SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K/A

(Mark One)

x Annual report pursuant to section 13 or 15 (d) of the Securities Exchange Act of 1934

For the fiscal year ended December 31, 2002.

¨ Transition report pursuant to section 13 or 15 (d) of the Securities Exchange Act of 1934.

For the transition period from              to             .

Commission file number 000-28249

AMERINST INSURANCE GROUP, LTD.

(Exact Name of Registrant as Specified in its Charter)

BERMUDA	98-020-7447
(State or other jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)
c/o USA Offshore Management, Limited, Windsor Place, 18 Queen Street, 2nd Floor PO Box HM 1601, Hamilton, Bermuda	HMHX
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code: (441) 296-3973

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

COMMON SHARES, PAR VALUE $1.00 PER SHARE

(Title of class)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.    YES  x     NO  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

Indicated by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).    YES  ¨    NO  x.

As of March 10, 2003, the registrant had 304,887 common shares, $1.00 par value per share outstanding. The aggregate market value of the common stock held by non-affiliates of the Registrant as of March 10, 2003 was $17,585,882 based on book value as of December 31, 2002.

Documents Incorporated by Reference

(Specific pages are incorporated as indicated under the Applicable, Item herein):

	Incorporated By Reference In Part No.
The Company’s Proxy Statement in connection with the Annual General Meeting of Shareholders to be held on May 29, 2003	III

AMERINST INSURANCE GROUP, LTD.

Annual Report on Form 10-K

For the year ended December 31, 2002

TABLE OF CONTENTS

		Page
PART I
Item 1.	Business	3
Item 2.	Properties	7
Item 3.	Legal Proceedings	8
Item 4.	Submission of Matter to A Vote of Securityholders	8
PART II
Item 5.	Market for Registrant’s Common Equity and Related Stockholder Matters	8
Item 6.	Selected Financial Data	8
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operation	9
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	14
Item 8.	Financial Statements and Supplementary Data	17
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	18
PART III
Item 10.	Directors and Executive Officers of the Registrant	18
Item 11.	Executive Compensation	18
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	18
Item 13.	Certain Relationships and Related Transactions.	18
Item 14.	Controls and Procedures	18
PART IV
Item 15.	Exhibits, Financial Statement Schedules and Reports On Form 8-K	18
Independent Auditors’ Report
Signatures
Certifications

Note on Incorporation by Reference

Information pertaining to certain items in Part III of this report is incorporated by reference to portions of the Company’s definitive 2003 Annual General Meeting Proxy Statement to be filed within 120 days after the end of year covered by this Annual Report Form 10-K, pursuant to Regulation 14A.

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PART I

Item 1. Business

General

AmerInst Insurance Group, Ltd. (“AMIG Ltd.” or the “Company”) was formed under the laws of Bermuda on July 16, 1998. AMIG Ltd.’s principal offices are located at Windsor Place, 18 Queen Street, 2^nd Floor, PO Box HM 1601, Hamilton HM GX, Bermuda. On December 2, 1999, the Company and its predecessor entity, AmerInst Insurance Group, Inc., a Delaware corporation (“AIIG”), consummated an exchange transaction pursuant to an Exchange Agreement, in which AIIG transferred all of its assets and liabilities to the Company in exchange for newly issued common shares of the Company (the “Exchange”). AIIG was then liquidated and AIIG shareholders received, on a share-for-share basis, the newly issued common shares of AMIG Ltd.

The primary purpose of AMIG Ltd. and its subsidiaries is to establish, for the benefit of accounting firms which are shareholders of the Company, an insurance company which over time could exert a stabilizing influence on the design, pricing and availability of accountants’ professional liability insurance. The sole business activity of the Company’s wholly owned subsidiary, AmerInst Insurance Company, Ltd. (“AMIC Ltd.”) is to act as a reinsurer of professional liability insurance policies that are issued under the AICPA Professional Liability Insurance Plan (“AICPA Plan” or “Plan”). The AICPA Plan offers professional liability coverage to accounting firms in all 50 states. Currently, approximately 23,000 accounting firms are insured under the Plan.

The purpose for the formation and operation of AMIG Ltd. and its wholly owned subsidiaries, AmerInst Mezco, Ltd. (“Mezco”), AmerInst Insurance Company, Ltd. (“AMIC Ltd.”) and AmerInst Investment Company, Ltd. (“Investco”) was to restructure AIIG’s operations and change AIIG’s domicile from Delaware to Bermuda. The change of domicile and the related restructuring permitted AIIG to reorganize its business activities to take maximum advantage of legal, financing and tax environments. There were several factors that contributed to the decision to carry out the restructuring and the change in domicile including, without limitation, (i) the enhanced ability to purchase shares of shareholders who have died or retired from the practice of accounting, as AIIG previously did generally at 75% of book value as of the end of the preceding year, (ii) the substantial elimination of double income taxation and (iii) Bermuda’s standing as a major reinsurance and financial center.

In the future, AMIC Ltd. may want to expand its business, subject to any required regulatory approvals, to include the reinsurance of other lines of coverage. AMIG Ltd.’s purpose is more fully described in Note 1 of the audited financial statements included herein.

The reinsurance activity of AMIC Ltd. depends upon agreements entered into with outside parties. From the inception of AIIG, AMIG Ltd.’s predecessor entity, through mid-1993, Crum and Forster Managers Corporation, through a group of affiliated insurance companies (collectively, “CGI”), was the primary insurer for the AICPA Plan. In 1988, AIIG’s wholly-owned subsidiary, AmerInst Insurance Company, Inc. (“AMIC”) provided reinsurance to CGI, assuming 10% of the risks related to the first $1,000,000 of coverage for each policy issued under the program. For the period 1989 through mid-1993, an unaffiliated company, Virginia Surety Company, Inc., (“VSC”) provided reinsurance to CGI and retroceded a portion to AIIC such that AIIC assumed 10% to 12.5% of the risk related to the first $1,000,000 of coverage limits for each policy issued under the program. In August 1993, the AICPA Plan endorsed the CNA insurance group as its insurance carrier, replacing CGI as the primary insurer. AIIC then began a reinsurance relationship with CNA, taking a 10% participation of the first $1,000,000 of liability of each policy written under the plan. Effective in December 1999, the Company began taking a 10% share of the “value plan” business from CNA, the “value plan” provides for separate $1,000,000 limits for losses and separate $1,000,000 limits for expenses. Additionally there is a separate $2,000,000 policy aggregate for combined losses and expenses.

AIIC entered into excess of loss retrocession agreements to limit its retained risk on any one claim underwritten by CGI to $50,000 in 1989 and 1990 and $62,500 in 1991 through mid-1993, subject to specified maximum recoveries for each contract year. Retrocession premiums ceded by the Company are adjustable within a specified range based on actual experience under each contract. Retrocession transactions do not relieve AMIC Ltd. from its obligation to the ceding companies.

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Third-party Managers and Service Providers

USA Offshore Management, Ltd. provides the day-to-day services necessary in the administration of AMIG Ltd.’s, Mezco’s, AMIC Ltd.’s and Investco’s business. Prior to the Exchange, these services were provided by USA Risk Group, an affiliate of USA Offshore Management, through Vermont Insurance Management, Inc.

The Country Club Bank of Kansas City, Missouri, provides portfolio management of fixed-income securities and directs AMIG Ltd.’s investments pursuant to guidelines approved by AMIG Ltd.’s board of directors. Harris Associates L.P. and Northeast Investment Management, Inc. provide discretionary investment advice with respect to AMIG Ltd.’s equity investments.

Milliman USA (fka Milliman & Robertson, Inc.), (Liscord, Ward & Roy, Inc. for year-ends prior to December 31, 1998) an independent casualty actuarial consulting firm, has been retained by AMIC Ltd. to render advice regarding actuarial matters.

The law firms of Altheimer & Gray and Conyers, Dill and Pearman have been retained to render advice on legal matters.

Deloitte & Touche has been retained by AMIG Ltd. as its independent auditor to audit its financial statements. Prior to the Exchange, Johnson Lambert & Co. served as independent auditor for AIIG.

Butterfield Corporate Services were retained effective January 1, 2001 to provide share transfer agent and share registry services. Prior to January 1, 2001 Computershare, Inc provided these services.

Professional Liability Coverage

The professional liability policy issued by CGI or CNA and ultimately reinsured by AMIC Ltd. (the “Policy”) is a Professional Liability Company Indemnity Policy form.

The coverage provided under the Policy is on a “claims made” basis, which means the Policy covers only those losses resulting from claims asserted against the insured during the policy period. The insuring clause of the Policy, which indemnifies for losses caused by acts, errors or omissions in the insured’s performance of professional accounting services for others, is in three parts:

Clause A indemnifies the accounting firm insured and, unless excluded by endorsements, any predecessor firms;

Clause B indemnifies any accountant or accounting firm while performing professional accounting services under contract with the insured;

Clause C indemnifies any former or new partner, officer, director or employee of the firm or predecessor firms.

Depending on the insured, defense costs for the policies issued by CNA (and reinsured by AMIC Ltd.) are either within the policy limits or in addition to policy limits. CNA charges additional premium to cover the cost of providing defense costs in addition to the policy limits. Those insureds under the value plan have separate limits for losses and defense costs. There are a few States in which defense costs may not be included within the Policy limit. Settlements are made only with the written consent of the insured. However, if the insured contests the settlement recommended by the insurer, the Policy will only cover costs that do not exceed the lesser of the amount for which the claim could have been settled or the policy limits.

Competition

The AICPA Plan’s current major competition comes from three large, established insurance companies, including the Plan’s former carrier, CGI. A number of smaller companies compete in the field, but none have significant nationwide market share. Many of these companies charge lower premiums than the Plan, which may provide different terms of coverage. The Plan’s principal competitive strength is its commitment to the use of large, financially strong and experienced primary insurers which enhances the Plan’s capacity to continue to be a stable and dependable source of coverage and to pay losses as they arise.

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Licensing and Regulation

The rates and terms of reinsurance agreements generally are not subject to regulation by any governmental authority. This is in contrast to direct insurance policies, the rates and terms of which are regulated by, or subject to notice to, State insurance departments. As a practical matter, however, the rates charged by primary insurers place a limit upon the rates that can be charged by reinsurers.

AMIG Ltd. and AMIC Ltd. are subject to regulation under the insurance laws of Bermuda, where they are domiciled.

Bermuda Regulation

AMIC Ltd., as a licensed Bermuda insurance company, is subject to regulation under The Insurance Act 1978, as amended, and related regulations (the “Bermuda Act”), which provides that no person shall conduct insurance business, including reinsurance, in or from Bermuda unless registered as an insurer under the Bermuda Act by the Supervisor of Insurance (“SOI”). In deciding whether to grant registration, the SOI has discretion to act as he thinks fit in the public interest. The SOI is required by the Bermuda Act to determine whether an applicant for registration is a fit and proper body to be engaged in insurance business and, in particular, whether it has, or has available to it, adequate knowledge and expertise. In connection with registration, the SOI may impose conditions relating to the writing of certain types of insurance business.

An Insurance Advisory Committee appointed by the SOI advises him on matters connected with the discharge of his functions and sub-committees thereof supervise and review the law and practice of insurance in Bermuda including reviews of accounting and administrative procedures.

