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þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the fiscal year ended December 31, 2005
or
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the transition period from           to

Ohio		31-1718622
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
465 Cleveland Ave. Westerville, Ohio		43082
(Address of principal executive offices)		(Zip Code)

Title of Each Class		Name of Each Exchange on Which Registered
Common Shares, without par value		NASDAQ

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				Page
PART I:
Item 1		Business			3
Item 1(a)		Risk Factors			24
Item 1(b)		Unresolved Staff Comments			30
Item 2		Properties			30
Item 3		Legal Proceedings			30
Item 4		Submission of Matters to a Vote of Security Holders			30
PART II:
Item 5		Market for the Registrant’s Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities			30
Item 6		Selected Financial Data			31
Item 7		Management’s Discussion and Analysis of Financial Condition and Results of Operations			33
Item 7(a)		Quantitative and Qualitative Disclosures About Market Risk			52
Item 8		Financial Statements and Supplementary Data			53
Item 9		Changes in and Disagreements with Accountants on Accounting and Financial Disclosure			100
Item 9(a)		Controls and Procedures			100
Item 9(b)		Other Information
PART III:
Item 10		Directors and Executive Officers of the Registrant			101
Item 11		Executive Compensation			101
Item 12		Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters			102
Item 13		Certain Relationships and Related Transactions			102
Item 14		Principal Accountant Fees and Services			102
PART IV:
Item 15		Exhibits and Financial Statement Schedules			102
EX-10.5
EX-21
EX-23
EX-31.1
EX-31.2
EX-32.1
EX-32.2

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Item 1.	Business

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	•	our commitment to underwriting profitability;
	•	our re-underwriting of our binding policies;
	•	continued low interest rates;
	•	close monitoring or downgrading of many insurers and reinsurers by rating agencies;
	•	new corporate governance requirements; and
	•	industry focus on rate adequacy and the negative effects of under-priced business on the industry as a whole.

			Years Ended December 31,
			2005				2004				2003
			(In thousands)
Gross written premiums:
	Property/ casualty		$	212,127				190,591				150,900
	Other (including exited lines)			4,037				814				(1,192	)
	Total gross written premiums			216,164				191,405				149,708
Ceded written premiums				26,645				25,381				17,869
Net written premiums			$	189,519				166,024				131,839
Net premiums earned			$	177,630				148,702				108,294
Net written premiums to gross written premiums				87.7	%			86.7	%			88.1	%
Net premiums earned to net written premiums				93.7	%			89.6	%			82.1	%
Net writings ratio, including discontinued operations(1)				1.6				1.4				1.7

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(1)

The ratio of net written premiums to our insurance subsidiaries’ combined statutory surplus. This ratio is not restated to exclude discontinued operations as the insurance subsidiaries’ combined statutory surplus is not allocated by line of business. Therefore, in computing the ratio of net written premiums to our insurance subsidiaries’ combined statutory surplus we do not restate the net written premium for discontinued operations to be consistent with that of the subsidiaries’ combined statutory surplus. Management believes this measure is useful in gauging our exposure to pricing errors in the current book of business. It may not be comparable to the definition of net writings ratio used by other companies.

	Property/ Casualty

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	Geographic Distribution

			Years Ended December 31,
			2005								2004								2003
			(In thousands)
Midwest			$	36,826				17.0	%			38,458				20.1	%			32,285				21.6	%
Southeast				56,348				26.1				51,841				27.1				42,805				28.6
Southwest				34,650				16.0				34,916				18.2				30,850				20.6
West				76,196				35.2				61,062				31.9				42,458				28.4
Northeast				8,933				4.1				5,128				2.7				2,286				1.5
Assumed Reinsurance				3,211				1.6				—				—				(976	)			(0.7	)
	Total		$	216,164				100.0	%			191,405				100.0	%			149,708				100.0	%

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	•	control loss and expenses through prompt investigation, accurate coverage determination, early evaluation, close supervision of outside service providers and early resolution of all reported claims;
	•	provide a high level of service and support to agents and insureds throughout the claims process; and
	•	provide information and intelligence to our underwriters and actuaries about changes in individual risk exposures and trends in claims and the law that affect our overall risk exposure.

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	•	our experience and the industry’s experience;
	•	historical trends in reserving patterns and loss payments;
	•	the impact of claim inflation;
	•	the pending level of unpaid claims;
	•	the cost of claim settlements;
	•	the line of business mix; and
	•	the environment in which property and casualty insurance companies operate.

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	•	performing an actuarial analysis of loss and loss expense reserves on a quarterly basis;
	•	assisting our Underwriting Department in evaluating pricing adequacy;
	•	assisting our Loss Reserve Committee, which includes our Senior Vice President and Chief Actuary, President and Chief Executive Officer of ProCentury, Senior Claims Officer, Senior Underwriting Officer, Chief Financial Officer and Treasurer, and President of Century, in establishing management’s best estimate of loss and loss expense reserves; and
	•	working with our independent external actuary in the year-end loss and loss expense reserves statement of actuarial opinion process.

					Years Ended December 31,
					2005				2004				2003
					(In thousands)
Loss and loss expense reserves at beginning of year, as reported					$	153,236				129,236				90,855
Less reinsurance recoverables on unpaid losses at beginning of year						29,485				36,739				31,853
Net loss and loss expense reserves at beginning of year						123,751				92,497				59,002
Provision for loss and loss expense incurred for claims related to:
	Current year					112,946				78,015				53,961
	Prior years:
		Property/ casualty:
			Casualty			7,384				12,842				22,190
			Property			(2,388	)			(3,244	)			2,254
		Other (including exited lines):
			Commercial automobile			439				789				1,350
			Workers compensation			(35	)			664				1,249
		Total prior years				5,400				11,051				27,043
			Total incurred			118,346				89,066				81,004
Loss and loss expense payments for claims related to:
	Current year					24,548				22,095				15,932
	Prior years					43,350				35,717				31,577
		Total paid				67,898				57,812				47,509
Net loss and loss expense reserves at end of year						174,199				123,751				92,497
Plus reinsurance recoverables on unpaid losses at end of year						37,448				29,485				36,739
Loss and loss expense reserves at end of year, as reported					$	211,647				153,236				129,236

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	Property/ Casualty

	Other (Including Exited Lines)

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			1996				1997				1998				1999				2000
			(In thousands)
Net liability for losses and loss expenses			$	30,321				39,644				42,262				46,649				44,915
Liability re-estimated as of:
	One year later			29,871				36,789				44,269				49,382				50,265
	Two years later			27,206				38,022				45,006				52,390				66,745
	Three years later			27,761				38,869				47,237				66,299				84,178
	Four years later			28,380				40,234				58,059				77,477				94,930
	Five years later			29,407				52,448				65,977				84,861				100,422
	Six years later			34,926				59,130				72,691				88,590
	Seven years later			37,827				63,389				76,396
	Eight years later			39,706				66,942
	Nine years later			39,725
Net cumulative redundancy (deficiency)				(9,404	)			(27,298	)			(34,134	)			(41,941	)			(55,507	)
Cumulative amount of net liability paid as of:
	One year later			8,623				12,042				14,221				18,741				19,047
	Two years later			15,562				21,304				25,237				31,444				37,562
	Three years later			19,842				28,707				33,559				45,199				54,598
	Four years later			23,211				33,508				42,754				55,536				68,806
	Five years later			25,824				40,788				49,406				65,559				78,743
	Six years later			29,778				45,935				57,133				72,538
	Seven years later			31,113				51,349				63,589
	Eight years later			34,693				57,283
	Nine years later			36,468
Gross liability — end of year				36,694				45,608				55,844				76,357				84,974
Reinsurance recoverable on unpaid losses				6,373				5,964				13,582				29,708				40,059
Net liability — end of year				30,321				39,644				42,262				46,649				44,915
Gross liability re-estimated — latest				43,948				77,741				85,359				123,506				141,208
Reinsurance recoverable on unpaid losses re-estimated — latest				4,223				10,779				8,963				34,916				40,786
Net liability re-estimated — latest				39,725				66,942				76,396				88,590				100,422
Gross cumulative redundance (deficiency)			$	(7,254	)			(32,133	)			(29,515	)			(47,149	)			(56,234	)

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			2001				2002				2003				2004				2005
			(In thousands)
Net liability for losses and loss expenses			$	48,944				59,002				92,497				123,763				174,199
Liability re-estimated as of:
	One year later			64,818				86,045				103,548				129,163
	Two years later			86,480				101,553				111,189
	Three years later			98,983				109,802
	Four years later			104,975
	Five years later
	Six years later
	Seven years later
	Eight years later
	Nine years later
Net cumulative redundancy (deficiency)				(56,031	)			(50,800	)			(18,692	)			(5400	)
Cumulative amount of net liability paid as of:
	One year later			24,805				30,585				35,717				43,363
	Two years later			46,413				56,457				62,569
	Three years later			65,472				76,414
	Four years later			78,143
	Five years later
	Six years later
	Seven years later
	Eight years later
	Nine years later
Gross liability — end of year				94,146				91,011				129,558				153,236				211,647
Reinsurance recoverable on unpaid losses				45,202				32,009				37,061				29,485				37,448
Net liability — end of year				48,944				59,002				92,497				123,751				174,199
Gross liability re-estimated — latest				138,570				140,914				133,980				162,831
Reinsurance recoverable on unpaid losses re- estimated — latest				33,595				31,112				22,791				33,668
Net liability re-estimated — latest				104,975				109,802				111,189				129,163
Gross cumulative redundance (deficiency)			$	(44,424	)			(49,903	)			(4,422	)			(9,595	)

(1)	For calendar years and diagonals between 1996 and 2003, the amounts have been restated to remove the net effects of the discontinued operations (i.e. the net surety business).
(2)	In 2004, we entered in a loss portfolio transfer agreement with Evergreen and Continental whereby we assume all of Evergreen and Continental’s business excluding surety and assumed workers’ compensation. Evergreen and Continental were spun-off to our class A shareholders in 2004 and are, therefore, no longer our subsidiaries. Therefore, for years prior to 2004 gross reserves include our gross reserves for all lines excluding surety (including the gross reserves for Evergreen and Continental) and the 2004 year and the gross liability re-estimated — latest excludes the gross reserves for Evergreen and Continental and includes the assumption of the net business of Evergreen and Continental. In addition, due to the above transactions in 2004, the gross cumulative redundancy (deficiency) includes the effects of eliminating Evergreen and Continental’s gross reserves and the assumption of Evergreen and Continental’s net reserves (excluding surety). Therefore, while the trend of the gross cumulative redundancy (deficiency) remains, the results may not represent the actual redundancy or deficiency of our gross reserves.

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Line of Business		Company Policy Limit		Reinsurance Coverage/ Company Retention
Property		Up to $12.5 million per risk		Up to $12.5 million per risk in excess of $500,000 per risk through treaty and automatic facultative agreements. Additional certificate facultative coverage is available for risks exceeding $12.5 million.
Casualty — primary		$1.0 million per occurrence		$500,000 per occurrence in excess of $500,000 per occurrence for 2005. In 2006, we will participate on a 50% quota share basis in $500,000 per occurrence in excess of $500,000 per occurrence.
Casualty — excess and umbrella		Up to $5.0 million per occurrence in excess of the $1.0 million primary policy		90% of first $1.0 million per occurrence and 100% of up to $4.0 million per occurrence.
Terrorism — aggregate excess of loss		Insurer deductible as defined in Section 102 for the Terrorism Risk Insurance Act of 2002 and amended by the Terrorism Risk Insurance Extension Act of 2005		$28 million excess of $4 million.

