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August 7, 2009

Board of Directors
Penn Millers Mutual Holding Company
72 North Franklin Street
Wilkes-Barre, Pennsylvania 18773

Members of the Board:

At your request, Curtis Financial Group, LLC (“Curtis”) completed and hereby provides an updated independent appraisal (the “Appraisal Update”) of the estimated consolidated pro forma market value of Penn Millers Mutual Holding Company (“PMMHC”) as of August 7, 2009, which is conducting a public offering in connection with the Plan of Conversion, as of April 22, 2009 (the “Plan” or “Offering”) transaction described below. PMHC Corp. (“PMHC”) is the wholly-owned subsidiary of PMMHC and the holding company for Penn Millers Insurance Company (“PMIC”, and together with PMHC and PMMHC, “Penn Millers” or the “Company”). Our previous Appraisal as of April 1, 2009 and appraisal update as of June 5, 2009 are incorporated herein by reference.

Because the Plan involves the conversion of PMMHC from mutual to stock form, the Plan must be approved by the Pennsylvania Insurance Commissioner pursuant to the Commissioner’s 1998 order approving the conversion transaction by which the Company’s current mutual holding company structure was created. Accordingly, and in order to ensure that this Plan is fair to members of PMMHC, the Company has discussed this Plan with senior staff at the Pennsylvania Insurance Department (“PID”), and, as a condition to the Offering, will obtain from the Insurance Commissioner an approval of the Offering or, as applicable, will obtain written confirmation from the Commissioner that such approval is not required and that the Company may proceed with the Offering. In accordance with the Plan, the estimated consolidated pro forma market value of the Company shall be determined by an independent valuation expert and shall represent the aggregate price of common stock (the “Estimated Pro Forma Market Value”). Furthermore, the pro forma market value may be expressed as a range of value and may be that value that is estimated to be necessary to attract a full subscription for the shares of common stock offered for sale in the Offering.

THE PLAN OF CONVERSION

The Board of Directors of the Company has adopted the Plan. As part of the Plan, PMMHC will convert from mutual to stock form and issue its common stock to its newly formed holding company, Penn Millers Holding Corporation, which will offer shares of its common stock (“Common Stock”) for sale in a subscription offering to the following potential subscribers: the Company’s policyholders, the Company’s employee stock ownership plan (“ESOP”), and directors, officers and employees of the Company in accordance with the terms and conditions of

Curtis Financial Group, LLC • One Liberty Place • 1650 Market Street, Suite 4400 • Philadelphia, PA 19103
(P) 215.972.2375 • (F) 215.972.2388 • www.curtisfinancial.com

Securities sold through Curtis Securities, LLC

Board of Directors
Penn Millers Mutual Holding Company
Page 2 of 4

the Plan. To the extent that shares remain available for purchase after satisfaction of all subscriptions received in the subscription offering, the shares may be offered for sale in a community offering and a syndicated community offering, if needed.

CURTIS FINANCIAL GROUP, LLC

Curtis is an investment banking firm specializing in business valuations, mergers and acquisitions, and raising private capital. The professional staff has a diverse background in investment banking, securities analysis, banking, insurance, engineering, accounting and tax. The expertise of the staff includes valuing, originating, structuring, negotiating and closing a wide variety of investment banking transactions. The background of Curtis is presented in Exhibit III. We believe that, except for the fee we will receive for our appraisal, we are independent of the Company and the other parties engaged by the Company to assist in the corporate reorganization and stock issuance process.

VALUATION METHODOLOGY

In preparing the Appraisal Update, we conducted an analysis of PMMHC that included discussions with the Company’s management. We reviewed the audited GAAP and statutory financial statements of the Company as of and for the years ended December 31, 2003 through December 31, 2008 and the quarterly periods ended March 31, 2009 and June 30, 2009. In addition, where appropriate, we considered information based on other available published sources that we believe are reliable; however, we cannot guarantee the accuracy and completeness of such information.

In preparing the Appraisal Update, we also reviewed and analyzed: (i) financial and operating information with respect to the business, operations, and prospects of the Company furnished to us by the Company; (ii) publicly available information concerning the Company that we believe to be relevant to our analysis; (iii) a comparison of the historical financial results and present financial condition of the Company with those of selected, publicly-traded insurance companies that we deemed relevant; and (iv) financial performance and market valuation data of certain publicly-traded insurance industry aggregates as provided by industry sources.

The Appraisal Update is based on the Company’s representation that the information contained in the Plan and additional evidence furnished to us by the Company and its independent auditor are truthful, accurate, and complete. We did not independently verify the financial statements and other information provided by the Company and reviewed by its independent auditor, nor did we independently value the assets or liabilities of the Company. The Appraisal Update considers the Company only as a going concern on a stand-alone basis and should not be considered as an indication of the liquidation value of the Company.

We have investigated the competitive environment within which the Company operates and have assessed the Company’s strengths and weaknesses relative to comparable companies. We have monitored material regulatory and legislative actions affecting financial institutions generally and analyzed the potential impact of such developments on the Company and the industry as a whole, to the extent we were aware of such matters. We have analyzed the potential effects of

Board of Directors
Penn Millers Mutual Holding Company
Page 3 of 4

the Offering on the Company’s operating characteristics and financial performance as they relate to the Estimated Pro Forma Market Value of PMMHC. We have reviewed the economy and demographic characteristics of the primary market area in which the Company currently operates. We have compared the Company’s financial performance and condition with publicly-traded insurance institutions evaluated and selected in accordance with the valuation guidelines. We have reviewed conditions in the securities markets in general and the markets for insurance companies, and insurance holding companies.

Our appraised value is predicated on a continuation of the current operating environment for PMHC, PMMHC, and for all insurance companies and their holding companies. Changes in the local and national economy, the federal and state legislative and regulatory environments for insurance companies, the stock market, interest rates, and other external forces (such as natural disasters or significant world events) may occur from time to time, often with great unpredictability, and may materially impact the value of insurance stocks as a whole or the Company’s value alone. To the extent that such factors can be foreseen, they have been factored into our analysis.

VALUATION CONCLUSION

It is our opinion that, as of August 7, 2009, the Estimated Pro Forma Market Value of the aggregate common shares outstanding immediately following the Offering, was within a range (the “Valuation Range”) of $45.05 million to $60.95 million with a midpoint of $53.0 million. The Valuation Range was based upon a fifteen percent decrease from the midpoint to determine the minimum and a fifteen percent increase from the midpoint to determine the maximum. Exhibit VII shows the assumptions and calculations utilized in determining the Company’s Valuation Range.

