In 2005, we promised that we would deliver rate stability to improve retention after our homeowner “fix” years. We fulfilled our promise by making rate changes that were all lower than the rate of claim inflation. As a result, our renewal retention rates are significantly higher.

When it comes to product introductions, 2005 was a great year. We introduced a sophisticated new homeowner product in five states that allows our agents to tailor homeowner insurance to their customers' individual needs. Our agents and the market have responded with significantly higher new application counts. Our newest auto product was delivered to South Carolina and is being embraced by the market. We expect to continue rolling out these new products in 2006.

Agency service has always been a very important part of our Personal Lines relationship with our agents, and we're always striving to continuously improve that relationship. In 2005, we implemented our Single Point of Contact program and greatly improved our underwriter communication standards. In response to those changes, our agents rated us with the highest marks Personal Lines has ever received in our annual agency survey.

Commercial Lines
2005 was a year of renewed commitment to Ease of Doing Business for our Commercial Lines Profit Center. Early in 2005, our Commercial Lines team hosted several agent focus groups to better understand what we can do to improve EODB. Based on agents’ suggestions, we developed a strategic action plan to make it easier for our partners to do business with us.

Two important components of our plan included increasing our speed of quotes and improving our underwriting performance. To help achieve those objectives, we implemented a new standard to ensure our underwriters contact agents upon receipt of all quotes to discuss the quote, determine if more information is necessary, and verify agents' quote “need by” date. In October, we introduced our Quote Guarantee, which promises agents we'll deliver their quotes by their “need by” date or we'll pay them $50. Throughout 2005, we conducted Excellence in Service training programs to help our underwriters and tech raters strengthen their customer service skills.

This year we also focused on offering new and improved products and services. Throughout 2005, we introduced new enhancement endorsements for Auto, General Liability and Printers E&O. In March, we started rolling out Account Bill, a new service that allows policyholders with multiple Grange Commercial Lines policies to receive one invoice instead of multiple ones.

Thanks to a commitment to EODB and great agent partners, our Commercial Lines Profit Center reached an important milestone in 2005: $200 million in direct written premium. EODB will continue to drive change for Commercial Lines in 2006. A new Small Commercial Service team will start offering responsive underwriting decisions and expertise on our Businessowners Policies (BOP), Contractors and Tradesmen (CT) policies and related products. We'll also launch our new Commercial AutoAccel^sm product in Ohio, one of four Grange states where agents will be able to take advantage of this new monoline Commercial Auto product in 2006.

Life
Grange Life continued to strengthen its partnerships and product offering in 2005. Our Life team introduced a revamped Annuity portfolio that includes a first year bonus rate for policyholders and a more competitive commission program for agents. We also launched a new Whole Life portfolio with fully guaranteed rates designed to meet the specific needs of target markets.

We're always looking for ways to write new Life business, and this year we focused on two initiatives to help us do just that. First, we worked diligently to get our agencies' Customer Service representatives (CSRs) more involved in the Life selling process. Earlier this year we trained CSRs to help increase their basic knowledge of Life products. We also launched EZ Quote, a tool on GAINWeb that generates term life insurance quotes tailored to meet potential Life customers' needs. Second, we introduced

Steve Jones Acting President & Senior Vice President/CFO Grange Bank	Tom Welch President, Grange Life

Grange Life Rewards, an incentive program that awards points to CSRs when a policy is written for a customer they've referred. CSRs redeem their points for a variety of rewards including travel, electronics, housewares and much more.

This year we also ramped up our Property Casualty Cross-selling Program (PCCP), building on the enhancements we implemented in late 2004. The PCCP has enabled us to offer tailored Life products to specific auto and homeowners policyholders. The program, along with enhanced products and a new agent compensation program, has made Grange Life more competitive, more profitable and even better at delivering EODB.

Bank
The Grange Bank enjoyed a record year in 2005 as profits increased 300 percent over 2004, making it easier for us to serve the financial needs of more customers.

The number of agencies that sell our bank products increased from 965 in 2004 to 1,054 this year, and the number of our agent mortgage broker partners increased 2005. With more agents selling our mortgage products, we also experienced a 15 percent increase in mortgage loan originations this year.

A large part of our success at The Grange Bank was also due to an enhanced mortgage product offering. This year we increased our mortgage products to 40, up from just 16 in 2004. With a more robust product offering, we're able to serve the needs of more customers.

Fiscal discipline also contributed to a great 2005 for The Grange Bank. By committing ourselves to controlling expenses, we were able to increase our profit margins.