EXHIBIT 10.15 REINSURANCE COVER NOTE

EX-10.15 10 l96558eexv10w15.txt EXHIBIT 10.15 REINSURANCE COVER NOTE Exhibit 10.15 [AM-RE BROKERS, INC. LOGO] A Member of Munich-American Global Services Group REINSURANCE COVER NOTE AUTO PHYSICAL DAMAGE QUOTA SHARE FOR SELECTED MEMBERS OF THE AMERICAN PREMIER UNDERWRITERS, INC. AND GREAT AMERICAN INSURANCE COMPANIES REINSURED: Leader Insurance Company Pool, consisting of TICO Insurance Company Leader Insurance Company Leader Preferred Insurance Company Leader Specialty Insurance Company Infinity Insurance Company Pool, consisting of Infinity Insurance Company Infinity Select Insurance Company Infinity National Windsor Insurance Company Pool, consisting of Windsor Insurance Company Regal Insurance Company American Deposit Insurance Company Coventry Insurance Company Atlanta Casualty Company Pool, consisting of Atlanta Casualty Company American Premier Insurance Company Atlanta Reserve Insurance Company Atlanta Specialty Insurance Company Hereinafter collectively referred to as "American Premier." Great American Alliance Insurance Company, Great American Assurance Company, Great American Contemporary Insurance Company, Great American Insurance Company, Great American Insurance Company of New York, Great American Security Insurance Company, Great American Spirit Insurance Company, Great Texas County Mutual Insurance Company Hereinafter collectively referred to as "Great American Insurance Companies") (American Premier together with the Great American Insurance Companies shall hereinafter be collectively referred to as the "Company") 685 College Road East, Princeton, NJ ###-###-#### Phone ###-###-#### Fax ###-###-####/41 Page 1 of 13 2003 Reinsurance Cover Note American Premier Underwriters, Inc. Automobile Physical Damage Quota Share - ---------- -------- ------ ----- ----- REINSURER: Inter-Ocean Reinsurance (Ireland) Limited - --------- Dublin, Ireland REINSURER 100% of a variable Quota Share cession by the Company to the SHARE: Reinsurer, subject to a minimum cession of 20% and a maximum - ----- cession of 90%, the basis for establishing the cession amount is set forth in the "Cover" Article hereinafter. The Company shall have the right to elect the cession percentage for each calendar quarter that this agreement is in effect, subject to the minimum and maximum cession percentages stated above, and shall inform the Reinsurer in writing of the elected cession percentage no less than three business days prior to the first calendar day of the calendar quarter for which the cession percentage election is being made. Notwithstanding anything to the contrary above, the cession percentage for the calendar quarter beginning January 1, 2003 shall be 90%. AGREEMENT 12:01 a.m. Eastern Standard Time, January 1, 2003 through PERIOD: December 31, 2003. - ------ COVER: Subject to all other terms and conditions set forth in this - ----- Agreement, the Company shall cede to the Reinsurer and the Reinsurer shall accept from the Company a variable quota share participation as set forth in the Reinsurer Share Article in respect of policies attaching during the Agreement Period (set forth hereinbefore) on business written and classified as Private Passenger Automobile Physical Damage (Collision and Other Than Collision). The quota share percentage cession will apply to each reinsured company and each line of business reinsured hereunder. COMPANY The Company shall retain net for its own account that RETENTION, portion of the Ultimate Net Loss not ceded to this SUBLIMITED Agreement, subject only to catastrophe reinsurance. LIABILITY OF REINSURER AND Additionally, the Reinsurer shall only be liable for its AGGREGATE quota share interest in the first $1,000,000 of Ultimate Net LIMIT OF Loss arising from per occurrence catastrophe losses subject REINSURER: to this Agreement, subject to an aggregate limit under this - --------- Agreement of $3,000,000. Further, the aggregate liability of the Reinsurer, subject to all terms and conditions of the Agreement, shall be unlimited, and the Reinsured and the Reinsurer shall