LIMITING FACTORS AND CONSIDERATIONS

Our Appraisal Update is not intended, and must not be construed, to be a recommendation of any kind as to the advisability of purchasing shares of Common Stock. Moreover, because the Appraisal Update is necessarily based upon estimates and projections of a number of matters, all of which are subject to change from time to time, no assurance can be given that persons who purchase shares of stock in the conversion will thereafter be able to sell such shares at prices related to the foregoing Estimated Pro Forma Market Value. The Appraisal Update reflects only a valuation range as of this date for the Estimated Pro Forma Market Value of PMMHC immediately upon issuance of the stock and does not take into account any trading actively with respect to the purchase and sale of common stock in the secondary market on the date of issuance of such securities or at anytime thereafter following the completion of the Offering. Any report prepared by Curtis shall not be used as an offer or solicitation with respect to the purchase or sale of any securities.

Curtis has made no recommendation regarding the merits of the decision to proceed or not to proceed with the Offering. The results of our Appraisal Update are but one of the many factors the Company’s Board of Directors should consider in making its decision. The Company has

PRO FORMA VALUATION APPRAISAL

I. RECENT FINANCIAL PERFORMANCE

Financial Condition

Table 1 presents selected data concerning the Company’s financial position as of March 31, 2009 and June 30, 2009. Exhibit IV-1 presents the Company’s balance sheet as of December 31, 2003 through December 31, 2008, as well as March 31, 2009 and June 30, 2009.

Table 1
Selected Financial Condition Data
As of March 31, 2009 and June 30, 2009
(Dollars in Thousands)


	6/30/2009			3/31/2009
Balance Sheet Data
Total assets		228,385			228,415
Total investments and cash		146,878			143,993
Premiums and fees receivable		26,783			28,753
Reinsurance receivables and recoverables		25,950			25,064

Loss and loss adjustment expense reserves		118,025			116,775
Unearned premiums		41,218			44,811
Total liabilities		176,413			177,254
Total surplus		51,972			51,161
Total surplus / assets		22.76	%		22.40	%


Source: Penn Millers’ GAAP financial statements.

The Company’s total assets remained flat at $228.4 million at March 31, 2009 and June 30, 2009. From March 31, 2009 to June 30, 2009, total investments increased by $6.5 million, This increase was mostly offset by a $3.6 million reduction in cash, a $2.0 million decline in premiums and fees receivable, and a $1.4 million decline in assets from discontinued operations.

The Company’s portfolio of investment securities amounted to $134.8 million at June 30, 2009 and constituted 59.0% of total assets. As of June 30, 2009, Penn Millers’ investments consisted of $26.7 million of mortgage-backed securities, and $108.0 million of other types of fixed-income securities. Exhibit IV-3 presents the Company’s investment portfolio as of December 31, 2006, December 31, 2007, December 31, 2008, and June 30, 2009. The following

PRO FORMA VALUATION APPRAISAL

displays the Company’s annual income statements for 2003 through 2008, as well as the TTM periods ended March 31, 2009 and June 30, 2009.

Table 2
Selected Operating Performance Data
For the TTM periods ended March 31, 2009 and June 30, 2009
(Dollars in Thousands)


	TTM ended			TTM ended
	6/30/2009 (e)			3/31/2009 (e)
REVENUE

Premiums earned	$	76,294		$	77,327
Investment income, net of investment expense		5,381			5,298
Realized investment (losses) gains, net		(7,828	)		(7,627	)
Fee Income		0			0
Commission income		0			0
Other income		301			282


Total revenue		74,148			75,280

LOSSES AND EXPENSES

Losses and loss adjustment expenses		54,564			56,343
Underwriting and administrative expenses (a)		26,056			26,414
Interest expense		253			213
Other expenses, net		379			376


Total losses and expenses		81,252			83,346

Income from continuing operations		(7,104	)		(8,066	)


Income taxes expense (benefit)		(1,765	)		(2,074	)


Net income (loss) from continuing operations		(5,339	)		(5,992	)


Discontinued Operations:
Pre-tax (loss) income on discontinued ops		(3,081	)		(3,104	)
Income tax (benefit) expense		641			632

(Loss) income on discontinued ops		(3,722	)		(3,736	)

Net income		(9,061	)		(9,728	)


Operating Ratios
Loss ratio (b)		71.5	%		72.9	%
Expense ratio (c)		34.2	%		34.2	%
Combined ratio (d)		105.7	%		107.0	%


Notes:

(a)		Includes amortization of deferred policy acquisition costs.

(b)		Losses and loss adjustment expenses divided by premiums earned.

(c)		Underwriting and administrative expenses divided by premiums earned.

(d)		Sum of the loss ratio and the expense ratio.

(e)		Represents the trailing twelve month period.

Source: Financial reports prepared by management and reviewed by KPMG.

PRO FORMA VALUATION APPRAISAL

On February 2, 2009, the Company completed the sale of Eastern Insurance Group (“EIG”) to Eastern Insurance Acquisition Agency, LLC for approximately $3.4 million. Performance results of EIG have been classified as discontinued operations in Penn Millers’ historical financial statements.

Excluding revenue from discontinued operations, Penn Millers’ total revenue decreased from $75.3 million for the TTM period ended March 31, 2009 to $74.1 million for the TTM period ended June 30, 2009 due to a $1.0 million decrease in premiums earned. Including discontinued operations, Penn Millers experienced a net loss of $9.1 million for the TTM period ended June 30, 2009 as compared to net loss of $9.7 million for the TTM period ended March 31, 2009.

Underwriting and administrative expenses decreased slightly from $26.4 million for the TTM period ended March 31, 2009 to $26.0 million for the TTM period ended June 30, 2009. As a percent of earned premium revenue, the Company’s expense ratio remained flat at 34.2% for the TTM period ended March 31, 2009 and the TTM period ended June 30, 2009. The loss ratio decreased from 72.9% for the TTM period ended March 31, 2009 to 71.5% for the TTM period ended June 30, 2009, resulting in a combined ratio that decreased from 107.0% for the TTM period ended March 31, 2009 to 105.7% for the TTM period ended June 30, 2009. According to management, the decrease in loss ratio is due to a lower level of new claim activity across most lines of business. As shown in the following chart, since 2003, Penn Millers’ combined ratio has ranged from 103.7% to 107.3%.



