PAULA Financial Notes Net Income for Fiscal 2003, Names New President for Agency Operations

March 31, 2004

California-based PAULA Financial reported net income for the fourth quarter of 2003 of $0.08 per share compared to $0.03 per shares for the 2002 period. Total revenue for the fourth quarter of 2003 was $5.2 million compared to $4.0 million for the 2002 period. Net income for fiscal 2003 was $0.22 per share compared to $0.09 per share in 2002. Total revenue increased to $19.4 million in 2003 from $13.7 million in 2002.

Jeff Snider, chairman and CEO, commented, “We are pleased with how the company finished 2003. Revenue was up significantly, largely due to strategic acquisitions made in mid-2002 and early 2003. Commissions associated with crop insurance, which prior to 2002 was virtually non-existent in the company’s revenue mix, accounted for the largest portion of the increase. Also contributing to the increase was the company’s historical mainstay, workers’ compensation, and a substantial increase in service fee revenue. It was also useful to find a new banking partner in the third quarter.

“We spent a lot of time and effort in the past two years recruiting. We are entering the 2004 year with the best bench I can recall,” offered Snider. “As the agency approaches $20 million in revenue, we are being asked to provide more and more complex products and services to meet the needs of California employers. We have spent the last several quarters talking about our gains in crop insurance and service fees. The California State Fund and the politics of high pricing have been worrisome. We now know there will be a lot less contingent income from the State Fund in future periods. Our revenue diversity will serve us well as consequence.

“We have a solid health practice in addition to fast growing property and liability sales. These two areas plus crop insurance and workers’ compensation make for a revenue mix which we believe to be healthy. To fulfill our potential going forward each profit center area needs solid leadership. Several senior positions were filled in 2003 and in early 2004 as well. The upcoming annual report will feature these recruiting gains. The company appears to be moving past a best efforts revenue model – and we are grateful for it,” added Snider.

As part of the company’s leadership development agenda, it also announced the promotion of Roberts Underwood to the position of president of the company’s agency operations, Pan American Underwriters Inc.

Underwood joined the company in July 2002 and brought with him extensive insurance experience in the agribusiness community in California and Arizona.

“Bob Underwood is a standout – and I have had the privilege of working alongside some talented professionals since I joined the company in 1975,” commented Snider. “Bob is a tested producer and a very capable consensus builder; his best executive years are ahead of him.”

PAULA Financial, through its Pan American Underwriters agency subsidiary, is a specialty distributor of commercial insurance products serving the risk management needs of agribusiness employers in the West since 1946.

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