have the right to cancel the Agreement on a cut-off basis at any time with sixty (60) days notice to the other party. Page 2 of 13 2003 Reinsurance Cover Note American Premier Underwriters, Inc. Automobile Physical Damage Quota Share TERRITORY: This Agreement shall apply where the Company's policies apply. REINSURANCE The Company shall pay to the Reinsurer the elected cession PREMIUM: percentage of the Company's SNWPI during each calendar month this Agreement is in effect. Payment of premiums due hereunder by the Company to the Reinsurer shall be effected as follows: The Company shall pay to the Reinsurer a non-refundable margin equaling 2.50% of the premium ceded hereunder, subject to a minimum margin of $3,800,000 which shall be payable upon execution of this Agreement. In the event that 2.50% of the premium ceded to this Agreement exceeds the minimum margin of $3,800,000, then the Company shall, on April 1, 2004, pay to the Reinsurer the difference between those amounts plus interest calculated at 7.0% as from the inception date of this Agreement. The Company shall retain, on a funds withheld basis, the remaining 97.50% of premiums ceded hereunder as provided for in the Funds Withheld Account Article herein. CEDING COMMISSION: Provisional commission 33.70%. Adjusted monthly in accordance with the following sliding scale:

*It is specifically understood and agreed that this adjustment will slide to actual acquisition expense (defined as Commission & Brokerage, Taxes Licenses & Fees, Other Acquisition, Field Supervision and Collection Expenses but excluding General Expenses), but for the purposes of calculations under this Agreement actual acquisition expense shall be deemed never to exceed 18.00%. Deficit/credit carry forward not applicable. Company to prepare underwriting-year basis calculations on a monthly basis within 30 days after the end of each month, with the first report due on or before May 1, 2004. Calculations to include IBNR as mutually agreed by the parties. Page 3 of 13 2003 Reinsurance Cover Note American Premier Underwriters, Inc. Automobile Physical Damage Quota Share CEDING COMMISSION: Cont'd Should the ceding commission calculated in accordance with the foregoing be less than the provisional ceding commission, then the ceding commission, including interest thereon, shall be adjusted monthly, with the first adjustment effective at March 31, 2004. Monthly interest shall be calculated at the same interest rate as set forth in the Funds Withheld Account Article. Each calculation shall be on a cumulative basis as from the inception date of this Agreement through the end of the calendar month for which computation is being made. FUNDS WITHHELD ACCOUNT: The Company shall maintain a Funds Withheld Account, the balance of which shall be calculated as follows: 1.) 97.50% of premiums ceded hereunder; less 2.) Ceding commissions due to the Company, including any adjustments thereto (as provided for in the "Ceding Commission" Article); less 3.) Ultimate Net Losses paid subject to this Agreement, plus 4.) Interest Premium cessions shall be credited to the Funds Withheld Account on a monthly basis as of the last day of each calendar month. Losses and the Provisional Ceding Commission shall be debited from the Funds Withheld Account as of the last day of each calendar month. Adjustments to the Ceding Commission (as provided for in the "Ceding Commission" Article) shall be made as of the last day of each calendar month. Interest shall be credited as of the last day of each calendar month, based on the average monthly balance, when the average monthly balance results in a positive amount. Monthly interest calculations shall be on a compound basis using a rate of 0.5654%. The Company shall provide the Reinsurer with a statement of the Funds Withheld Account Balance when submitting other reports required under this Agreement. Monthly calculation of the Funds Withheld Account shall continue until the Agreement is finalized or the Funds Withheld Balance is exhausted. Page 4 of 13 2003 Reinsurance Cover Note American Premier