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<br />The main factor behind this year's smaller dividend is that we incurred losses at a higher level <br />than projected, primarily a string of mid-sized to larger fire and storm losses in 2005 and the <br />beginning part of2006. These higher-than-projected losses reached into the safety margin we <br />established when we set rates for the year. In addition, our review of prior years suggests that <br />some of those losses may also turn out to be higher than we've previously projected. Using our <br />margin to pay for these losses means there's less available to give back as a dividend. <br /> <br />The LMCIT Board also again used a small part of this year's net income to further strengthen the <br />program's fund balance. The Board concluded that this was appropriate in light of the continued <br />growth in the property/casualty program's premium volume and the increased amount of risk <br />LMCIT is now retaining. <br /> <br />If you have any questions or comments, please feel free to contact Pete Tritz or Ann Gergen at <br />the League office, or any of the members of the LMCIT Board. <br /> <br />5 <br />