The Bermuda Act requires, among other things, Bermuda insurance companies to meet and maintain certain standards of solvency, to file periodic reports in accordance with the Bermuda Statutory Accounting Rules, to produce annual audited financial statements and to maintain a minimum level of statutory capital and surplus. In general, the regulation of insurers in Bermuda relies heavily upon the auditors, directors and managers of the Bermuda insurer, each of which must certify each year that the insurer meets the solvency and capital requirements of the Bermuda Act. Furthermore, the SOI is granted powers to supervise, investigate and intervene in the affairs of insurance companies. Significant aspects of the Bermuda insurance regulatory framework are set forth below.

An insurer’s registration may be canceled by the SOI on certain grounds specified in the Bermuda Act, including the failure of the insurer to comply with the obligations of the Bermuda Act or if, in the opinion of the SOI after consultation with the Insurance Advisory Committee, the insurer has not been carrying on business in accordance with sound insurance principles.

Every registered insurer must appoint an independent auditor approved by the SOI who will annually audit and report on the statutory financial statements and the statutory financial return of the insurer, which are required to be filed annually with the SOI. The approved auditor may be the same person or firm that audits the insurer’s financial statements and reports for presentation to its shareholders.

An insurer must prepare annual statutory financial statements. The statutory financial statements are not prepared in accordance with generally accepted accounting principles and are distinct from the financial statements prepared for presentation to the insurer’s shareholders under the Companies Act 1981, as amended, of Bermuda (the “Companies Act”).

The Bermuda Act provides that the statutory assets of an insurer must exceed its statutory liabilities by an amount greater than the prescribed minimum solvency margin. Pursuant to the Bermuda Act, AMIC Ltd. is registered as a Class 3 insurer and, as such: (i) is required to maintain a minimum of solvency margin equal to the greatest of : (x) $1,000,000, (y) 20% of net premiums written in its current financial year up to $6,000,000 plus 15% of net premiums written in its current financial year over $6,000,000, or (z) 15% of loss reserves; (ii) is required to file annually with the SOI a statutory financial return together with a copy of its

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respective statutory financial statements which includes a report of the independent auditor concerning the statutory financial statements of the insurer, a declaration of the statutory ratios, and the related solvency certificate, and an opinion of a loss reserve specialist in respect of its loss and loss expense provisions, all within four months following the end of the relevant financial year; (iii) is prohibited from declaring or paying any dividends during any financial year if it is in breach of its minimum solvency margin or minimum liquidity ratio or if the declaration or payment of such dividends would cause it to fail to meet such margin or ratio (if it fails to meet its minimum solvency margin or minimum liquidity ratio on the last day of any financial year, the insurer will be prohibited, without the approval of the SOI from declaring or paying and dividends during the next financial year); (iv) will be prohibited, without the approval of the SOI from reducing by 15% or more its total statutory capital, as set out in its previous year’s financial statements; and (v) if it appears to the SOI that there is a risk of AMIC Ltd. becoming insolvent or that it is in breach of the Bermuda Act or any conditions imposed upon its registration, the SOI may, in addition to the restrictions specified above, direct AMIC Ltd. not to declare or pay any dividends or any other distributions or may restrict it from making such payments to such extent as the SOI may think fit.

The Bermuda Act provides a minimum liquidity ratio for general business. An insurer engaged in general business is required to maintain the value of its relevant assets as not less than 75% of the amount of its relevant liabilities. Relevant assets include cash and time deposits, quoted investments, unquoted bonds and debentures, first liens on real estate, investment income due and accrued, account and premiums receivable and reinsurance balances receivable. There are certain categories of assets which, unless specifically permitted by the SOI, do not automatically qualify such as advances to affiliates, real estate and collateral loans. The relevant liabilities are total general business insurance reserves and total other liabilities less deferred income tax and sundry liabilities (by interpretation, those not specifically defined). Based upon the foregoing, AMIC Ltd.’s holding in Investco requires the specific approval of the SOI, which it has received.

The SOI may appoint an inspector with extensive powers to investigate the affairs of an insurer if the SOI believes that an investigation is required in the interest of the insurer’s policyholders or persons who may become policyholders. In order to verify or supplement information otherwise provided to him, the SOI may direct an insurer to produce documents or information in relation to matters connected with the insurer’s business.

If it appears to the SOI that there is a risk of an insurer becoming insolvent or, if the insurer is in breach of the Bermuda Act and the regulations or of any condition imposed on its regulation as an insurer, the SOI may direct the insurer in certain respects, including not to take on any new insurance business; not to vary any insurance contract if the effect would be to increase the insurer’s liabilities; not to make certain investments; to realize certain investments; to maintain in, or transfer to and to keep in the custody of, a specified bank, certain assets; not to declare or pay any dividends or other distributions or to restrict the making of such payments; and/or to limit its premium income.

As a Bermuda insurer, AMIG Ltd. is required to maintain a principal office in Bermuda and to appoint and maintain a principal representative in Bermuda. For the purpose of the Bermuda Act, the principal office of the Company is located at Windsor Place, 18 Queen Street, 2^nd Floor, PO Box HM 1601, Hamilton HMGX, Bermuda. The principal representative is USA Offshore Management Ltd. Without a reason acceptable to the SOI an insurer may not terminate the appointment of its principal representative, and the principal representative may not cease to act as such, unless 30 days’ notice in writing to the SOI is given of the intention to do so. It is the duty of the principal representative, within 30 days of his reaching the view that there is a likelihood of the insurer for which he acts becoming insolvent or its coming to his knowledge, or his having reason to believe, that an “event” has occurred, to make a report in writing to the SOI setting out all the particulars of the case that are available to him. Examples of such an “event” include failure by the insurer to comply substantially with a condition imposed upon the insurer by the SOI relating to a solvency margin or a liquidity or other ratio.

The business of the Company and its subsidiaries is conducted from offices in Hamilton, Bermuda. AMIC Ltd. conducts the casualty insurance underwriting business previously conducted by AIIC. Investco and the Company conduct investment business

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for their own accounts through investment advisors in the U.S. or other investment markets as needed and appropriate. Neither Investco nor the Company operate as an investment manager or as a broker dealer requiring registration under investment advisory or securities broker regulations in the U.S., Bermuda or otherwise. The directors and officers of AMIC Ltd. negotiate reinsurance treaties for acceptance in Bermuda. Among other matters, the following business functions are conducted from the Bermuda offices at which the officers of AMIC Ltd. and Investco are located: (i) communications with shareholders of the Company, including the providing of financial reports; (ii) communications with the general public of a nature other than advertising; (iii) solicitation of the sale by the Company, AMIC Ltd. or Investco of shares in any of such entities; (iv) accepting subscriptions of new shareholders of the Company; (v) maintenance of principal corporate records and original books of account; (vi) audit of original books of account; (vii) disbursement of funds in payment of dividends, claims, legal fees, accounting fees, and officers’ and directors’ fees and salaries; (viii) arrangement for and conduct of meetings of the shareholders and directors of the Company, AMIC Ltd. and Investco; and (ix) execution of redemptions of shares of stock of the Company, AMIC Ltd. and Investco. The Company does not maintain an office or place of business in the United States.

AMIC Ltd.’s ability to pay dividends to AMIG Ltd. is subject to the provisions of the Bermuda insurance laws. Under the Bermuda Companies Act, AMIC Ltd. is prohibited from declaring or paying a dividend at December 31, 2002 if such payment would reduce the realizable value of its assets ($53,335,167) to an amount less than the aggregate value of its liabilities ($34,236,897) issued share capital ($120,000) and share premium (additional paid-in capital in the amount of $5,879,981) accounts. As at December 31, 2002, $13,098,289 was available for the payment of dividends to shareholders.

AMIG Ltd.’s ability to pay common shareholders’ dividends and its operating expenses is dependent on cash dividends from AMIC Ltd. including its subsidiary, Investco (collectively the “reinsurance subsidiaries”). The payment of such dividends by the reinsurance subsidiaries to AMIG Ltd. is limited under Bermuda law by the Bermuda Insurance Act 1978 and related regulations as amended which require that AMIC Ltd. maintain minimum levels of solvency and liquidity. For the years ended December 31, 2002 and 2001 these requirements have been met as follows:

	Statutory Capital & Surplus				Liquid Assets
	Minimum		Actual		Minimum		Actual
December 31, 2002	$	4,571,826	$	16,005,873	$	35,102,366	$	62,809,027
December 31, 2001	$	4,344,963	$	17,214,779	$	32,708,085	$	60,825,559

Customers

AMIC Ltd.’s only source of income, other than its investment portfolio, is its reinsurance treaties. Without such reinsurance treaties, current levels of investment income would provide enough revenue to continue operations while the Company evaluated other reinsurance and insurance opportunities.

Employees

AMIG Ltd., AMIC Ltd., Mezco and Investco have no employees. See Note 8, Notes to the Consolidated Financial Statements.

Loss Reserves

For information concerning AMIC Ltd.’s loss reserves, changes in aggregate reserves for the last three years, and loss reserve development as of the end of each of the last ten years, see Management’s Discussion and Analysis of Financial Condition and Results of Operation, Note 3 to the Consolidated Financial Statements, and Note 6 to the Consolidated Financial Statements.

Item 2. Properties

The Company does not own or lease any plants, mines or physical properties.

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Item 3. Legal Proceedings.

The Company is not a party to any material legal proceedings.

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

No matters were submitted to a vote of the Company’s security holders during the quarter ended December 31, 2002.

PART II

Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters

There is no established public trading market for the common shares of AMIG Ltd. AMIG Ltd.’s Bye-Laws provide that all transfers of common shares of AMIG Ltd. must be approved by AMIG Ltd.’s Board of Directors or a committee thereof. AMIG Ltd.’s Board of Directors has appointed a Shareholder Relations Committee for purposes of reviewing and approving applications for transfer. All transferees must meet the qualifications for share ownership contained in AMIG Ltd.’s Share Ownership Policy.

Notwithstanding the absence of a public market for its common shares, the Company has a policy of having its subsidiary, AmerInst Investment Company, Ltd. (“Investco”), which holds almost all of the Company’s investment portfolio, redeem AMIG Ltd. shares owned by shareholders who have retired from the practice of accounting or have died at 75% of net book value as of the preceding fiscal year end.

On June 1, 2000 the Board of Directors of Investco, which holds almost all of the company’s investment portfolio, authorized it to expend up to $1,000,000 to repurchase outstanding common shares of the Company. On September 8, 2000, the Bermuda Monetary Authority authorized a purchase of up to 15,000 common shares pursuant to the Board’s authorization. Such purchases are affected through privately negotiated transactions and are in addition to Investco’s practice of redeeming the shares of individuals who have died or retired from the practice of public accounting. Subsequently, on July 19, 2002, the Bermuda Monetary Authority authorized blanket permission for Investco to purchase Common Shares from individuals who have died or retired from the practice of public accounting and on a negotiated case-by-case basis without limit. Through March 31, 2003, Investco had purchased 15,075 Common Shares for a purchase price of $474,326. In addition, through that date, Investco had purchased 11,809 Common Shares from individuals who had died or retired for a purchase price of $521,521.

As of March 10, 2003, AMIG Ltd. had 2,429 holders of record of its common shares. On August 28, 1995, the Board of Directors of AIIG adopted a dividend policy for AIIG to pay a quarterly dividend of $0.65 per share subject to legally available funds and specific Board approval for each quarter. During 2002, 2001 and 2000, AMIG Ltd. paid cash dividends of $803,430, $821,556 and $855,681, respectively, representing four quarterly payments of $0.65 per share in each year. The declaration of dividends by AMIG Ltd.’s Board of Directors is dependent upon AMIG Ltd.’s and AMIC Ltd.’s capacity to insure or reinsure business, profitability, financial condition, and other factors which the Board of Directors may deem appropriate. For a description of the restrictions which Bermuda law imposes on AMIC Ltd.’s ability to pay dividends, see Licensing and Regulation above.