		5

PRO FORMA VALUATION APPRAISAL

Table 3
Segment Operating Performance Data
For the TTM Periods ended March 31, 2009 and June 30, 2009
(Dollars in Thousands)


	For the twelve month period ended June 30, 2009
																		As a % of Total
	Agri			Commerical			Personal			Assumed		Total			Agri			Comm			Pers			Assum

Direct premiums written	$	57,779		$	32,938		$	0		$	246		90,963			63.5	%		36.2	%		0.0	%		0.3	%

Net premiums written		44,992			26,420			0			1,360		72,772			61.8	%		36.3	%		0.0	%		1.9	%

Net premiums earned		44,767			30,148			0			1,379		76,294			58.7	%		39.5	%		0.0	%		1.8	%

Losses and loss adjustment expenses		31,359			23,051			(467	)		621		54,564			57.5	%		42.2	%		-0.9	%		1.1	%
Other underwriting expenses		13,836			11,130			0			537		25,503			54.3	%		43.6	%		0.0	%		2.1	%


Total losses and expenses		45,195			34,181			(467	)		1,158		80,067			56.4	%		42.7	%		-0.6	%		1.4	%

Underwriting income (loss)		(428	)		(4,033	)		467			221		(3,773	)		11.3	%		106.9	%		-12.4	%		-5.9	%


	For the twelve month period ended March 31, 2009
																		As a % of Total
	Agri			Commerical			Personal			Assumed		Total			Agri			Comm			Pers			Assum

Direct premiums written	$	59,305		$	35,661		$	0		$	263		95,229			62.3	%		37.4	%		0.0	%		0.3	%

Net premiums written		46,085			28,494			0			1,618		76,197			60.5	%		37.4	%		0.0	%		2.1	%

Net premiums earned		44,879			30,823			0			1,625		77,327			58.0	%		39.9	%		0.0	%		2.1	%

Losses and loss adjustment expenses		31,845			24,026			(198	)		673		56,346			56.5	%		42.6	%		-0.4	%		1.2	%
Other underwriting expenses		13,834			11,346			0			598		25,778			53.7	%		44.0	%		0.0	%		2.3	%


Total losses and expenses		45,679			35,372			(198	)		1,271		82,124			55.6	%		43.1	%		-0.2	%		1.5	%

Underwriting income (loss)		(800	)		(4,549	)		198			354		(4,797	)		16.7	%		94.8	%		-4.1	%		-7.4	%

Source: Penn Millers financial statements.

Table 4 presents additional gross premium data for the Company’s agribusiness and commercial lines segments for the TTM periods ended March 31, 2009 and June 30, 2009.



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PRO FORMA VALUATION APPRAISAL

Table 4
Agribusiness and Commercial Lines Segment Gross Premium Data
For the TTM Periods ended March 31, 2009 and June 30, 2009
(Dollars in Thousands)


	Agribusiness						Commerical Lines
	TTM 6/30/09			TTM 3/31/09			TTM 6/30/09			TTM 3/31/09
Direct premiums written:
Fire and Allied		18,763			19,235			4,363			4,837
Inland		2,187			2,238			282			275
Workers Compensation		8,127			8,290			6,856			7,373
General Liability		10,212			10,407			5,200			5,670
Product Liability		4,721			4,871			531			426
Surety		22			19			0			0
Burglary		169			168			26			61
Boiler and Machinery		887			898			822			838
Auto		12,690			13,181			4,771			5,041
Commercial Multi-Peril		—			—			10,057			11,118
Earthquake		—			—			31			22

Total		57,779			59,305			32,939			35,661


(% of Total Premiums)
Direct premiums written:
Fire and Allied		32.5	%		32.4	%		13.2	%		13.6	%
Inland		3.8	%		3.8	%		0.9	%		0.8	%
Workers Compensation		14.1	%		14.0	%		20.8	%		20.7	%
General Liability		17.7	%		17.5	%		15.8	%		15.9	%
Product Liability		8.2	%		8.2	%		1.6	%		1.2	%
Surety		0.0	%		0.0	%		0.0	%		0.0	%
Burglary		0.3	%		0.3	%		0.1	%		0.2	%
Boiler and Machinery		1.5	%		1.5	%		2.5	%		2.3	%
Auto		22.0	%		22.2	%		14.5	%		14.1	%
Commercial Multi-Peril		0.0	%		0.0	%		30.5	%		31.2	%
Earthquake		0.0	%		0.0	%		0.1	%		0.1	%

Total		100.0	%		100.0	%		100.0	%		100.0	%

Source: Penn Millers GAAP financial data.

Fire and allied direct premiums written, the largest component of the Company’s agribusiness segment, decreased by 2.5% to $18.8 million in the TTM period ended June 30, 2009. Direct commercial multi-peril direct premiums written, the largest component of the Company’s commercial lines segment, decreased by 9.5% to $10.1 million in the TTM period ended June 30, 2009 due to declining prices. The chart below shows the Company’s composition of direct premiums written, by line of business, for the TTM period ended June 30, 2009.



		9

PRO FORMA VALUATION APPRAISAL

III. INDUSTRY UPDATE

The P&C insurance industry continues to experience a soft market. According to P&C insurance data from SNL Financial as of May 22, 2009 for the first quarter of 2009, after-tax realized capital losses though near an historically high level, did exhibit marginal improvements from the loss levels in the third and fourth quarters of 2008. The number of companies reporting realized capital losses during the first quarter of 2009 outnumbered those posting gains by a count of 995 to 828. The industry’s combined ratio of 102.01% for the first quarter of 2009, was similar to the combined ratio of 102.53% for the fourth quarter of 2008. Net premiums written increased by approximately 7.9% from $98.7 billion in the fourth quarter of 2008 to $106.5 billion in the first quarter of 2009.