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		A.M. Best				Net Amount
		Rating				Recoverable
Reinsurer		As of December 31, 2005
		(In thousands)
Hannover Ruckvesicherungs-Aktiengeselischaft			A			$	10,348,000
GE Reinsurance Corporation			A				9,655,000
Ace Property and Casualty			A +				6,261,000
General Reinsurance Corporation			A ++				3,452,000
American Re-Inusrance Company			A				3,116,000
Berkley Insurance Company			A				2,806,000
Folksamerica Reinsurance Company			A				2,178,000
Swiss Reinsurance America Corporation			A +				1,805,000
Gerling Global Reinsurance Corporation(1)			NR3				1,632,000
SCOR Reinsurance Company(1)			B ++				1,314,000

(1)	We are closely monitoring the financial status of Gerling Global Reinsurance Corporation (which is not rated as it is no longer accepting new business) and SCOR Reinsurance Company, each of which is continuing to pay claims.

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									Percent of
					Amount				Portfolio
					(Dollars in thousands)
Fixed-maturity:
	U.S. Treasury securities				$	3,725				1.0	%
	Agencies not backed by the full faith and credit by the U.S. Government					15,335				4.2
	Corporate securities					35,853				9.8
	Mortgage-backed securities					40,061				10.9
	Asset-backed securities					39,152				10.7
	Collateralized mortgage obligations					27,352				7.5
	Obligations of states and political subdivisions					142,282				38.8
		Total fixed-maturity				303,760				82.9
Cash and short-term investments						17,857				4.9
Equity securities:
	Bond mutual funds					17,852				4.9
	Preferred shares					22,337				6.1
	Common shares					4,604				1.2
		Total equity securities				44,793				12.2
			Total		$	366,410				100.0	%

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Company		Ratio		Usual Range		Our Ratio
PIC		Net change in adjusted surplus		25.0 - 10.0			(38.8	)
PIC		Change in policyholders’ surplus		50.0 - 10.0			(75.0	)
Century		Two-year reserve development to surplus		20.0 -  0.0			33.0

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Item 1(a).	Risk Factors

	Our actual incurred losses may be greater than our loss and loss expense reserves, which could cause our future earnings, liquidity and financial rating to decline.

	•	claims inflation;
	•	claims development patterns;
	•	legislative and judicial activity;
	•	social and economic patterns; and
	•	litigation and regulatory trends

	A decline in our financial rating assigned by A.M. Best may result in a reduction of new or renewal business.

	We are subject to extensive regulation and judicial decisions affecting insurance and tort law, which may adversely affect our ability to achieve our business objectives. In addition, if we fail to comply with these regulations, we may be subject to penalties, including fines and suspensions, which may adversely affect our financial condition and results of operations.

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	Our general agents may exceed their authority and bind us to policies outside our underwriting guidelines, and until we effect a cancellation, we may incur loss and loss expenses related to that policy.

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	If we lose key personnel or are unable to recruit qualified personnel, our ability to implement our business strategies could be delayed or hindered.

	Our investment results and, therefore, our financial condition may be impacted by changes in the business, financial condition or operating results of the entities in which we invest, as well as changes in government monetary policies, general economic conditions and overall capital market conditions, all of which impact interest rates.

	•	credit risk, which is the risk that our investments will decrease in value due to unfavorable changes in the financial prospects or a downgrade in the credit rating of an entity in which we have invested;
	•	equity price risk, which is the risk that we will incur economic loss due to a decline in common or preferred stock or bond mutual fund share prices; and
	•	interest rate risk, which is the risk that our investments may decrease in value due to changes in interest rates.

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	We distribute our products through a select group of general agents, five of which account for a significant part of our business, and such relationships could be discontinued or cease to be profitable.

	Our reinsurers may not pay claims made by us on losses in a timely fashion or may not pay some or all of these claims, in each case causing our costs to increase and our revenues to decline.

	If we are not able to renew our existing reinsurance or obtain new reinsurance, either our net exposure would increase or we would have to reduce the level of our underwriting commitment.

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	Our business is cyclical in nature, which will affect our financial performance and may affect the price of our common shares.

	If we are unable to compete effectively with the large number of companies in the insurance industry for underwriting revenues, we may incur increased costs and our underwriting revenues and net income may decline.

	•	an increase in capital-raising by companies in our lines of business, which could result in new entrants to our markets and an excess of capital in the industry;

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	•	the implementation of commercial lines deregulation in several states, which could increase competition from standard carriers for our excess and surplus lines of insurance business;
	•	programs in which state-sponsored entities provide property insurance in catastrophe prone areas or other “alternative markets” types of coverage and;
	•	changing practices caused by the Internet, which may lead to greater competition in the insurance business.

	•	the perceived market strength of the insurer;
	•	pricing and other terms and conditions;
	•	services provided;
	•	the speed of claims payment;
	•	the reputation and experience of the insurer; and
	•	ratings assigned by independent rating organizations such as A.M. Best.

	Severe weather conditions and other catastrophes may result in an increase in the number and amount of claims experienced by our insureds.

	As a holding company, we are dependent on the results of operations of our insurance subsidiary and the regulatory and contractual capacity of our subsidiary to pay dividends to us. Some states limit the aggregate amount of dividends our subsidiary may pay to us in any twelve-month period, thereby limiting our funds to pay expenses and dividends.

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Item 1(b).	Unresolved Staff Comments

Item 2.	Properties

Item 3.	Legal Proceedings

Item 4.	Submission of Matters to a Vote of the Security Holders

Item 5.	Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

		Quarter of 2005
		1st				2nd				3rd				4th
High		$	12.50				11.05				10.75				11.45
Low			10.11				9.75				9.81				9.96
Close			10.49				10.20				10.22				10.73

		Quarter of 2004
		1st				2nd(2)				3rd				4th
High		$	(1	)			10.99				10.24				12.65
Low			(1	)			9.37				9.30				9.62
Close			(1	)			9.73				9.91				12.40

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(1)	The Company’s common shares were privately held prior to April 26, 2004. Therefore, information for the first quarter of 2004 is not provided.

Item 6.	Selected Financial and Operating Data

		Years Ended December 31,
		2005				2004				2003				2002				2001
		(In thousands)
Operating Data:
Premiums earned		$	177,630				148,702				108,294				63,290				42,524
Net investment income			14,487				10,048				6,499				5,075				4,595
Net realized investment gains (losses)			(326	)			50				1,932				2,438				364
Total revenues			191,791				158,800				116,725				71,203				48,058
Discontinued operations(1)			—				1,259				1,548				881				(519	)
Net income			10,241				14,980				314				6,080				1,393
Comprehensive income (loss)			6,271				14,566				(405	)			6,693				1,845

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			Years Ended December 31,
			2005				2004				2003				2002				2001
			(In thousands)
Basic and diluted net income per share:
Net income (loss) from continuing operations before cumulative effect of change in accounting principle			$	0.78				1.29				(0.25	)			0.88				0.38
Discontinued operations				—				0.12				0.31				0.18				(0.10	)
Cumulative effect of change in accounting principle, net of taxes				—				—				—				0.16				—
Net income (loss)			$	0.78				1.41				0.06				1.22				0.28
Weighted average of shares outstanding
	— basic			13,060,509				10,623,645				5,000,532				5,000,532				5,000,133
	— diluted			13,129,425				10,653,316				5,000,532				5,000,532				5,000,133
Insurance Performance Data: (for the periods ended)
Gross written premiums(2)			$	216,164				191,405				149,708				100,542				70,484
Net written premiums(3)				189,519				166,024				131,839				78,362				44,990
GAAP Underwriting Ratios:(for the periods ended)
Loss ratio(4)				66.6	%			59.9	%			74.8	%			71.7	%			70.4	%
Expense ratio(5)				32.6	%			31.9	%			34.2	%			38.3	%			42.3	%
Combined ratio(6)				99.2	%			91.8	%			109.0	%			110.0	%			112.7	%
Balance Sheet Data:(at the end of the period)
Cash and investments			$	366,410				312,399				171,201				130,101				77,791
Reinsurance recoverables on paid and unpaid losses, net				43,870				33,382				42,042				35,323				48,550
Assets available for sale				—				—				59,018				51,229				49,306
Total assets				474,145				394,927				332,113				260,758				212,677
Loss and loss expense reserves				211,647				153,236				129,236				90,855				93,998
Liabilities available for sale				—				—				51,431				36,179				32,793
Long term debt				25,000				25,000				34,133				9,813				10,000
Trust preferred securities				—				—				—				14,545				—
Total shareholders’ equity				121,203				115,237				36,397				36,396				29,703
Other Data:
Net writings ratio, including discontinued operations(7)				1.6				1.4				1.7				1.3				1.4
Return on average equity(8)				8.7	%			18.5	%			0.9	%			18.4	%			5.3	%

(1)

Immediately prior to the completion of the IPO, the common shares of Evergreen and its wholly owned subsidiary, Continental were distributed as dividends from Century to ProCentury and then by ProCentury to ProCentury’s existing Class A shareholders. Prior to the dividends, Evergreen was a controlled subsidiary of Century. The operations of Evergreen and Continental consisted of ProCentury’s historical surety and assumed excess workers’ compensation lines of insurance, which were re-classified (net of minority interest and income taxes) as discontinued operations in the above selected consolidated financial data.

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(2)	The amount received or to be received for insurance policies written by us during a specific period of time without reduction for acquisition costs, reinsurance costs or other deductions.
(3)	Gross written premiums less the portion of such premiums ceded to (reinsured by) other insurers during a specific period of time.
(4)	The ratio of losses and loss expenses to premiums earned, net of the effects of reinsurance.
(5)	The ratio of amortization of deferred policy acquisition costs and other underwriting expenses to premiums earned, net of the effects of reinsurance.
(6)	The sum of the loss and loss expense ratio, net of the effects of reinsurance.
(7)	The ratio of net written premiums to our insurance subsidiaries’ combined statutory surplus. Management believes this measure is useful in gauging our exposure to pricing errors in our current book of business. It may not be comparable to the definition of net writings ratio used by other companies. For periods prior to 2004, this ratio includes discontinued operations, as the insurance subsidiaries’ combined statutory surplus is not allocated by line of business. Therefore, in computing the ratio of net written premiums to our insurance subsidiaries’ combined statutory surplus we did not restate the net written premium for discontinued operations to be consistent with that of the subsidiaries’ combined statutory surplus.
(8)	Return on average equity consists of the ratio of net income to the average of the beginning of period and end of period total shareholders’ equity. For 2004, return on average equity consists of the ratio of net income to the average equity, which is based on the average of the beginning of period and the end of each quarters’ total shareholders’ equity.

Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations

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			Years Ended December 31,
			2005				2004				2003
			(In thousands)
Selected Financial Data:
Gross written premiums			$	216,164				191,405				149,708
Net premiums earned				177,630				148,702				108,294
Net investment income				14,487				10,048				6,499
Net realized investment (losses) gains				(326	)			50				1,932
Total revenues				191,791				158,800				116,725
Total expenses				178,212				138,496				119,546
Other transactions:
	Loss on sale of minority interest in subsidiary, net			—				—				(503	)
	Discontinued operations			—				1,259				1,548
Net income			$	10,241				14,980				314
Key Financial Ratios:
Loss and loss expense ratio				66.6	%			59.9	%			74.8	%
Expense ratio				32.6				31.9				34.2
Combined ratio				99.2	%			91.8	%			109.0	%

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	Premiums

	•	property/casualty; and
	•	other (including exited lines).

