date by the Board for policyholder dividends. For
purposes of the Plan of Reorganization, Membership Interests shall not include
any other right expressly conferred by an insurance policy.

"Named Insured" shall have the meaning specified in Section 5.2.

"Person" means a natural person. A Person who is the Named Insured of
Policies in more than one legal capacity (e.g., a trustee under separate trusts)
shall be deemed to be a separate Person in each such capacity.

"Plan of Reorganization" means this Plan of Reorganization (including all
Exhibits hereto), as it may be amended from time to time in accordance with
Section 8.7.

"Policy" has the meaning specified in Section 5.1.

"Public Hearing" has the meaning specified in Section 2.2.

"Stock Insurer" means MIIX Insurance Company, a newly-incorporated New
Jersey domestic stock insurer that is a wholly owned subsidiary of the Holding
Company and is the successor to the Company.

"Transfer Agent" means the transfer agent to be designated by the Company,
or its successors or assigns.

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"Underwriter" means New Jersey State Medical Underwriters, Inc., a New
Jersey Corporation that is the attorney-in-fact for the Company.

ARTICLE II: APPROVAL BY THE COMMISSIONER

2.1. Application. The Company shall seek the approval of the Commissioner
for the reorganization of the Company into a stock insurer owned by a stock
holding company, as set forth in Article IV below by filing with the
Commissioner an application including the following documents:

(a) this Plan of Reorganization, including all exhibits hereto;

(b) a certification that this Plan of Reorganization has been duly
adopted by a vote of at least two-thirds of the members of the Board; and

In addition, the Holding Company shall file with the Commissioner an application
for the formation of the Stock Insurer containing all required documents.

2.2. Commissioner's Public Hearing. (a) This Plan of Reorganization is
subject to the approval of the Commissioner after a hearing thereon (the "Public
Hearing"), which shall be held pursuant to procedures established by the
Commissioner under New Jersey law and regulations.

2.3. Approval of Plan. The Commissioner shall make a determination
whether to approve the Plan of Reorganization after the completion of the Public
Hearing. The Stock Insurer shall be formed and licensed to do business for the
same lines of insurance currently permitted of the Company upon the entry of an
order by the Commissioner approving the Plan and the transactions contemplated
thereby.

ARTICLE III: APPROVAL BY MEMBERS

3.1. Member Vote. After the Commissioner's determination to approve the
Plan, the Company shall hold a special meeting of Members (the "Members'
Meeting"). At such Members' Meeting, the Members shall be entitled to vote on
the proposal to approve the Plan of Reorganization.

(a) The Plan of Reorganization is subject to the approval of not less
than two-thirds of the votes of the Members voting thereon in person or by
proxy at the Members' Meeting.

(b) Based upon the Company's records and pursuant to Article II,
Section Three of the Company's Rules and Regulations, each Member shall be
entitled to one vote.

3.2. Notice of Members' Meeting. (a) The Company shall mail notice of the
Members' Meeting to all Members. The notice shall set forth the reasons for the
vote and the time and place of the Members' Meeting. Such notice shall be sent
by first class mail to the address of each Member as it appears on the records
of the Company, at least 30 days prior to the Members' Meeting and shall be in a
form satisfactory to the Commissioner.

(b) Such notice of such Members' Meeting shall include an information
statement (the "Information Statement") containing the following
information:

(i) a copy of the Plan;

(ii) a copy of the Commissioner's order approving the Plan;

(iii) an explanation of the Plan;

(iv) a copy of an opinion from a nationally-recognized investment
banking firm to the effect that the Plan is fair from a financial point
of view as at the date of such opinion; and

(v) a description of the Company's business, including financial
statements.

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3.3. Certification. Promptly after the Members' Meeting, the Company
shall file a certification with the Commissioner setting forth the vote and
certifying whether the Plan of Reorganization was approved by at least
two-thirds of the votes of the Members voting in person or by proxy at the
Members' Meeting.

ARTICLE IV: THE REORGANIZATION

4.1. Holding Company and Stock Insurer. Prior to the Effective Time,
(i) the Holding Company shall exist as a duly organized Delaware corporation
that is a wholly-owned subsidiary of the Company, and (ii) the Holding Company
shall own 100% of the stock of the Stock Insurer, which shall be a duly
organized New Jersey insurer.

4.2. Effect of Reorganization. (a) At the Effective Time:

(i) pursuant to the Assumption Reinsurance and Administration
Agreement between the Company and the Stock Insurer substantially in the
form attached hereto as Exhibit E and the Assignment and Assumption
Agreement between the Company and the Stock Insurer substantially in the
form attached hereto as Exhibit F, all of the assets of the Company,
except the voting stock of the Holding Company, and the cash to be
distributed to Distributees pursuant to Article VI hereunder, shall be
transferred to the Stock Insurer, in exchange, all of the Company's
insurance and non-insurance liabilities shall be assumed by the Stock
Insurer without recourse to the Company;

(ii) pursuant to the Stock Purchase Agreement between and among the
Holding Company and The Medical Society of the State of New Jersey
substantially in the form attached hereto as Exhibit G (the "Stock
Purchase Agreement"), the Holding Company shall acquire 100% of the
stock of the Underwriter, in exchange for newly-issued Holding Company
Stock and cash, pursuant to a formula as set forth in Section 7.2 below;

(iii) Distributees shall be entitled to receive Holding Company
Stock or cash, allocated pursuant to Article VI hereof;

(iv) all Membership Interests shall be extinguished; and

(v) the Company shall dissolve.

(b) On the Effective Date, the Company shall cause to be issued to the
Transfer Agent, for the respective accounts of the Distributees entitled to
receive such stock pursuant to Article VI, a number of shares of Holding
Company Stock determined in accordance with Article VI.

(c) As promptly as possible after the Effective Date, the Transfer
Agent shall transfer to the Distributees such shares of Holding Company
Stock, allocated in accordance with Article VI, as are registered in the
respective names of such Distributees. As promptly as possible after the
Effective Date, the Holding Company shall pay or cause the Company to pay
or credit cash consideration to eligible Distributees in accordance with
Article VI.

4.3. Conditions to Effectiveness of Plan. The effectiveness of the Plan
is subject to the conditions that:

(i) the Company has received an opinion from a
nationally-recognized investment banking firm to the effect that the
Plan is fair from a financial point of view as at the date of such
opinion;

(ii) the Company has received on or prior to the Effective Date
rulings from the Internal Revenue Service or opinions of its tax
advisors substantially to the effect that the transfer of Company's
assets to, and assumption of its liabilities by, the Stock Insurer, and
dissolution of the Company, shall qualify as a tax-free reorganization.

(iii) the Members shall have approved the Plan as specified in
Section 3.3 hereof;

(iv) the Underwriter shall cancel all powers of attorney entered
into with any applicant for insurance with the Company;

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(v) all requisite approvals of the Assumption Reinsurance and
Administration Agreement shall have been obtained;

(vi) the Company shall have filed with the Commissioner the
certificate set forth in Section 3.3 hereof and a certificate stating
that the conditions set forth in clause (ii) -- (v) have been satisfied;
and

(vii) the order of the Commissioner set forth in Section 2.5 has
become final (the date of such event the "Final Order Date"), and the
Commissioner shall have issued a certificate of authority (the
"Certificate of Authority") to the Stock Insurer to do business for the
same lines of insurance currently permitted of the Company and shall
have granted to the Stock Insurer any required rate and form approvals.

The effective date of the Plan of Reorganization (the "Effective Date") shall be
the date on which the Certificate of Authority issued by the Commissioner
becomes effective, provided that in no event shall the Effective Date be less
than 30 days after the Final Order Date nor more than 12 months after the Final
Order Date, unless such period is extended by the Commissioner. The Plan of
Reorganization shall be deemed to have become effective on the Effective Date at
the time specified in the Certificate of Authority (the "Effective Time").

4.4. Initial Public Offering. An Initial Public Offering may be conducted
at the discretion of the Board concurrent with or at any time after the
Effective Date.

ARTICLE V: POLICIES

5.1. Policies. Each insurance policy duly issued by the Company is deemed
to be a Policy for purposes of this Plan of Reorganization.

5.2. Who is a Named Insured. The Named Insured in any Policy as of any
date shall be determined on the basis of the Company's records as of such date
in accordance with the following provisions;

(a) The Named Insured in a Policy shall be as shown on the Policy
Declarations page in the Company's records.