Table 5
Historical P&C Insurance Performance

P&C individual insurance entity performance
2,691 out of 2,824 estimated P&C filers


	Q1’09			Q1’08			Q1’07			Q4’08			Q4’07			Q4’06			2008Y			2007Y
Direct premiums written ($000)		118,455,173			121,804,657			124,068,523			111,594,148			116,741,582			118,218,869			485,991,577			494,306,660
Net premiums written ($000)		106,506,506			110,863,246			110,075,278			98,751,445			103,103,331			104,799,553			436,753,985			442,117,195
Premiums earned ($000)		105,705,550			108,127,697			108,519,714			107,782,211			110,306,568			110,149,769			438,802,790			439,868,969
Losses & LAE ($000)		78,817,336			78,364,422			70,482,463			79,487,557			77,200,013			71,449,801			337,270,449			297,370,025
Underwriting expenses ($000)		28,883,752			30,024,309			29,553,977			27,688,341			28,600,233			29,396,912			119,469,343			108,149,919
Underwriting gain		-1,995,539			-261,033			8,483,274			606,313			4,506,322			9,303,056			-17,937,002			34,349,026
Dividends to policyholders ($000)		343,872			386,482			326,130			803,002			1,133,648			2,083,073			2,005,743			3,322,619
Loss ratio (%)		74.56	%		72.47	%		64.95	%		73.75	%		69.99	%		64.87	%		76.86	%		67.60	%
Expense ratio (NPW) (%)		27.12	%		27.08	%		26.85	%		28.04	%		27.74	%		28.05	%		27.35	%		24.46	%
Policyholder dividend ratio (%)		0.33	%		0.36	%		0.30	%		0.75	%		1.03	%		1.89	%		0.46	%		0.76	%
Combined ratio (%)		102.01	%		99.91	%		92.10	%		102.53	%		98.75	%		94.81	%		104.67	%		92.82	%
Change in DPW (%)		-2.75	%		-1.82	%					-4.41	%		-1.25	%					-1.68	%		0.78	%
Change in NPW (%)		-3.93	%		0.72	%					-4.22	%		-1.62	%					-1.21	%		-0.23	%
After-tax realized capital gains ($000)		-7,919,560			-364,638			1,858,954			-10,166,651			1,598,324			1,505,369			-19,367,269			8,807,110


Source: SNL Financial

Fitch Ratings (“Fitch”) believes that profitability will improve moderately in 2009 but underwriting losses are anticipated to continue. Both SNL Financial and Fitch acknowledged that a primary contributor to the poor underwriting performance in the P&C sector was due to the deterioration in results for financial guarantors and mortgage insurers, which are included in the P&C industry.

Fitch’s outlook for the P&C insurance industry is negative based on economic and investment uncertainty. Key negative factors affecting the P&C industry include: pricing trends

PRO FORMA VALUATION APPRAISAL

Table 6
Comparable Financial Condition Data
Penn Millers and the Comparable Group
As of or for the most recent TTM Period


									Total Cash
							Total Policy		and					Tangible			Total Policy		Cash and
	Total Assets		Total Equity		Tangible		Reserves		Investments		Equity /			Equity /			Reserves /		Investments /
	($ 000)		($ 000)		Equity ( $000)		($ 000)		($ 000)		Assets			Assets			Equity		Assets

Penn Millers	$	228,385	$	51,972	$	51,972	$	118,025	$	146,878		22.8	%		22.8	%		2.27x		64.3	%

Public P&C Insurance Group Mean		12,858,005		3,718,911		3,113,906		6,817,464		8,342,222		31.3	%		28.6	%		2.28x		69.9	%
Public P&C Insurance Group Median		2,952,489		828,897		766,195		1,687,845		2,194,325		28.6	%		26.0	%		2.02x		71.3	%

Comparable Group Mean		656,297		203,549		191,587		379,975		456,182		32.0	%		30.1	%		1.94x		70.8	%
Comparable Group Median		673,276		189,064		165,293		377,520		468,155		31.3	%		27.4	%		1.77x		71.0	%

Comparable Group
21st Century Holding Company		204,676		76,228		76,228		114,701		150,471		37.2	%		37.2	%		1.50x		73.5	%
Baldwin & Lyons, Inc.		765,742		345,853		345,853		369,849		543,677		45.2	%		45.2	%		1.07x		71.0	%
CRM Holdings, Ltd.		452,951		101,677		98,465		273,506		340,804		22.4	%		21.7	%		2.69x		75.2	%
Donegal Group Inc.		893,824		371,328		371,328		488,237		638,161		41.5	%		41.5	%		1.31x		71.4	%
Eastern Insurance Holdings, Inc.		385,487		137,234		117,736		207,849		273,564		35.6	%		30.5	%		1.51x		71.0	%
EMC Insurance Group Inc.		1,142,746		307,348		306,406		723,328		1,002,325		26.9	%		26.8	%		2.35x		87.7	%
First Mercury Financial Corporation		1,045,694		286,838		223,154		578,191		648,738		27.4	%		21.3	%		2.02x		62.0	%
Hallmark Financial Services, Inc.		551,279		190,555		121,220		277,022		368,415		34.6	%		22.0	%		1.45x		66.8	%
Mercer Insurance Group, Inc.		580,809		148,430		143,014		385,190		392,632		25.6	%		24.6	%		2.60x		67.6	%
National Interstate Corporation		969,243		243,547		243,547		584,812		572,988		25.1	%		25.1	%		2.40x		59.1	%
National Security Group, Inc.		125,054		35,045		35,045		70,927		93,511		28.0	%		28.0	%		2.02x		74.8	%
NYMAGIC, INC.		977,190		187,572		187,572		651,829		617,900		19.2	%		19.2	%		3.48x		63.2	%
SeaBright Insurance Holdings, Inc.		911,125		341,811		336,425		498,059		594,029		37.5	%		36.9	%		1.46x		65.2	%
Unico American Corporation		182,340		76,226		76,226		96,150		149,331		41.8	%		41.8	%		1.26x		81.9	%


Source: Penn Millers’ GAAP financial statements; SNL Financial.

Table 7 compares Penn Millers with the Comparable Group and Public P&C Insurance Group based on selected measures of profitability.