Item 6. Selected Financial Data

The following summary sets forth selected financial data with respect to AMIG Ltd. for the five fiscal years ended December 31, 2002. The balance sheet and income statement data have been derived from AMIG Ltd.’s consolidated financial statements which have been audited, for fiscal years through 1998 by Johnson Lambert & Co., AIIG’s independent auditors and, for fiscal years 2002, 2001, 2000 and 1999 by Deloitte & Touche, AMIG Ltd.’s independent auditors. The data set forth below should be read in conjunction with the audited financial statements and notes thereto included elsewhere herein.

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SELECTED FINANCIAL STATEMENT DATA

Income Statement Data												RESTATED
	2002			2001		2000			1999			1998
Premiums Earned	$	6,775,407		$	6,400,322	$	6,544,342		$	6,388,323		$	5,901,939
Net Investment Income		1,887,778			2,121,542		2,144,379			2,163,178			2,166,368
Net Realized Gain (Loss)		(1,005,185	)		986,422		(168,819	)		532,954			277,627
Total Revenue	$	7,658,000		$	9,508,286	$	8,519,902		$	9,084,455		$	8,345,934
Net Income (Loss)	$	(741,560	)	$	751,092	$	(648,013	)	$	(1,438,024	)	$	1,061,530
Basic Earnings (Loss) Per Share	$	(2.40	)	$	2.37	$	(1.98	)	$	(4.33	)	$	3.19
Cash dividends declared per common share	$	2.60		$	2.60	$	2.60		$	2.60		$	2.60

Balance Sheet Data

Balance Sheet Data									RESTATED
	2002		2001		2000		1999		1998
Investments	$	46,267,306	$	46,085,433	$	45,827,405	$	39,281,257	$	42,548,658
Other Assets		5,947,257		6,759,060		4,903,333		8,021,904		7,232,788
Total Assets	$	52,214,563	$	52,844,493	$	50,730,738	$	47,303,161	$	49,781,446
Losses and Loss
Adjustment Expenses	$	30,478,843	$	29,242,625	$	27,703,085	$	25,037,029	$	21,718,087
Unearned Premiums		3,350,380		3,127,409		2,789,499		3,057,408		3,415,651
Other Liabilities		668,604		747,240		1,263,002		598,905		2,705,699
Total Liabilities		34,497,827		33,117,274		31,755,586		28,693,342		27,839,437
Stockholders’ Equity		17,716,736		19,727,219		18,975,152		18,609,819		21,942,009
Total Liabilities and Stockholders’ Equity	$	52,214,563	$	52,844,493	$	50,730,738	$	47,303,161	$	49,781,446

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

The following discussion presents the financial condition and results of operation for AMIG Ltd. combined with the financial condition and results of operation for its predecessor entity, AIIG, for the periods and as of the dates indicated.

On December 2, 1999, the Company and its predecessor entity, AIIG, consummated an exchange transaction pursuant to an Exchange Agreement, in which AIIG transferred all of its assets and liabilities to the Company in exchange for newly issued common shares of the Company. See Note 2 to the Consolidated Financial statements for a further description of the transaction.

Results of Operation

A net loss of $(741,560) was reported in 2002, compared to net income of $751,092 in 2001. A net loss of $648,013 was reported in 2000.

Premiums earned increased by 5.9% in 2002 to $6,775,407 from $6,400,322 in 2001. Premiums earned for 2001 decreased by 2.2% from $6,544,342 reported in 2000. In 2002, 2001, and 2000 premiums earned includes $59,577, $0 and $0, respectively, resulting from reductions in the ultimate estimated premium ceded pursuant to retrocession agreements in effect during 1989 through mid-1993. Ultimate premiums are dependent on loss experience under the agreements and are reevaluated as ultimate losses are reevaluated.

The increase in earned premiums during 2002 is attributable to the fluctuation of the effective dates of policies written in the comparative period. Premiums written increased by 3.9% in 2002 to $6,998,378 from $6,738,231 in 2001. The increase in premiums written during 2002 is attributable to the continued growth of the AICPA Plan, primarily the result of rate increases associated with a “step plan”

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which was initiated during 1995. Under the step plan, insureds are offered discounted premium rates for favorable loss experience. However, as these insureds experience losses their premiums are “stepped up” accordingly. Because of the use of claims-made policies, as the number of years of coverage provided increases, CNA’s (and AMIG Ltd.’s) exposure increases. This additional exposure results in an increase in premiums charged.

Net investment income, includes amounts earned on the Company’s investment portfolio and cash equivalents. Net investment income decreased $233,764 or 11.0% in 2002 to $1,887,778 from $2,121,542 in 2001 due to volatile market conditions. Net investment income in 2001 decreased by $22,837, or 1.1% from the $2,144,379 reported in 2000.

Net realized capital gains and losses decreased $1,991,607 in 2002 to $(1,005,185) from $986,422 in 2001. 2002 includes realized capital gains on sales of $513,702 less realized loss on other than temporary impairment of investments of $(1,518,887). Net realized capital gains and losses in 2001 increased by $1,155,241 from the $(168,819) reported in 2000.

Invested assets including cash equivalents increased by $485,637 or 1.0% to $49,426,851 in 2002 compared to $48,941,214 in 2001. 2001 invested assets increased by 2.2% from $47,888,738 in 2000. Investment yield including net realized capital gains and losses in 2002 was 1.8% as compared to 6.4% in 2001 and 4.3% in 2000. Excluding realized capital gains and losses, the yield was 3.8% in 2002, 4.4% in 2001 and 4.6% in 2000. The decrease in investment yield excluding realized capital gains and losses from 2001 to 2002 is primarily due to a general decrease in the yields for fixed term investments over the last three years.

Unrealized gain on investments is $3,330,260 at December 31, 2002 as compared to $3,582,854 at December 31, 2001. AMIG Ltd. considers all of its investment portfolio to be available for sale and accordingly all investments are reported at market value, with changes in net unrealized gains and losses reflected as an adjustment to accumulated other comprehensive income.

The composition of the investment portfolio at December 31, 2002 and 2001 is as follows:

	2002		2001
U.S. Treasury notes	0	%	0	%
Mortgage backed securities and obligations of U.S. Government agencies	44		39
Corporate debt securities	7		4
Obligations of state and political subdivisions	18		21
Equity securities	31		36
	100	%	100	%

AMIG Ltd. continues to invest in high-grade debt and equity securities.

Losses and loss adjustment expenses incurred decreased by 9.8% to $5,468,410 in 2002 from $6,065,656 in 2001, and for 2001 decreased by 2.7% from $6,231,210 in 2000. These amounts include favorable development of prior years’ estimates of losses and loss adjustment expense of approximately $577,001 in 2002, $22,742 in 2001 and $0 in 2000. AMIG Ltd.’s loss ratio, calculated as the ratio of losses and loss adjustment expense to premiums earned, is 80.7% in 2002, 94.8% in 2001 and 95.2% in 2000. The ratio calculated using only losses and loss adjustment expenses incurred for the current year (excluding the effects of developments of prior year estimates and excluding reductions to retrocession premiums) is 89.2% in 2002, 95.1% in 2001, 95.2% in 2000.

The Company’s actuary provides a range for loss reserves at December 31 each year. At December 31, 2002 the Company’s management determined that the net reserve should be $29,804,620. This amount is within, and at the upper end of the range provided by the actuary. Due to the inherent uncertainty in reserving for accountants’ professional liability claims, management believes this is an appropriate reserving policy. It should be noted that any reserve amount selected in the range has a direct effect on the net income of any given year, as well as shareholders’ equity and the book value per share of the Company.

10

Policy acquisition costs of $1,983,400 were expensed in 2002 as compared to $1,891,474 in 2001, an increase of 4.9%. Policy acquisition costs expensed in 2001 reflect a decrease of 1.9% from $1,927,973 in 2000. Such costs as a percentage of premiums earned (excluding the effects of increases to retrocession premiums) are 29.5% in 2002, 29.6% in 2001 and 29.5% in 2000, and result primarily from ceding commissions paid to ceding companies determined contractually pursuant to reinsurance agreements and federal excise taxes paid on premiums written to ceding companies.

Operating and management expenses increased by 18.5% in 2002 to $947,750 from $800,064 in 2001. The primary reasons for this increase are due to increased legal fees for additional SEC disclosures. Operating and management expenses for 2001 decreased by 21.0% from $1,013,138 in 2000, due to a significant reduction in 2001 legal fees due to completion of work on the redomestication to Bermuda compared to 2000. As well, due to the events of September 11^th, 2001, there was one less meeting of the AMIG Ltd. Board of Directors resulting in a reduction in Director’s fees and travel expenses.

Effective December 2, 1999, the date of redomestication to Bermuda, the Company ceased to pay corporate income taxes, which meant the Company’s deferred tax asset could not be utilized. As the Company reported a tax loss for the period ended December 2, 1999, a tax benefit resulted. This amount was received in 2002.

Liquidity and Capital Resources

The Company’s cash needs consist of settlement of losses and expenses under its reinsurance treaty and funding day-to-day operations. Management expects to be able to meet these needs from cash flows arising from its investment portfolio. Because substantially all of the Company’s assets are marketable securities, the Company has sufficient flexibility to provide for unbudgeted cash needs which may arise without resorting to borrowing.

As of December 31, 2002, total invested assets amounted to $46,267,306, an increase of $181,873 or 0.4% from $46,085,433 at December 31, 2001. Cash balances increased from $2,855,781 at December 31, 2001 to $3,159,545 at December 31, 2002. The amount of cash and cash equivalents varies depending on the maturities of fixed term investments and on the level of funds invested in money market mutual funds. The ratio of cash and invested assets to total liabilities and stockholders’ equity at December 31, 2002 was .95 to 1, compared to .93 to 1 at December 31, 2001.

AMIG Ltd.’s gross premiums assumed in 2002 amounted to $6,998,378, an increase of $260,147 from 2001. Gross premium assumed in 2001 increased by $461,797, or 7.4% from 2000. Assumed reinsurance premiums receivable represents current assumed premiums receivable less commissions payable to the fronting carriers. This balance was $514,992 at December 31, 2002 and $1,145,874 at December 31, 2001. This balance fluctuates due to the timing of renewal premiums written. The increase in premiums has also resulted in a direct increase in policy acquisition costs, unearned premiums, fixed commissions paid to CNA as part of its quota share agreement, and loss reserves.

Reinsurance recoveries represent AMIG Ltd.’s estimate of losses to be reimbursed by its reinsurer from future loss payments. AMIG Ltd. (through AMIC) entered into excess of loss retrocession agreements to limit its retained risk on any one claim underwritten by Coregis Group, Inc. (formerly Crum and Forster Managers Corporation), to $50,000 in 1989 and 1990 and $62,500 in 1991 through mid-1993, subject to specified maximum recoveries for each contract year. Retrocession premiums ceded by AMIG Ltd. are adjustable within a specified range based on actual experience under each contract. Amounts recoverable from the reinsurers pursuant to retrocession agreements have been estimated using actuarial assumptions consistent with those used in establishing the liability for unpaid losses and loss adjustment expenses.