(b) The Named Insured in a Policy that is a group insurance policy
shall be the Person or Persons specified as Named Insureds.

(c) Except as otherwise set forth in this Article V, the identity of
the Named Insured of a Policy shall be determined without giving effect to
any interest of any other Person in such Policy.

(d) In any situation not expressly covered by the foregoing provisions
of this Section 5.2, the first Named Insured, as reflected on the records
of, and as determined in good faith by, the Company, shall conclusively be
presumed to be the Named Insured in such Policy for purposes of this
Section 5.2, provided such Named Insured is a Person, and the Company shall
not be required to examine or consider any other facts or circumstances.

(e) Any dispute as to the identity of the Named Insured in a Policy or
the right to vote or receive consideration shall be resolved by the Company
in accordance with the foregoing.

5.3. In Force. (a) A Policy shall be deemed to be in force ("In Force")
as of any date if, as shown on the Company's records, (1)(i) such Policy has
been issued and the status of such Policy has been changed from pending to in
force on the Company's records, or (ii) in the case of an individual Policy, the
Company's administrative office has received by such date in respect of such
Policy an application, complete on its face, together with payment of the full
initial premium (unless submission of such premium is precluded by the Company's
underwriting rules), provided that any Policy referred to in this clause (ii) is
issued as applied for and the status of such Policy has been changed from
pending to in force on the Company's records within 30 days of such date, and
(2) such Policy has not been surrendered, canceled or otherwise terminated;
provided that a Policy shall be deemed to be In Force after lapse for nonpayment
of premiums until expiration

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of any applicable grace period (or other similar period however designated in
such Policy) during which the Policy is in full force for its basic benefits.

(b) A Policy shall not be deemed to be In Force merely because, prior
to the date on which such Policy was issued, insurance coverage may have
been provided by a binder of coverage.

(c) A Policy shall not be deemed to be In Force as of any date if the
Policy is returned to the Company and all return premiums due have been
refunded within 60 days after such date.

ARTICLE VI: ALLOCATION OF CONSIDERATION TO DISTRIBUTEES

6.1. Allocation of Consideration. (a) The consideration to be given to
Distributees shall be shares of Holding Company Stock, or, as set forth in
Section 6.2(b), cash. Solely for purposes of calculating the amount of such
consideration, each Distributee will be allocated (but not issued) shares of
Holding Company Stock in accordance with this Article VI.

(b) Each Distributee shall be allocated a pro rata share of the
Holding Company Stock held by the Company after the purchase of the
Underwriter, in proportion to the percentage that direct premium earned by
the Company attributable to such Distributee, less return premiums, over
the three years prior to the Adoption Date bears to direct premium earned
by the Company attributable to all Distributees, less return premiums, over
the three years prior to the Adoption Date.

(c) The number of shares of Holding Company Stock calculated in
accordance with Section 6.1(b) in respect of each Distributee shall be the
sum of the number of shares of Holding Company Stock after rounding such
number to the nearest integral number of shares (with one-half being
rounded upward). Because of such rounding, the aggregate number of certain
Distributees' Holding Company Stock will not necessarily be precisely equal
to the such Distributee's pro rata proportion of direct premium earned by
such Distributee over the three years prior to the Adoption Date.

6.2. Payment of Consideration. (a) The Company shall be deemed to issue
to the Transfer Agent for the account of each Distributee a number of shares of
Holding Company Stock equal to the number of shares of Holding Company Stock
allocated to such Distributee, except that a Distributee shall not be issued
such shares of Holding Company Stock and shall instead be paid cash (in an
amount determined pursuant to subsection (b) of this Section 6.2) based on the
number of shares of Holding Company Stock allocated to such Distributee as
provided in this Article VI.

(b) A Distributee shall not be issued such shares of Holding Company
Stock and shall instead be paid cash based on the number of shares of
Holding Company Stock allocated to such Distributee as provided in this
Article VI if: (i) shares of Holding Company Stock are allocable to a
Distributee whose address for mailing purposes as shown on the records of
the Company is located outside the States of the United States of America
or is shown on the Company's records to be an address at which mail to such
Distributee is undeliverable, or (ii) such Distributee is allocated an
integral number of shares of Holding Company Stock that is less than or
equal to 99 (as each such number is subject to proportional adjustment as
provided in Section 8.3).

(c) If consideration is to be paid or credited to a Distributee in
cash, the amount of such consideration shall be equal to the number of
shares of Holding Company Stock allocable to such Distributee as provided
in this Article VI multiplied by the Conversion Value. Payment shall be
made by check, net of any applicable withholding tax, as soon as reasonably
practicable after the Effective Date.

(d) In the event that a Person who is a Distributee is the Named
Insured in more than one Policy, any calculation of consideration to be
allocated to such Distributee shall aggregate earned premium under all
Policies in which such Person is the Named Insured.

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ARTICLE VII: ACQUISITION OF THE UNDERWRITER

7.1. Stock Purchase Agreement. Pursuant to the terms of the Stock
Purchase Agreement, the Holding Company shall acquire on the Effective Date 100%
of the stock of the Underwriter in exchange for specified, negotiated
consideration consisting of shares of Holding Company Stock and cash in an
amount of $11.1 million.

7.2. Determination of Consideration for Stock of The Underwriter. The
consideration for the stock of the Underwriter was determined in negotiations
with The Medical Society of the State of New Jersey. Consideration to be paid to
The Medical Society of the State of New Jersey is set forth in a formula in the
Stock Purchase Agreement.

ARTICLE VIII: ADDITIONAL PROVISIONS

8.1. Assumption Certificates. Pursuant to the Assumption Reinsurance
Agreement between the Company and the Stock Insurer, on or after the Effective
Date, the Stock Insurer shall mail assumption certificates to all current
policyholders of the Company to transfer by assumption reinsurance the
obligations of the Company to the Stock Insurer.

8.2. Notices. If the Company complies substantially and in good faith
with the requirements of this Plan of Reorganization with respect to the giving
of any required notice to policyholders or Members, its failure in any case to
give such notice to any person or persons entitled thereto shall not impair the
validity of the actions and proceedings taken under this Plan of Reorganization
or entitle such person to any injunctive or other equitable relief with respect
thereto.

8.3. Adjustment of Share Numbers. Subject to the Commissioner's approval,
by vote of the Company's Board or a duly authorized committee thereof at any
time before the Effective Date, the Company may adjust the number of shares of
Holding Company Stock set forth in the definition of Allocable Shares. Upon such
an adjustment, the following numbers of shares of Holding Company Stock in the
Plan of Reorganization shall be adjusted proportionately; (a) the number of
shares set forth in the definition of Allocable Shares in Article I, and (b) the
number of shares of Holding Company Stock expected to be outstanding on the
Effective Date. The number of shares resulting from any such adjustment shall be
rounded up to the next higher whole share.

8.4. Authority to Remedy Errors. Subject to the terms of the Plan of
Reorganization and with, the prior approval of the Commissioner, at or after the
Effective Date, the Holding Company may issue additional shares of Holding
Company Stock and take any other action it deems appropriate to remedy errors or
miscalculations made in connection with this Plan of Reorganization.

8.5. Corrections. The Company may make such modifications as are
appropriate to correct errors, clarify existing items or make additions to
correct manifest omissions in this Plan of Reorganization. After the conclusion
of the Public Hearing, any such modification shall be made only with the prior
approval of the Commissioner.

8.6. Amendment of The Plan. Prior to the conclusion of the Public
Hearing, the Plan of Reorganization may be amended by the vote of at least
two-thirds of the members of the Board.

8.7. Extension of Time Periods. Any time periods for action by the
Commissioner set forth in this Plan may be extended with the consent of the
Company.

8.8. Abandonment of Plan. The Company may, by at least a two-thirds vote
of the Board and upon reasonable notice to the Commissioner, abandon the Plan of
Reorganization at any time before the issuance of the Certificate of Authority
by the Commissioner.

8.9. Costs and Expenses. All reasonable out-of-pocket costs of the
Commissioner related to the review of the Plan of Reorganization shall be paid
by the Company and/or the Holding Company.

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8.10. Addresses of Members. The mailing address of a Member as of any
date for purposes of this Plan of Reorganization shall be the Member's last
known address as shown on the records of the Company as of such date.

8.11. Governing Law. The terms of the Plan of Reorganization shall be
governed by and construed in accordance with the laws of the State of New
Jersey.