PRO FORMA VALUATION APPRAISAL

Table 7
Comparable Operating Performance Data
Penn Millers and the Comparable Group
For the most recent TTM period


	Total Revenue		Net Income			GAAP			GAAP Loss			Combined
	($ 000)		($ 000)			Expense Ratio			Ratio			Ratio			ROAA			ROAE

Penn Millers	$	74,148		($5,339	)		34.2	%		71.5	%		105.7	%		-2.4	%		-9.6	%

Public P&C Insurance Group Mean		3,533,184		161,709			32.3	%		60.3	%		92.7	%		0.9	%		3.2	%
Public P&C Insurance Group Median		655,419		29,149			31.3	%		60.8	%		93.7	%		1.3	%		4.4	%

Comparable Group Mean		196,170		1,694			36.0	%		64.1	%		100.1	%		-0.4	%		-1.5	%
Comparable Group Median		166,200		7,201			35.0	%		63.3	%		97.7	%		1.4	%		3.9	%

Comparable Group
21st Century Holding Company		62,937		(6,484	)		47.5	%		63.8	%		111.3	%		-3.2	%		-8.1	%
Baldwin & Lyons, Inc.		176,997		10,154			35.3	%		54.0	%		89.3	%		1.3	%		3.0	%
CRM Holdings, Ltd.		134,533		(14,860	)		51.3	%		80.8	%		132.1	%		-3.5	%		-13.5	%
Donegal Group Inc.		378,831		17,222			31.2	%		72.7	%		103.9	%		1.9	%		4.7	%
Eastern Insurance Holdings, Inc.		129,820		(20,512	)		34.8	%		67.0	%		101.7	%		-5.4	%		-13.5	%
EMC Insurance Group Inc.		405,255		3,786			36.4	%		63.1	%		99.5	%		0.3	%		1.3	%
First Mercury Financial Corporation		251,615		22,708			30.6	%		63.4	%		94.0	%		2.4	%		8.5	%
Hallmark Financial Services, Inc.		267,758		12,208			29.5	%		62.0	%		91.5	%		2.3	%		6.5	%
Mercer Insurance Group, Inc.		155,403		9,050			37.0	%		60.9	%		97.9	%		1.6	%		6.5	%
National Interstate Corporation		295,525		21,474			23.8	%		56.6	%		80.4	%		2.2	%		9.8	%
National Security Group, Inc.		59,538		(4,505	)		42.0	%		76.5	%		118.4	%		-3.4	%		-11.5	%
NYMAGIC, INC.		107,837		(52,159	)		48.4	%		48.0	%		96.4	%		-7.1	%		-28.4	%
SeaBright Insurance Holdings, Inc.		275,243		20,284			30.3	%		67.2	%		97.5	%		2.4	%		6.3	%
Unico American Corporation		45,089		5,352			26.0	%		61.0	%		87.0	%		2.9	%		7.3	%


Source: Penn Millers’ GAAP financial statements; SNL Financial.

The Company was not profitable in the TTM period ended June 30, 2009. Five companies in the Comparable Group also experienced operating losses during the most recent TTM period. Penn Millers’ profitability continues to be impacted by a high combined ratio, which was 105.7%. The Comparable Group reported mean and median combined ratios of 100.1% and 97.7%, respectively.

The Company’s relatively high combined ratio was attributable primarily to its higher loss ratio. Penn Millers’ loss ratio measured 71.5% for the TTM period ended June 30, 2009, which was above the Comparable Group mean and median loss ratios of 64.1% and 63.3%. Among the Comparable Group members, CRM Holdings, Ltd., Donegal Group, Inc., and National Security Group, Inc. reported higher loss ratios at 80.8%, 72.7%, and 76.5%, respectively.

PRO FORMA VALUATION APPRAISAL

V. MARKET CONDITIONS AND MARKET VALUE ADJUSTMENTS

Stock Price Performance and Market Conditions

Table 7 summarizes stock price and valuation ratios changes for the Comparable Group from the June 5, 2009 Appraisal Update. Nine companies experienced a price increase, and five companies experienced a price decline. The mean and median price changes among the Comparable Group were positive 6.6% and positive 4.2%, respectively. The market valuation ratios of the Comparable Group have remained relatively unchanged since June 5, 2009.

Table 8
Comparative Market Valuation Performance
As of June 5, 2009 and August 7, 2009


														8/7/2009			6/5/2009
	Change in													Price /			Price /			8/7/2009		6/5/2009		8/7/2009		6/5/2009		8/7/2009			6/5/2009
	Closing			8/7/2009		6/5/2009		8/7/2009			6/5/2009			Tangible			Tangible			Price / LTM		Price / LTM		Price / LTM		Price / LTM		Price / Total			Price / Total
	Price			Closing Price		Closing Price		Price / Book			Price / Book			Book			Book			EPS		EPS		Revenue		Revenue		Assets			Assets


Public P&C Insurance Group Mean	NA			NA		NA			96.9	%		93.2	%		107.1	%		103.6	%		21.30x		26.05x		1.45x		0.66x		29.7	%		27.6	%
Public P&C Insurance Group Median	NA			NA		NA			90.3	%		87.2	%		100.0	%		94.5	%		14.35x		10.44x		1.04x		0.95x		26.6	%		25.7	%

Comparable Group Mean		6.6	%	NA		NA			76.6	%		75.3	%		82.3	%		81.5	%		21.90x		27.78x		0.85x		0.82x		24.5	%		23.4	%
Comparable Group Median		4.2	%	NA		NA			75.7	%		70.4	%		83.1	%		73.4	%		12.85x		11.65x		0.76x		0.73x		23.2	%		23.1	%

Comparable Group
21st Century Holding Company		37.9	%		4.66		3.38		49.0	%		35.5	%		49.0	%		35.5	%	Neg		Neg			0.59x		0.43x		18.2	%		13.2	%
Baldwin & Lyons, Inc.		0.6	%		21.08		20.95		89.8	%		95.0	%		89.8	%		95.0	%		29.69x		130.94x		1.75x		1.85x		40.6	%		40.4	%
CRM Holdings, Ltd.		-6.8	%		1.10		1.18		18.1	%		19.3	%		18.7	%		19.9	%	Neg		Neg			0.14x		0.15x		4.1	%		4.3	%
Donegal Group Inc.		-0.9	%		15.75		15.89		108.1	%		110.2	%		108.1	%		110.4	%		23.16x		20.91x		1.06x		1.07x		44.9	%		45.6	%
Eastern Insurance Holdings, Inc.		4.9	%		9.90		9.44		65.0	%		62.5	%		75.8	%		72.8	%	Neg		Neg			0.69x		0.66x		23.1	%		22.2	%
EMC Insurance Group Inc.		6.2	%		23.10		21.75		99.5	%		100.7	%		99.8	%		101.0	%		74.52x	Neg			0.75x		0.71x		26.8	%		26.1	%
First Mercury Financial Corporation		-11.0	%		12.41		13.94		78.1	%		92.0	%		100.3	%		120.1	%		9.85x		6.51x		0.89x		1.09x		21.4	%		25.6	%
Hallmark Financial Services, Inc.		-4.2	%		6.69		6.98		73.3	%		76.5	%		115.2	%		120.2	%		11.53x		12.03x		0.52x		0.54x		25.3	%		26.4	%
Mercer Insurance Group, Inc.		21.7	%		18.50		15.20		78.5	%		66.8	%		81.5	%		69.4	%		12.85x		11.26x		0.75x		0.60x		20.1	%		16.7	%
National Interstate Corporation		11.1	%		18.55		16.69		147.4	%		143.6	%		147.4	%		143.6	%		16.71x		23.51x		1.22x		1.09x		37.1	%		31.5	%
National Security Group, Inc.		-1.2	%		8.50		8.60		59.8	%		60.5	%		59.8	%		60.5	%	Neg		Neg			0.35x		0.36x		16.8	%		17.0	%
NYMAGIC, INC.		25.0	%		18.42		14.74		84.7	%		74.0	%		84.7	%		74.0	%	Neg		Neg			1.47x		1.23x		16.3	%		13.0	%
SeaBright Insurance Holdings, Inc.		3.7	%		9.81		9.46		61.5	%		60.5	%		62.4	%		61.3	%		10.33x		9.01x		0.76x		0.75x		23.1	%		22.5	%
Unico American Corporation		4.8	%		8.05		7.68		59.2	%		56.5	%		59.2	%		56.5	%		8.47x		8.09x		1.00x		0.96x		24.8	%		23.6	%