Underwriters, Inc. Automobile Physical Damage Quota Share PROFIT The Reinsurer shall maintain a notional Profit Sharing SHARING: Account for each agreement period, which shall be calculated in accordance with the following formula, it being understood that the Profit Sharing Account Balance shall never be less than zero (0): 1. Premiums earned for the agreement period; less 2. Reinsurer's non-refundable margin; less 3. Ceding commission allowed the Company on premiums earned for the agreement period; less 4. Loss and loss adjustment expense incurred for the agreement period; plus 5. Interest for the agreement period calculated in accordance with the Funds Withheld Account provision. Within ninety (90) days from the end of each agreement period, and monthly thereafter, Company shall calculate and report to the Reinsurer the Profit Sharing Account Balance until all losses subject hereto have been finally settled. Each such calculation shall be based on cumulative transactions hereunder from the beginning of the agreement period through the date of calculation. The Company may request that the Reinsurer release 100% of the Profit Sharing Account Balance to the Company at any time on or after March 31, 2004 provided that the Profit Sharing Account Balance is positive at the time of the request. Notwithstanding the above, the Company must request that the Reinsurer release 100% of the Profit Sharing Account Balance to the Company no later than December 31, 2004. Such release of the Profit Sharing Account Balance to the Company by the Reinsurer shall release both the Company and the Reinsurer from any and all future obligations and liabilities under this Agreement whether such obligations and liabilities were known by either party at the time of such release of the Profit Sharing Account Balance. REPORTS, Monthly reports within 30 days after the end of each REMITTANCES, calendar month. AND SETTLEMENTS: Balances due the Reinsurer to accompany the monthly reports. Balances due the Company to be remitted by the Reinsurer promptly upon the Reinsurer's receipt of the monthly report. Loss payments due to the Company shall first be debited from the Funds Withheld Account balance. In the event that the Funds Withheld Account is exhausted, loss payments due to the Company shall then be made directly by the Reinsurer to the Company. Page 5 of 13 2003 Reinsurance Cover Note American Premier Underwriters, Inc. Automobile Physical Damage Quota Share - -------------------------------------- ASSIGNMENT: Subject to the provisions of this Article, no party shall assign, transfer or dispose of its rights and obligations under this Agreement without the prior written consent of the other. Notwithstanding the forgoing, the Company shall have the right at any time to transfer and assign this Agreement to its successor Company, ("Infinity Property and Casualty Corporation"), in the event that the proposed sale by American Premier of its common shares to the public shareholders of Infinity Property and Casualty Corporation, as described in the Form S-1 filed with the Securities and Exchange Commission on January 15, 2003, is concluded. WARRANTY: - Warranted maximum value insured per vehicle $75,000 or so deemed. - Warranted that Company will advise the Reinsurer prospectively of any changes to its practices, procedures or policies regarding the use of OEM parts in the repair of vehicles as outlined in the "Material Damage Claims Handling Guidelines Manual" dated May 1, 2002, which has been forwarded to the Reinsurer. Reinsurer has the option to terminate this Agreement on a cut-off basis as of the earlier of the date when the Company's practices and procedures regarding the use of OEM parts in the repair of vehicles changed or the effective date of a change in the Company's policies regarding the use of OEM parts in the repair of vehicles as outlined in the "Material Damage Claims Handling Guidelines Manual" dated May 1, 2002. - Warranted that the Company's State Mix of Business for the Agreement period will not increase by more than five (5) percentage