8.12. Confidentiality. All information relating to the Plan of
Reorganization, other than information which has become part of the record for
the Public Hearing, shall be given confidential treatment and shall not be made
public by the Commissioner or any other person without the prior written consent
of the Company unless the Commissioner, after giving the Company and its
affiliates who would be affected thereby notice and opportunity to be heard,
determines that the interests of policyholders or the public will be served by
the publication thereof, in which event the Commissioner may publish all or any
part thereof in such manner as the Commissioner may deem appropriate.

IN WITNESS WHEREOF, Medical Inter-Insurance Exchange, by authority of its
Board of Governors, has caused this Plan of Reorganization to be duly executed
this 15th day of October, 1997.

MEDICAL INTER-INSURANCE
EXCHANGE OF NEW JERSEY

By DANIEL GOLDBERG

--------------------------------------
Daniel Goldberg
President & Chief Executive Officer
New Jersey State Medical Underwriters,
Inc.
Attorney-in-Fact for
Medical Inter-Insurance Exchange of
New Jersey

Attest:
CATHERINE E. WILLIAMS
Catherine E. Williams
Assistant Corporate Secretary
New Jersey State Medical Underwriters, Inc.
Attorney-in-Fact for
Medical Inter-Insurance Exchange of New Jersey

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ANNEX B

STATE OF NEW JERSEY
DEPARTMENT OF BANKING AND INSURANCE

IN THE MATTER OF THE REORGANIZATION
OF THE MEDICAL INTER-INSURANCE
EXCHANGE

ORDER APPROVING
PLAN OF REORGANIZATION

This matter having been opened by the Commissioner of Banking and Insurance
("Commissioner"), State of New Jersey pursuant to the authority of N.J.S.A.
17:1-15e, 17:17-10, 17:50-1 et seq. and all powers expressed or implied therein;
and

IT APPEARING that the Medical Inter-Insurance Exchange ("MIIX") is a
reciprocal insurance exchange formed in 1977 pursuant to N.J.S.A. 17:50-1 et
seq. and is governed by a Board of Governors elected by its
members/policyholders; and

IT FURTHER APPEARING that MIIX was formed under the auspices of the Medical
Society of New Jersey ("Medical Society"), a physician trade association,
initially in order to create a medical malpractice insurer committed to service
the Medical Society's membership; and

IT FURTHER APPEARING that MIIX is managed by an attorney-in-fact, New
Jersey State Medical Underwriters, Inc. ("Medical Underwriters") which is wholly
owned by the Medical Society; and

IT FURTHER APPEARING that MIIX has matured into a significant insurer of
medical malpractice liability in New Jersey, with a significant share of the New
Jersey medical malpractice insurance market; and that in addition to New Jersey,
MIIX is licensed and conducts business in Connecticut, Pennsylvania, Delaware,
Maryland and Kentucky, and is also licensed to transact business in Michigan,
Vermont and West Virginia;

IT FURTHER APPEARING that on October 16, 1997, the MIIX Board of Governors
filed with the Department of Banking and Insurance ("Department") a plan of
reorganization by which MIIX would change its structure from a reciprocal
insurance exchange into a domestic stock insurer; and

IT FURTHER APPEARING that the stated purpose for the reorganization is to
provide MIIX with a corporate structure that will enable it to access capital
markets through its parent holding company, and thus provide a long-term source
of permanent capital to allow the company to grow and develop new business as
well as strengthen its ability to meet all of its commitments, thereby
permitting growth necessary for it to remain an effective, competitive,
financially secure insurer in the future; and

IT FURTHER APPEARING that the plan of reorganization consists of the
following:

1. Formation of the MIIX Group, Inc. ("MIIX Group"), which will be
the ultimate parent company of all of the MIIX companies upon the effective
date of the plan and will wholly own MIIX Insurance Company;

2. Formation of MIIX Insurance Company ("New MIIX"), to be a New
Jersey domiciled stock insurer and successor to MIIX;

3. The assumption of all existing MIIX business and liabilities by
New MIIX;

4. The allocation and distribution of MIIX Group's stock and cash by
which MIIX Group will acquire 100 percent of the stock of Medical
Underwriters from the Medical Society and all subsidiaries of Medical
Underwriters, and the distribution of MIIX Group's stock or equivalent cash
to current members of MIIX as defined in its rules and regulations
("members"), and former MIIX members who were insured at any time during
the three years prior to the plan adoption date ("look back insureds").

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The amount of stock will be based on MIIX direct premium on, less any
return premium (that is, net earned premium), attributable to each member
and look back insured over the three years prior to the plan adoption date.
Pursuant to the plan, cash will be distributed instead of stock to members
and look back insureds where the allocation would be less than 100 shares;
and

5. The dissolution of MIIX as a reciprocal exchange; and

IT FURTHER APPEARING that the Department reviewed the plan and related
documents and information, and provided notice of the proposed plan both by
publication in the December 1, 1997 issue of the New Jersey Register and by mail
to persons comprising the Department's mailing list for the Insurance Division;
and

IT FURTHER APPEARING that following the review of the plan by the
Department staff, the Department sought comments, views and relevant data from
interested parties and the public, and pursuant to N.J.S.A. 52:14B-4g, held a
hearing on December 22, 1997 to receive public comment from interested parties
regarding whether the proposed plan should be approved; and

IT FURTHER APPEARING that the Department accepted written comments until
December 31, 1997 from interested parties regarding the proposed plan as well as
any additional documentation or responses from comments from MIIX; and

IT FURTHER APPEARING that the Department received two timely written
comments from MIIX member insureds on the proposed plan; and

IT FURTHER APPEARING that the Hearing Officer for the hearing filed a
report dated March 3, 1998 that recommended that the proposed plan of
reorganization as filed by MIIX on October 16, 1997 be approved, subject to the
conditions of approval by the MIIX membership in accordance with its rules of
governance and the formation of New MIIX in accordance with applicable law; and

IT FURTHER APPEARING that upon review of the Hearing Officer's Report and
the recommendations set forth therein, and for the reasons set forth therein, I
find that it is appropriate to approve the proposed plan of reorganization
subject to the conditions set forth in the Hearing Officer's Report dated March
3, 1998.

THEREFORE, IT IS ON this 5th day of March, 1998,

ORDERED that the proposed plan of reorganization as filed by MIIX on
October 16, 1997 is approved, subject to the conditions of authorization and
approval by the MIIX membership in accordance with its rules of governance, and
the formation of New MIIX in accordance with applicable law.

/s/ ELIZABETH RANDALL
--------------------------------------
Elizabeth Randall
Commissioner

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Annex C

[SALOMON SMITH BARNEY LETTERHEAD]

February , 1999

Board of Governors
Medical Inter-Insurance Exchange of New Jersey
Two Princess Road
Lawrenceville, New Jersey 08648

Ladies and Gentlemen:

You have requested our opinion as investment bankers as to the fairness,
from a financial point of view, (i) to the Distributees (as defined below) of
Medical Inter-Insurance Exchange of New Jersey (the "Company"), as a group, of
the consideration to be received by the Distributees upon the exchange by
Members (as defined below) of Membership Interests (as defined below) and the
distribution to Look-Back Insureds (as defined below) in the reorganization (the
"Reorganization") of the Company from a reciprocal insurer into a domestic stock
insurer pursuant to the Plan of Reorganization of the Company (the "Plan") and
(ii) to the Company of the consideration to be paid by the Holding Company (as
defined below) in the NJSMU Acquisition (as defined below). As used herein, the
"Distributees" shall mean the Members and the Look-Back Insureds; "Members"
shall mean persons who are named insureds in one or more policies that are in
force on the date of adoption of the Plan (the "Adoption Date"); "Membership
Interests" shall mean all rights or interests of Members of the Company arising
under the Rules and Regulations of the Company or otherwise by law at the
effective date of the Reorganization (the "Effective Date"); and "Look-Back
Insureds" shall mean natural persons, other than Members, who were named
insureds in one or more policies that were in force at any time during the
three-year period prior to the Adoption Date.