Reinsurance balances payable represent AMIG Ltd.’s estimate of the premiums due to the Company’s reinsurer under the retrocession agreements described above, and amounts currently due for losses and loss adjustment expenses payable. The estimate of reinsurance balances due for retrospective premiums decreased by $174,833, $0 and $0 during 2002, 2001 and 2000, respectively. Including loss and loss adjustment expenses currently due, reinsurance balances payable are $0 at December 31, 2002 and $174,833 at December 31, 2001.

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Prepaid expenses and other assets amounted to $136,204 at December 31, 2002, an increase of 4.4% from 2001.

Deferred policy acquisition costs, representing the deferral of ceding commission expense related to premiums not yet earned, increased from December 31, 2001 along with the increase in unearned premiums. The current ceding commission rate, which became effective August 1, 1995, is 28.5%.

The Company paid its thirtieth consecutive quarterly dividend of $0.65 per share during the fourth quarter of 2002.

During 2002, 2001 and 2000, the Board of Directors declared quarterly dividends of $0.65 per share totaling $803,430, $821,556 and $855,681, respectively. Continuation of quarterly dividend payments is subject to the Board of Directors’ continuing evaluation of the Company’s level of surplus vis a vis its capacity to accept more business. It is an objective of the Company to build surplus to retain flexibility for any future business expansion.

On June 1, 2000, the Board of Directors of Investco, which holds almost all of the Company’s investment portfolio, authorized Investco to spend up to $1,000,000 to purchase outstanding Common Shares of the Company. On September 8, 2000, the Bermuda Monetary Authority authorized the purchase of up to 15,000 Common Shares pursuant to the June 1 Board authorization. Such purchases are affected through privately negotiated transactions and are in addition to Investco’s practice of purchasing the shares of individuals who have died or retired from the practice of public accounting. Subsequently, on July 19, 2002, the Bermuda Monetary Authority authorized blanket permission for Investco to purchase Common Shares from individuals who have died or retired from the practice of public accounting and on a negotiated case-by-case basis without limit. Through March 31, 2003, Investco had purchased 15,075 Common Shares for a purchase price of $474,326. In addition, through that date Investco has purchased 11,809 Common Shares from individuals who had died or retired for a purchase price of $521,521.

Property/Casualty Losses and Loss Adjustment Expenses

The consolidated financial statements include the established liability for unpaid losses and loss adjustment expenses (“LAE”) of the Company’s property/casualty (“P/C”) insurance operations. The liabilities for losses and loss adjustment expenses are determined utilizing both case-basis evaluations and actuarial projections, which together represent an estimate of the ultimate net cost of all unpaid losses and LAE incurred through December 31 of each year. These estimates are subject to the effect of trends in future claim severity and frequency. The estimates are continually reviewed and, as experience develops and new information becomes known, the liability is adjusted as appropriate, and reflected in current financial reports.

The anticipated effect of inflation is implicitly considered when estimating liabilities for losses and LAE. Future average severity is projected based on historical trends adjusted for anticipated changes in underwriting standards, policy provisions and general economic trends. These anticipated trends are monitored based on actual development and are modified as necessary.

As is customary in the business, an actuarial review and projection is performed for AMIC Ltd. by its independent actuary as of June 30 and December 31 of each year. The Company reviews the actuarial estimates throughout the year and the possible impact on the Company’s financial position. Unless a significant trend is evident during the year, the Company’s policy has been to make adjustments in the fourth quarter.

In preparing ultimate loss and allocated loss adjustment expenses, the Company’s actuary examined a variety of methods. The method most commonly relied up on was the Generalized Cape Cod Method, which was applied to the incurred, adjusted incurred and paid losses. The case reserving practices for the CNA business differ significantly from those of the Coregis business, therefore, the actuary performed a claims-adjusted incurred loss development method on the CNA data, which adjusted the reserves upward to reflect what would have been outstanding reserves at the level of the Coregis reserves. The actuary selected the Generalized Cape Cod Method applied to claims-adjusted incurred losses to determine ultimate loss estimates for CNA. The actuary also applied the standard paid and incurred loss development methods to the CNA data, however, these were not selected because of the belief that they are biased downward due to the CNA case reserving and claim closing practices.

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The result of this process is that twice a year, the actuary has made recommendations of a range of ultimate loss estimate to AMIC’s Board of Directors, which for each period has selected ultimate loss estimates that fall within that range. Based on the foregoing practice, the estimated loss ratio has been updated by AMIG Ltd.’s Board of Directors at least once each year.

The following table shows the development of the estimated liability for the previous ten years of the Company’s P/C operations:

ANALYSIS OF LOSS AND LOSS ADJUSTMENT EXPENSES DEVELOPMENT

(Thousands of Dollars)

Amounts prior to 1993 restated to conform with SFAS 113

	Year Ended December 31,
	1992		1993		1994		1995		1996		1997		1998		1999		2000		2001		2002
Gross Liability for Loss and LAE Reserves	$	25,287	$	27,047	$	25,335	$	21,789	$	20,300	$	20,803	$	21,718	$	25,037	$	27,703	$	29,243	$	30,479
Reinsurance Recoverable for Unpaid Loss and LAE Reserves		969		4,764		4,071		3,160		2,020		1,040		876		674		674		674		674
Net Liability for Unpaid Losses and LAE reserves	$	24,318	$	22,283	$	21,264	$	18,629	$	18,280	$	19,763	$	20,842	$	24,363	$	27,029	$	28,569	$	29,805

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	Year Ended December 31,
	1992	1993	1994	1995	1996	1997	1998	1999	2000		2001	2002
Losses Reestimated as of:
One Year Later	23,004	18,099	17,957	15,709	16,869	14,883	18,309	21,062	25,775		24,444	—
Two Years Later	20,133	15,064	15,042	14,299	10,161	12,919	15,750	17,451	28,307
Three Years Later	17,782	12,196	13,635	8,417	9,458	11,531	12,359	20,055
Four Years Later	15,520	10,811	9,322	7,849	8,864	10,596	14,136
Five Years Later	14,825	8,479	9,074	7,621	8,419	11,780
Six Years Later	12,817	8,328	8,987	7,541	8,839
Seven Years Later	12,651	8,190	9,098	7,542
Eight Years Later	12,557	8,628	8,858
Nine Years Later	12,858	8,667
Ten Years Later	13,087
Cumulative Redundancy(Deficiency)	11,231	13,616	12,406	11,087	9,441	7,983	6,706,	4,308,	(1,278	)	4,125	—
Cumulative Amount Paid Through:
One Year Later	6,100	1,555	4,007	2,885	3,036	3,567	3,030	3,301	4,358		4,044	—
Two Years Later	7,860	5,128	6,469	4,791	5,580	5,531	5,589	6,759	7,233
Three Years Later	10,370	6,765	7,721	6,087	6,471	6,919	7,785	8,563
Four Years Later	11,436	7,666	8,551	6,655	7,065	8,032	8,581
Five Years Later	11,878	8,199	8,920	6,883	7,546	8,364
Six Years Later	12,263	8,398	9,007	7,268	7,729
Seven Years Later	12,412	8,536	9,277	7,324
Eight Years Later	12,506	8,609	9,327
Nine Years Later	12,575	8,662
Ten Years Later	12,598

The above table of losses reestimated has been prepared on a net basis - i.e., loss and loss adjustment expenses and reinsurance recoveries receivable have not been grossed-up, as required under FAS 113. The schedule has been prepared on a net basis due to the relative immateriality of reinsurance balances when considered in relation to total loss and loss adjustment expense reserves, and due to the cost/benefit of not providing such information.

The above table presents the development of balance sheet liabilities for 1992 through 2002 as of year-end 2002. The top line of the table shows the original recorded unpaid liability for losses and LAE recorded at the balance sheet date for each of the indicated years.

This liability represents the estimated amount of losses and LAE for claims arising in all prior years, both paid and unpaid at the balance sheet date, including losses that had been incurred, but not yet reported, to the Company. The upper portion of the table shows the experience as of the end of each succeeding year. The estimate is increased or decreased as more information becomes known about the frequency and severity of claims.

The “cumulative redundancy (deficiency)” represents the aggregate change in the estimates over all prior years. For example, the 1995 liability has developed a $11,087,000 redundancy which has been reflected in income in subsequent years as the reserves were reestimated.

The lower section of the table shows the cumulative amount paid in respect of the previously recorded liability as of the end of each succeeding year. For example, the 1995 year end liability was originally $18,629,000. As of December 31, 2002, the Company had paid $7,324,000 of the currently estimated $7,542,000 of losses and LAE that had been incurred for 1995 and prior years through the end of 2002; thus an estimated $218,000 in losses incurred through 1995 remain unpaid as of the current financial statement date.

In evaluating this information, it should be understood that each amount includes the effects of all changes in amounts for prior periods. This table does not present accident or policy year development data, which readers may be more accustomed to analyzing. Conditions and trends that have affected development of liability in the past may not necessarily occur in the future. Accordingly, it may not be appropriate to extrapolate future redundancies or deficiencies based on this table.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Inflation

The Company does not believe its operations have been materially affected by inflation. The potential adverse impacts of inflation include: (a) a decline in the market value of the Company’s fixed maturity investment portfolio; (b) an increase

14

in the ultimate cost of settling claims which remain unresolved for a significant period of time; and (c) an increase in the Company’s operating expenses. However, the Company generally holds its fixed maturity investments to maturity and currently believes that the yield is adequate to compensate the Company for the risk of inflation. In addition, the Company expects that any increase from inflation in the ultimate cost of settling unpaid claims will be offset by investment income earned during the period that the claim is outstanding. Finally, the increase in operating expenses resulting from inflation should generally be matched by similar inflationary increases in the premium rates.

Market Sensitive Instruments

Market risk generally represents the risk of loss that may result from potential change in the value of a financial instrument due to a variety of market conditions. The Company’s exposure to market risk is generally limited to potential losses arising from changes in the level of interest rates on market values of fixed term holdings and changes in the market values of equity securities. The Company does not hold or issue derivative financial instruments for either trading or hedging purposes.

a) Interest Rate Risk

Interest rate risk results from the Company’s holdings in interest-rate-sensitive instruments. The Company is exposed to potential losses arising from changes in the level of interest rates on fixed rate instruments held. The Company is also exposed to credit spread risk resulting from possible changes in the issuer’s credit rating. To manage its exposure to interest rate risk the Company attempts to select investments with characteristics that match the characteristics of the related insurance liabilities. Additionally, the Company generally only invests in higher-grade interest bearing instruments.

b) Foreign Exchange Risk

The Company only invests in U.S. dollar denominated financial instruments and does not have any exposure to foreign exchange risk.

c) Equity Price Risk

Equity price risk arises from fluctuations in the value of securities held. The Company invests in equity securities in order to diversify its investment portfolio, which Management believes will assist the Company to achieve its goal of long-term growth of capital and surplus. Management has adopted investment guidelines that set out rate of return and asset allocation targets, as well as degree of risk and equity investment restrictions to minimize exposure to material risk from changes in equity prices.

The table below provides information about the Company’s available for sale investments that are sensitive to change in interest rates at December 31, 2002.