points per State from the Expected State Mix of Business Exhibit A, attached to and forming part of this Agreement. The Expected State Mix of Business is calculated as the Net Written Premium in each State divided by the Subject Net Written Premium. In the event that the Net Written Premium in any individual state increases by more than five (5) percentage points of the total Subject Net Written Premium during the Agreement Period, for purposes of calculations under this Agreement the Net Written Premium for that state will be adjusted to a maximum increase of five (5) percentage points of the Subject Net Written Premium, and the Reinsurer shall only be liable for its quota share percentage of the Ultimate Net Loss from that state, which shall be equal to the cession percentage multiplied by the Maximum State Mix, multiplied by the Subject Net Written Premium, divided by the actual unadjusted Net Written Premium for that state. CHANGES IN A. If at any time during the continuance of this Agreement any CONDITIONS: of the following events occur with respect to the Company: 1. the financial strength rating assigned by AM Best ("Best's") for the following entities is reduced below the financial strength ratings outlined as follows, and / or the financial strength rating assigned by Standard and Poors ("S&P") for the following entities is reduced below the financial strength ratings outlined as follows: Page 6 of 13 2003 Reinsurance Cover Note American Premier Underwriters, Inc. Automobile Physical Damage Quota Share CHANGES IN - Great American Insurance Company Pool Best's Rating: "A-" CONDITIONS: - Leader Insurance Company Pool Best's Rating: "B++" CONT'D - Infinity Insurance Company Pool Best's Rating: "B++" - Windsor Insurance Company Pool Best's Rating: "B++" - Atlanta Casualty Company Pool Best's Rating: "B++" - Great American Insurance Company Pool S&P Rating: "A-" - Leader Insurance Company Pool S&P Rating: "A-" - Infinity Insurance Company Pool S&P Rating: "A-" - Windsor Insurance Company Pool S&P Rating: "A-" - Atlanta Casualty Company Pool S&P Rating: "A-" 2. the Company or its Parent undergoes a Change of Control. "Change of Control" shall mean (i) a merger of the Company or its Parent with another entity or entities unless the Company or its Parent is the surviving corporation following such a merger, (ii) the acquisition of voting control (directly or indirectly) of the Company or its Parent by another entity or entities, or (iii) the entry by the Company or its Parent into a legally binding agreement (or the entry by any other person or entities into an agreement that would be legally binding on or in respect of the Company or its Parent or all or substantially all of the Company's or its Parent's properties or assets), which agreement shall be deemed legally binding for purposes hereof notwithstanding that it may be conditioned upon the occurrence of certain events, such as obtaining shareholder approval, which would result in a Change of Control under clauses (i) or (ii) of this definition in respect of the Company or its Parent. The sale to the public by American Premier of its common shares to the public shareholders of Infinity Property and Casualty Company as described under the Assignment Article shall not constitute a Change of Control. 3. the Company fails to achieve an effective rate increase for the Agreement Period of 5.00%. the parties agree, with regard to Changes in Conditions described in A.1. and A.2. above, that the Reinsurer shall have the right to terminate, on a cut-off basis, this Agreement as of the effective date of the Changes in Conditions. In the event that the Reinsurer exercises its right to terminate this Agreement as provided for above, the Reinsurer, shall return to the Company the unearned portion of the Reinsurer's Margin subject to a maximum of 50.00%.