As more fully set forth in the Plan, in the Reorganization: (i) all of the
assets of the Company, other than consideration to be received by the
Distributees, will be transferred to MIIX Insurance Company (the "Stock
Insurer"), a newly organized New Jersey domestic stock insurer and a wholly
owned subsidiary of The MIIX Group, Incorporated (the "Holding Company"), a
Delaware stock holding company, and all of the Company's insurance and
non-insurance liabilities shall be assumed by the Stock Insurer pursuant to an
Assumption Reinsurance and Administration Agreement and an Assignment and
Assumption Agreement, each among the Company, the Holding Company and the Stock
Insurer (collectively, the "Assignment Agreements"); (ii) Distributees shall
become entitled to receive shares of common stock, par value $.01 per share, of
the Holding Company ("Holding Company Stock") and cash, with each Distributee
entitled to receive a pro rata portion of the shares of Holding Company Stock
allocated for distribution, based upon the percentage that direct premiums
earned by the Company attributable to such Distributee, less return premiums,
over the three years prior to the Adoption Date bears to direct premiums earned
by the Company attributable to all Distributees, less return premiums, over such
period, rounded to the nearest integral number of shares, with cash being paid
in lieu of shares to Distributees who would receive fewer than 100 shares of
Holding Company Stock and to certain other Distributees; (iii) all Membership
Interests will be extinguished; and (iv) the Company will be dissolved.

In addition, as more fully set forth in the Plan, on the Effective Date,
the Holding Company will acquire (the "NJSMU Acquisition") 100% of the stock of
New Jersey State Medical Underwriters, Inc. and its

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subsidiaries ("NJSMU"), a New Jersey corporation and a wholly owned subsidiary
of Medical Society of New Jersey ("Medical Society"), in exchange for shares of
Holding Company Stock with a market value equal to $11,000,000, determined as
set forth in the Stock Purchase Agreement dated as of October 15, 1997 between
the Holding Company and Medical Society as amended as of September 20, 1998 and
as of December 21, 1998 (the "Purchase Agreement"), and cash in the amount of
$100,000, pursuant to the Purchase Agreement. The Plan also contemplates that,
at the discretion of the board of directors of the Holding Company, Holding
Company Stock may be offered to the public in an initial public offering (the
"Initial Public Offering"). We understand that subsequent to approval of the
Plan by the Board of Governors of the Company, the Holding Company decided that
it may conduct the Initial Public Offering if market conditions are favorable.

In connection with rendering our opinion we have reviewed and analyzed,
among other things, the following: (i) a copy of the Plan as filed with the New
Jersey Department of Banking and Insurance on October 16, 1997; (ii) drafts
dated July 15, 1998 of the Assignment Agreements; (iii) a copy of the Purchase
Agreement; (iv) the statutory annual statements provided by the Company for the
years 1993 through 1997; (v) certain GAAP financial data provided by the
Company, including the income statement and balance sheet of each of the Company
and NJSMU for the years 1993 through 1997 and the nine month period ending
September 30, 1998; (vi) certain other internal information, primarily financial
in nature, including projections, concerning the business and operations of the
Company and NJSMU furnished to us by the Company for purposes of our analysis;
(vii) certain publicly available information with respect to certain other
companies that we believe to be comparable to the Company and the trading
markets for certain of such other companies' securities; and (viii) certain
publicly available information concerning the nature and terms of certain other
transactions that we consider relevant to our inquiry. We have also considered
such other information, financial studies, analyses, investigations and
financial, economic and market criteria that we deemed relevant. We have also
discussed the foregoing, as well as other matters we believe relevant to our
inquiry, with the management of the Company and NJSMU.

In our review and analysis and in arriving at our opinion, we have assumed
and relied upon the accuracy and completeness of all of the financial and other
information provided us or publicly available and have neither attempted
independently to verify nor assumed responsibility for verifying any of such
information and have further relied upon the assurances of management of the
Company that they are not aware of any facts that would make any of such
information inaccurate or misleading. We have not conducted a physical
inspection of any of the properties or facilities of the Company or NJSMU, nor
have we made or obtained or assumed any responsibility for making or obtaining
any independent evaluations or appraisals of any such properties or facilities.
With respect to projections, we have, upon the advice and consent of management
of the Company, assumed that such projections have been reasonably prepared on
the bases reflecting the best currently available estimates and judgments of the
management of the Company as to the future financial performance of the Company
and NJSMU and we express no view with respect to such projections or the
assumptions on which they were based. We have assumed that neither the Plan nor
the Purchase Agreement will, after the date hereof, be amended to contain any
terms or conditions that differ materially from the terms and conditions
contained in the executed copies of such documents we have reviewed, the
Assignment Agreements, when executed, will not contain any terms or conditions
that differ materially from the terms and conditions contained in the drafts of
such documents we have reviewed, the conditions precedent to the Reorganization
contained in the Plan and to the NJSMU Acquisition contained in the Purchase
Agreement will be satisfied, without any waiver thereof, and the Reorganization
and the NJSMU Acquisition will be consummated in accordance with the terms of
the Plan and the Purchase Agreement.

Furthermore, you have directed us to assume and we have assumed that: (i)
the Reorganization will meet all applicable legal and regulatory requirements
and that all necessary action will have been taken to comply with all applicable
laws and requirements, including the receipt of all required approvals by
policyholders, regulators and otherwise; (ii) the Reorganization will qualify as
a tax-free reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986; (iii) any credit facility entered into by the Company or
the Holding Company and any borrowings thereunder will not have a material
adverse impact on the Company's business operations or performance or ratings by
A.M. Best Company, Inc. ("A.M. Best");

C-2
<PAGE> 142

(iv) the terms of the Initial Public Offering (which have not yet been
determined) will not affect the legal or tax treatment of the Plan or the
Reorganization and (v) the Initial Public Offering, which, if consummated, may
close simultaneously with the Reorganization, is a separate and distinct
transaction from the Reorganization. We have been advised as to certain legal
matters by counsel to the Company and as to certain tax matters by the Company's
tax advisor and, with respect to such matters, we have relied upon such counsel
and tax advisor.

In conducting our analysis and arriving at our opinion as expressed herein,
we have considered such financial and other factors as we have deemed
appropriate under the circumstances including, among others, the following: (i)
the historical and current financial position and results of operations of the
Company and NJSMU; (ii) the business prospects of the Company and NJSMU; (iii)
the historical relationship between the Company and NJSMU; (iv) the historical
and current market for the equity securities of certain other companies that we
believe to be comparable to the Company, the Holding Company or NJSMU; (v) the
nature and terms of certain other transactions that we believe to be relevant;
(vi) the fact that the Company has advised us that growth is extremely important
to remain an effective and competitive insurer in the future; (vii) the fact
that the Company had advised us that it is of significant strategic importance
that the Company have broader access to external capital to finance this growth;
(viii) the Company's A (Excellent) rating by A.M. Best and the considerations on
which such rating is based; (ix) the fact that, in its present form as a
reciprocal insurer, the Company has limited access to capital markets for new
capital; (x) the fact that, following the Reorganization, the Company would have
a capital structure potentially enabling it to access the capital markets for
new capital; and (xi) the illiquidity of Membership Interests. We have also
taken into account our assessment of general economic, market and financial
conditions as well as our experience in connection with similar transactions and
securities valuation generally. Our opinion necessarily is based upon conditions
as they exist and can be evaluated on the date hereof and we assume no
responsibility to update or revise our opinion based upon circumstances or
events occurring after the date hereof. Our opinion is, in any event, limited to
the fairness, from a financial point of view, to the Distributees, as a group,
of the consideration to be received by the Distributees in the Reorganization
pursuant to the Plan, does not address the Company's underlying business
decision to effect the Reorganization or the Initial Public Offering, and does
not constitute a recommendation to any Member as to how such Member should vote
with respect to the Plan or a recommendation to the Company or the Holding
Company of whether to conduct the Initial Public Offering.

You have not asked for our opinion and we do not express any opinion as to:
(i) which of the Company's policyholders are to be included among the
Distributees; (ii) the fairness of the proposed consideration to be paid to any
Distributee, individually, or to any class of Distributees in connection with
the Reorganization, including any provisions of the Plan relating to which
Distributees receive Holding Company Stock, the allocation of such Holding
Company Stock among Distributees and any other provisions of the Plan that
distinguish among Distributees; and (iii) the Initial Public Offering, including
the effect thereof, or of any decision not to proceed with the Initial Public
Offering, on the Reorganization, the price at which Holding Company Stock may be
sold in the Initial Public Offering (the "IPO Price"), the fair market value of
any shares of Holding Company Stock to be issued pursuant to the Plan or the
price at which the Holding Company Stock issued in connection with the Plan or
pursuant to the Initial Public Offering will trade. We note that the IPO Price
will be a function of market conditions and the recent performance of and
outlook for the Company at that time. We believe that trading in the Holding
Company Stock for a period following the completion of a distribution of the
Holding Company Stock, including the Initial Public Offering, would be
characterized by a redistribution of the Holding Company Stock among
Distributees that were issued shares of Holding Company Stock and other
investors. It is possible that during these periods of redistribution the
Holding Company Stock may trade at prices below the prices at which it would
trade on a fully distributed basis.