Source: SNL Financial and CapitalIQ.

Table 9 summarizes the recent performance of various insurance stock indexes maintained by SNL Financial, along with selected other industry and broader market indexes. The SNL Insurance Index of all publicly-traded insurance companies increased 13.6% between June 5, 2009 and August 7, 2009. The SNL Insurance Index outperformed the broader markets indexes as reflected by the Standard & Poor’s 500, which increased 7.5% and the Russell 3000, which increased 7.7% between June 5, 2009 and August 7, 2009.



		16

PRO FORMA VALUATION APPRAISAL

Table 9
Selected Stock Market Index Performance
For the Period Ended August 7, 2009


					Change (%)
	Index Value		Index Value		Since
	8/7/2009		6/5/2009		6/5/2009		YTD			1 Year			3 Years
SNL Insurance Indexes
SNL Insurance		326.80		287.77		13.57		6.94			(22.75	)		(36.29	)
SNL Insurance Underwriter		322.33		283.17		13.83		7.81			(23.15	)		(37.47	)
SNL Insurance Broker		516.17		469.08		10.04		(5.07	)		(14.73	)		(6.95	)
S&P Insurance		157.77		138.28		14.09		6.53			(38.25	)		(53.64	)
SNL Sector Indexes
SNL Insurance Multiline		89.71		88.20		1.71		(2.59	)		(67.78	)		(82.44	)
SNL Insurance L&H		421.40		358.42		17.57		12.72			(29.80	)		(34.33	)
SNL Insurance P&C		340.66		299.74		13.65		4.14			(6.61	)		(2.07	)
SNL Reinsurance		443.80		379.44		16.96		9.84			(27.95	)		(48.80	)
SNL Managed Care		452.33		432.64		4.55		8.72			(19.77	)		(38.35	)
SNL Title Insurer		528.62		425.66		24.19		(6.83	)		18.73			(47.93	)
SNL Mortgage & Finl Guaranty		52.46		45.50		15.30		60.33			(14.97	)		(90.25	)
SNL Asset Size Indexes
SNL Insurance < $250M		349.06		323.83		7.79		17.49			(18.87	)		(39.80	)
SNL Insurance $250M-$500M		329.59		285.08		15.62		8.81			(23.54	)		(40.70	)
SNL Insurance $500M-$1B		329.19		317.42		3.71		1.47			(7.04	)		(20.53	)
SNL Insurance $1B-$2.5B		574.97		561.29		2.44		(4.91	)		(14.09	)		(12.07	)
SNL Insurance $2.5B-$10B		409.22		368.06		11.18		1.57			(8.01	)		(27.40	)
SNL Insurance > $10B		309.51		272.55		13.56		8.17			(25.90	)		(39.75	)
SNL Insurance > $1B		334.97		296.65		12.92		6.95			(23.87	)		(38.05	)
SNL Insurance < $1B		384.11		363.09		5.79		4.64			(11.06	)		(25.48	)
SNL Market Cap Indexes
SNL Micro Cap Insurance		180.33		176.53		2.15		8.64			(32.73	)		(48.07	)
SNL Small Cap Insurance		390.73		358.86		8.88		(6.63	)		(16.17	)		(33.17	)
SNL Mid Cap Insurance		213.53		199.72		6.92		(2.40	)		(27.14	)		(46.89	)
SNL Large Cap Insurance		305.06		233.30		30.75		25.21			(13.79	)		(28.92	)
Broad Market Indexes
S&P 500		1,010.48		940.09		7.49		11.87			(20.19	)		(20.79	)
SNL All Financial Institutions		409.26		347.62		17.73		14.27			(24.12	)		(48.61	)
Russell 1000		1,063.95		987.61		7.73		13.47			(20.04	)		(20.05	)
Russell 2000		1,422.56		1,318.08		7.93		14.61			(19.77	)		(17.77	)
Russell 3000		1,086.08		1,008.03		7.74		13.56			(20.01	)		(19.88	)



		17

PRO FORMA VALUATION APPRAISAL

VI. VALUATION ANALYSIS AND CONCLUSIONS

Valuation Review

In the April 1, 2009 Appraisal and June 5, 2009 Appraisal Update, the Company’s Estimated Pro Forma Market Value was discounted on a P/B basis relative to the trading market valuations of the Comparable Group. The Company’s Estimated Pro Forma Market Value was adjusted for earnings prospects, liquidity of issue and new issue discounts.

The Comparable Group’s market valuation ratios have remained relatively unchanged since the June 5, 2009 Appraisal Update. The median P/B ratio of the Comparable Group increased from 70.4% at June 5, 2009 to 75.7% at August 7, 2009 and the mean P/B ratio of the Comparable Group increased from 75.3% at June 5, 2009 to 76.6% at August 7, 2009. The P/B ratio continues to be the primary valuation metric generally accepted for financial services companies in the current investment climate. Penn Millers’ relatively low returns on equity and assets and negative profitability during the TTM period ended June 30, 2009 render the P/E ratio not applicable. The P/A ratio was again considered to confirm that our Valuation Range for PMMHC was within reason.