	Amortized Cost		Estimated Fair Value
Due in one year or less	$	527,198	$	539,405
Due after one year through five years		6,306,458		6,509,437
Due after five years through ten years		3,201,299		3,312,414
Due after ten years		1,110,000		1,217,128
Subtotal		11,144,955		11,578,384
Mortgage-backed securities		19,282,521		20,327,420
Total	$	30,427,476	$	31,905,804

15

Forward-Looking Statements

Certain statements contained in this Form 10-K, or otherwise made by officers of the Company, including statements related to the Company’s future performance and our outlook for our businesses and respective markets, projections, statements of management’s plans or objectives, forecasts of market trends and other matters, are forward-looking statements, and contain information relating to us that is based on the beliefs of management as well as assumptions, made by, and information currently available to, management. The words “goal”, “anticipate”, “expect”, “believe” and similar expressions as they relate to us or our management, are intended to identify forward-looking statements. No assurance can be given that the results in any forward-looking statement will be achieved. For the forward-looking statements, we claim the protection of the safe harbor for forward-looking statements provided for in the Private Securities Litigation Act of 1995. Such statements reflect the management’s current views with respect to future events and are subject to certain risks, uncertainties and assumptions that could cause actual results to differ materially from those reflected in the forward-looking statements. Factors that might cause such actual results to differ materially from those reflected in any forward-looking statements include, but are not limited to (i) the occurrence of catastrophic events with a frequency or severity exceeding the Company’s expectations; (ii) a decrease in the level of demand for reinsurance and or an increase in the supply of reinsurance capacity; (iii) increased competitive pressures, including the consolidation and increased globalization of reinsurance providers; (iv) actual losses and loss expenses exceeding the Company’s loss reserves, which are necessarily based on actuarial and statistical projections of ultimate losses; (v) changing rates of inflation and other economic conditions; (vi) losses due to foreign currency exchange rate fluctuations; (vii) changes in the legal or regulatory environments in which the Company operates; and (viii) other risks including those risks identified in any of our other filings with the Securities and Exchange Commission. The foregoing review of important factors should not be construed as exhaustive and should be read in conjunction with other cautionary statements that are included herein. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management’s analysis only as of the date they are made. The Company undertakes no obligation to release publicly the results of any future revisions it may make to forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

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Item 8. Financial Statements and Supplementary Data

The financial statements required by this Item are listed below:

INDEX TO FINANCIAL STATEMENTS AND SCHEDULES

	Page
Financial Statements
Report of Independent Accountants	19
Consolidated Balance Sheets	20
Consolidated Statements of Income and Other Comprehensive Income	21
Consolidated Statement of Changes in Stockholders’ Equity	22-24
Consolidated Statements of Cash Flows	25
Notes to the Consolidated Financial Statements	26
Financial Statement Schedules:
Reports of Independent Accountants on Financial Statement Schedules	37
Schedule I, Investments	38
Schedule IV, Reinsurance	38

Schedules II, III, V, and VI are omitted as they are inapplicable, immaterial, or because the required information may be found in the audited consolidated financial statements and notes thereto.

17

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

There have been no changes in, or disagreements with, accountants on accounting and financial disclosure. The retention of Deloitte & Touche by the Company has been approved by the Company’s Board of Directors and the Company’s shareholders. There have been no disagreements with Deloitte & Touche with respect to any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure.

PART III

Item 10. Directors and Executive Officers of the Registrant

The information required by Item 10 of Form 10-K with respect to identification of directors is incorporated by reference from the information contained in the section captioned “Election of Directors” in the Company’s definitive Proxy Statement for the Annual Meeting of Shareholders to be held on or after May 29, 2003 the (“Proxy Statement”), a copy of which will be filed with the Securities and Exchange Commission within 120 days after the end of the year covered by this Annual Report on Form 10-K. The Company has two executive officers, both of whom are directors of the Company.

Item 11. Executive Compensation

The information required by Item 11 of Form 10-K is incorporated by reference from the information contained in the section captioned “Executive Compensation” in the Proxy Statement.

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

The information required by Item 12 of Form 10-K is incorporated by reference from the information contained in the section captioned “Security Ownership of Certain Beneficial Owners and Management” in the Proxy Statement.

Item 13. Certain Relationships and Related Transactions

The information required by Item 13 of Form 10-K is incorporated by reference from the information contained in the section captioned “Certain Relationships and Related Transactions” in the Proxy Statement.

Item 14. Controls and Procedures

Within the 90 days prior to the filing date of this report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures, pursuant to Rule 13(a)-14 under the Securities Exchange act of 1934, as amended. Based upon that evaluation, the Chief Executive Officer concluded that the Company’s disclosure controls and procedures are effective in ensuring that all material information required to be filed in this annual report has been made known to them in a timely fashion.

There have been no significant changes in the Company’s internal controls or in other factors that could significantly affect internal controls subsequent to the date of the Company’s last evaluation.

PART IV

Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a)  (1) See Index to Financial Statements on page 15.

(a)  (2) See Index to Financial Statement Schedules on page 15.

(a)  (3) See Index to Exhibits set forth on pages 40 - 41.

(b) No reports on Form 8-K were filed during the year ended December 31, 2002.

(c) See Index to Exhibits set forth on pages 40 - 41.

(d) See Index to Financial Statement Schedules on page 15.

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INDEPENDENT AUDITORS’ REPORT

To the Board of Directors and Shareholders

of AmerInst Insurance Group, Ltd.

We have audited the accompanying consolidated balance sheets of AmerInst Insurance Group, Ltd. and subsidiaries (the “Company”) as at December 31, 2002 and 2001, and the related consolidated statements of operations and other comprehensive income (loss), of changes in stockholders’ equity, and of cash flows for each of the three years in the period ended December 31, 2002. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of AmerInst Insurance Group, Ltd. and subsidiaries as at December 31, 2002 and 2001 and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2002 in conformity with accounting principles generally accepted in the United States of America.

/s/ Deloitte & Touche

DELOITTE & TOUCHE

Hamilton, Bermuda

March 21, 2003

19

AMERINST INSURANCE GROUP, LTD.

CONSOLIDATED BALANCE SHEETS

December 31, 2002 and 2001

(expressed in U.S. dollars)

	2002			2001
ASSETS
Investments (Notes 4 and 5):
Fixed maturity investments, at market value (amortized cost $30,427,476 and $28,529,843)	$	31,905,804		$	29,529,239
Equity securities, at market value (cost $12,509,570 and $13,972,736)		14,361,502			16,556,194
TOTAL INVESTMENTS		46,267,306			46,085,433
Cash and cash equivalents		3,159,545			2,855,781
Assumed reinsurance premiums receivable		514,992			1,145,874
Reinsurance balances recoverable (Note 6)		674,223			674,223
Fund deposit with a reinsurer (Note 4)		108,000			108,000
Accrued investment income		399,435			448,786
Deferred policy acquisition costs		954,858			891,311
Federal income taxes receivable		—			504,658
Prepaid expenses and other assets		136,204			130,427
TOTAL ASSETS	$	52,214,563		$	52,844,493
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES
Unpaid losses and loss adjustment expenses(Note 6)	$	30,478,843		$	29,242,625
Unearned premiums		3,350,380			3,127,409
Reinsurance balances payable		—			174,833
Accrued expenses and other liabilities		668,604			572,407
TOTAL LIABILITIES		34,497,827			33,117,274
STOCKHOLDERS’ EQUITY
Common stock, $1 par value, 500,000 shares authorized, 2002 and 2001: 331,751 shares issued and outstanding		331,751			331,751
Additional paid-in-capital		6,801,870			6,801,870
Retained earnings		8,202,991			9,747,981
Accumulated other comprehensive income		3,330,260			3,582,854
Treasury stock (25,615 and 20,388 shares) at cost		(950,136	)		(737,237	)
TOTAL STOCKHOLDERS’ EQUITY		17,716,736			19,727,219
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	52,214,563		$	52,844,493

See accompanying notes to the consolidated financial statements

20

AMERINST INSURANCE GROUP, LTD.

CONSOLIDATED STATEMENTS OF OPERATIONS AND

OTHER COMPREHENSIVE INCOME (LOSS)

years ended December 31, 2002, 2001,and 2000

(expressed in U.S. dollars)

	2002			2001			2000
REVENUES
Net premiums earned (Note 7)	$	6,775,407		$	6,400,322		$	6,544,342
Net investment income (Note 5)		1,887,778			2,121,542			2,144,379
Net realized capital gain (loss) (Note 5)		(1,005,185	)		986,422			(168,819	)
TOTAL REVENUES		7,658,000			9,508,286			8,519,902
LOSSES AND EXPENSES
Losses and loss adjustment expenses		5,468,410			6,065,656			6,231,210
Policy acquisition costs		1,983,400			1,891,474			1,927,973
Operating and management expenses (Note 8)		947,750			800,064			1,013,138
TOTAL LOSSES AND EXPENSES		8,399,560			8,757,194			9,172,321
NET INCOME (LOSS) BEFORE INCOME TAXES		(741,560	)		751,092			(652,419	)
Provision for income taxes (Note 9)		—			—			4,406
NET INCOME (LOSS)		(741,560	)		751,092			(648,013	)
OTHER COMPREHENSIVE INCOME (LOSS),
Net unrealized holding gain (loss) arising during the period		261,108			2,194,042			2,052,356
Reclassification adjustment for (gain) and losses included in net income (loss)		(513,702	)		(986,422	)		168,819
OTHER COMPREHENSIVE INCOME LOSS		(252,594	)		1,207,620			2,221,175
COMPREHENSIVE INCOME (LOSS)	$	(994,154	)	$	1,958,712		$	1,573,162
BASIC EARNINGS (LOSS) PER SHARE	$	(2.40	)	$	2.37		$	(1.98	)
Average common shares outstanding for the year		308,750			316,661			326,855

See accompanying notes to the consolidated financial statements

21

AMERINST INSURANCE GROUP, LTD.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

years ended December 31, 2002, 2001 and 2000

(expressed in U.S. dollars)

	Common Stock		Additional Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive Income, Net of Tax		Treasury Stock			Total Stockholders’ Equity
BALANCE AT DECEMBER 31, 1999	$	331,751	$	6,801,870	$	11,322,139		$	154,059	$	—		$	18,609,819
Net income		—		—		(648,013	)		—		—			(648,013	)
Other comprehensive income, net of tax:
Unrealized gains on securities, net of reclassification adjustment		—		—		—			2,221,175		—			2,221,175
Purchases of treasury stock		—		—		—			—		(352,148	)		(352,148	)
Cash dividends paid ($2.60 per share)		—		—		(855,681	)		—		—			(855,681	)
BALANCE AT DECEMBER 31, 2000	$	331,751	$	6,801,870	$	9,818,445		$	2,375,234	$	(352,148	)	$	18,975,152

See accompanying notes to the consolidated financial statements

22

AMERINST INSURANCE GROUP, LTD.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

years ended December 31, 2002, 2001 and 2000

(expressed in U.S. dollars)

	Common Stock		Additional Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive Income, Net of Tax		Treasury Stock			Total Stockholders’ Equity
BALANCE AT DECEMBER 31, 2000	$	331,751	$	6,801,870	$	9,818,445		$	2,375,234	$	(352,148	)	$	18,975,152
Net income		—		—		751,092			—		—			751,092
Other comprehensive income net of tax:
Unrealized gains on securities, net of reclassification adjustment		—		—		—			1,207,620		—			1,207,620
Purchases of treasury stock		—		—		—			—		(385,089	)		(385,089	)
Cash dividends paid ($2.60 per share)		—		—		(821,556	)		—		—			(821,556	)
BALANCE AT DECEMBER 31, 2001	$	331,751	$	6,801,870	$	9,747,981		$	3,582,854	$	(737,237	)	$	19,727,219

See accompanying notes to the consolidated financial statements

23

AMERINST INSURANCE GROUP, LTD.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

years ended December 31, 2002, 2001 and 2000

(expressed in U.S. dollars)