Page 7 of 13 2003 Reinsurance Cover Note American Premier Underwriters, Inc. Automobile Physical Damage Quota Share CHANGES IN The parties further agree, with regard to Changes in Conditions CONDITIONS: described in A.3. above, the minimum Commission Ratio shall be Cont'd adjusted based upon the effective rate change for underwriting year 2003 calculated as follows: Es Ec Ws,c Rs,c Ts,c -------------------- Es Ec Ws,c Where: Es = sum over each state Ec = sum over each company Ws,c = 2002 written premium for a given state and company Rs,c = 2003 filed rate change percentage Ts,c = 2003 filed rate change time remaining = (Days between 12/31/03 and effective date)/365 Resulting in the adjusted minimum Commission Ratio calculated as follows: 1 - 2.50% - {(1 - 2.50% - 18.00%) x 1.05/[1 + (lesser of 5.00% or Effective Rate Change)]} B. With regard to paragraph A.2. above, the Company agrees to give the Reinsurer written notice of any Change in Control within three (3) business days of the occurrence thereof (or, with respect to a Change of Control referred to in clause A.2. (iii) of the definition hereof, within three (3) business days after execution of any such agreement. FEDERAL The parties acknowledge that there is no Federal Excise Tax EXCISE TAX: ("FET") due hereunder. Should FET become due, however, any such FET liability shall be payable by the Reinsurer; provided, however, that in the event that at any time during the Agreement Period or any runoff period thereafter any United States tax authority, including without limitation the Department of the Treasury or the Internal Revenue Service, shall initiate an investigation or audit of the Company with respect to this Agreement, the Company will immediately notify the Reinsurer of such investigation or audit and will authorize the Reinsurer or its designated representatives to participate, with the full cooperation of the Company, in any such investigation or audit. Page 8 of 13 2003 Reinsurance Cover Note American Premier Underwriters, Inc. Automobile Physical Damage Quota Share - -------------------------------------- EXCLUSIONS: Subject to all exclusions set forth in the original policies of - ---------- insurance protected by this Agreement, and as follows: - All lines and coverages of insurance not classified as Private Passenger Auto Physical Damage Insurance in the Company's statutory annual statement - All insurance classified as Private Passenger Auto Physical Damage Insurance in the Company's statutory annual statement not produced by independent agents - Reinsurance Assumed - Extra Contractual Obligations - Excess of Policy Limits Judgments - Declaratory Judgment Expenses - Recovery for Unallocated Loss Adjustment Expenses - Insolvency Funds - Pools and Associations - War - Nuclear - Absolute Terrorism Exclusion - Class Action Lawsuits Other exclusions, if any, to be agreed. WORDING: To be mutually agreed. - ------- GENERAL CONDITIONS AND DEFINITIONS: - ----------- Definition of Ultimate Net Loss (Loss and ALAE only) Definition of Occurrence Definition of Subject Net Written Premium Income (SNWPI) Definition of Loss & ALAE ratio Other definitions, if any, to be agreed Currency: all in U.S. Dollars Access to Records Errors and Omissions Insolvency Offset Reserves and Taxes Salvage and Subrogation Collateralization of Schedule F: if required, costs to be borne by the Company. Service of Suit Clause Intermediary: Am-Re Brokers Other Conditions, if any, to be agreed. Page 9 of 13 2003 Reinsurance Cover Note American Premier Underwriters, Inc. Automobile Physical Damage Quota Share INFORMATION: Subject Net Written Premium Income (as defined) for the period January 1, to December 31, 2003, inclusive estimated to be $410,000,000 (100% basis). REINSURERS HEREON: PARTICIPATION Inter-Ocean Reinsurance (Ireland) Limited 100% Dublin, Ireland Page 10 of 13 2003 Reinsurance Cover Note American Premier Underwriters, Inc. Automobile Physical Damage Quota Share - -------------------------------------- We have available evidence of assumption of risk by all reinsurers, including authority given to agents by assuming companies. We have inquired into and have available upon request the most recent Financial Statement for reinsurers unauthorized in the State of New York. AM-RE Brokers has complied with Section 32.1 (a), (b), (c), (e) and (f) and all other provisions of Regulation 98 of the New York Insurance Department. Please examine this document carefully and advise us immediately if any of the details of the security used are not in accordance with your order or requirements. Your signature below confirms your approval of this reinsurance placement that we have made on your behalf. [Illegible} Date: 1/17/03 - ------------------------------------------- ----------------------- AM-RE Brokers, Inc. [Illegible} Date: 1/21/03 - ------------------------------------------- ----------------------- Approved: LEADER INSURANCE COMPANY POOL [Illegible} Date: 1/21/03 - ------------------------------------------- ----------------------- Approved: INFINITY INSURANCE COMPANY POOL [Illegible} Date: 1/21/03 - ------------------------------------------- ----------------------- Approved: WINDSOR INSURANCE COMPANY POOL [Illegible} Date: 1/21/03 - ------------------------------------------- ----------------------- Approved: ATLANTA CASUALTY COMPANY POOL [Illegible} Date: 1/21/03 - ------------------------------------------- ----------------------- Approved: GREAT AMERICAN INSURANCE COMPANIES Page 11 of 13 2003 Reinsurance Cover Note American Premier Underwriters, Inc. Automobile Physical Damage Quota Share AMERICAN PREMIER GROUP
2003 PY Expected Maximum State Abrev Code State Mix State Mix - ----- ----- ---- --------- --------- Alabama AL 01 1.6% 6.6% Alaska AK 54 0.9% 5.9% Arizona AZ 02 2.5% 7.5% Arkansas AR 03 0.0% 5.0% California CA 04 36.1% 41.1% Colorado CO 05 0.6% 5.6% Connecticut CT 06 3.4% 8.4% Florida FL 09 9.4% 14.4% Georgia GA 10 7.5% 12.5% Hawaii HI 52 0.0% 5.0% Idaho ID 11 0.0% 5.0% Illinois IL 12 0.0% 5.0% Indiana IN 13 0.7% 5.7% Iowa IA 14 0.2% 5.2% Kansas KS 15 0.3% 5.3% Kentucky KY 16 2.0% 7.0% Louisiana LA 17 1.1% 6.1% Maine ME 18 0.0% 5.0% Maryland MD 19 0.0% 5.0% Massachusetts MA 20 0.0% 5.0% Michigan MI 21 0.2% 5.2% Minnesota MN 22 0.8% 5.8% Mississippi MS 23 1.3% 6.3% Missouri MO 24 1.7% 6.7% Montana MT 25 0.0% 5.0% Nebraska NE 26 0.1% 5.1% Nevada NV 27 0.2% 5.2% New Mexico NM 30 0.4% 5.4% New York NY 31 6.5% 11.5% North Carolina NC 32 1.2% 6.2% North Dakota ND 33 0.2% 5.2% Ohio OH 34 1.3% 6.3% Oklahoma OK 35 0.8% 5.8% Oregon OR 36 0.5% 5.5% Pennsylvania PA 37 6.9% 11.9% Rhode Island RI 38 0.2% 5.2% South Carolina SC 39 2.2% 7.2% South Dakota SD 40 0.1% 5.1% Tennessee TN 41 2.3% 7.3% Texas TX 42 2.7% 7.7% Utah UT 43 1.2% 6.2% Virginia VA 45 1.0% 6.0% Washington WA 46 0.1% 5.1% West Virginia WV 47 0.0% 5.0% Wisconsin WI 48 1.6% 6.6% Wyoming WY 49 0.0% 5.0% 100.0%
Page 12 of 13 2003 Reinsurance Cover Note American Premier Underwriters, Inc. Automobile Physical Damage Quota Share Great American Insurance Companies
2003 PY Expected Maximum State Abrev Code State Mix State Mix - ----- ----- ---- --------- --------- Alabama AL 0.17% 5.17% Arizona AZ 2.38% 7.38% California CA 9.85% 14.85% Colorado CO 0.46% 5.46% Connecticut CT 45.77% 50.77% Florida FL 2.89% 7.89% Georgia GA 0.15% 5.15% Idaho ID 0.01% 5.01% Illinois IL 0.10% 5.10% Indiana IN 0.01% 5.01% Kentucky KY 0.44% 5.44% Maine ME 0.02% 5.02% Maryland MD 0.24% 5.24% Michigan MI 2.69% 7.69% Minnesota MN 3.58% 8.58% Missouri MO 0.06% 5.06% Nevada NV 0.02% 5.02% New Jersey NJ 2.56% 7.56% New Mexico NM 0.04% 5.04% New York NY 6.51% 11.51% North Carolina NC 5.38% 10.38% North Dakota ND 0.00% 5.00% Ohio OH 1.46% 6.46% Oregon OR 0.10% 5.10% Pennsylvania PA 13.39% 18.39% South Dakota SD 0.02% 5.02% Tennessee TN 0.12% 5.12% Texas TX 0.49% 5.49% Utah UT 0.08% 5.08% Virginia VA 0.79% 5.79% Washington WA 0.23% 5.23% Wisconsin WI 0.00% 5.00% 100.00% 105.00%