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			Years Ended December 31,
			2005				2004				2003
			(In thousands)
Gross written premiums:
	Property/ casualty		$	212,127				190,591				150,900
	Other (including exited lines)			4,037				814				(1,192	)
	Total gross written premiums			216,164				191,405				149,708
Ceded written premiums				26,645				25,381				17,869
Net written premiums			$	189,519				166,024				131,839
Net premiums earned			$	177,630				148,702				108,294
Net written premiums to gross written premiums				87.7	%			86.7	%			88.1	%
Net premiums earned to net written premiums				93.7	%			89.6	%			82.1	%
Net writings ratio, including discontinued operations(1)				1.6				1.4				1.7

(1)

The ratio of net written premiums (including discontinued operations) to our insurance subsidiaries’ combined statutory surplus. This ratio is not restated to exclude discontinued operations as the insurance subsidiaries’ combined statutory surplus is not allocated by line of business. Therefore, in computing the ratio of net written premiums to our insurance subsidiaries’ combined statutory surplus we did not restate the net written premium for discontinued operations to be consistent with that of the subsidiaries’ combined statutory surplus. Management believes this measure is useful in gauging our exposure to pricing errors in the current book of business. It may not be comparable to the definition of net writings ratio used by other companies.

	Gross Written Premiums

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	Net Written and Earned Premiums

	Net Investment Income

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	Realized Gains (Losses) on Securities

	Losses and Loss Expenses

	•	the number of exposures covered in the current year;
	•	trends in claim frequency and claim severity;
	•	changes in the cost of adjusting claims;
	•	changes in the legal environment relating to coverage interpretation, theories of liability and jury determinations;
	•	and the re-estimation of prior years’ reserves in the current year.

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				Years Ended December 31,
				2005				2004				2003
				(In thousands)
Net incurred losses and loss expenses attributable to insured events of:
Current year				$	112,946				78,015				53,961
Prior years:
	Property/ casualty:
		Casualty			7,384				12,842				22,190
		Property			(2,388	)			(3,244	)			2,254
	Other (including exited lines):
		Commercial automobile			439				789				1,350
		Workers compensation			(35	)			664				1,249
Net incurred				$	118,346				89,066				81,004
Net loss and loss expense ratio:
Current year					63.6	%			52.5	%			49.8	%
Prior years					3.0				7.4				25.0
Net loss and loss expense ratio					66.6	%			59.9	%			74.8	%

			Year Ended
			December 31,
			2005
			(In thousands)
Property/ casualty:
	Casualty		$	142,451
	Property			27,972
Other (including exited lines):
	Commercial auto			936
	Workers’ compensation			2,657
	Landfill			183
Net reserves for losses and loss expenses				174,199
Plus reinsurance recoverables on unpaid losses at end of period				37,448
Gross reserves for losses and loss expenses			$	211,647

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			Year Ended
			December 31,
			2004
			(In thousands)
Property/ casualty:
	Casualty		$	102,430
	Property			16,115
Other (including exited lines):
	Commercial auto			1,780
	Workers’ compensation			3,426
Net reserves for losses and loss expenses				123,751
Plus reinsurance recoverables on unpaid losses at end of period				29,485
Gross reserves for losses and loss expenses			$	153,236

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	•	our experience and the industry’s experience;
	•	historical trends in reserving patterns and loss payments;
	•	the impact of claim inflation;
	•	the pending level of unpaid claims;
	•	the cost of claim settlements;
	•	the line of business mix; and
	•	the environment in which property and casualty insurance companies operate.

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	Other (Including Exited Lines)

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	Operating Expenses

				Years Ended December 31,
				2005				2004				2003
				(In thousands)
Amortization of deferred policy acquisition costs (“ADAC”)				$	42,935				33,872				25,237
Other operating expenses					14,265				13,292				11,757
Severance expense					793				250				—
ADAC and other operating expenses					57,993				47,414				36,994
Interest expense on the redemption of Class B shares					—				518				—
Interest expense					1,873				1,498				1,548
		Total operating expenses		$	59,866				49,430				38,542
Expense ratio:
	ADAC				24.2	%			22.8	%			23.3	%
	Other operating expenses				8.0				8.9				10.9
	Severance expense				0.4				0.2				—
		Total expense ratio(1)			32.6	%			31.9	%			34.2	%

(1)	Interest expense is not included in the calculation of the expense ratio.

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				Years Ended December 31,
				2005				2004				2003
Federal income tax expense at statutory rate					35.00	%			35.00	%			35.00	%
(Decrease) increase attributable to:
	Nontaxable interest income				(9.77	)			(2.82	)			0.07
	Dividend received deduction net of proration				(0.33	)			(0.12	)			5.63
	Difference between the book and tax basis of Evergreen				—				—				9.33
	Other nontaxable income				(0.32	)			(0.04	)			1.00
	Other				—				0.40				(0.46	)
		Total			24.58	%			32.42	%			50.57	%

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	Year ended December 31, 2005 compared to Year ended December 31, 2004

	Year ended December 31, 2004 compared to Year ended December 31, 2003

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			Payments Due by Years
			2006				2007				2008				2009				2010				Thereafter				Total
			(In thousands)
Long Term Debt:
Debt issues to a related party trust(1)(2)			$	2,128				2,128				2,128				2,128				2,128				72,246				82,886
Loss and loss expense payments, net of the effects of reinsurance(3)				65,623				42,457				31,296				15,363				7,697				11,763				174,199
Operating leases on facilities				978				998				1,018				734				594				1,745				6,067
Other operating leases				245				245				181				15				4				—				690
	Total contractual obligations		$	68,974				45,828				34,623				18,240				10,423				85,754				263,842

(1)	Amounts include interest payments associated with these obligations using applicable interest rates as of December 31, 2005.
(2)	In connection with the adoption of FIN 46R, ProCentury has deconsolidated the trusts established in connection with the issuance of trust preferred securities effective December 31, 2003. As a result, ProCentury reports as a component of long term debt the junior subordinated debentures payable by ProCentury to the trusts. See Note 8(b) to our audited consolidated financial statements included in Item 8 of this Annual Report on Form 10-K.
(3)	The timing for payment of our estimated losses, net of the effects of reinsurance is determined by periods based on our historical claims payment experience. Due to the uncertainty in estimating the timing of such payments, there is a risk that the amounts paid in any period can be significantly different than the amounts disclosed above.

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									Percent of
					Amount				Portfolio
					(Dollars in thousands)
Fixed-maturity:
	U.S. Treasury securities				$	3,725				1.0	%
	Agencies not backed by the full faith and credit by the U.S. Government					15,335				4.2
	Corporate securities					35,853				9.8
	Mortgage-backed securities					40,061				10.9
	Asset-backed securities					39,152				10.7
	Collateralized mortgage obligations					27,352				7.5
	Obligations of states and political subdivisions					142,282				38.8
		Total fixed-maturity				303,760				82.9
Cash and short-term investments						17,857				4.9
Equity securities:
	Bond mutual funds					17,852				4.9
	Preferred shares					22,337				6.1
	Common shares					4,604				1.2
		Total equity securities				44,793				12.2
			Total		$	366,410				100.0	%

“AAA”				69.0	%
“AA”				14.2
“A”				6.1
“BBB”				2.8
Below “BBB”				7.9
	Total			100.0	%

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Financial				60.3	%
Consumer, non-cyclical				13.3
Utilities				8.0
Energy				2.7
Industrial				6.9
Consumer, cyclical				2.2
Communications				4.6
Basic materials				1.8
Governments				0.2
	Total			100.0	%

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				December 31, 2005
				Less Than 12 Months								12 Months or Longer								Total
				Estimated				Gross				Estimated				Gross				Estimated				Gross
				Fair				Unrealized				Fair				Unrealized				Fair				Unrealized
				Value				Loss				Value				Loss				Value				Loss
				(In thousands)
Fixed maturity securities:
	U.S. Treasury securities			$	2,097				(18	)			1,329				(35	)			3,426				(53	)
	Agencies not backed by the full faith and credit of the U.S. Government				6,497				(44	)			7,604				(186	)			14,101				(230	)
	Obligations of states and political subdivisions				73,534				(538	)			30,571				(499	)			104,105				(1,037	)
	Corporate securities				15,042				(357	)			15,158				(519	)			30,200				(876	)
	Mortgage-backed securities				33,314				(680	)			6,208				(200	)			39,522				(880	)
	Collateralized mortgage obligations				17,004				(358	)			9,055				(248	)			26,059				(606	)
	Asset-backed securities				18,521				(393	)			7,821				(242	)			26,342				(635	)
		Total			166,009				(2,388	)			77,746				(1,929	)			243,755				(4,317	)
Equities:
	Equity securities				10,523				(490	)			3,873				(305	)			14,396				(795	)
	Bond mutual funds				8,305				(390	)			9,095				(289	)			17,400				(679	)
		Total			18,828				(880	)			12,968				(594	)			31,796				(1,474	)
		Grand Total		$	184,837				(3,268	)			90,714				(2,523	)			275,551				(5,791	)

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										Hypothetical Percentage
										Increase (Decrease) in
						Estimated
		Estimated				Change in				Fair				Shareholders’
Hypothetical Change in Interest Rates		Fair Value				Fair Value				Value				Equity
200 basis point increase		$	312,767				(31,171	)			(9.1	)%			(25.7	)%
100 basis point increase			328,237				(15,702	)			(4.6	)%			(13.0	)%
No change			343,939				—				—				—
100 basis point decrease			359,553				15,614				4.5	%			12.9	%
200 basis point decrease			374,847				30,908				9.0	%			25.5	%

Item 7A.	Quanitative and Qualitative Disclosures about Market Risk

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Item 8.	Financial Statements and Supplementary Data

		Page
Financial Statements:
Report of independent registered public accounting firm			54
Consolidated Balance Sheets at December 31, 2005 and 2004			56
Consolidated Statements of Operations for the three years ended December 31, 2005			57
Consolidated Statements of Shareholders’ Equity and Comprehensive Income for the three years ended December 31, 2005			58
Consolidated Statements of Cash Flows for the three years ended December 31, 2005			59
Notes to Consolidated Financial Statements			60
Financial Statement Schedules:
Schedule I — Summary of Investments — Other than Investments in Related Parties			92
Schedule II — Condensed Financial Information of Parent Company			93
Schedule III — Supplementary Insurance Information			96
Schedule IV — Reinsurance			97
Schedule V — Valuation and Qualifying Accounts			98
Schedule VI — Supplemental Information Concerning Property — Casualty Insurance Operations			99

