Message from James C. Epolito

The year 2000 was a turning point for the millennium, and it was a turning point for Accident Fund Insurance Company of America. After years of declining rates and carriers flooding Michigan's market, the market hardened. The result was a market shift that saw many carriers fleeing their customers and the state of Michigan. At Accident Fund Insurance Company of America, however, our reputation as the carrier where the "Agent is Number One" was strengthened.

Not only did our Michigan business grow, we expanded into other states and have, in a few short months, seen impressive results. This was possible because we have looked beyond the traditional ways of conducting business, and explored the possibilities that technology - and teamwork -- can offer our company.

• New business premium is up 71% for the year, and written premium is up 27%. New business application hit ratio surpasses 30%.
• A.M. Best raises its rating for the Accident Fund from "A-" to "A."
• Accident Fund Insurance Company of America implements business expansion outside Michigan and is licensed in five states besides Michigan as of December 31, 2000.
• A joint marketing program with Blue Cross Blue Shield of Michigan is launched in Lansing and Traverse City.
• Accident Fund Insurance Company of America's dedication to Y2K preparations ensure that problems from the year 2000 rollover are practically non-existent.
• Group programs expand to total 25 plans.

We are proud of the way our company has achieved its goals, and we are just beginning. Accident Fund Insurance Company of America has ambitious goals for the future, and we are well on our way to making them a reality.

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Financial Results

I invite you to look at Accident Fund Insurance Company of America's financial statements. You'll find a financially strong, well-run company with the resources to meet long-term insurance needs.

Here are some highlights:

• Assets of over $1 billion consist primarily of high quality bonds and equities. The income from these investments provides a strong base that allows the Company to weather the periodic up's and down's of the insurance market.
• Loss reserves - the liabilities for unpaid claims and related expenses - total $561 million. These are funds we've set aside to cover existing claims, which can last thirty or forty years or more. We've established reserves at levels that are sufficient to withstand adverse future trends such as high medical inflation and unexpected disability duration.
• Surplus (assets minus liabilities) stands at more than $356 million. Whether measured in relation to premiums, reserves, or complex enterprise risk formulas, this level of surplus provides a strong safety net.
• Earned premiums of more than $150 million (and growing) are the result of good retention of renewing business as well as new business sales.

Ronald Schoen, CFO

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Accident Fund Insurance Company of America Balance Sheets Statutory Basis (in Thousands)

	Assets		2000		1999
	Cash, Cash Equivalents & Short-Term Investments	53,744	23,887
	Bonds	778,957	812,652
	Common Stock	152,305	131,359
	Total Cash and Investments	985,006	967,898
	Premiums Receivable	85,632	16,893
	Property and Equipment - Net	17,428	18,214
	Other Assets	31,845	21,232
	Total Assets	1,119,911	1,024,237
	Liabilities and Surplus
	Reserves for Losses and Loss Adjustment Expenses	561,646	577,017
	Unearned Premiums	80,322	28,196
	Other	121,385	69,369
	Total Liabilities	763,353	674,582
	Surplus
	Capital	10,200	10,000
	Unassigned Surplus	346,358	339,655
	Total Surplus	356,558	349,655
	Total Liabilities and Surplus	1,119,911	1,024,237

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Accident Fund Insurance Company of America Statement of Operations (in Thousands)

			2000		1999
	Net Premiums Written	203,027	115,107
	Change in Unearned Premiums	(52,127)	4,714
	Net Premiums Earned	150,900	119,821
	Losses and Expenses
	Losses Incurred	87,054	54,075
	Loss Adjustment Expenses	10,320	22,752
	Other Underwriting Expenses	44,450	35,776
	Underwriting Gain (Loss)	9,076	7,218
	Net Investment Income	52,621	54,803
	Net Realized Capital Gains	12,527	6,544
	Net Investment Gain	65,148	61,347
	Other Expenses, Net	3,106	2,639
	Federal Income Taxes	24,155	17,658
	Net Income	46,963	48,268
	Ratios
	Loss Ratio	57.7%	45.1%
	LAE Ratio	6.8%	19.0%
	Expense Ratio	21.9%	31.1%
	Dividend Ratio	1.2%	1.9%
	Combined Ratio	87.6%	97.1%

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©Copyright 2001 Accident Fund Insurance Company of America