As you are aware, Salomon Smith Barney Inc., the successor to Salomon
Brothers Inc and Smith Barney Inc., has acted as financial advisor to the
Company in connection with the Reorganization and has received a fee in
connection with those services. Additionally, we or our affiliates have
previously rendered certain investment banking and financial advisory services
to the Company, for which we or such affiliates have

C-3
<PAGE> 143

received, or will receive, customary compensation. Salomon Smith Barney Inc. and
its affiliates (including Citigroup Inc. and The Robinson-Humphrey Company, LLC)
may have other business relationships with the Company, NJSMU and the Medical
Society.

This opinion is intended solely for the benefit and use of the Board of
Governors of the Company in considering the transaction to which it relates and
may not be used for any other purpose or reproduced, disseminated, quoted or
referred to at any time, in any manner or for any purpose, without the prior
written consent of Salomon Smith Barney Inc., except that this opinion may be
reproduced in full in, and references to the opinion and to Salomon Smith Barney
Inc. and its relationship with the Company (in each case in such form as Salomon
Smith Barney Inc. shall approve) may be included in, the prospectus dated
, 1999 the Company distributes to the Members and a copy of this
opinion may be provided to the Commissioner of Banking and Insurance of the
State of New Jersey.

Based upon and subject to the foregoing, we are of the opinion as
investment bankers that, as of the date hereof, (i) the consideration to be
received by Distributees, as a group, in the Reorganization pursuant to the Plan
is fair, from a financial point of view, to the Distributees, as a group, and
(ii) the consideration to be paid by the Holding Company in the NJSMU
Acquisition is fair, from a financial point of view, to the Company.

Very truly yours,

C-4
<PAGE> 144

med inter logo
<PAGE> 145

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

<TABLE>
<S> <C>
SEC Registration Fee........................................ $ 95,875
NYSE Filing Fee............................................. 136,860
Blue Sky Fees and Expenses.................................. 0
Legal Fees and Expenses..................................... 1,303,000
Accounting Fees and Expenses................................ 615,000
Registrar and Transfer Agent Fees........................... 80,000
Printing and Engraving Expenses............................. 325,000
Miscellaneous............................................... 126,000
----------
Total............................................. $2,681,735
==========
</TABLE>

- ---------------
Each amount set forth above, except the SEC registration fee and NYSE
filing fee, is estimated.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Delaware General Corporation Law (the "DGCL") permits a Delaware
corporation to include in its charter and bylaws certain provisions to eliminate
the personal liability of directors for monetary damages and to indemnify its
directors and officers. The MIIX Group By-laws (the "By-laws") provide that
subject to certain exceptions in the case of actions by or in the right of The
MIIX Group, The MIIX Group shall indemnify its directors and officers, and may
indemnify its agents and employees, against judgments, fines and amounts paid in
settlement actually and reasonably incurred by him or her, incurred by reason of
the fact that such person was serving as a director, officer, employee or agent
of The MIIX Group, so long as such person acted and in a manner reasonably
believed to be in or not opposed to the best interest of The MIIX Group, and,
with respect to any criminal action, so long as the indemnified party had no
reason to believe that his or her conduct was unlawful. The MIIX Group's
Certificate of Incorporation provides that directors shall not be liable to The
MIIX Group or The MIIX Group's stockholders for monetary damages for breach of
his or her fiduciary duty as a director, except that liability may not be
eliminated (i) for any breach of such person's duty of loyalty, (ii) for acts or
omissions not in good faith or involving intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the DGCL or (iv) for any
transaction in which such person received an improper personal benefit. Section
145(a) of the DGCL provides that a corporation may indemnify a director,
officer, employee, or agent if such person acted in good faith and in a manner
reasonably believed to be in, or not opposed to, the best interests of the
corporation and, with respect to any criminal proceeding, had no reasonable
cause to believe the conduct was unlawful. In addition, effective upon
consummation of the Reorganization, The MIIX Group will enter into
indemnification agreements with each of its directors and certain of its
executive officers that generally provide for similar indemnification. Insofar
as indemnification for liabilities arising under the Securities Act of 1933 may
be permitted to directors, officers or persons controlling the registrant
pursuant to the foregoing provisions, the Registrant has been informed that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is therefore unenforceable.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

The MIIX Group was incorporated under the laws of the State of Delaware on
October 14, 1997. On October 15, 1997, The MIIX Group issued 10 shares of its
Common Stock, par value $.01 per share, to the Medical Inter-Insurance Exchange
of New Jersey for an aggregate purchase price of $10. Such issuance was exempt
from registration under the Securities Act of 1933, as amended, pursuant to
Section 4(2) thereof, because such issuance did not involve any public offering
of securities.

II-1
<PAGE> 146

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Exhibits

The following exhibits are filed herewith unless otherwise indicated:

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
2.1 Plan of Reorganization of Medical Inter-Insurance
Exchange.(2)
2.2 Stock Purchase Agreement between The Medical Society of New
Jersey and the MIIX Group, Incorporated (incorporated by
reference to Exhibit 2.1).
2.3 Amendment No. 1 to Stock Purchase Agreement between The
Medical Society of New Jersey and the MIIX Group,
Incorporated, dated as of September 20, 1998.
2.4 Amendment No. 2 to Stock Purchase Agreement between The
Medical Society of New Jersey and The MIIX Group,
Incorporated, dated as of December 21, 1998.
2.5 Resolution of the Medical Inter-Insurance Exchange of New
Jersey Board of Governors amending the Plan of
Reorganization.
3.1 Restated Certificate of Incorporation of the MIIX Group,
Incorporated.(2)
3.2 Bylaws of The MIIX Group, Incorporated.(2)
5.1 Opinion of Dechert Price & Rhoads.
8.1 Tax Opinion of PricewaterhouseCoopers LLP.(2)
10.1 Lease Between the Medical Society of New Jersey and New
Jersey State Medical Underwriters, Inc. dated June 29,
1981.(2)
10.2 Extension of Lease between the Medical Society of New Jersey
and New Jersey State Medical Underwriters, dated June 26,
1998.(2)
10.3 Lease Between Princeton Pike Corporate Center Associates IV
and Physician Healthcare Plan of New Jersey Inc. dated May
24, 1991 and assigned to New Jersey State Medical
Underwriters, Inc. on February 11, 1997.(2)
10.4 Specific Excess Reinsurance Contract, effective January 1,
1997, among Medical Inter-Insurance Exchange of New Jersey
and Swiss Reinsurance Company; Hannover Ruckversicherungs;
Underwriters Reinsurance Company; Kemper Reinsurance
Company; and London Life and Casualty Reinsurance
Corporation.(2)
10.5 Specific Excess Reinsurance Contract, effective January 1,
1997, between Medical Inter-Insurance Exchange of New Jersey
and American Re-Insurance Company.(2)
10.6 Combined Quota Share, Aggregate and Specific Excess of Loss
Reinsurance Treaty, effective November 1, 1996, among
Medical Inter-Insurance Exchange of New Jersey and Hannover
Reinsurance (Ireland) Ltd.,; E&S Reinsurance (Ireland) Ltd.;
Underwriters Reinsurance Company (Barbados) Inc.; London
Life and Reinsurance Corporation; and Lawrenceville Re,
Ltd.(2)
10.7 Specific Excess Reinsurance Contract, effective January 1,
1996 and terminated December 31, 1996, among Medical
Inter-Insurance Exchange of New Jersey and Swiss Reinsurance
Company; Hannover Ruckversicherungs; Underwriters
Reinsurance Company; American Re-Insurance Company; Kemper
Reinsurance Company; and London Life and Casualty
Reinsurance Corporation.(2)
10.8 Combined Aggregate and Casualty Catastrophe Excess of Loss
Reinsurance Treaty, effective January 1, 1996 among Medical
Inter-Insurance Exchange of New Jersey and Hannover
Reinsurance (Ireland) Ltd.; Eisen und Stahl Reinsurance
(Ireland) Ltd.; London Life and Casualty Reinsurance
Corporation; and Scandinavian Reinsurance Company, Ltd.; and
Lawrenceville Re, Ltd.(2)
</TABLE>