	Common Stock		Additional Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive Income			Treasury Stock			Total Stockholders’ Equity
BALANCE AT DECEMBER 31, 2001	$	331,751	$	6,801,870	$	9,747,981		$	3,582,854		$	(737,237	)	$	19,727,219
Net income		—		—		(741,560	)		—			—			(741,560	)
Other comprehensive income net of tax:
Unrealized loss on securities, net of reclassification adjustment		—		—		—			(252,594	)		—			(252,594	)
Purchase of treasury stock		—		—		—			—			(212,899	)		(212,899	)
Cash dividends paid ($2.60 per share)		—		—		(803,430	)		—			—			(803,430	)
BALANCE AT DECEMBER 31, 2002	$	331,751	$	6,801,870	$	8,202,991		$	3,330,260		$	(950,136	)	$	17,716,736

See accompanying notes to the consolidated financial statements

24

AMERINST INSURANCE GROUP, LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

years ended December 31, 2002, 2001 and 2000

(expressed in U.S. dollars)

	2002			2001			2000
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	(741,560	)	$	751,092		$	(648,013	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Amortization of net premiums on investments		(49,137	)		69,135			111,278
Net realized (gains) losses on sale of investments		(513,702	)		(986,422	)		168,819
Realized loss on other than temporary impairment		1,518,887			—			—
Changes in assets and liabilities:
Assumed reinsurance premiums receivable		630,882			(1,030,618	)		(115,256	)
Accrued investment income		49,351			11,499			27,557
Deferred policy acquisition costs		(63,547	)		(96,304	)		76,355
Federal income taxes receivable		504,658			24,771			142,906
Prepaid expenses and other assets		(5,777	)		29,373			(79,213	)
Unpaid losses and loss adjustment expenses		1,236,218			1,539,540			2,666,056
Unearned premiums		222,971			337,910			(267,909	)
Reinsurance balances payable		(174,833	)		(131,696	)		210,421
Accrued expenses and other liabilities		96,197			28,614			40,996
Due to broker		—			(412,680	)		412,680
Net cash provided by operating activities		2,710,608			134,214			2,746,677
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of investments		(30,336,802	)		(17,713,781	)		(49,575,685	)
Proceeds from sales and maturities of investments		28,946,287			19,580,660			44,970,615
Net cash provided by (used in) investing activities		(1,390,515	)		1,866,879			(4,605,070	)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid		(803,430	)		(821,556	)		(855,681	)
Purchases of treasury stock		(212,899	)		(385,089	)		(352,148	)
Net cash used in financial activities		(1,016,329	)		(1,206,645	)		(1,207,829	)
NET CHANGE IN CASH AND CASH EQUIVALENTS		303,764			794,448			(3,066,222	)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR		2,855,781			2,061,333			5,127,555
CASH AND CASH EQUIVALENTS, END OF YEAR	$	3,159,545		$	2,855,781		$	2,061,333
SUPPLEMENTAL DATA - Income taxes (received) paid	$	(504,658	)	$	24,771		$	(147,312	)

See accompanying notes to the consolidated financial statements

25

AMERINST INSURANCE GROUP, LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2002 and 2001

(expressed in U.S. dollars)

1. DESCRIPTION OF BUSINESS

AmerInst Insurance Group, Ltd., (“AMIG Ltd.” or the “Company”) was formed under the laws of Bermuda on July 16, 1998. The Company, through its wholly-owned subsidiary AmerInst Insurance Company Ltd. (AMIC Ltd.) and its predecessor, has been engaged in the reinsurance of claims-made insurance policies of participants in an AICPA - endorsed insurance program that provides accountants’ professional liability insurance coverage (AICPA Plan). In 1999, as part of the redomestication and restructuring (see Note 2), AMIC Ltd. assumed the rights and obligations of AIIC Inc. under the reinsurance agreements.

The reinsurance activity of AMIC Ltd. depends upon agreements entered into with outside parties. From the inception of AmerInst Insurance Group, Inc. (“AIIG”), AMIG Ltd.’s predecessor entity, through mid-1993, Crum and Forster Managers Corporation, through a group of affiliated insurance companies (collectively, “CGI”), was the primary insurer for the AICPA Plan. In 1988, AIIG’s wholly-owned subsidiary, AIIC Inc. provided reinsurance to CGI, assuming 10% of the risks related to the first $1,000,000 of coverage for each policy issued under the program. For the period 1989 through mid-1993, an unaffiliated company, Virginia Surety Company, Inc., (“VSC”) provided reinsurance to CGI and retroceded a portion to AIIC Inc. such that AIIC Inc. assumed 10% to 12.5% of the risk related to the first $1,000,000 of coverage limits for each policy issued under the program. In August 1993, the AICPA Plan endorsed the CNA insurance group as its insurance carrier, replacing CGI as the primary insurer. AIIC Inc. then began a reinsurance relationship with CNA, taking a 10% participation of the first $1,000,000 of liability of each policy written under the plan. Effective in December 1999, the Company began taking a 10% share of the “value plan” business from CNA, the “value plan” provides for separate $1,000,000 limits for losses and separate $1,000,000 limits for expenses. Additionally there is a separate $2,000,000 policy aggregate for combined losses and expenses.

AIIC entered into excess of loss retrocession agreements to limit its retained risk on any one claim underwritten by CGI to $50,000 in 1989 and 1990 and $62,500 in 1991 through mid-1993, subject to specified maximum recoveries for each contract year. Retrocession premiums ceded by the Company are adjustable within a specified range based on actual experience under each contract. Retrocession transactions do not relieve AMIC Ltd. from its obligation to the ceding companies.

2. REDOMESTICATION AND RESTRUCTURING

At December 2, 1999 AmerInst Insurance Group Inc. (AIIG) a Delaware company and AMIG Ltd. entered into an Exchange Agreement (“Exchange”), pursuant to which AIIG transferred all of its assets and liabilities to AMIG Ltd. in exchange for newly issued shares of AMIG Ltd. AIIG was then liquidated and AIIG shareholders received on a share-for-share basis the newly issued shares of AMIG Ltd.

The restructuring of AIIG’s business, including the redomestication of the insurance operations of AIIC to AMIG Ltd. was consummated in the following steps:

AmerInst Insurance Company Inc. (“AIIC”), an Illinois company and a wholly-owned subsidiary of AIIG, distributed to AIIG a cash dividend, of approximately $20,000, to be used solely to fund the capitalization required for the formation of the new entities described below; and the expenses of the restructuring.

AIIC formed a new wholly-owned subsidiary, AmerInst Mezco, Ltd., under the laws of Bermuda (“Mezco”). Mezco was funded by AIIC with investment securities in an amount sufficient for the capitalization of a Bermuda insurance company.

26

AMERINST INSURANCE GROUP, LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2002 and 2001

(expressed in U.S. dollars)

2. REDOMESTICATION AND RESTRUCTURING (cont’d)

AIIC distributed all of the shares of Mezco to AIIG as a dividend.

Mezco formed a new wholly-owned subsidiary, AMIC Ltd., under the laws of Bermuda.

AIIC retroceded to AMIC Ltd. all of its insurance treaty liabilities under past treaties, and paid to AMIC Ltd. in connection therewith a premium determined on the basis of actuarial projections, appropriately discounted based on the expected payout patterns, intended to reflect an arms’ length fair market value for such retrocession. The payment of the premium was partially in the form of a transfer of investment securities at market value.

AMIC Ltd. formed a new wholly-owned subsidiary, AmerInst Investment Company, Ltd. (“Investco”) under the laws of Bermuda and contributed assets to capitalize Investco, and provided a subsequent transfer of securities.

AIIC . was liquidated, with its remaining assets and liabilities distributed to AIIG.

Pursuant to the Exchange, AIIG exchanged all of its assets (including the shares of Mezco) and liabilities with AMIG Ltd. solely for AMIG Ltd. common shares, and the currently outstanding AMIG Ltd. common shares were cancelled.

AIIG was dissolved, with holders of shares of AIIG common stock receiving the AMIG Ltd. common shares previously issued to AIIG by AMIG Ltd. on a share-for-share basis.

A replacement treaty for the CNA Treaty was entered into between AMIC Ltd. and CNA.

Following the restructuring, Mezco, AMIC Ltd. and Investco, became wholly-owned direct and indirect subsidiaries of the AMIG Ltd. and neither AIIG nor AIIC continued to exist as separate entities.

The transfers of the operations of AIIG to AMIG Ltd. has been accounted for at historic cost in a manner similar to that in pooling-of-interests accounting.

3. ACCOUNTING POLICIES

Basis of presentation

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America and include the accounts of AMIG Ltd. and its wholly-owned subsidiaries, Mezco, AMIC Ltd. and Investco. Intercompany accounts and transactions have been eliminated in consolidation.

27

AMERINST INSURANCE GROUP, LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2002 and 2001

(expressed in U.S. dollars)

3. ACCOUNTING POLICIES (cont’d)

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Premiums

Premiums assumed are earned on a pro rata basis over the terms of the underlying policies to which they relate. Premiums assumed relating to the unexpired portion of policies in force at the balance sheet date are recorded as unearned premiums. Pursuant to prior retrocession agreements, charges or credits resulting from adjustments to related provisional retrocession premiums are reflected as adjustments to ceded premiums. Management believes that recorded retrocession premiums ceded represent its best estimate of such amounts; however, as changes in the estimated ultimate losses and loss adjustment expenses applicable to the retrocession layers are determined, the estimated ultimate ceded premiums will also change. As adjustments to these estimates become necessary, such adjustments are reflected in current operations.

Deferred policy acquisition costs

Ceding commissions related to assumed reinsurance agreements are deferred and amortized over the terms of the underlying policies to which they relate.

Unpaid losses and loss adjustment expenses

The liability for unpaid losses and loss adjustment expenses includes case basis estimates of reported losses plus supplemental amounts for projected losses incurred but not reported (IBNR), calculated based upon loss projections utilizing certain actuarial assumptions and AMIC Ltd.’s historical loss experience supplemented with industry data. Management believes that its aggregate liability for unpaid losses and loss adjustment expenses at year end represents its best estimate, based upon the available data, of the amount necessary to cover the ultimate cost of loss, based upon an actuarial analysis prepared by a consulting actuary. However, because of the volatility inherent in professional liability coverage, actual loss experience may not conform to the assumptions used in determining the estimated amounts for such liability at the balance sheet date. Accordingly, the ultimate liability could be significantly in excess of or less than the amount indicated in the financial statements. As adjustments to these estimates become necessary, such adjustments are reflected in current operations. AMIC Ltd. does not discount its loss reserves for purposes of these financial statements.

The anticipated effect of inflation is implicitly considered when estimating liabilities for unpaid losses and loss adjustment expenses. Future average severities are projected based on historical trends adjusted for anticipated trends, are monitored based on actual development and are modified if necessary.

28

AMERINST INSURANCE GROUP, LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2002 and 2001

(expressed in U.S. dollars)

3. ACCOUNTING POLICIES (cont’d)

Reinsurance recoveries receivable

Reinsurance recoveries receivable is comprised of estimated amounts of losses and loss adjustment expenses paid and unpaid which are expected to be recoverable from reinsurers. Amounts recoverable from the reinsurers pursuant to retrocession agreements have been estimated using actuarial assumptions consistent with those used in establishing the liability for unpaid losses and loss adjustment expenses. Management believes that reinsurance recoveries receivable as recorded represents its best estimate of such amounts; however, as changes in the estimated ultimate liability for unpaid losses and loss adjustment expenses are determined, the estimated ultimate amount recoverable from the reinsurers will also change. Accordingly, the ultimate recoverable could be significantly in excess of or less than the amount indicated in the financial statements. Further, management has determined that no provision for uncollectible reinsurance recoveries is necessary. As adjustments to these estimates become necessary, such adjustments are reflected in current operations.