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					2005				2004
					(In thousands)
ASSETS
Investments:
	Fixed maturities:
		Available-for-sale, at fair value (amortized cost 2005, $306,237; 2004, $262,470)			$	302,632				263,401
		Held-to-maturity, at amortized cost (fair value 2005, $1,118; 2004, $1,156)				1,128				1,142
	Equities (available-for-sale):
		Equity securities, at fair value (cost 2005, $27,521; 2004, $17,944)				26,941				18,228
		Bond mutual funds, at fair value (cost 2005, $18,516; 2004, $18,943)				17,852				18,921
	Short-term investments, at amortized cost					12,229				5,584
			Total investments			360,782				307,276
Cash						5,628				7,732
Premiums in course of collection, net						14,849				10,696
Deferred policy acquisition costs						20,649				17,411
Prepaid reinsurance premiums						10,989				9,382
Reinsurance recoverable on paid losses, net						6,422				3,897
Reinsurance recoverable on unpaid losses, net						37,448				29,485
Deferred federal income tax asset						9,151				5,442
Other assets						8,227				3,606
			Total assets		$	474,145				394,927
LIABILITIES AND SHAREHOLDERS’ EQUITY
Loss and loss expense reserves					$	211,647				153,236
Unearned premiums						95,631				82,135
Long term debt						25,000				25,000
Accrued expenses and other liabilities						6,893				6,703
Reinsurance balances payable						2,572				2,348
Collateral held						11,014				7,008
Federal income taxes payable						185				3,260
			Total liabilities		$	352,942				279,690
Shareholders’ equity:
	Common stock, without par value:
		Common shares — issued and outstanding 13,211,019 shares at December 31, 2005 and 13,155,995 shares issued and outstanding at December 31, 2004			$	—				—
	Additional paid-in capital					100,202				100,110
	Retained earnings					24,846				15,727
	Unearned share compensation					(695	)			(1,420	)
	Accumulated other comprehensive (loss) income, net of taxes					(3,150	)			820
			Total shareholders’ equity			121,203				115,237
			Total liabilities and shareholders’ equity		$	474,145				394,927

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					2005				2004				2003
					(In thousands, except per share data)
Premiums earned					$	177,630				148,702				108,294
Net investment income						14,487				10,048				6,499
Net realized investment (losses) gains						(326	)			50				1,932
			Total revenues			191,791				158,800				116,725
Losses and loss expenses						118,346				89,066				81,004
Amortization of deferred policy acquisition costs						42,935				33,872				25,237
Other operating expenses						14,265				13,292				11,757
Severance expense						793				250				—
Interest expense						1,873				1,498				1,548
Interest expense on the redemption of Class B shares						—				518				—
			Total expenses			178,212				138,496				119,546
			Income (loss) before loss on sale of minority interest in subsidiary, net			13,579				20,304				(2,821	)
Loss on sale of minority interest in subsidiary, net of transaction fees						—				—				(503	)
			Income (loss) before minority interest and income tax			13,579				20,304				(3,324	)
Minority interest						—				—				(409	)
Income tax expense (benefit)						3,338				6,583				(1,681	)
			Net income (loss) before discontinued operations			10,241				13,721				(1,234	)
Discontinued operations, net of tax						—				1,259				1,548
			Net income		$	10,241				14,980				314
Basic net income per share:
	Net income (loss) before discontinued operations				$	0.78				1.29				(0.25	)
	Discontinued operations, net of tax					—				0.12				0.31
		Net income			$	0.78				1.41				0.06
Diluted net income per share:
	Net income (loss) before discontinued operations				$	0.78				1.29				(0.25	)
	Discontinued operations, net of tax					—				0.12				0.31
		Net income			$	0.78				1.41				0.06
Weighted average of shares outstanding — basic						13,060,509				10,623,645				5,000,532
Weighted average of shares outstanding — diluted						13,129,425				10,653,316				5,000,532

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						2005				2004				2003
						(In thousands)
SHAREHOLDERS’ EQUITY
Capital stock:
	Beginning of year					$	—				—				—
	Stock issued						—				—				—
	End of year						—				—				—
Additional paid-in capital:
	Beginning of year						100,110				26,866				26,460
	Issuance of common shares						—				77,931				—
	Issuance costs						—				(1,298	)			—
	Redemption of Class B shares						—				(5,000	)			—
	Share compensation under employee share based award plans						92				1,611				—
	Gain on sale of minority interest in subsidiary, net of tax						—				—				406
	End of year						100,202				100,110				26,866
Retained earnings:
	Beginning of year						15,727				8,297				7,983
	Net income						10,241				14,980				314
	Dividend of subsidiary available for sale						—				(7,025	)			—
	Dividends declared ($0.085/share for 2005 and $0.04/share for 2004)						(1,122	)			(525	)			—
	End of year						24,846				15,727				8,297
Unearned share compensation:
	Beginning of year						(1,420	)			—				—
	Shares issued under share compensation plans						—				(1,611	)			—
	Vesting of restricted shares						324				191				—
	Shares forfeited under share compensation plans						401				—				—
	End of year						(695	)			(1,420	)			—
Accumulated other comprehensive (loss) income, net of taxes:
	Beginning of year						820				1,234				1,953
	Unrealized holding (losses) gains arising during the period, net of reclassification adjustment						(3,970	)			144				(562	)
	Unrealized holding losses arising during the period, discontinued operations						—				—				(157	)
	Dividend of subsidiary available for sale						—				(558	)			—
	End of year						(3,150	)			820				1,234
			Total shareholders’ equity			$	121,203				115,237				36,397
COMPREHENSIVE INCOME
Net income						$	10,241				14,980				314
Other comprehensive income (loss):
	Unrealized (losses) gains arising during the period:
		Unrealized holding (losses) gains arising during the period:
		Gross					(6,368	)			298				1,054
		Related federal income tax benefit (expense)					2,186				(121	)			(360	)
			Net unrealized (losses) gains				(4,182	)			177				694
	Reclassification adjustment for (losses) gains included in net income Gross						(326	)			50				1,932
		Related federal income tax benefit (expense)					114				(18	)			(676	)
			Net reclassification adjustment				(212	)			32				1,256
				Other comprehensive (loss) income			(3,970	)			144				(562	)
				Other comprehensive loss, discontinued operations			—				(558	)			(157	)
				Total other comprehensive loss			(3,970	)			(414	)			(719	)
				Total comprehensive income (loss)		$	6,271				14,566				(405	)

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						2005				2004				2003
						(In thousands)
Cash flows provided by operating activities:
	Net income					$	10,241				14,980				314
	Adjustments:
		Deferred retroactive reinsurance gain					—				—				(2,506	)
		Minority interest					—				—				(409	)
		Net realized investment losses (gains)					326				(50	)			(1,932	)
		Gain on the sale of minority interest in subsidiary					—				—				(313	)
		Deferred federal income tax benefit					(1,781	)			(2,512	)			(3,205	)
		Federal income tax expense included in additional paid-in capital									—				(1,418	)
		Discontinued operations					—				(1,259	)			(1,548	)
		Share compensation under employee share based award plans					817				191				—
		Changes in assets and liabilities:
			Premiums in course of collection, net				(4,153	)			(1,525	)			(10,224	)
			Deferred policy acquisition costs				(3,238	)			(5,697	)			(5,441	)
			Prepaid reinsurance premiums				(1,607	)			(2,682	)			389
			Reinsurance recoverable on paid, unpaid losses, and retroactive, net				(10,488	)			8,660				7,160
			Federal income taxes payable				(3,075	)			1,196				1,165
			Losses and loss expense reserves				58,411				24,000				38,381
			Unearned premiums				13,496				19,996				23,164
			Collateral held				4,006				1,292				1,509
			Funds held under retroactive reinsurance contract				—				—				(11,089	)
			Receivable from subsidiary available for sale				—				26,687				(12,034	)
			Discontinued operations				—				—				14,032
			Other, net				702				(2,303	)			(1,647	)
				Net cash provided by operating activities			63,657				80,974				34,348
Cash flows used in investing activities:
	Purchases of equity securities						(55,903	)			(60,755	)			(114,454	)
	Purchase of fixed maturity securities available-for-sale						(120,162	)			(193,030	)			(129,094	)
	Purchase of fixed maturity securities held-to-maturity						—				—				(1,069	)
	Proceeds from sales of equity securities						46,246				48,797				111,206
	Proceeds from sales and maturities of fixed maturities available-for-sale						75,139				49,807				93,232
	Proceeds from maturities of fixed maturities held-to-maturity						—				325				1,100
	Acquisition, net of cash acquired						(1,041	)			—				—
	Net proceeds from (purchases) sale of short-term investments						(6,645	)			12,060				(3,312	)
	Changes in receivable/payable for securities						(2,273	)			1,250				308
	Discontinued operations						—				—				(9,909	)
				Net cash used in investing activities			(64,639	)			(141,546	)			(51,992	)
Cash flows (used) provided by financing activities:
	Proceeds from issuance of common stock						—				77,931				—
	Issuance costs						—				(1,298	)			—
	Proceeds from the issuance of Trust Preferred Securities						—				—				10,000
	Redemption of Class B shares						—				(5,000	)			—
	Principal payment on long term debt						—				(9,133	)			(680	)
	Dividend paid to shareholders						(1,122	)			(525	)			—
	Draw on line of credit						2,300				—				—
	Principal payment on line of credit						(2,300	)			—				—
	Gain on sale of minority interest in subsidiary						—				—				(625	)
	Discontinued operations						—				—				7,500
				Net cash (used) provided by financing activities			(1,122	)			61,975				16,195
				(Decrease) increase in cash and cash equivalents			(2,104	)			1,403				(1,449	)
Cash and equivalents at beginning of year							7,732				6,329				7,778
Cash and equivalents at end of year						$	5,628				7,732				6,329
Supplemental disclosure of cash flow information:
	Interest paid					$	1,873				1,632				1,521
	Federal income taxes paid					$	8,194				7,900				3,540

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(1)	Basis of Presentation

(a)	Organization

	•	Immediately prior to the completion of the IPO, each outstanding Class A common share was converted into 500 common shares. After the conversion, but prior to the completion of the IPO, the Company had 4,999,995 Class A common shares outstanding. The share conversion is reflected for all periods presented;
	•	Immediately prior to the completion of the IPO, the common shares of Evergreen were distributed as dividends from Century to ProCentury and then by ProCentury to ProCentury’s existing Class A shareholders;
	•	The Company issued 8,000,000 common shares and received net proceeds (before expenses) of $77.9 million;
	•	The Company granted 101,200 restricted common shares and 364,000 stock options to certain employees of ProCentury;
	•	The Company repaid $8.7 million of bank indebtedness outstanding at the closing of the IPO;
	•	The Company redeemed all of its outstanding Class B common shares for an aggregate redemption price of $5.0 million and recorded interest expense of $518,000 in connection with the redemption; and
	•	The Company amended its articles of incorporation to eliminate the authority to issue Class B and Class C common shares.