II-2
<PAGE> 147

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
10.9 Specific Excess Reinsurance Contract, effective January 1,
1995 and terminated December 31, 1995 among Medical
Inter-Insurance Exchange of New Jersey and Swiss Reinsurance
Company; Hannover Ruckversicherungs; Underwriters
Reinsurance Company; and PMA Reinsurance Corporation.(2)
10.10 Combined Aggregate and Casualty Catastrophe Excess of Loss
Reinsurance Treaty, effective January 1, 1995 among Medical
Inter-Insurance Exchange of New Jersey and Hanover
Reinsurance (Ireland) Ltd.; Eisen und Stahl Reinsurance
(Ireland) Ltd.; London Life and Casualty Reinsurance
Corporation; and Scandinavian Reinsurance Company Ltd.(2)
10.11 Combined Aggregate and Casualty Catastrophe Excess of Loss
Reinsurance Treaty, effective January 1, 1994 among Medical
Inter-Insurance Exchange of New Jersey and Scandinavian
Reinsurance Company Ltd.; Hannover Reinsurance (Ireland)
Ltd.; and Eisen und Stahl Reinsurance (Ireland) Ltd.(2)
10.12 Combined Aggregate and Casualty Catastrophe Excess of Loss
Reinsurance Treaty, effective January 1, 1993 among Medical
Inter-Insurance Exchange of New Jersey and Scandinavian
Reinsurance Company Ltd.; Hannover Reinsurance (Ireland)
Ltd.; and Eisen und Stahl Reinsurance (Ireland) Ltd.(2)
10.13 Combined Aggregate and Casualty Catastrophe Excess of Loss
Reinsurance Treaty, effective December 15, 1992 among
Medical Inter-Insurance Exchange of New Jersey and Hannover
Reinsurance (Ireland) Ltd.; and Eisen und Stahl Reinsurance
(Ireland) Ltd.(2)
10.14 1998 Long Term Incentive Equity Plan of The MIIX Group,
Incorporated.(2)
10.15 Employment Agreement among The MIIX Group, Incorporated, New
Jersey State Medical Underwriters, Inc. and Daniel
Goldberg.(2)
10.16 Employment Agreement among The MIIX Group, Incorporated, New
Jersey State Medical Underwriters, Inc. and Kenneth
Koreyva.(2)
10.17 Employment Agreement among The MIIX Group, Incorporated, New
Jersey State Medical Underwriters, Inc. and Joseph
Hudson.(2)
10.18 Employment Agreement between New Jersey State Medical
Underwriters, Inc. and Lisa Kramer.(2)
10.19 Employment Agreement between New Jersey State Medical
Underwriters, Inc. and Ronald Wade.(2)
10.20 Form of Stock Purchase and Loan Agreement between The MIIX
Group, Incorporated and Daniel Goldberg.(2)
10.21 Form of Stock Purchase and Loan Agreement between The MIIX
Group, Incorporated and Kenneth Koreyva.(2)
10.22 Form of Stock Purchase and Loan Agreement between The MIIX
Group, Incorporated and Joseph Hudson.(2)
10.23 Restricted Split-Dollar Life Insurance Agreement between
Daniel Goldberg and Medical Underwriters, Inc. dated
September 12, 1996.(2)
10.24 Split-Dollar Life Insurance Agreement dated November 3, 1995
between Daniel Goldberg and Medical Underwriters, Inc.(2)
10.25 Split-Dollar Life Insurance Agreement dated June 8, 1995
between Medical Underwriters, Inc. and Joseph Hudson.(2)
10.26 Split-Dollar Life Insurance Agreement dated December 27,
1991 between Medical Inter-Insurance Exchange, Inc. and
Kenneth Koreyva.(2)
10.27 Split-Dollar Life Insurance Agreement dated December 27,
1991 between Medical Underwriters, Inc. and Lisa Kramer.(2)
</TABLE>

II-3
<PAGE> 148

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
15.1 Letter of Independent Auditor regarding Unaudited Interim
Financial Information.
21.1 Subsidiaries of The MIIX Group, Incorporated.(2)
23.1 Consent of Dechert Price & Rhoads (included in Exhibit 5.1).
23.2 Consent of Ernst & Young LLP.
23.3 Consent of PricewaterhouseCoopers LLP (included in Exhibit
8.1).(2)
24.1 Powers of Attorney.(2)
27.1 Financial Data Schedules.
99.1 Consent of Salomon Smith Barney Inc.
99.2 Form of Proxy Cards.
99.3 Form of Share Allocation Cards.(2)
99.4 Miscellaneous communications materials.(2)
</TABLE>

- ---------------
(1) To be filed by amendment.

(2) Previously filed.

(b) Financial Statement Schedules:

The required schedules as identified on the Index to Consolidated Financial
Statements on page F-1 of the Prospectus forming part of this Registration
Statement and are incorporated herein by reference. All other schedules for
which provision is made in the applicable accounting regulation of the
Securities and Exchange Commission are not required under the related
instructions or are inapplicable and therefore have been omitted.

ITEM 17. UNDERTAKINGS.

(a) The undersigned registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:

(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;

(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement.

(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.

(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.

(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.

II-4
<PAGE> 149

(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

II-5
<PAGE> 150

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Lawrenceville and State of New Jersey on January 29, 1999.

By: /s/ DANIEL GOLDBERG

------------------------------------
Daniel Goldberg
President and Chief Executive
Officer

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <S> <C>

/s/ DANIEL GOLDBERG President, Chief Executive Officer January 29, 1999
- ------------------------------------------------ and Director (principal executive
Daniel Goldberg officer)

/s/ KENNETH KOREYVA Executive Vice President and Chief January 29, 1999
- ------------------------------------------------ Financial Officer (principal
Kenneth Koreyva financial accounting officer)

* Director January 29, 1999
- ------------------------------------------------
Angelo S. Agro, M.D.

* Director January 29, 1999
- ------------------------------------------------
Hillel M. Ben-Asher, M.D.

* Director January 29, 1999
- ------------------------------------------------
Harry M. Carnes, M.D.

* Director January 29, 1999
- ------------------------------------------------
Palma E. Formica, M.D.

* Director January 29, 1999
- ------------------------------------------------
John S. Garra, M.D.

* Director January 29, 1999
- ------------------------------------------------
Paul Hirsch, M.D.

* Director January 29, 1999
- ------------------------------------------------
Louis L. Keeler, M.D.

* Director January 29, 1999
- ------------------------------------------------
Henry R. Liss, M.D.

* Director January 29, 1999
- ------------------------------------------------
Arganey Lucas, Jr., M.D.

* Director January 29, 1999
- ------------------------------------------------
S. Stuart Mally, M.D.
</TABLE>

II-6
<PAGE> 151

<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <S> <C>
* Director January 29, 1999
- ------------------------------------------------
Vincent A. Maressa, Esq.

* Director January 29, 1999
- ------------------------------------------------
Murray N. Matez, D.O.

* Director January 29, 1999
- ------------------------------------------------
Robert S. Maurer, D.O.

* Director January 29, 1999
- ------------------------------------------------
A. Richard Miskoff, D.O.

* Director January 29, 1999
- ------------------------------------------------
Charles J. Moloney, M.D.

* Director January 29, 1999
- ------------------------------------------------
Eileen Marie Moynihan, M.D.

* Director January 29, 1999
- ------------------------------------------------
John J. Pastore, M.D.

* Director January 29, 1999
- ------------------------------------------------
Pascal A. Pironti, M.D.

* Director January 29, 1999
- ------------------------------------------------
Joseph A. Riggs, M.D.

* Director January 29, 1999
- ------------------------------------------------
Bernard Robins, M.D.

* Director January 29, 1999
- ------------------------------------------------
Herman M. Robinson, M.D.

* Director January 29, 1999
- ------------------------------------------------
Gabriel F. Sciallis, M.D.

* Director January 29, 1999
- ------------------------------------------------
Martin L. Sorger, M.D.

* Director January 29, 1999
- ------------------------------------------------
Bessie M. Sullivan, M.D.

* Director January 29, 1999
- ------------------------------------------------
Harvey P. Yeager, M.D.