Investments

Investments held by AMIG Ltd. consist of obligations of states and political subdivisions and debt securities, mortgage-backed securities, and equity securities. AMIG Ltd. classifies these investments as available-for-sale. Accordingly, AMIG Ltd. reports these securities at their estimated fair values with unrealized holding gains and losses being reported as other comprehensive income, net of applicable taxes. Fair value of investments is based on market quotation. Realized capital gains and losses on sales of investments are accounted for by specifically identifying the cost and are reflected in the income statement in the period of sale.

Declines in the market value of investments below cost are evaluated for other than temporary impairment losses. The evaluation for other than temporary impairment losses is a quantitative and qualitative process which is subject to risks and uncertainties in the determination of whether declines in the fair value of investments are other than temporary. The risks and uncertainties include changes in general economic conditions, the issuer’s financial condition or near term recovery prospects, and the effects of changes in interest rates. AMIG Ltd.’s accounting policy requires that a decline in the value of a security below its cost basis be assessed to determine if the decline is other than temporary. If so, the security is deemed to be impaired and, a charge is recorded in net realized capital losses equal to the difference between the fair value and the cost basis of the security. The fair value of the impaired investment becomes its new cost basis.

Cash and cash equivalents

For purposes of the statements of cash flows, AMIG Ltd. considers all money market funds and highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents.

Net income per common share

Basic earnings per share is determined as net income available to common shareholders divided by the weighted average number of common shares outstanding for the period. There are no dilutive securities.

29

AMERINST INSURANCE GROUP, LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2002 and 2001

(expressed in U.S. dollars)

3. ACCOUNTING POLICIES (cont’d)

Accounting pronouncements

In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities” (SFAS 133). SFAS 133 establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. SFAS 133 became effective in the first quarter of fiscal 2001 and does not have a material impact on the Company’s financial position or results of operations as of December 31, 2002.

4. PLEDGED ASSETS

Pursuant to the reinsurance agreements described in Note 1, AMIC Ltd. is required to provide the ceding companies with collateral for AMIC Ltd.’s liabilities to them. At December 31, 2002 and 2001, $108,000 was held in deposit pursuant to the 1988 reinsurance agreement with CGI. Also at December 31, 2002 and 2001, the carrying value of investments in a trust account held by Bank of New York pursuant to reinsurance agreements with VSC in effect from 1989 to mid-1993 was $358,538 and $3,055,536, respectively. Additionally, at December 31, 2002 and 2001, AMIC Ltd. had provided CNA with a Section 114 Trust, held by JPMorgan Chase Bank, with investments with a carrying value of $17,919,996 and $16,742,314 respectively.

5. INVESTMENTS

The cost or amortized cost, gross unrealized holding gains and losses, and estimated fair value of investments in fixed maturity investments by major security type, and equity securities at December 31, 2002 and 2001 are as follows:

	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
December 31, 2002
Fixed maturity investments:
Obligations of states and political subdivisions	$	7,954,915	$	502,108	$	(13,677	)	$	8,443,346
Corporate debt securities		3,190,040		13,993		(68,995	)		3,135,038
Mortgage-backed securities		19,282,521		1,054,372		(9,473	)		20,327,420
Total fixed maturity investments		30,427,476		1,570,473		(92,145	)		31,905,804
Equity securities		12,509,570		2,209,636		(357,704	)		14,361,502
Total investments	$	42,937,046	$	3,780,109	$	(449,849	)	$	46,267,306

30

AMERINST INSURANCE GROUP, LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2002 and 2001

(expressed in U.S. dollars)

5. INVESTMENTS (cont’d)

	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
December 31, 2001
Fixed maturity investments:
Obligations of states and political subdivisions	$	9,341,931	$	296,378	$	(73,685	)	$	9,564,624
Corporate debt securities		2,017,420		32,185		—			2,049,605
Mortgage-backed securities		17,170,492		748,088		(3,570	)		17,915,010
Total fixed maturity investments		28,529,843		1,076,651		(77,255	)		29,529,239
Equity securities		13,972,736		3,507,034		(923,576	)		16,556,194
Total investments	$	42,502,579	$	4,583,685	$	(1,000,831	)	$	46,085,433

The cost or amortized cost and estimated fair value of fixed maturity investments at December 31, 2002, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities as borrowers may have the right to call or prepay obligations without penalties.

	Amortized Cost		Estimated Fair Value
Due in one year or less	$	527,198	$	539,405
Due after one year through five years		6,306,458		6,509,437
Due after five years through ten years		3,201,299		3,312,414
Due after ten years		1,110,000		1,217,128
Subtotal		11,144,955		11,578,384
Mortgage-backed securities		19,282,521		20,327,420
Total	$	30,427,476	$	31,905,804

Information on sales and maturities of investments are as follows:

	2002		2001		2000
Total proceeds	$	28,946,287	$	19,580,660	$	44,970,615
Gross gains		1,182,992		1,789,884		868,521
Gross losses		669,290		803,462		1,037,340

31

AMERINST INSURANCE GROUP, LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2002 and 2001

(expressed in U.S. dollars)

5. INVESTMENTS (cont’d)

Major categories of net interest and dividend income, and net realized capital gains (losses) on sales of investments are summarized as follows:

	2002			2001			2000
Interest earned:
Fixed maturity investments	$	1,828,710		$	2,084,461		$	2,072,196
Short term investments and cash and cash equivalents		58,584			40,556			64,342
Dividends earned		175,414			166,875			134,341
Investment expenses		(174,930	)		(170,350	)		(126,500	)
Net investment income	$	1,887,778		$	2,121,542		$	2,144,379
Net realized capital gains (losses) on sales of investments:
Fixed maturity investments		327,555			22,468			(108,894	)
Equity securities		186,147			963,954			(59,925	)
Realized loss on other than temporary impairment	$	(1,518,887	)		—			—
Net realized capital gains (losses)	$	(1,005,185	)		986,422			(168,819	)

6. LIABILITY FOR LOSSES AND LOSS ADJUSTMENT EXPENSES

Details of the liability for unpaid losses and loss adjustment expenses and related reinsurance recoveries receivable at December 31, 2002 and 2001 are as follows:

	Gross Liability		2002 Reinsurance Receivable			Net Liability		Gross Liability		2001 Reinsurance Receivable			Net Liability
Case basis estimates	$	5,643,222	$	(151,000	)	$	5,492,222	$	4,648,083	$	(151,000	)	$	4,497,083
IBNR		24,835,621		(523,223	)		24,312,398		24,594,542		(523,223	)		24,071,319
Totals	$	30,478,843	$	(674,223	)	$	29,804,620	$	29,242,625	$	(674,223	)	$	28,568,402

32

AMERINST INSURANCE GROUP, LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2002 and 2001

(expressed in U.S. dollars)

6. LIABILITY FOR LOSSES AND LOSS ADJUSTMENT EXPENSES (cont’d)

Unpaid losses and loss adjustment expense activity is as follows:

	2002			2001			2000
Liability net of reinsurance balances recoverable	$	28,568,402		$	27,028,862		$	24,362,806
Incurred related to:
Current year		6,045,411			6,088,398			6,231,210
Prior years		(577,001	)		(22,742	)		—
Total incurred		5,468,410			6,065,656			6,231,210
Paid related to:
Current year		(138,324	)		(168,017	)		(116,871	)
Prior years		(4,093,868	)		(4,358,099	)		(3,448,283	)
Total paid		(4,232,192	)		(4,526,116	)		(3,565,154	)
Liability net of reinsurance balances recoverable	$	29,804,620		$	28,568,402		$	27,028,862

As a result of the change in estimates of insured events in prior years, the provision for losses and loss expenses decreased by $577,001 in 2002, $22,742 and $0 in 2001 and 2000, respectively. The 2002 decrease related mainly to positive loss development in the fiscal years 1988 to 1999. The 2001 decrease related mainly to positive loss development in the fiscal years 1988 to 1996.

7. NET PREMIUMS EARNED

A reconciliation of assumed to net premiums, on both a written and an earned basis is as follows:

	2002				2001				2000
	Written		Earned		Written		Earned		Written		Earned
Assumed	$	6,938,801	$	6,715,830	$	6,738,231	$	6,400,322	$	6,276,434	$	6,544,342
Retroceded		59,577		59,577		—		—		—		—
Net premiums	$	6,998,378	$	6,775,407	$	6,738,231	$	6,400,322	$	6,276,434	$	6,544,342

Revisions to the estimates of ultimate premiums pursuant to the retrocession agreements resulted in additional reductions to retroceded premiums recorded of $59,577, $0 and $0 during 2002, 2001 and 2000, respectively.

33

AMERINST INSURANCE GROUP, LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2002 and 2001

(expressed in U.S. dollars)

8. OPERATING AND MANAGEMENT EXPENSES

AMIG Ltd., AMIC Ltd., Mezco and Investco have no employees. Their operating activities, as well as certain management functions, are performed by contracted professional service providers. USA Offshore Management, Ltd. provides AMIG Ltd. and AMIC Ltd. certain management, administrative and operations services under the direction of the AMIG Ltd.’s Board of Directors pursuant to an agreement. The agreement may be terminated by either party within a period not exceeding ninety days and no less than 60 days prior written notice. Operating and management expenses include compensation paid to members of the Board of Directors and various committees of the Board totaling $212,192 in 2002, $167,558 in 2001 and $188,950 in 2000.

9. INCOME TAXES

As at December 2, 1999 AIIG Inc. and AIIC Inc. transferred all assets and liabilities to AMIG Ltd. and AMIC Ltd., respectively (see Note 2). Following the Exchange, AIIG Inc. and AIIC Inc. were liquidated.

Prior to the liquidation, United States deferred federal income taxes arose from temporary differences between the valuation of assets and liabilities as determined for financial reporting and tax purposes. Such temporary differences relate principally to unrealized gains and losses on investments, discounting of loss reserves, recognition of unearned premiums and deferred policy acquisition costs. At the date of the liquidation, remaining deferred United States federal income taxes assets of $596,028 were written off to income. Significant permanent differences between book and taxable income include nontaxable municipal bond income, the dividends received deduction, and recovery of capital losses in excess of gains relating to a prior year.

The components of the provision for income tax are as follows:

	2002		2001		2000
Federal income tax
Current tax (benefit)	$	—	$	—	$	(4,406	)
Deferred tax (benefit)		—		—		—
Total federal income tax		—		—		(4,406	)
State income tax (benefit)		—		—		—
Provision for income tax	$	—	$	—	$	(4,406	)

34

AMERINST INSURANCE GROUP, LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2002 and 2001

(expressed in U.S. dollars)

9. INCOME TAX (cont’d)

Reconciliation of income tax at the federal statutory rate to the Company’s provision for income tax is as follows:

	2002		2001		2000
Income tax at federal statutory rate	$	—	$	—	$	—
Effect of tax exempt investment income		—		—		—
State income taxes		—		—		—
Gain on portfolio transfer		—		—		—
Net operating loss carryforward		—		—		—
Other		—		—		(4,406	)
Total	$	—	$	—	$	(4,406	)

Under current Bermuda law, the Company is not required to pay taxes in Bermuda on either income or capital gains. The Company has received an undertaking from the Bermuda government that, in the event of income or capital gains taxes being imposed, the Company will be exempted from such taxes until the year 2016.