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	•	Legal/ Regulatory Risk is the risk that changes in the legal or regulatory environment in which an insurer operates will occur and create additional loss costs or expenses not anticipated by the insurer in pricing its products. That is, regulatory initiatives designed to reduce insurer profits or new legal theories may create costs for the insurer beyond those recorded in the consolidated financial statements. Management attempts to reduce this risk by underwriting and loss adjusting practices that identify and minimize the adverse impact of these risks.
	•	Credit Risk is the risk that issuers of securities owned by the Company will default or other parties, including reinsurers that owe the Company money, will not pay. The Company attempts to minimize this risk by adhering to a conservative investment strategy and by maintaining reinsurance and credit and collection policies.
	•	Interest Rate Risk is the risk that interest rates will change and cause a change in the value of an insurer’s investments. The Company attempts to mitigate this risk by attempting to match the maturity schedule of its assets with the expected payouts of its liabilities. To the extent that liabilities come due more quickly than assets mature, an insurer may have to sell assets prior to maturity and recognize a gain or loss.
	•	Ratings Risk is the risk that rating agencies change their outlook or rating of Century. The rating agencies generally utilize proprietary capital adequacy models in the process of establishing ratings for Century. Century is at risk to changes in these models and the impact that changes in the underlying business that it is engaged in can have on such models. To help mitigate this risk, Century maintains regular communications with the rating agencies and evaluates the impact of significant transactions on such capital adequacy models and considers the same in the design of transactions to minimize the adverse impact of this risk.
	•	Significant Business Concentrations: As of December 31, 2005, the Company did not have a material concentration of financial instruments in a single investee or geographic location. Also, the Company did not have a concentration of business transactions with a particular distribution source, a market or geographic area in which business is conducted that makes it overly vulnerable to a single event which could cause a severe impact to the Company’s financial position. The Company did, however, have a concentration of business transactions with a particular customer. See Note 12(d).
	•	Reinsurance: The Company has entered into reinsurance contracts to cede a portion of its business. Total amounts recoverable under these reinsurance contracts include ceded reserves, paid and unpaid

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		claims, and certain other amounts, which totaled $52.3 million as of December 31, 2005. The ceding of risk does not discharge the original insurer from its primary obligation to the contract holder. The Company is selective in its choice of reinsurers and considers numerous factors, the most important of which are the financial stability of the reinsurer, its history of responding to claims and its overall reputation. In an effort to minimize the Company’s exposure to the insolvency of its reinsurers, the Company evaluates the acceptability and reviews the financial condition of each reinsurer annually. The Company generally uses only those reinsurers that have an A.M. Best rating of “A-” (excellent) or better and that have at least $500 million in policyholders’ surplus, or Lloyds of London syndicates that have an A.M. Best rating of “A-” (excellent) or better. See Note 5.
	•	Catastrophe Exposures: Certain insurance coverages that the Company writes includes exposure to catastrophic events such as hurricanes, tornados, hail storms, winter storms and freezing. As a result, a single catastrophe occurrence or destructive weather pattern could materially adversely affect the results of operations and surplus of our insurance subsidiaries. The Company attempts to mitigate this risk by excluding wind peril on non-mobile properties in Florida and within two counties of the Gulf of Mexico and eastern seaboard. In addition, the Company maintains a property catastrophe reinsurance treaty to mitigate future potential catastrophe loss exposure. The property catastrophe reinsurance coverage in 2005 provided coverage of up to 95% of a loss of $16.0 million in excess of the Company’s loss retention of $4.0 million per occurrence.

(b)	Summary of Significant Accounting Policies

(c)	Consolidation Policy

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(d)	Investment Securities

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(e)	Premiums in Course of Collection

(f)	Loss and Loss Expense Reserves

(g)	Premium Earned and Unearned

(h)	Collateral

(i)	Deferred Policy Acquisition Costs

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(j)	Reinsurance Ceded

(k)	Intangibles and Goodwill

(l)	Federal Income Taxes

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(m)	Net Income Per Share

		For the Year Ended December 31, 2005
		Income				Shares				Per Share
		(Numerator)				(Denominator)				Amount
		(In thousands except per share data)
Basic Net Income Per Share
Net income before discontinued operations		$	10,241				13,060,509				0.78
Effect of Dilutive Securities
Restricted common shares			—				68,916				—
Diluted EPS
Net income before discontinued
operations		$	10,241				13,129,425				0.78

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		For the Year Ended December 31, 2004
		Income				Shares				Per Share
		(Numerator)				(Denominator)				Amount
		(In thousands except per share data)
Basic Net Income Per Share
Net income before discontinued
operations		$	13,721				10,623,645				1.29
Effect of Dilutive Securities
Restricted common shares			—				29,671				—
Diluted EPS
Net income before discontinued
operations		$	13,721				10,653,316				1.29

(n)	Comprehensive Income

(o)	Fair Value Disclosures

	•	Cash and short-term investments — The carrying amounts reported approximate their fair value.
	•	Investment securities — Fair values for fixed maturity securities are based on quoted market prices, where available. For fixed maturity securities not actively traded, fair values are estimated using values obtained from independent pricing services. Fair values for equity securities, consisting of preferred and common stocks and bond mutual funds, are based on quoted market prices or independent pricing services. Fair value disclosures for investments are included in Note 2.
	•	Other — The carrying amounts reported for premiums in the course of collection, reinsurance recoverables, accrued investment income, and other assets approximate their fair value. The Company’s long term debt, accrued expenses and other liabilities, collateral, and reinsurance balances payable are either short term in nature or based on current market price, which also approximates fair value.

(p)	Share Based Compensation

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			Years Ended December 31,
			2005				2004				2003
			(In thousands, except for per
			share data)
Net income:
	As reported		$	10,241				14,980				314
	Add: Share-based employee compensation expense included in reported net income, net of related tax effects			530				124				—
	Less: Additional share-based employee compensation expense determined under fair value-based method for all awards, net of related tax effects			(824	)			(677	)			—
	Pro Forma		$	9,947				14,427				314
Basic income per common share:
	As reported		$	0.78				1.41				0.06
	Pro Forma		$	0.76				1.36				0.06
Diluted income per common share:
	As reported		$	0.78				1.41				0.06
	Pro Forma		$	0.76				1.35				0.06

		Year Ended
		December 31, 2005
Risk free interest rate			3.97%
Dividend yield			0.76%
Volatility factor			23.14%
Weighted average expected option life			7.00 Years

		Year Ended
		December 31, 2004
Risk free interest rate			3.74%
Dividend yield			0.76%
Volatility factor			23.14%
Weighted average expected option life			6.15 Years

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(q)	Recently Issued Accounting Standards

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(r)	Reclassifications

(2)	Investments

			December 31, 2005
							Gross				Gross
			Amortized				Unrealized				Unrealized				Estimated
			Cost				Gains				Losses				Fair Value
			(In thousands)
U.S. Treasury securities			$	89				13				—				102
Agencies not backed by the full faith and credit of the U.S. Government				1,039				—				(23	)			1,016
	Total		$	1,128				13				(23	)			1,118

			December 31, 2004
							Gross				Gross
			Amortized				Unrealized				Unrealized				Estimated
			Cost				Gains				Losses				Fair Value
			(In thousands)
U.S. Treasury securities			$	89				13				—				102
Agencies not backed by the full faith and credit of the U.S. Government				1,053				1				—				1,054
	Total		$	1,142				14				—				1,156

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				December 31, 2005
								Gross				Gross
				Amortized				Unrealized				Unrealized				Estimated
				Cost				Gains				Losses				Fair Value
				(In thousands)
Fixed Maturities:
	U.S. Treasury securities			$	3,688				1				(53	)			3,636
	Agencies not backed by the full faith and credit of the U.S. Government				14,526				—				(230	)			14,296
	Obligations of states and political subdivisions				142,932				387				(1,037	)			142,282
	Corporate securities				36,689				40				(876	)			35,853
	Mortgage-backed securities				40,910				31				(880	)			40,061
	Collateralized mortgage obligations				27,943				15				(606	)			27,352
	Asset-backed securities				39,549				238				(635	)			39,152
		Total fixed maturities			306,237				712				(4,317	)			302,632
Equities:
	Equity securities				27,521				215				(795	)			26,941
	Bond mutual funds				18,516				15				(679	)			17,852
		Total equities			46,037				230				(1,474	)			44,793
		Total		$	352,274				942				(5,791	)			347,425

				December 31, 2004
								Gross				Gross
				Amortized				Unrealized				Unrealized				Estimated
				Cost				Gains				Losses				Fair Value
				(In thousands)
Fixed Maturities:
	U.S. Treasury securities			$	4,169				35				(32	)			4,172
	Agencies not backed by the full faith and credit of the U.S. Government				16,805				98				(84	)			16,819
	Obligations of states and political subdivisions				119,893				1,225				(399	)			120,717
	Corporate securities				46,249				200				(300	)			46,149
	Mortgage-backed securities				33,148				276				(48	)			33,376
	Collateralized mortgage obligations				23,825				72				(120	)			23,777
	Asset-backed securities				18,383				135				(127	)			18,391
		Total fixed maturities			262,470				2,041				(1,110	)			263,401
Equities:
	Equity securities				17,944				458				(174	)			18,228
	Bond mutual funds				18,943				3				(25	)			18,921
		Total equities			36,887				461				(199	)			37,149
		Total		$	299,358				2,501				(1,309	)			300,550

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				December 31, 2005
				Less Than 12 Months								12 Months or Longer								Total
				Estimated				Gross				Estimated				Gross				Estimated				Gross
				Fair				Unrealized				Fair				Unrealized				Fair				Unrealized
				Value				Loss				Value				Loss				Value				Loss
				(In thousands)
Fixed maturity securities:
	U.S. Treasury securities			$	2,097				(18	)			1,329				(35	)			3,426				(53	)
	Agencies not backed by the full faith and credit of the U.S. Government				6,497				(44	)			7,604				(186	)			14,101				(230	)
	Obligations of states and political subdivisions				73,534				(538	)			30,571				(499	)			104,105				(1,037	)
	Corporate securities				15,042				(357	)			15,158				(519	)			30,200				(876	)
	Mortgage-backed securities				33,314				(680	)			6,208				(200	)			39,522				(880	)
	Collateralized mortgage obligations				17,004				(358	)			9,055				(248	)			26,059				(606	)
	Asset-backed securities				18,521				(393	)			7,821				(242	)			26,342				(635	)
		Total			166,009				(2,388	)			77,746				(1,929	)			243,755				(4,317	)
Equities:
	Equity securities				10,523				(490	)			3,873				(305	)			14,396				(795	)
	Bond mutual funds				8,305				(390	)			9,095				(289	)			17,400				(679	)
		Total			18,828				(880	)			12,968				(594	)			31,796				(1,474	)
		Grand Total		$	184,837				(3,268	)			90,714				(2,523	)			275,551				(5,791	)

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			December 31, 2005
			Amortized				Estimated Fair
			Cost				Value
			(In thousands)
Held-to-maturity:
	Due in one year or less		$	—				—
	Due after one year through five years			1,039				1,016
	Due after five years through ten years			—				—
	Due after ten years			89				102
			$	1,128				1,118
Available-for-sale:
	Due in one year or less		$	1,663				1,648
	Due after one year through five years			47,846				46,870
	Due after five years through ten years			68,212				67,706
	Due after ten years			80,114				79,843
	Mortgage-backed, collateralized obligations and asset backed			108,402				106,565
			$	306,237				302,632

		2005				2004				2003
		(In thousands)
Interest on fixed maturities		$	12,393				8,781				5,778
Dividends on equity securities			2,832				1,904				1,255
Interest on cash and short-term investments			486				199				121
			15,711				10,884				7,154
Less investment expenses			1,224				836				655
		$	14,487				10,048				6,499

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					Years Ended December 31,
					2005				2004				2003
					(In thousands)
Realized gains (losses):
	Fixed maturities:
		Gross realized gains			$	590				289				713
		Gross realized losses				(417	)			(240	)			(538	)
			Total fixed maturities			173				49				175
	Equity securities:
		Gross realized gains				116				294				1,900
		Gross realized losses				(615	)			(293	)			(143	)
			Total equity securities			(499	)			1				1,757
			Net realized investment losses/gains		$	(326	)			50				1,932

			Years Ended December 31,
			2005				2004				2003
			(In thousands)
Fixed maturities securities			$	(4,536	)			363				(1,112	)
Equity securities				(1,506	)			(115	)			234
	Change in unrealized appreciation on investments before adjustment to taxes			(6,042	)			248				(878	)
Change in deferred income taxes				(2,072	)			103				(316	)
	Change in net unrealized appreciation on investments, net of tax		$	(3,970	)			145				(562	)

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(3)	Sale of Minority Interest of Evergreen

	(a) The Class A and B shareholders are entitled to receive (on a pro rata basis) the lesser of the total amount of the liquidation proceeds or $25 million.
	(b) The Class C shareholders are entitled to receive (on a pro rata basis) the lesser of the amount of liquation proceeds (net of the first distribution as defined in (a) above) or $5 million per Class C share plus 5% per annum simple interest thereon between the date of issuance of such Class C share and the date of the liquidation event.
	(c) Any liquidation proceeds remaining after the previous distributions are distributed to the Class A and B and C shareholders on a pro rata basis.