Page 13 of 13 [Am-Re Brokers, Inc. Letterhead] Via Overnight Mail January 17, 2003 Mr. Allen F. Eling Vice President Great American Insurance Companies 580 Walnut Street, Floor 13 Cincinnati, OH 45202 Re: Private Passenger Auto Physical Damage Quota Share Reinsurance Proposal Dear Al: In response to your request for Am-Re Brokers, Inc. to secure an extension of the existing renewal option and revised terms to those outlined in the Cover Note attached to the existing option to renew the captioned Agreement for Underwriting Year 2003, we have been asked by Inter-Ocean Re (Ireland) Limited ("I-O Re") to offer to you the following revised terms with respect to the renewal of the captioned Agreement. The attached Cover Note will replace the Cover Note attached to the renewal option offered by I-O Re and accepted by Keith Jensen on September 20th, 2002. Further, I-O Re has agreed to extend the previously agreed to "Renewal Option Exercise Period" from September 17, 2002 - December 15, 2002 to September 17, 2002 - January 22, 2003. To assist in your review of the attached we have outlined below the revision to the Renewal Option Exercise Period and the revisions to the previous Cover Note: REVISED OPTION TERMS: - - Renewal Option Exercise Period: September 17, 2002 - January 22, 2003 REVISED RENEWAL TERMS: - - Reinsured: Now includes the Great American Insurance Company subsidiaries that underwrite the agency produced standard and preferred personal lines automobile business. - - Reinsurer Share: The quota share percentage cession is variable and is subject to a minimum cession of 20% and a maximum cession of 90%. The Company may elect the quota share cession percentage at the beginning of each calendar quarter during the Term of the Agreement with notice to the Reinsurer taking place no less than three business days prior to the first day of the calendar quarter. - - Company Retention, Sublimited Liability of Reinsurer and Aggregate Limit of Reinsurer: The 95% cap on the aggregate liability of the Reinsurer, has been removed. The aggregate liability of the Reinsurer, subject to all terms and conditions of the Agreement, shall be unlimited and the Reinsured and the Reinsurer shall have the right to cancel the Agreement on a cut-off basis at any time with sixty (60) notice to the other party. - - Reinsurance Premium: The minimum Reinsurer's margin has been revised to $3,800,000. - - Assignment: An Assignment Article has been included to allow the Company to transfer and assign its interests in the Agreement to the publicly held successor Company in the event that the IPO is concluded. 685 College Road East, Princeton, NJ ###-###-#### Phone: 609 ###-###-#### Fax: 609 ###-###-####/41 Letter to Allen F. Eling Great American Insurance Companies January 17, 2003 Page 2 of 2 - - Changes in Conditions: Definition of a Change of Control has been amended to specifically exclude the IPO. The Reinsurer will retain its right, however, to terminate on a cut-off basis for any other Change of Control. Further, the return of the unearned portion of the Reinsurer's margin in the event that the Reinsurer terminates the Agreement on a cut-off basis has been revised from a dollar amount of $3,750,000 to 50.00%. I-O Re has indicated to us that they have concluded to their satisfaction their on-site due diligence of the American Premier operation and at this time have asked us to convey to you that they have removed the Renewal Option due diligence contingency. Please note, however, that the inclusion of the Great American agency produced standard and preferred automobile physical damage portfolio in the Agreement is subject to on-site claims and underwriting due diligence by I-O Re or its designee, with reviews to take place as soon as possible after the acceptance of the revised terms in the attached Cover Note. If you are in agreement with the revision to the Renewal Option Exercise Period and the attached terms of the renewal, please indicate your acceptance by executing all three copies in the space provided, keep one copy for your records and return two copies to my attention. As always, if you have any questions regarding the above please feel free to give me a call. Sincerely, /s/ John Tholen John Tholen Assistant Vice President Am-Re Brokers Attachment Agreed and Accepted: By: [Illegible signature] ------------------------------------ Title: Senior Vice President --------------------------------- Date: 1/21/03 ---------------------------------- cc: A. Finn (I-O Ireland) D. Wilson (I-O Bermuda)