10. DIVIDEND RESTRICTIONS AND STATUTORY REQUIREMENTS

Under the Bermuda Companies Act, AMIG Ltd. is prohibited from declaring or paying a dividend at December 31, 2002 if such payment would reduce the realizable value of its assets to an amount less than the aggregate value of its liabilities ($34,497,827), issued share capital ($331,751) and share premium (additional paid-in capital in the amount of $6,801,870) accounts. As at December 31, 2002, $17,716,736 was available to stockholders.

AMIG Ltd.’s ability to pay common shareholders’ dividends and its operating expenses is dependent on cash dividends from AMIC Ltd. including its subsidiary, Investco (collectively the “reinsurance subsidiaries”). The payment of such dividends by the reinsurance subsidiaries to AMIG Ltd. is limited under Bermuda law by the Bermuda Insurance Act 1978 and related regulations as amended which require that AMIC Ltd. maintain minimum levels of solvency and liquidity. For the years ended December 31, 2002 and 2001 these requirements have been met. The minimum required statutory capital and surplus was $4,571,826 and $4,344,963 and actual statutory capital and surplus was $16,005,873 and $17,214,779 at December 31, 2002 and 2001. The minimum required level of liquid assets was $35,102,366 and $32,708,085 and actual liquid assets were $62,809,027 and $60,825,559 at December 31, 2002 and 2001, respectively.

35

11. UNAUDITED QUARTERLY FINANCIAL DATA

2002	FIRST QUARTER		SECOND QUARTER			THIRD QUARTER			FOURTH QUARTER
Reinsurance:
Net premiums earned	$	1,712,320	$	1,585,148		$	1,382,612		$	2,095,327
Net investment income (loss)		434,073		500,007			599,778			353,920
Net realized gain (loss)		293,360		588,508			(129,060	)		(1,757,993	)
Total revenues		2,439,753		2,673,663			1,853,330			691,254
Income (loss) before income taxes	$	170,063	$	559,151		$	(17,872	)	$	(1,452,902	)
Net income (loss)	$	170,063	$	559,151		$	(17,872	)	$	(1,452,902	)
Basic and diluted net (loss) income per share	$	0.55	$	1.80		$	(0.06	)	$	(4.69	)
2001	FIRST QUARTER		SECOND QUARTER			THIRD QUARTER			FOURTH QUARTER
Reinsurance:
Net premiums earned	$	1,654,406	$	1,501,212		$	1,600,860		$	1,643,844
Investment income (loss)		771,389		694,484			603,810			1,038,281
Total revenues		2,425,795		2,195,696			2,204,670			2,682,125
Income (loss) before income taxes	$	97,167	$	(69,423	)	$	97,759		$	625,589
Net income (loss)	$	97,167	$	(69,423	)	$	97,759		$	625,589
Basic and diluted net (loss) income per share	$	0.31	$	(0.22	)	$	0.31		$	1.97

36

REPORT OF INDEPENDENT ACCOUNTANTS

ON FINANCIAL STATEMENT SCHEDULES

INDEPENDENT AUDITORS’ REPORT

To the Board of Directors and Shareholders

of AmerInst Insurance Group, Ltd.

We have audited the consolidated financial statements of AmerInst Insurance Group, Ltd. and subsidiaries as of December 31, 2002 and for the years then ended and have issued our report thereon dated March 21, 2003; such financial statements and report are included on page 17 of this Form 10-K. Our audits also included the financial statement schedules of AmerInst Insurance Group, Ltd. listed in the Index on page 15. These financial statement schedules are the responsibility of the Company’s management. Our responsibility is to express an opinion based on our audit. In our opinion, such financial statements schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein.

/s/ Deloitte & Touche

Hamilton, Bermuda

March 21, 2003

37

INVESTMENTS—SCHEDULE I

AmerInst Insurance Group, Ltd.

Consolidated Summary of Investments

as of December 31, 2002

Type of investment	Cost (1)		Market Value		Amount at which shown in the Balance Sheet
Fixed maturity investments:
Bonds:
United States Government and Agencies and authorities	$	19,282,522	$	20,327,420	$	20,327,420
States, municipalities and political subdivisions		7,954,915		8,443,346		8,443,346
All other corporate bonds		3,190,039		3,135,038		3,135,038
Total fixed maturities		30,427,476		31,905,804		31,905,804
Equities:
Common stocks:
Bank, trust and insurance companies		1,668,235		1,205,526		1,205,526
Industrial, miscellaneous and all other		10,841,335		13,155,976		13,155,976
Total equities securities		12,509,570		14,361,502		14,361,502
Total investments	$	42,937,046	$	46,267,306	$	46,267,306

(1) Original cost of equity securities and, as to fixed maturities, original cost reduced by repayments and adjusted for amortization of premiums or accrual of discounts.

AMERINST INSURANCE GROUP, LTD.

REINSURANCE—SCHEDULE IV

Year Ended	Column A	Column B	Column C	Column D	Column E	Column F
	Line of Business	Gross Premium Written	Ceded to Other Companies	Assumed Premiums Written	Net Premiums Written	% Assumed To Net Premiums Written
12/31/02	Professional Liability	—	59,577	6,065,656	6,998,378	99.1	%
12/31/01	Professional Liability	—	—	6,738,231	6,738,231	100.0	%
12/31/00	Professional Liability	—	—	6,276,434	6,276,434	100.0	%

38

SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: February 3, 2004	AMERINST INSURANCE GROUP, LTD.
	By:	/s/ Stuart H. Grayston
		Stuart H. Grayston, President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and as of the dates indicated.

Signature	Title	Date
/s/ Stuart H. Grayston	President and Director (Principal Executive Officer)	February 3, 2004
Stuart H. Grayston
/s/ Murray Nicol	Vice-President, Treasurer and Director (Principal Financial and Accounting Officer)	February 3, 2004
Murray Nicol
/s/ Ronald S. Katch	Director and Chairman of the Board	February 3, 2004
Ronald S. Katch
/s/ Jerome A. Harris	Director and Vice-Chairman of the Board	February 3, 2004
Jerome A. Harris
/s/ David N. Thompson	Director	February 3, 2004
David N. Thompson
/s/ John T. Schiffman	Director	February 3, 2004
John T. Schiffman
/s/ Irvin F. Diamond	Director	February 3, 2004
Irvin F. Diamond
/s/ Jeffry I. Gillman	Director	February 3, 2004
Jeffry I. Gillman
/s/ Jerrell A. Atkinson	Director	February 3, 2004
Jerrell A. Atkinson

39

INDEX TO EXHIBITS

YEAR ENDED DECEMBER 31, 2002

Exhibit Number	Description
3(i)	Memorandum of Association of the Company (1)
3(ii)	Bye-laws of the Company (1)
4.1	Section 47 of the Company’s Bye-laws—included in Exhibit 3(ii) above
4.2	Statement of Share Ownership Policy, as Amended (9)
10.1	Reinsurance Treaty between AIIC and Virginia Surety Company, Inc. (2)
10.2	Agreement between Country Club Bank and AIIC (2)
10.3	Agreement between Country Club Bank and AIIG (2)
10.4	Reinsurance Treaty between AIIC and CNA Insurance Companies (3), 1994 placement slip (4) 1995 placement slip (5) 1996 placement slip (6) 1997 placement slip (8) 1998 placement slip (10) and Endorsement No. 1 to the Treaty effective July 1, 1999 (11)
10.5	Revised Management Agreement between Vermont Insurance Management, Inc. and AIIC dated May 1, 1997(7) Addenda to Management Agreement dated July 1, 1997 (8) Addenda to Management Agreement dated July 1, 1998 (10) Management Agreement between USA Offshore Management, Ltd. and AmerInst Insurance Company Ltd. dated as of December 2, 1999 (12) and Addenda to Agreement between AmerInst Insurance Company Ltd. and USA Offshore Management, Ltd. dated June 2, 2000 (12).
10.6	Escrow Agreement among AIIC, United States Fire Insurance Company and Harris Trust and Savings Bank dated March 7, 1995 (5)
10.7	Security Trust Agreement among AIIC, Harris Trust and Savings Bank and Virginia Surety Company, Inc. dated March 9, 1995 (5) and Agreement of Resignation, Appointment and Acceptance by and among AMIC Ltd., Harris Trust and Savings Bank and The Bank of New York dated as of May 8, 2000 (filed herewith)
10.8	Investment Advisory Agreement For Discretionary Accounts between Amerinst Insurance Company and Harris Associates L.P. dated as of January 22, 1996, as amended by the Amendment to Investment Advisory Agreement for Discretionary Accounts dated as of April 2, 1996 (1
10.9	Exchange Agreement between the Company and AMIG Ltd., dated as of January 20, 1999 (1)
10.10	Reinsurance Treaty between AMIC Ltd. and CNA Insurance Companies, effective December 1, 1999 (11)
10.11	Value Plan Reinsurance Treaty between AMIC Ltd. and CNA Insurance Companies, effective December 1, 1999 (11)
10.12	Trust Agreement among AMIC Ltd., Continental Casualty Company and Chase Manhattan Bank dated as of December 21, 2000 (12)
10.13	Investment Counsel Agreement between AMIC Ltd. and Northwest Investment Management, Inc. dated August 1, 2000 (13)
10.14	Registrar and Transfer Agent Agreement between AIC Ltd. and Butterfield Corporate Services Limited dated as of January 1, 2001 (14)
10.15	Reinsurance Treaty between AIC Ltd. and CNA Insurance Companies, effective January 1, 2002 (15)
10.16	Value Plan Reinsurance Treaty between AIC Ltd. and CNA Insurance Companies, effective January 1, 2002 (15)
21	Subsidiaries of the Registrant (1)
31.1	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Stuart Grayston pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Murray Nicol pursuant to 18 U.S. C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(1) Filed with the Company’s Registration Statement on Form S-4, Registration No. 333-64929 and incorporated herein by reference.

(2) Filed with AIIG’s Annual Report on Form 10-K for the year ended December 31, 1992 and incorporated herein by reference.

(3) Filed with AIIG’s Annual Report on Form 10-K for the year ended December 31, 1993 and incorporated herein by reference.

(4) Filed with AIIG’s Annual Report on Form 10-K for the year ended December 31, 1994 and incorporated herein by reference.

(5) Filed with AIIG’s Quarterly Report on Form 10-Q for the quarter ended September 30, 1995 and incorporated herein by reference.

(6) Filed with AIIG’s Quarterly Report on Form 10-Q for the quarter ended September 30, 1996 and incorporated herein by reference.

(7) Filed with AIIG’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1997 and incorporated herein by reference.

(8) Filed with AIIG’s Quarterly Report on Form 10-Q for the quarter ended September 30, 1997 and incorporated herein by reference.

(9) Filed with AIIG’s Annual Report on Form 10-K for the year ended December 31, 1996 and incorporated herein by reference.

(10) Filed with AIIG’s Quarterly Report on Form 10-Q for the quarter ended September 30, 1998 and incorporated herein by reference.

(11) Filed with the Company’s Annual Report on Form 10-K for the year ended December 31, 1999.

(12) Filed with AIIG’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2000 and incorporated herein by reference.

(13) Filed with AMIG LTD.’s Annual Report on Form 10-K for the year ended December 31, 2000 and incorporated herein by reference.

(14) Filed with the Company’s Annual Report on Form 10-K for the year ended December 31, 2001.

(15) Filed with the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2002 and incorporated herein by reference.