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(4)	Loss and Loss Expense Reserves

				Years Ended December 31,
				2005				2004				2003
				(In thousands)
Loss and loss expense reserves at beginning of year,
as reported				$	153,236				129,236				90,855
Less reinsurance recoverables on unpaid losses at beginning of year					29,485				36,739				31,853
		Net loss and loss expense reserves at beginning of year			123,751				92,497				59,002
Provision for loss and loss expenses incurred for claims related to:
	Current year				112,946				78,015				53,961
	Prior years				5,400				11,051				27,043
		Total incurred			118,346				89,066				81,004
Losses and loss expense payments for claims related to:
	Current year				24,548				22,095				15,932
	Prior years				43,350				35,717				31,577
		Total paid			67,898				57,812				47,509
Net loss and loss expense reserves at end of year					174,199				123,751				92,497
Plus reinsurance recoverables on unpaid losses at end of year					37,448				29,485				36,739
		Loss and loss expense reserves at end of year, as reported		$	211,647				153,236				129,236

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(5)	Reinsurance

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				Years Ended December 31,
				2005				2004				2003
				(In thousands)
Premiums written:
	Direct			$	212,953				191,136				150,616
	Assumed				3,211				269				(908	)
	Ceded				(26,645	)			(25,381	)			(17,869	)
		Net premiums written		$	189,519				166,024				131,839
Premiums earned:
	Direct			$	200,805				171,718				127,114
	Assumed				1,863				497				(551	)
	Ceded				(25,038	)			(23,513	)			(18,269	)
		Net premiums earned		$	177,630				148,702				108,294
Losses and loss expenses incurred:
	Direct			$	136,406				106,492				99,156
	Assumed				(721	)			22				990
	Ceded				(17,339	)			(17,448	)			(19,142	)
		Net losses and loss expenses incurred		$	118,346				89,066				81,004

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		A.M. Best				Net Amount
		Rating				Recoverable
Reinsurer		As of December 31, 2005
		(In thousands)
Hannover Ruckvesicherungs — Aktiengeselischaft			A			$	10,348,000
GE Reinsurance Corporation			A				9,655,000
Ace Property and Casualty			A+				6,261,000
General Reinsurance Corporation			A++				3,452,000
American Re-Inusrance Company			A				3,116,000
Berkley Insurance Company			A				2,806,000
Folksamerica Reinsurance Company			A				2,178,000
Swiss Reinsurance America Corporation			A+				1,805,000
Gerling Global Reinsurance Corporation(1)			NR3				1,632,000
SCOR Reinsurance Company(1)			B++				1,314,000

(1)	We are closely monitoring the financial status of Gerling Global Reinsurance Corporation (which is not rated as it is no longer accepting new business) and SCOR Reinsurance Company, each of which is continuing to pay claims.

(6)	Retroactive Reinsurance

				Years Ended December 31,
				2005				2004				2003
				(In thousands)
Reserves transferred:
	Initial reserves			$	—				—				20,000
	Adjustments — prior years				—				—				(6,120	)
	Adjustments — current year				—				—				(13,880	)
		Reinsurance recoverables on retroactive reinsurance, end of year		$	—				—				—
Funds held:
	Consideration for reserves transferred			$	—				—				20,000
	Consideration paid in cash to reinsurer				—				—				(500	)
	Interest credited — prior years				—				—				2,109
	Interest credited — current year				—				—				—
	Paid losses recovered — prior years				—				—				(10,520	)
	Adjustments — current year				—				—				(11,089	)
		Funds held under retroactive reinsurance contract, end of year		$	—				—				—

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(7)	Deferred Policy Acquisition Costs

				Years Ended December 31,
				2005				2004				2003
				(In thousands)
Balance at beginning of year				$	17,411				11,714				6,274
	Policy acquisition costs deferred				46,173				39,569				30,677
	Amortization of deferred policy acquisition costs				(42,935	)			(33,872	)			(25,237	)
		Balance at end of year		$	20,649				17,411				11,714

(8)	Long-Term Debt

(a)	Bank Debt

(b)	Company Obligated Mandatorily Redeemable Preferred Securities of Subsidiary Trust Holding Solely Junior Subordinated Debentures

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(c)	Line of Credit

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(9)	Federal Income Taxes

			Years Ended December 31,
			2005				2004				2003
			(In thousands)
Federal current tax expense			$	5,119				9,095				1,524
Federal deferred tax benefit				(1,781	)			(2,512	)			(3,205	)
	Total federal income tax expense (benefit)		$	3,338				6,583				(1,681	)

				Years Ended December 31,
				2005				2004				2003
Federal income tax expense at statutory rate					35.00	%			35.00	%			35.00	%
(Decrease) increase attributable to:
	Nontaxable interest income				(9.77	)			(2.82	)			0.07
	Dividend received deduction net of proration				(0.33	)			(0.12	)			5.63
	Difference between the book and tax basis of Evergreen				—				—				9.33
	Other nontaxable income				(0.32	)			(0.04	)			1.00
	Other				—				0.40				(0.46	)
		Total			24.58	%			32.42	%			50.57	%

			Years Ended December 31,
			2005				2004				2003
			(In thousands)
Unearned premiums not deductible			$	5,925				5,093				3,368
Loss and loss expense reserves discounting				8,303				6,621				4,114
Unrealized loss on investments				1,700				—				—
Other, net				450				193				423
	Total gross deferred tax assets			16,378				11,907				7,905
Less valuation allowance				—				—				—
	Net deferred tax assets			16,378				11,907				7,905
Deferred policy acquisition costs				(7,227	)			(6,094	)			(4,196	)
Difference between the book and tax basis of Evergreen				—				—				(1,666	)
Unrealized appreciation on investments				—				(371	)			(269	)
	Total gross deferred tax liabilities			(7,227	)			(6,465	)			(6,131	)
	Net deferred federal income tax asset		$	9,151				5,442				1,774

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(10)	Employee Benefits

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		December 31, 2005								December 31, 2004
						Weighted-								Weighted-
		Number of				Average				Number of				Average
		Shares				Exercise Price				Shares				Exercise Price
Outstanding at beginning of year			364,000			$	10.50				—				—
Granted			18,000				10.30				364,000			$	10.50
Exercised			—				—				—				—
Forfeited			—				—				—				—
Outstanding at end of year			382,000			$	10.49				364,000			$	10.50
Exercisable at end of year			217,393			$	10.50				75,611			$	10.50
Weighted-average fair value of options granted during year						$	2.99							$	3.04

		Year Ended				Year Ended
		December 31				December 31
		2005				2004
Risk free interest rate			4.03	%			3.97	%
Dividend yield			0.76	%			0.76	%
Volatility factor			23.14	%			23.14	%
Weighted average expected option life			7 Years				7 Years

		Options Outstanding												Options Excercisable
						Weighted
						Average				Weighted								Weighted
						Remaining				Average				Exercisable				Average
		Outstanding				Contract				Exercise				as of				Exercise
Price Range		Options				Life				Price				12/31/2005				Price
$10.20			12,000				9.4			$	10.20				2,328			$	10.20
$10.50			370,000				8.3			$	10.50				215,065			$	10.50

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		2005								2004
						Weighted								Weighted
		Number of				Average				Number of				Average
		Shares				Grant Price				Shares				Grant Price
Beginning of year			137,049			$	10.31				—			$	—
Add (deduct):
Granted			—				—				156,000				10.32
Vested			(31,593	)			10.28				(18,951	)			10.44
Cancelled			(37,423	)			10.50				—				—
End of year			68,033			$	10.22				137,049			$	10.31

(11)	Transactions with Related Parties

(a)	Evergreen National Indemnity Company and Continental Heritage Insurance Company

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(b)	Evergreen-UNI

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(c)	Shareholders of ProCentury

	•	Accretive Agreements. These agreements were entered into as of July 1, 2002. Pursuant to these agreements, the Company’s shareholders assisted the Company in developing financial products and services to be offered to and through the community banks. Pursuant to these agreements the Company paid approximately $241,000 and $966,000 in 2004 and 2003, respectively.
	•	Stonehenge Monitoring Agreement. This agreement was entered into as of July 1, 2002. In connection with its investment in the Company, the Company has paid Stonehenge Opportunity Fund, LLC a monitoring fee for the time and effort it expended in monitoring its investment in the Company, which included reviewing and evaluating the financial statements, attending meetings with management and board of directors and consulting with the Company with respect to business and prospects. Pursuant to this agreement the Company paid approximately $85,000 and $342,000 in 2004 and 2003, respectively.
	•	Full Circle Consulting Arrangement. Pursuant to this agreement, the Company paid Full Circle Holdings, LTD fees for managing the investment in the Company made by its members. Pursuant to this agreement the Company paid approximately $158,000 and $625,000 in 2004 and 2003, respectively.

(12)	Commitments, Contingencies and Concentration

(a)	Commitments

			Payments Due by Years
			2006				2007				2008				2009				2010				Thereafter				Total
			(In thousands)
Operating leases on facilities			$	978				998				1,018				734				594				1,745				6,067
Other operating leases				245				245				181				15				4				—				690
	Total contractual obligations		$	1,223				1,243				1,199				749				598				1,745				6,757

(b)	Lawsuits

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(c)	Concentration of Revenues

(13)	Dividends from Subsidiaries and Statutory Information

(14)	Segment Reporting Disclosures

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				Years Ended December 31,
				2005				2004				2003
				(In thousands)
Segment revenue:
	P/ C			$	176,404				148,708				108,319
	Investing				14,161				10,098				8,431
	Other (including exited lines)				1,226				(6	)			(25	)
		Segment revenue		$	191,791				158,800				116,725
Segment profit (loss):
	P/ C			$	2,200				11,873				(5,018	)
	Investing				14,161				10,098				8,431
	Other (including exited lines)				121				(1,580	)			(3,336	)
		Segment profit		$	16,482				20,391				77
Segment assets:
	Investing			$	366,410				312,399				171,201
	Assets not allocated				107,735				82,528				160,912
		Total consolidated assets		$	474,145				394,927				332,113

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					Years Ended December 31,
					2005				2004				2003
					(In thousands)
Total revenues:
	Segment revenues				$	191,791				158,800				116,725
	Other					—				—				—
			Total consolidated revenues		$	191,791				158,800				116,725
Income before minority interest and income taxes:
Segment profit					$	16,482				20,391				77
Unallocated amounts:
	Corporate expenses					(1,030	)			893				(1,350	)
	Loss on sale of minority interest in subsidiary, net					—				—				(503	)
	Interest expense on the redemption of Class B shares					—				518				—
	Interest expense					(1,873	)			(1,498	)			(1,548	)
		Income (loss) before minority interest and income taxes			$	13,579				20,304				(3,324	)

				Property				Casualty				Other				Consolidated
				(In thousands)
Year ended December 31, 2005:
	P/ C			$	56,224				120,180				—				176,404
	Other (including exited lines)				—				—				1,226				1,226
		Earned premiums		$	56,224				120,180				1,226				177,630
Year ended December 31, 2004:
	P/ C			$	56,901				91,807				—				148,708
	Other (including exited lines)				—				—				(6	)			(6	)
		Earned premiums		$	56,901				91,807				(6	)			148,702
Year ended December 31, 2003:
	P/ C			$	46,433				61,886				—				108,319
	Other (including exited lines)				—				—				(25	)			(25	)
		Earned premiums		$	46,433				61,886				(25	)			108,294

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(15)	Unaudited Interim Financial Information

				First				Second				Third				Fourth
				Quarter				Quarter				Quarter				Quarter				Year-to-Date
				(In thousands)
2005
Net premiums earned				$	41,520				43,025				44,934				48,151				177,630
Net investment income					3,159				3,495				3,866				3,967				14,487
Net realized investment losses					(59	)			(94	)			(66	)			(107	)			(326	)
	Income (loss) before income tax				4,398				5,571				(2,921	)			6,531				13,579
		Net income (loss)			3,079				3,999				(1,793	)			4,956				10,241
Basic earnings per share(1)				$	0.24				0.31				(0.14	)			0.38				0.78
Diluted earning per share(1)				$	0.23				0.30				(0.14	)			0.38				0.78
2004
Net premiums earned				$	32,059				35,819				39,543				41,281				148,702
Net investment income					1,965				2,410				2,719				2,954				10,048
Net realized investment gains (losses)					123				21				(22	)			(72	)			50
	Income before minority interest and income tax				4,150				4,486				5,459				6,209				20,304
		Net income			2,887				2,986				3,712				5,395				14,980
Basic earnings per share(1)				$	0.58				0.27				0.28				0.41				1.41
Diluted earning per share(1)				$	0.58				0.26				0.28				0.41				1.41

(1)	Since the weighted-average shares for the quarters are calculated independently of the weighted-average shares for the year, quarterly income per share may not total to annual income per share.