*By: /s/ DANIEL GOLDBERG
-------------------------------------------
Daniel Goldberg
Attorney-in-Fact
</TABLE>

II-7

<PAGE> 1
EXHIBIT 2.3

AMENDMENT NO. 1 TO STOCK PURCHASE AGREEMENT

Amendment No. 1 to Stock Purchase Agreement, dated as of September 20,
1998, between The Medical Society of New Jersey, a New Jersey not-for-profit
corporation (the "Medical Society") and The MIIX Group, Incorporated, a Delaware
corporation ("MIIX Holding").

WHEREAS, MIIX Holding and the Medical Society are parties to a Stock
Purchase Agreement dated as of October 15, 1997 (the "Stock Purchase
Agreement"); and

WHEREAS, MIIX Holding and the Medical Society wish to amend the Stock
Purchase Agreement in order to facilitate the MIIX Plan of Reorganization and
the consummation of the transactions contemplated thereby;

NOW, THEREFORE, MIIX Holding and the Medical Society agree as follows:

1. Amendment to Section 1.3 of Stock Purchase Agreement. Section 1.3 of
the Stock Purchase Agreement is hereby deleted in its entirety, and the
following is inserted in its place:

1.3 Closing. The closing of the sale and purchase of the Company
Shares (the "Closing") shall take place at 10:00 a.m. on the Effective
Date (as defined in the MIIX Plan of Reorganization) of the MIIX Plan of
Reorganization (the "Closing Date") at such place as the parties may
agree. At the Closing:

(a) the Medical Society will deliver to MIIX Holding, free and
clear of any Liens, one or more certificates representing all of the
Company Shares, duly endorsed in blank or accompanied by stock
powers or other instruments of transfer duly executed in blank, and
bearing or accompanied by all requisite stock transfer stamps; and

(b) MIIX Holding will deliver to the Medical Society $100,000
by wire transfer to an account to be designated by the Medical
Society at least five business days in advance of the Closing.

2. Addition of Section 1.4 to the Stock Purchase Agreement. The following
is inserted as Section 1.4 of the Stock Purchase Agreement:

1.4 Delivery of MIIX Holding Share Amount. If the MIIX Holding Share
Amount is determined in accordance with Section 1.2(a) hereof, then such
number of MIIX Holding Shares will be delivered to the Medical Society at
the Closing. If the MIIX Holding Share Amount is determined in accordance
with Section 1.2(b) hereof,
<PAGE> 2
then such number of MIIX Holding Shares will be delivered to the Medical
Society as soon as practicable after the fifteenth trading day of MIIX
Holding Shares.

3. Registered Public Offering. It is understood that the references to a
"registered public offering" in Section 1.2 of the Stock Purchase Agreement mean
an underwritten public offering and do not encompass the distribution of MIIX
Holding Shares to members of the Medical Inter-Insurance Exchange of New Jersey
pursuant to the MIIX Plan of Reorganization.

4. Defined Terms. Defined terms used herein without definition shall bear
the respective meanings ascribed thereto in the Stock Purchase Agreement.

5. No Other Amendment. Except as expressly amended hereby, the Stock
Purchase Agreement shall continue in full force and effect.

6. Counterparts. This Amendment No. 1 to Stock Purchase Agreement may be
executed in any number of counterparts, each of which shall be deemed an
original and all of which taken together shall constitute one and the same
instrument.

IN WITNESS WHEREOF, the parties have duly executed this Amendment No. 1 to
Stock Purchase Agreement as of the day first above written.

THE MEDICAL SOCIETY OF NEW JERSEY

By: /s/ Vincent A. Maressa
--------------------------------------------
Name: Vincent A. Maressa
Title: Executive Director

THE MIIX GROUP, INCORPORATED

By: /s/ Daniel Goldberg
--------------------------------------------
Name: Daniel Goldberg
Title: President and Chief Executive Officer

<PAGE> 1
EXHIBIT 2.4

AMENDMENT NO. 2 TO STOCK PURCHASE AGREEMENT

Amendment No. 2 to Stock Purchase Agreement, dated as of December 21,
1998, between The Medical Society of New Jersey, a New Jersey not-for-profit
corporation (the "Medical Society") and The MIIX Group, Incorporated, a Delaware
corporation ("MIIX Holding").

WHEREAS, MIIX Holding and the Medical Society are parties to a Stock
Purchase Agreement dated as of October 15, 1997, as amended (the "Stock Purchase
Agreement"); and

WHEREAS, MIIX Holding and the Medical Society wish to amend the Stock
Purchase Agreement in order to provide for a mutually acceptable method of
determining the MIIX Holding Share Amount;

NOW, THEREFORE, MIIX Holding and the Medical Society agree as follows:

1. Amendment to Section 1.2(b). Section 1.2(b) of the Stock Purchase
Agreement is hereby deleted in its entirety, and the following is inserted in
its place:

(b) If no registered public offering of MIIX Holding Shares shall
have occurred on or prior to the Closing Date, the number of MIIX Holding
Shares constituting the MIIX Holding Share Amount shall be determined
based upon the average trading price (based upon the mean of the daily
high and low share price) for the first sixty days of trading of MIIX
Holding Shares on any nationally recognized securities exchange, and the
MIIX Holding Share Amount shall be payable as soon as practicable after
the sixtieth trading day of MIIX Holding Shares.

2. Amendment to Section 1.4. Section 1.4 of the Stock Purchase Agreement
is hereby deleted in its entirety, and the following is inserted in its place:

1.4 Delivery of MIIX Holding Share Amount. If the MIIX Holding Share
Amount is determined in accordance with Section 1.2(a) hereof, then such
number of MIIX Holding Shares will be delivered to the Medical Society at
the Closing. If the MIIX Holding Share Amount is determined in accordance
with Section 1.2(b) hereof, then such number of MIIX Holding Shares will
be delivered to the Medical Society as soon as practicable after the
sixtieth trading day of MIIX Holding Shares.

3. Defined Terms. Defined terms used herein without definition shall bear
the respective meanings ascribed thereto in the Stock Purchase Agreement.

4. No Other Amendment. Except as expressly amended hereby, the Stock
Purchase Agreement shall continue in full force and effect.
<PAGE> 2
5. Counterparts. This Amendment No. 2 to Stock Purchase Agreement may be
executed in any number of counterparts, each of which shall be deemed an
original and all of which taken together shall constitute one and the same
instrument.

IN WITNESS WHEREOF, the parties have duly executed this Amendment No. 2 to
Stock Purchase Agreement as of the day first above written.

THE MEDICAL SOCIETY OF NEW JERSEY

By: /s/ Vincent A. Maressa
--------------------------------------------
Name: Vincent A. Maressa
Title: Executive Director

THE MIIX GROUP, INCORPORATED

By: /s/ Daniel Goldberg
--------------------------------------------
Name: Daniel Goldberg
Title: President and Chief Executive Officer

<PAGE> 1
Exhibit 2.5

FURTHER RESOLVED, that the last paragraph of Section 4.3 of the Plan of
Reorganization is deleted in its entirety and is replaced by the following:

The effective date of the Plan of Reorganization (the "Effective Date")
shall be the date on which the Certificate of Authority issued by the
Commissioner becomes effective; provided that in no event shall the
Effective Date be less than 30 days after the Final Order Date nor more
than 18 months after the Final Order Date, unless such period is extended
by the Commissioner. The Plan of Reorganization shall be deemed to have
become effective on the Effective Date at the time specified in the
Certificate of Authority (the "Effective Time").

<PAGE> 1

Exhibit 5.1

[LETTERHEAD OF DECHERT PRICE & RHOADS]

January 29, 1999

The MIIX Group, Incorporated
Two Princess Road
Lawrenceville, NJ 08648

Re: Form S-1 Registration Statement
Registration No. 333-59371

Gentlemen and Ladies:

We have acted as counsel to The MIIX Group Incorporated, a Delaware
corporation ("The MIIX Group"), in connection with the preparation and filing of
the Registration Statement on Form S-1 (Registration No. 333-59371), originally
filed on July 17, 1998 with the Securities and Exchange Commission under the
Securities Act of 1933, as amended (the "Securities Act"), and as subsequently
amended by amendments thereto, filed on September 2, 1998, October 2, 1998,
October 27, 1998, December 4, 1998, January 8, 1999 and an amendment to be filed
today (the "Registration Statement"), relating to the proposed issuance of up to
12,000,000 shares (the "Shares") of Common Stock, par value $.01 per share, of
The MIIX Group ("Common Stock") pursuant to the Plan of Reorganization of the
Medical Inter-Insurance Exchange of New Jersey and the transactions contemplated
thereby (the "Plan of Reorganization").

