New Workers’ Comp Company Authorized in Texas

March 5, 2003

The Texas Department of Insurance has issued a Certificate of Authority for a new property-casualty insurance company to be located in Tyler, Texas, named Old Glory Insurance Company.

The new company will operate as a wholly owned subsidiary of the holding company, Heartland Security Insurance Group, which also owns Hibbs-Hallmark & Company, Claims Administrative Services, Patriot National Underwriters, Premium Convenience Services, and other risk management-related entities. Heartland said Old Glory will specialize in writing workers’ compensation for small employers across the state of Texas.

“This represents a significant milestone for our associates and stockholders in the desire to continue diversifying our operations,” said Billy E. Hibbs, Jr. president and CEO of the holding company, who will also serve as Old Glory’s president. “At least five years of planning, research, and negotiations are behind this moment. Finding reinsurance for a start-up insurance company in a post September 11th environment has been a significant challenge. But it is a real tribute to our many associates who have worked on this project that we not only have excellent-rated reinsurers backing us in this venture, we have reinsurers who believe strongly in our business model.”

With the consolidation of insurance companies over the last several years, smaller insurance agents located across the state no longer have as many markets or options for their clients, according to Cliff Clay, president of the entity responsible for marketing Old Glory products. “We want to fill this void for the small agent. Old Glory products will be distributed through Patriot National Underwriters, our wholesale operation located in Dallas. We anticipate that the demand for this business will be strong, so we have recently strengthened our underwriting capabilities with a number of seasoned insurance veterans.”

According to Hibbs, the company has been designed to have the lowest overhead in the industry. “Over the past several years, we have built a state-wide infrastructure of claims adjusters and loss control representatives. These associates do an outstanding job for the 450 independent school districts that utilize our claims subsidiary to handle their workers’ compensation needs. Accordingly, Old Glory will be able to operate with a minimum of staff, protecting policyholders’ surplus. This will allow our capital to grow much faster, and should be a real positive in the eyes of regulators and rating agencies.”

Barry Jones, president of the subsidiary responsible for claims and loss control, noted the focus on intense loss control for all clients. “We are looking for safety minded employers who want the premium stability that results from lowering the frequency and severity of their losses.”

“Another important element is the outstanding relationship we maintain with the medical community across Texas,” said Jones. “School districts are usually among the largest employers in small communities. Over the last decade, we have developed excellent relationships with doctors, hospitals and treatment centers that are able to deliver consistent high quality care. Through experience, we know who in the medical community is truly focused on good outcomes for their patients. We encourage injured workers to use these providers and in return, the medical providers know we offer quick turnaround and prompt payment on their charges. It’s a win-win for everyone.”

In January, Heartland increased the number of internal shareholders from 12 to 40. “In the highly volatile risk business it is critically important that you have people who make decisions like owners,” said Hibbs. Heartland presently employs over 170 individuals.

Board members for Old Glory Insurance Company include Billy Hibbs, Billy Hibbs, Jr., Barry Jones, Gary Howell, Robert Monaghan, Cliff Clay, and Robert Henderson.

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