Valuation Analysis

As noted in our April 1, 2009 Appraisal, a discount of approximately 25% to 35% based on the P/B ratio was deemed appropriate for determining the Company’s Estimated Pro Forma Market Value relative to the Comparable Group’s market valuation ratios. The Company is valued at a pro-forma P/B ratio of 50.5% at the minimum, 55.0% at the midpoint, and 59.0% at the maximum as shown in Table 10.



		18

PRO FORMA VALUATION APPRAISAL

Table 11
Comparative Market Valuation Analysis
As of August 7, 2009


			Total
			Market					Price /			Price /		Price /		Price /						Current
	Closing		Value		Price /			Tangible			LTM		LTM		Total			Equity /			Dividend
	Price		($000’s)		Book			Book			EPS		Revenue		Assets			Assets			Yield


Penn Millers
Pro Forma Valuation Minimum	$	10.00	$	45,050		50.5	%		50.5	%	Neg			0.60x		17.0	%		33.6	%		0.0	%
Pro Forma Valuation Midpoint		10.00		53,000		55.0	%		55.0	%	Neg			0.70x		19.4	%		35.3	%		0.0	%
Pro Forma Valuation Maximum		10.00		60,950		59.0	%		59.0	%	Neg			0.80x		21.8	%		36.9	%		0.0	%

Comparable Group Mean	NA		$	174,147		76.6	%		82.3	%		21.90x		0.85x		24.5	%		32.0	%		4.6	%
Comparable Group Median	NA			149,256		75.7	%		83.1	%		12.85x		0.76x		23.2	%		31.3	%		2.8	%

Comparable Group
21st Century Holding Company		4.66		37,345		49.0	%		49.0	%	Neg			0.59x		18.2	%		37.2	%		15.6	%
Baldwin & Lyons, Inc.		21.08		311,288		90.0	%		90.0	%		29.69x		1.76x		40.7	%		45.2	%		5.5	%
CRM Holdings, Ltd.		1.10		18,280		18.0	%		18.6	%	Neg			0.14x		4.0	%		22.4	%	NA
Donegal Group Inc.		15.75		401,238		108.1	%		108.1	%		23.16x		1.06x		44.9	%		41.5	%		2.5	%
Eastern Insurance Holdings, Inc.		9.90		89,946		65.5	%		76.4	%	Neg			0.69x		23.3	%		35.6	%		3.5	%
EMC Insurance Group Inc.		23.10		305,750		99.5	%		99.8	%		74.52x		0.75x		26.8	%		26.9	%		2.8	%
First Mercury Financial Corporation		12.41		223,907		78.1	%		100.3	%		9.85x		0.89x		21.4	%		27.4	%	NA
Hallmark Financial Services, Inc.		6.69		139,640		73.3	%		115.2	%		11.53x		0.52x		25.3	%		34.6	%	NA
Mercer Insurance Group, Inc.		18.50		116,521		78.5	%		81.5	%		12.85x		0.75x		20.1	%		25.6	%		2.4	%
National Interstate Corporation		18.55		359,109		147.4	%		147.4	%		16.71x		1.22x		37.1	%		25.1	%		1.3	%
National Security Group, Inc.		8.50		20,966		59.8	%		59.8	%	Neg			0.35x		16.8	%		28.0	%		6.6	%
NYMAGIC, INC.		18.42		158,873		84.7	%		84.7	%	Neg			1.47x		16.3	%		19.2	%		1.7	%
SeaBright Insurance Holdings, Inc.		9.81		210,058		61.5	%		62.4	%		10.33x		0.76x		23.1	%		37.5	%	NA
Unico American Corporation		8.05		45,137		59.2	%		59.2	%		8.47x		1.00x		24.8	%		41.8	%	NA


Source: Penn Millers, SNL Financial and Capital IQ.

The Company’s pro forma P/B valuation ratios reflect discounts to the Comparable Group’s mean ratio of 76.6% measuring 23.0% at the valuation maximum, 28.2% at the valuation midpoint, and 34.1% at the valuation minimum. The Company’s P/B valuation ratios reflect a discount to the Comparable Group’s 75.7% median of 22.1% at the valuation maximum, 27.3% at the valuation midpoint, and 33.3% at the valuation minimum. In our opinion, these levels of discounts are appropriate to reflect the adjustments for earnings prospects, the new issue discount, and liquidity of the issue discussed in the previous Appraisal as of April 1, 2009 and Appraisal Update as of June 5, 2009.

Based on the P/A ratio, the Company’s midpoint valuation of $53.0 million reflects a P/A ratio of 19.4%, ranging from 17.0% at the minimum to 21.8% at the maximum. The Company’s P/A valuation ratio at the midpoint is below the Comparable Group’s corresponding mean and



		20

EXHIBIT I

STATEMENT OF GENERAL ASSUMPTIONS AND LIMITING CONDITIONS

This report is subject to the following general assumptions and limiting conditions.

1.		No investigation has been made of, and no responsibility is assumed for, the legal description of the property being valued or legal matters, including title or encumbrances. Title to the property is assumed to be good and marketable unless otherwise stated. The property is assumed to be free and clear of any liens, easements or encumbrances unless otherwise stated.

2.		Information furnished by others, upon which all or portions of this analysis is based, is believed to be reliable, but has not been verified except as set forth in this report. No warranty is given as to the accuracy of such information.

3.		This report has been made only for the purpose stated and shall not be used for any other purpose.

4.		Except as specified in our engagement letter, neither Curtis nor any individual signing or associated with this report shall be required by reason of this report to give further consultation, provide testimony, or appear in court or other legal proceeding.

5.		No responsibility is taken for changes in market conditions and no obligation is assumed to revise this report to reflect events or conditions which occur subsequent to the date hereof.

6.		The date to which the opinions expressed in this report apply is set forth in the letter of transmittal. Our opinion is based on the purchasing power of the United States dollar as of that date.

7.		It is assumed that all required licenses, certificates of occupancy, consents, or other legislative or administrative authority from any local, state, or national government or private entity or organization have been or can readily be obtained or renewed.

8.		Full compliance with all applicable federal, state and local zoning, use, environmental and similar laws and regulations is assumed, unless otherwise stated.