(16)	Subsequent Event

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						December 31, 2005
														Amount
														Shown on
						Amortized								Balance
						Cost				Fair Value				Sheet
						(In thousands)
Fixed maturities:
Available-for-sale
Bonds:
	United States Government					$	3,688				3,636				3,636
	Agencies not backed by the full faith and credit of the U.S. Government						14,526				14,296				14,296
	States, municipals and political subdivisions						142,932				142,282				142,282
	Convertibles and bonds with warrants attached						1,000				1,000				1,000
	All other corporate bonds						144,091				141,418				141,418
Redeemable preferred stocks							5,364				5,265				5,265
		Total available-for-sale					311,601				307,897				307,897
Held-to-maturity
Bonds:
	United States Government						89				102				89
	Agencies not backed by the full faith and credit of the U.S. Government						1,039				1,016				1,039
		Total held-to-maturity					1,128				1,118				1,128
			Total fixed-maturities				312,729				309,015				309,025
Equity securities:
Common stocks
	Banks, trust and insurance companies						2,150				2,035				2,035
	Industrial, miscellaneous and all other						21,419				20,422				20,422
Nonredeemable preferred stocks							17,140				17,071				17,071
			Total equity securities				40,709				39,528				39,528
Short-term investments							12,229				XXXX				12,229
				Total investments		$	365,667				XXXX				360,782

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					2005				2004
					(In thousands)
Assets
Investments
	Fixed maturities:
		Available-for-sale, at fair value (cost 2005, $1,000; 2004, $ — )			$	1,000				—
	Equities (available-for-sale):
		Bond mutual funds, at fair value (cost 2005, $237; 2004, $6,549)				230				6,549
			Total investments			1,230				6,549
Cash						870				10
Investment in consolidated subsidiaries, equity method						142,407				135,057
Receivable from consolidated subsidiaries						1,303				1,303
Federal income taxes receivable						472				—
Other assets						705				733
			Total assets		$	146,987				143,652
Liabilities and Shareholders’ Equity
Liabilities:
	Long term debt				$	25,000				25,000
	Accrued expenses and other liabilities					690				161
	Deferred federal income tax liability					94				264
	Federal income taxes payable					—				2,990
			Total liabilities			25,784				28,415
Shareholders’ equity:						121,203				115,237
			Total liabilities and shareholders’ equity		$	146,987				143,652

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				Years Ended December 31,
				2005				2004				2003
				(In thousands)
Net investment income				$	153				113				—
Net realized loss					(46	)			(32	)			—
Cash dividends on common stock of consolidated subsidiaries					2,500				9,088				3,000
	Total revenue				2,607				9,169				3,000
Other operating expenses					2,312				694				1,381
Interest expense of Class B shares					—				518				—
Interest expense					1,873				1,498				1,548
	Total expenses				4,185				2,710				2,929
		(Loss) income before transaction fees on sale of minority interest in subsidiary			(1,578	)			6,459				71
Transaction fees on sale of minority interest in subsidiary					—				—				(815	)
		(Loss) income before equity in undistributed earnings of consolidated subsidiaries and income taxes			(1,578	)			6,459				(744	)
Equity in undistributed earnings of consolidated subsidiaries					10,391				7,671				1,319
Income tax (benefit) expense					(1,428	)			(850	)			261
		Net income		$	10,241				14,980				314

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				Years Ended December 31,
				2005				2004				2003
				(In thousands)
Cash flows from operating activities:
	Net income			$	10,241				14,980				314
	Adjustments to reconcile net income to net cash provided by operating activities				(14,517	)			(15,400	)			(1,261	)
		Net cash used in operating activities			(4,276	)			(420	)			(947	)
Cash flows from investing activities:
	Purchase of investments				(5,069	)			(10,063	)			(10,017	)
	Sale of investments				11,327				3,490				10,637
	Capital contributions to subsidiaries				—				(55,000	)			(9,000	)
		Net cash (used in) provided by investing activities			6,258				(61,573	)			(8,380	)
Cash flows from financing activities:
	Proceeds from issuance of trust preferred securities				—				—				10,000
	Principal payments on long term debt				—				(9,133	)			(680	)
	Proceeds from issuance of common stock				—				77,931				—
	Issuance costs				—				(1,298	)			—
	Redemption of Class B shares				—				(5,000	)			—
	Dividend paid to shareholders				(1,122	)			(525	)			—
	Draw on line of credit				2,300				—				—
	Principal payment on line of credit				(2,300	)			—				—
		Net cash (used in) provided by financing activities			(1,122	)			61,975				9,320
		Decrease in cash			860				(18	)			(7	)
Cash at beginning of year					10				28				35
Cash at end of year				$	870				10				28
Supplemental disclosure of cash flow information:
	Interest paid			$	1,873				1,632				1,521
	Federal income taxes paid			$	8,194				7,900				3,540

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							Liability for
							Unpaid																				Amortization
			Deferred				Losses and																Losses and				of Deferred
			Policy				Loss												Net				Loss				Policy				Other				Net
			Acquisition				Adjustment				Unearned				Earned				Investment				Adjustment				Acquisition				Underwriting				Premiums
			Costs				Expenses				Premiums				Premiums				Income				Expenses				Costs				Expenses				Written
			(In thousands)
Year ended December 31, 2005
P/ C			$	20,021				199,633				93,467				176,404				—				117,864				42,326				14,014				187,033
Investing				—				—				—				—				14,487				—				—				—				—
Other (including Exited Lines)				628				12,014				2,164				1,226				—				482				609				14				2,486
Unallocated				—				—				—				—				—				—				—				237				—
	Total		$	20,649				211,647				95,631				177,630				14,487				118,346				42,935				14,265				189,519
Year ended December 31, 2004
P/ C			$	17,411				141,511				81,843				148,708				—				87,463				33,872				15,500				166,020
Investing				—				—				—				—				10,048				—				—				—				—
Other (including Exited Lines)				—				11,725				292				(6	)			—				1,603				—				(29	)			4
Unallocated				—				—				—				—				—				—				—				(2,179	)			—
	Total		$	17,411				153,236				82,135				148,702				10,048				89,066				33,872				13,292				166,024
Year ended December 31, 2003
P/ C			$	11,714				97,117				62,126				108,319				—				77,942				24,642				10,753				132,010
Investing				—				—				—				—				6,499				—				—				—				—
Other (including Exited Lines)				—				32,119				13				(25	)			—				3,062				595				(346	)			(171	)
Unallocated				—				—				—				—				—				—				—				1,350				—
	Total		$	11,714				129,236				62,139				108,294				6,499				81,004				25,237				11,757				131,839

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						Ceded to				Assumed from								Percentage of
						Other				Other				Net Premium				Assumed to
		Direct				Companies				Companies				Written				Net
		(In thousands)
Year ended December 31, 2005		$	212,953				(26,645	)			3,211				189,519				1.7	%
Year ended December 31, 2004		$	191,136				(25,381	)			269				166,024				0.2	%
Year ended December 31, 2003		$	150,616				(17,869	)			(908	)			131,839				(0.7	)%

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								Additions
								Charged/
				Balance at				(Credited)				Charged to								Balance at
				Beginning				to Costs and				Other				Deductions				End of
				of Period				Expenses				Accounts				(1)				Period
Year ended December 31, 2005
Allowance for uncollectible:
	Premiums in course of collection			$	79				(10	)							11				58
		Reinsurance		$	1,285				—				—				—				1,285
Year ended December 31, 2004
Allowance for uncollectible:
	Premiums in course of collection			$	204				(118	)			—				7				79
		Reinsurance		$	1,382				(97	)			—				—				1,285
Year ended December 31, 2003
Allowance for uncollectible:
	Premiums in course of collection			$	898				(127	)			—				567				204
		Reinsurance		$	1,382				—				—				—				1,382

(1)	Deductions include write-offs of amounts determined to be uncollectible.

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										Loss and Loss
		Liability for								Adjustment Expenses
		Unpaid				Discount,				(Benefits) Incurred
		Losses and				if any,				Related to								Paid Losses and
		Loss				Deducted												Loss
		Adjustment				from				Current				Prior				Adjustment
		Expenses				Reserves				Period				Periods				Expenses
Year ended December 31, 2005		$	211,647				—				112,946				5,400				67,898
Year ended December 31, 2004		$	153,236				—				78,015				11,051				57,812
Year ended December 31, 2003		$	129,236				—				53,961				27,043				47,509

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Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Item 9A.	Controls and Procedures

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Item 10.	Directors and Executive Officers of the Registrant

Name		Age				Position with ProCentury
Edward F. Feighan			58			Chairman of the Board, President, Chief Executive Officer
Erin E. West			30			Chief Financial Officer and Treasurer
Christopher J. Timm			49			Executive Vice President and Director
Greg D. Ewald			52			Senior Vice President of Underwriting

Item 11.	Executive Compensation

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Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Number of

Common Shares to

Number of

be Issued Upon

Weighted Average

Common Shares

Exercise of

Exercise Price of

Remaining

Outstanding

Outstanding

Available for Future

Plan Category

Options

Options

Issuance(1)

Equity compensation plans approved by shareholders

382,000

$

10.50

586,084

Equity compensation plans not approved by shareholders

N/A

N/A

N/A

Total

382,000

$

10.50

586,084

(1)	Shares may be issued upon exercise of options or in the form of appreciation rights, performance units, restricted stock or restricted stock units.