We have participated in the preparation of the Registration Statement and
have made such legal and factual examination and inquiry as we have deemed
advisable for the rendering of this opinion. In making our examination we have
assumed the genuineness of all signatures, the authenticity of all documents
submitted to us as originals and the conformity to all authentic original
documents of all documents submitted to us as copies.

<PAGE> 2
The MILX Group
January 29, 1999
Page 2

Based on the foregoing, it is our opinion that the Shares of Common Stock,
when issued in accordance with the terms of the Plan of Reorganization, will be
duly authorized, validly issued, fully paid and non-assessable.

The opinion expressed herein is rendered for your benefit in connection
with the transactions contemplated by the Plan of Reorganization. The opinion
expressed herein may not be used or relied on by any other person, nor may this
letter or any copies thereof be furnished to a third party, filed with a
government agency, quoted, cited or otherwise referred to without our prior
written consent, except as noted below.

We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name in the Prospectus contained
therein, under the caption "Legal Matters." In giving such consent we do not
thereby admit that we are in the category of persons whose consent is required
under Section 7 of the Securities Act.

Very truly yours,

/s/ Dechert Price & Rhoads

<PAGE> 1

Exhibit 15.1

Acknowledgement of Independent Auditors

Board of Governors
Medical Inter-Insurance Exchange

We are aware of the inclusion in Amendment #6 to the Registration Statement
(Form S-1 No. 333-59371) of the MIIX Group, Incorporated for the registration
of 12,000,000 shares of its common stock of our report dated November 23, 1998
relating to the unaudited consolidated interim financial statements of Medical
Inter-Insurance Exchange and subsidiaries as of and for the nine months ended
September 30, 1998.

/s/ Ernst & Young LLP
---------------------

New York, New York
January 28, 1999

<PAGE> 1
Exhibit 23.2

CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated March 25, 1998, in Amendment No. 6 to the Registration
Statement (Form S-1 No. 333-59371) and related Prospectus of The MIIX Group,
Incorporated for the registration of 12,000,000 shares of its common stock.

/s/ Ernst & Young LLP
---------------------

New York, New York
January 28, 1999

<ARTICLE> 7
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE AUDITED
AND UNAUDITED FINANCIAL STATEMENTS CONTAINED IN THE REGISTRATION STATEMENT ON
FORM S-1 OF WHICH THIS SCHEDULE FORMS A PART AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>

<S> <C> <C>
<PERIOD-TYPE> 12-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1998
<PERIOD-START> JAN-01-1997 JAN-01-1998
<PERIOD-END> DEC-31-1997 SEP-30-1998
<DEBT-HELD-FOR-SALE> 852,746 1,082,033
<DEBT-CARRYING-VALUE> 0 0
<DEBT-MARKET-VALUE> 0 0
<EQUITIES> 89,080 3,159
<MORTGAGE> 0 0
<REAL-ESTATE> 0 0
<TOTAL-INVEST> 1,026,971 1,194,560
<CASH> (380) 362
<RECOVER-REINSURE> 270,731 311,879
<DEFERRED-ACQUISITION> 100 4,359
<TOTAL-ASSETS> 1,441,302 1,648,484
<POLICY-LOSSES> 876,721 937,072
<UNEARNED-PREMIUMS> 20,886 77,577
<POLICY-OTHER> 0 0
<POLICY-HOLDER-FUNDS> 0 0
<NOTES-PAYABLE> 0 0
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 309,974 327,187
<TOTAL-LIABILITY-AND-EQUITY> 1,441,302 1,648,484
123,330 114,666
<INVESTMENT-INCOME> 53,892 47,623
<INVESTMENT-GAINS> 10,296 33,563
<OTHER-INCOME> 2,884 1,526
<BENEFITS> 120,496 113,050
<UNDERWRITING-AMORTIZATION> 0 0
<UNDERWRITING-OTHER> 25,415 27,738
<INCOME-PRETAX> 31,130 32,049
<INCOME-TAX> 2,006 8,621
<INCOME-CONTINUING> 29,124 23,428
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 29,124 23,428
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
<RESERVE-OPEN> 573,700 605,990
<PROVISION-CURRENT> 120,496 113,050
<PROVISION-PRIOR> 0 0
<PAYMENTS-CURRENT> 3,930 2,315
<PAYMENTS-PRIOR> 84,276 91,532
<RESERVE-CLOSE> 605,990 625,193
<CUMULATIVE-DEFICIENCY> 0 0

</TABLE>

<PAGE> 1
Exhibit 99.1

CONSENT OF SALOMON SMITH BARNEY INC.

Salomon Smith Barney Inc., successor to Salomon Brothers Inc and Smith Barney
Inc., hereby consents to the use of its name and each of its predecessors' name
and the description of its opinion, referred to under the heading "THE
REORGANIZATION-Opinion of Financial Advisor" in the Prospectus, dated January
29, 1999, contained in the Registration Statement on Form S-1 of The MIIX Group,
Incorporated. By giving such consent Salomon Smith Barney Inc. does not hereby
admit that (1) Salomon Smith Barney Inc. is, or either of its predecessors was,
an expert with respect to any part of such Registration Statement within the
meaning of the term "expert" as used in the Securities Act of 1933, as amended,
or the rules and regulations of the Securities and Exchange Commission
promulgated thereunder, or (2) Salomon Smith Barney Inc. comes, or either of its
predecessors came, within the category of persons whose consent is required
under the Securities Act of 1933, as amended, or the rules and regulations of
the Securities and Exchange Commission promulgated thereunder.

SALOMON SMITH BARNEY INC.

By: /s/ Mario Torsiello
--------------------------
Name: Mario Torsiello
Title: Managing Director

1/29/99
New York, New York

<PAGE> 1
Exhibit 99.2

[Form of Proxy Card--Obverse]

PROXY

[MIIX LOGO]

Medical Inter-Insurance Exchange of New Jersey (the "Exchange") Proxy solicited
by the Board of Governors for a Special Meeting of Members to be held at 10:00
a.m. EST, March 17, 1999 at the offices of New Jersey State Medical
Underwriters, Inc., Two Princess Road, Lawrenceville, New Jersey.

The undersigned, revoking all previous proxies, hereby appoints Angelo S. Agro,
M.D. and Palma E. Formica, M.D. and each of them proxies with full power of
substitution to represent the undersigned at the Special Meeting of Members of
the Exchange, be held on March 17, 1999 or at any adjournments thereof and
to vote, as directed below, all of which the undersigned would be entitled to
vote if personally present.

The Board of Governors recommends a vote "FOR" Item 1.

1. To approve the Plan of Reorganization dated October 15, 1997, pursuant to
which, among other things, the Exchange will be dissolved, the assets and
liabilities of the Exchange will be assumed by MIIX Insurance Company, a
wholly owned subsidiary of The MIIX Group, Incorporated, and certain current and
former Members of the Exchange will receive common stock of The MIIX Group,
Incorporated, or in certain cases, cash; and to approve an amendment to the
Rules and Regulations of the Exchange to permit the dissolution of the Exchange
in accordance with the Plan of Reorganization.

2. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting or at any adjournment thereof.

This proxy when properly executed will be voted in the manner directed herein by
the undersigned Member. If no decision is made, this proxy will be voted "FOR"
Item 1.

The undersigned acknowledges receipt of the Prospectus and the Notice of the
Special Meeting relating to the Plan of Reorganization.

/ / / /
FOR AGAINST

Please mark only one box

___________________________________________________
Name Policy Number

___________________________________________________
Address #1

___________________________________________________
Address #2

Please read the
___________________________________________________ important information
City State Zip on the back of this card

SIGN HERE
___________________________________________________

Signature Date

Please sign exactly as your name appears above. When signing as attorney,
executor, administrator, trustee or guardian, please give your title as such.

[Form of Proxy Card -- Reverse]

PROXY

[MIIX LOGO]

Please make any corrections to name and address on the back of your Taxpayer
Identification card, rather than on this card.

IT IS IMPORTANT THAT YOU RETURN THIS CARD IMMEDIATELY.

If Business Reply Envelope is lost, please return this card to:

MIIX
c/o First Chicago Trust Company of New York
P.O. Box xxxx
Edison, NJ 08838-3211

The Plan of Reorganization will have no impact on your current premiums or
policies. All policies will remain in force according to their current terms.

IF YOU HAVE ANY QUESTIONS, CALL THE MIIX CONVERSION INFORMATION CENTER AT (888)
359-8644.