1.6% 3.6% ————————Total1.6% 3.3% ————————————————————————————————-Note 1 – (Increase) decrease in estimates for unpaid claims from prior accident years reflected in current financial year resultsNote 2 – Increase (decrease) in current financial year reported combined ratioNote 3 – Increase (decrease) compared to estimated unpaid claims at the end of the preceding fiscal yearExpensesThe overall expenses increased in the quarter due to the severance costsassociated with the Company’s corporate restructuring plan totaledapproximately $2.9 million. 9.7%15.5% ————————Total 10.6%14.3% ————————As a % of unpaid claims (note 3):Canada 1.6% 1.4%U.S. 3 months to March 31:————————————————————————-(in millions of dollars) 2009 2008————————————————————————-Favourable (unfavourable) change in estimated unpaid claims for prior accident years (note 1):Canada $(10.1)$(10.7)U.S.(19.9) (48.1) ————————Total$(30.0)$(58.8) ————————As a % of net premiums earned (note 2):Canada12.8%10.5%U.S. On a consolidated basis, the proformacombined ratio, excluding Lincoln General except for the exclusively managedbusiness, was 109.9% for the quarter. Lincoln General accounts for $21.5 million of this reservedevelopment for the quarter or $0.33 per share after tax for the quarter. Anadjustment to the unallocated loss adjustment expenses at Lincoln Generalaccounted for $5.5 million of the unfavourable reserve development. Theterminated artisan contractors liability program reported favourabledevelopment of $1.0 million in the quarter.

Excluding Lincoln General, exceptfor the exclusively managed business, the proforma combined ratio for the U.S.operations was 105.0% for the quarter. The lossratio in the quarter was 81.1% compared to 75.8% in Q1 2008.The U.S. operations experienced estimated net unfavourable reserve developmentof $19.9 million for the quarter compared with $48.1 million in the samequarter last year. The Canadian operations reported a one timeadjustment to write off recoveries for deductibles on certain policies of $4.9million that was classified as unfavourable reserve development.

88.9%87.2% 1.7%————————————-Total86.7%84.4% 2.3%—————————————————————————————————————————————————The Canadian operations experienced estimated unfavourable reserve developmentof $10.1 million for the quarter (or 12.8% to the Canadian operations combinedratio) compared to unfavourable reserve development of $10.7 million for thefirst quarter last year. 32.4%29.4% 3.0%————————————-Total34.0%31.6% 2.4%————————————————————————–Loss ratioCanada 81.1%75.8% 5.3%U.S. (43.6) (51.6)(16%)————————————-Total $(58.8)$(66.1)(11%)————————————————————————–Combined ratioCanada119.3% 114.3% 5.0%U.S.121.3% 116.6% 4.7%————————————-Total 120.7% 116.0% 4.7%————————————————————————–Expense ratioCanada 38.2%38.5%(0.3%)U.S. The decision to liquidatethe equity portfolio has significantly reduced the number and value ofsecurities in an unrealized loss position and, consequently, the value ofsecurities considered to be other than temporarily impaired as at March 31,2009.Underwriting Results————————————————————————-3 months to March 31:————————————————————————-(in millions of dollars)2009 2008 Change————————————————————————-Underwriting profit (loss)Canada$(15.2)$(14.5)5%U.S. In addition to the $91.9 million impairmentcharge on the common share equity portfolio taken in the fourth quarter of2008, the liquidation resulted in a realized loss of $18.2 million in 2009.The write-down of securities considered to be temporarily impaired as at March31, 2008 related to common share equity securities. As was previouslyannounced, the Company elected to dispose of virtually all of its common shareequities during the quarter. Net realized gains on the sale of fixed income securities amounted to$0.3 million for the three months ended March 31, 2009 compared a net realizedgain of $2.6 million for the same period last year.

Because the proceeds of thecommon share equity portfolio began to be reinvested in fixed incomesecurities in the later part of the quarter, the straight line calculationproduces an inflated average amortized cost base and consequently a loweryield. The yield iscalculated using a straight line average cost base which implies a change inthe balance occurs evenly throughout the period. The cost based yield represents the totalinterest income before expenses divided by the average amortized cost base offixed income securities held in the portfolio during the period. portfolios and a weaker Canadian dollarcompared to the same period last year which reduces the investment incomeearned by the Canadian operations when reported in U.S dollars. The costbased yield on the fixed income portfolio decreased to 4.2% compared to 4.7%for the same quarter last year. Alsocontributing to the decrease in investment income in the quarter are loweryields on both the Canadian and U.S. operations represented 76% of gross premiums written in the quartercompared with 78% in the same quarter of last year.