Item 13.	Certain Relationships and Related Transactions

Item 14.	Principal Accountant Fees and Services

Item 15.	Exhibits and Financial Statement Schedules

	Reports of independent registered public accounting firm
	Consolidated Balance Sheets at December 31, 2005 and 2004
	Consolidated Statements of Operations for the three years ended December 31, 2005
	Consolidated Statements of Shareholders’ Equity and Comprehensive Income for the three years ended December 31, 2005

	Consolidated Statements of Cash Flows for the three years ended December 31, 2005

	Notes to Consolidated Financial Statements

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	Schedule I — Summary of Investments — Other than Investments in Related Parties
	Schedule II — Condensed Financial Information of Parent Company
	Schedule III — Supplementary Insurance Information
	Schedule IV — Reinsurance
	Schedule V — Valuation and Qualifying Accounts
	Schedule VI — Supplemental Information Concerning Property — Casualty Insurance Operations

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	PROCENTURY CORPORATION

	By:

	Edward F. Feighan,
	Chairman, President and Chief
	Executive Officer

Signature				Title		Date
Edward F. Feighan				Chairman of the Board of Directors, President and Chief Executive Officer (Principal Executive Officer)		March 15, 2006
Erin E. West				Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer)		March 15, 2006
Michael J. Endres				Director		March 15, 2005
Robert F. Fix				Director		March 15, 2006
Jeffrey A. Maffett				Director		March 15, 2006
Press C. Southworth III				Director		March 15, 2006
Christopher J. Timm				Director		March 15, 2006
Alan R. Weiler				Director		March 15, 2006
Robert J. Woodward, Jr.				Director		March 15, 2006

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Exhibit
Number				Description
	3.1			Amended and Restated Articles of Incorporation of ProCentury Corporation (incorporated herein by reference to ProCentury Corporation’s Quarterly Report on Form 10-Q for the period ended March 31, 2004 (File No. 000-50641))
	3.2			Amended and Restated Code of Regulations of ProCentury Corporation (incorporated herein by reference to ProCentury Corporation’s Quarterly Report on Form 10-Q for the period ended March 31, 2004 (File No. 000-50641))
	4.1			Specimen Certificate for common shares, without par value, of ProCentury Corporation (incorporated herein by reference to ProCentury Corporation’s Registration Statement on Form S-1 (File No. 333-111294), as amended)
	4.2			Indenture, dated as of December 4, 2002, by and between ProFinance Holdings Corporation and State Street Bank and Trust Company of Connecticut (incorporated herein by reference to ProCentury Corporation’s Registration Statement on Form S-1 (File No. 333-111294), as amended)
	4.3			Amended and Restated Declaration of Trust, dated as of December 4, 2002, by and among State Street Bank and Trust Company of Connecticut, ProFinance Holdings Corporation and Steven R. Young and John Marazza, as Administrators (incorporated herein by reference to ProCentury Corporation’s Registration Statement on Form S-1 (File No. 333-111294), as amended)
	4.4			Guarantee Agreement, dated as of December 4, 2002, by and between ProFinance Holdings Corporation and State Street Bank and Trust Company of Connecticut (incorporated herein by reference to ProCentury Corporation’s Registration Statement on Form S-1 (File No. 333-111294), as amended)
	4.5			Indenture, dated as of May 15, 2003, by and between ProFinance Holdings Corporation and U.S. Bank National Association (incorporated herein by reference to ProCentury Corporation’s Registration Statement on Form S-1 (File No. 333-111294), as amended)
	4.6			Amended and Restated Declaration of Trust, dated as of May 15, 2003, by and among U.S. Bank National Association, ProFinance Holdings Corporation and Steven R. Young and John Marazza, as Administrators (incorporated herein by reference to ProCentury Corporation’s Registration Statement on Form S-1 (File No. 333-111294), as amended)
	4.7			Guarantee Agreement, dated as of May 15, 2003, by and between ProFinance Holdings Corporation and U.S. Bank National Association (incorporated herein by reference to ProCentury Corporation’s Registration Statement on Form S-1 (File No. 333-111294), as amended)
	10.1			Employment Agreement, dated as of December 15, 2003, by and between ProCentury Corporation and Edward F. Feighan (incorporated herein by reference to ProCentury Corporation’s Registration Statement on Form S-1 (File No. 333-111294), as amended)(1)
	10.2			Employment Agreement, dated as of December 15, 2003, by and between ProCentury Corporation and John A. Marazza (incorporated herein by reference to ProCentury Corporation’s Registration Statement on Form S-1 (File No. 333-111294), as amended)(1)
	10.3			Employment Agreement, dated as of December 15, 2003, by and between ProCentury Corporation and Christopher J. Timm (incorporated herein by reference to ProCentury Corporation’s Registration Statement on Form S-1 (File No. 333-111294), as amended)(1)
	10.4			Employment Agreement, dated as of December 15, 2003, by and between ProCentury Corporation and Charles D. Hamm (incorporated herein by reference to ProCentury Corporation’s Registration Statement on Form S-1 (File No. 333-111294), as amended)(1)
	10.5			Employment Agreement, dated as of February 22, 2006, by and between ProCentury Corporation and Erin E. West(1)
	10.6			Separation Agreement by and between ProCentury Corporation and John A. Marazza, dated January 21, 2005 (incorporated herein by reference to ProCentury Corporation’s Current Report on Form 8-K dated January 21, 2005 (File No. 000-50641))(1)
	10.7			Consulting Agreement by and between ProCentury Corporation and Charles D. Hamm, dated September 20, 2005 (incorporated herein by reference to ProCentury Corporation’s Quarterly Report on Form 10-Q for the period ended September 30, 2005 (File No. 000-50641))(1)

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Exhibit
Number				Description
	10.8			Form of ProCentury Corporation Indemnification Agreement by and between ProCentury Corporation and each member of its Board of Directors (incorporated herein by reference to ProCentury Corporation’s Registration Statement on Form S-1 (File No. 333-111294), as amended)(1)
	10.9			ProCentury Corporation 2004 Stock Option and Award Plan (incorporated herein by reference to ProCentury Corporation’s Registration Statement on Form S-1 (File No. 333-111294), as amended)(1)
	10.10			ProCentury Corporation Deferred Compensation Plan (incorporated herein by reference to ProCentury Corporation’s Registration Statement on Form S-1 (File No. 333-111294), as amended)(1)
	10.11			ProCentury Corporation Deferred Compensation Plan Rabbi Trust Agreement (incorporated herein by reference to ProCentury Corporation’s Registration Statement on Form S-1 (File No. 333-111294), as amended)(1)
	10.12			ProCentury Corporation Annual Incentive Plan (incorporated herein by reference to ProCentury Corporation’s Registration Statement on Form S-1 (File No. 333-111294), as amended)(1)
	10.13			Form of Restricted Stock Award Agreement for Restricted Stock under the ProCentury Corporation 2004 Stock Option and Award Plan (incorporated herein by reference to ProCentury Corporation’s Annual Report on Form 10-K for the fiscal year ended 2004 (File No. 000-50641))(1)
	10.14			Form of Stock Option Agreement for Non-Qualified Stock Options under the ProCentury Corporation 2004 Stock Option and Award Plan (incorporated herein by reference to ProCentury Corporation’s Annual Report on Form 10-K for the fiscal year ended 2004 (File No. 000-50641))(1)
	10.15			Form of Stock Option Agreement for Incentive Stock Options under the ProCentury Corporation 2004 Stock Option and Award Plan (incorporated herein by reference to ProCentury Corporation’s Annual Report on Form 10-K for the fiscal year ended 2004 (File No. 000-50641))(1)
	10.16			Form of Restricted Stock Award Agreement for Restricted Stock for Executive Officers under the ProCentury Corporation 2004 Stock Option and Award Plan (incorporated herein by reference to ProCentury Corporation’s Annual Report on Form 10-K for the fiscal year ended 2004 (File No. 000-50641))(1)
	10.17			Form of Stock Option Agreement for Non-Qualified Stock Options for Executive Officers under the ProCentury Corporation 2004 Stock Option and Award Plan (incorporated herein by reference to ProCentury Corporation’s Annual Report on Form 10-K for the fiscal year ended 2004 (File No. 000-50641))(1)
	10.18			Form of Restricted Stock Award Agreement for Performance Vesting Restricted Stock under the ProCentury Corporation 2004 Stock Option and Award Plan (incorporated herein by reference to ProCentury Corporation’s Quarterly Report on Form 10-Q for the period ended March 31, 2005 (File No. 000-50641))(1)
	10.19			Form of Stock Option Agreement for Non-Qualified Stock Options Granted to Non-Employee Directors under the ProCentury Corporation 2004 Stock Option and Award Plan (incorporated herein by reference to ProCentury Corporation’s Quarterly Report on Form 10-Q for the period ended March 31, 2005 (File No. 000-50641))(1)
	10.20			Transitional Administrative Agreement, effective as of January 1, 2004, by and among ProCentury Corporation, Evergreen National Indemnity Corporation and Continental Heritage Insurance Company (incorporated herein by reference to ProCentury Corporation’s Registration Statement on Form S-1 (File No. 333-111294), as amended)
	10.21			Loss Portfolio Transfer Reinsurance Contract, effective as of January 1, 2004, issued to Century Surety Company by Evergreen National Indemnity Company (incorporated herein by reference to ProCentury Corporation’s Registration Statement on Form S-1 (File No. 333-111294), as amended)
	10.22			Loss Portfolio Transfer Reinsurance Contract, effective as of January 1, 2004, issued to Continental Heritage Insurance Company by Century Surety Company (incorporated herein by reference to ProCentury Corporation’s Registration Statement on Form S-1 (File No. 333-111294), as amended)
	10.23			Loss Portfolio Transfer Reinsurance Contract, effective as of January 1, 2004, issued to Evergreen National Indemnity Company by Century Surety Company (incorporated herein by reference to ProCentury Corporation’s Registration Statement on Form S-1 (File No. 333-111294), as amended)

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Exhibit
Number				Description
	10.24			Quota Share Reinsurance Contract, effective as of January 1, 2004, issued to Evergreen National Indemnity Company by Century Surety Company (incorporated herein by reference to ProCentury Corporation’s Registration Statement on Form S-1 (File No. 333-111294), as amended)
	10.25			Quota Share Reinsurance Contract, effective as of January 1, 2004, issued to Continental Heritage Insurance Company by Century Surety Company (incorporated herein by reference to ProCentury Corporation’s Registration Statement on Form S-1 (File No. 333-111294), as amended)
	10.26			Quota Share Reinsurance Contract, effective as of January 1, 2004, issued to Century Surety Company by Evergreen National Indemnity Company (incorporated herein by reference to ProCentury Corporation’s Registration Statement on Form S-1 (File No. 333-111294), as amended)
	10.27			Software License Agreement, effective as of January 1, 2004, by and among Century Surety Company, Evergreen National Indemnity Company and Continental Heritage Insurance Company (incorporated herein by reference to ProCentury Corporation’s Registration Statement on Form S-1 (File No. 333-111294), as amended)
	10.28			Software Support and Maintenance Agreement, effective as of January 1, 2004, by and among Century Surety Company, Evergreen National Indemnity Company and Continental Heritage Insurance Company (incorporated herein by reference to ProCentury Corporation’s Registration Statement on Form S-1 (File No. 333-111294), as amended)
	21			Subsidiaries of ProCentury Corporation
	23			Consent of KPMG LLP
	31.1			Certification of Principal Executive Officer pursuant to Rule 13a-14(a) of the Exchange Act
	31.2			Certification of Principal Financial Officer pursuant to Rule 13a-14(a) of the Exchange Act
	32.1			Certification of Principal Executive Officer pursuant to Rule 13a-14(b) of the Exchange Act and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002(2)
	32.2			Certification of Principal Financial Officer pursuant to Rule 13a-14(b) of the Exchange Act and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002(2)

(1)	Management contracts and compensatory plans or arrangements required to be filed as an exhibit pursuant to Item 15(b) of Form 10-K.
(2)	These certifications are not deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section. These certifications will not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates them by reference.

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