9.		Competent management is assumed.

10.		The opinion is predicated on the financial structure prevailing as of the date of this report.

Exhibit III

Overview of Curtis

With offices in Philadelphia and Pittsburgh, PA, Curtis Financial Group, LLC (“Curtis”) is a leading investment banking and corporate finance advisory firm serving middle-market clients since 1994. Our expertise and experience with financial services industry clients is reflected in our consistently high national rankings by SNL Financial LC. The Curtis team offers clients the benefit of more than 125 years of collective experience, having served: public and private middle-market companies operating in a diverse group of industries in the United States and globally; and entrepreneurs, families, corporations, private equity and venture capital investors. All securities are sold through Curtis Securities, LLC, a FINRA (www.finra.org) registered broker-dealer.

Background of Appraisers

Anthony A. Latini, Jr., CFA
Managing Director

Mr. Latini has over 20 years of experience providing corporate finance and investment banking services to middle market and large corporate clients. Mr. Latini focuses on merger and acquisition advisory services and capital raising for clients in a wide variety of industries including manufacturing, distribution, and financial services. He has been involved with seven mutual to stock conversions. Prior to joining Curtis, Mr. Latini was a Director in the Financial Services Group at Berwind Financial L.P. and has also held positions at Evans & Company, Inc., and CoreStates Financial Corporation. Mr. Latini received his B.S. from the Wharton School at the University of Pennsylvania and is a Chartered Financial Analyst (CFA).

Paul M. Yeakel, Jr.
Vice President

Mr. Yeakel has more than eight years of investment banking and real estate financing experience, having successfully completed projects in industries including telecommunications, flat panel displays, accounts receivable management, healthcare, software, energy and real estate. Prior to joining Curtis Financial Group, Mr. Yeakel co-founded Lighthouse Development Partners, LLC, a real estate development firm, and spent four years working in a corporate development role for CD Ventures and Gatehouse Ventures, both private investment firms located in Berwyn, PA. Additionally, Mr. Yeakel worked for Corning Incorporated as an internal corporate strategy consultant. Mr. Yeakel graduated from Carnegie Mellon’s Graduate School of Industrial Administration with a M.B.A. and earned a B.A. in English from The College of Wooster.

Laura E. Anastasio
Senior Associate

Ms. Anastasio joined Curtis Financial Group in 2005 after two years with Ernst & Young, LLP. As part of the Transaction Advisory Services Group, Ms. Anastasio completed valuation assignments involving both businesses and sale leaseback transactions. She has experience working in a variety of industries ranging from consumer products to computer technology, and has been involved with three mutual to stock conversions. Ms. Anastasio holds a B.S. in Industrial Engineering from Lehigh University. She is also a member of the American Society of Appraisers.

Exhibit IV-1
Penn Millers Mutual Holding Company
Historical Balance Sheets — GAAP Basis
(Dollars in Thousands)


	6/30/2009			3/31/2009			12/31/2008			12/31/2007			12/31/2006			12/31/2005			12/31/2004			12/31/2003
ASSETS
Investments:
Fixed securities		134,783			128,298			121,914			112,769			99,906			94,549			92,752			87,123
Equity securities		—			—			—			13,409			13,697			12,328			12,819			11,266

Total investments		134,783			128,298			121,914			126,178			113,603			106,877			105,571			98,389

Cash and cash equivalents (cash overdraft)		12,095			15,695			11,959			10,134			13,052			10,021			11,431			14,387
Premiums and fees receivable		26,783			28,753			31,080			32,489			30,465			26,910			29,256			24,056
Reinsurance receivables and recoverables		25,950			25,064			20,637			15,640			18,886			22,923			18,053			22,222
Deferred acquisition costs		9,862			10,522			10,601			11,014			10,381			9,646			10,352			9,243
Prepaid reinsurance premiums		3,769			4,170			4,342			4,234			4,119			3,645			3,731			3,209
Accrued investment income		1,565			1,391			1,431			1,499			1,439			1,302			1,225			1,236
PP&E, less accumulated depreciation		3,958			4,071			4,231			4,401			4,228			4,255			5,020			5,583
Income taxes receivable		738			1,294			1,508			1,056			—			894						—
Deferred income taxes		3,240			3,656			4,728			1,872			1,439			1,429			—			—
Other		5,642			4,058			4,879			3,972			2,812			2,557			2,144			1,845
Assets from discontinued operations		—			1,443			3,214			7,124			7,344			7,438			5,237			5,285

Total assets		228,385			228,415			220,524			219,613			207,768			197,897			192,020			185,455


LIABILITIES AND SURPLUS
Loss and loss adjustment expense reserves		118,025			116,775			108,065			95,956			89,405			83,849			73,287			69,463
Unearned premiums		41,218			44,811			45,322			46,595			43,294			39,984			42,798			38,090
Accounts due reinsurers		—			—			—			—			—			—			2,597			4,973
Accounts payable and accrued expenses		14,211			12,631			13,353			12,874			10,394			9,603			7,991			7,226
Deferred income taxes payable		—			—			—			—			—			—			673			1,344
Income taxes payable		—			—			—			—			256			1			22			161
Long-term debt		2,959			3,037			2,382			1,745			2,307			4,400			3,064			3,059
Liabilities from discontinued operations		—			—			647			1,042			1,582			2,291			1,682			1,864


Total liabilities		176,413			177,254			169,769			158,212			147,238			140,128			132,114			126,180

Unassigned surplus		51,730			51,945			51,914			59,293			58,207			56,127			55,837			54,439
Accumulated other comprehensive income, net		242			(784	)		(1,159	)		2,108			2,323			1,642			4,069			4,836

Total surplus		51,972			51,161			50,755			61,401			60,530			57,769			59,906			59,275

Total liabilities and surplus		228,385			228,415			220,524			219,613			207,768			197,897			192,020			185,455

Performance and Capital Ratios
Return on average assets		-2.37	%		-2.66	%		-2.03	%		0.68	%		0.94	%		0.12	%		0.64	%		1.00	%
Return on average surplus		-9.61	%		-10.57	%		-7.95	%		2.38	%		3.23	%		0.41	%		2.03	%		3.12	%
Surplus to total assets		22.76	%		22.40	%		23.02	%		27.96	%		29.13	%		29.19	%		31.20	%		31.96	%

Notes:

Source: Financial reports prepared by management and reviewed by KPMG.

Exhibit IV-2
Penn Millers Mutual Holding Company
Historical Income Statements — GAAP Basis
(Dollars in Thousands)


	TTM ended			TTM ended
	6/30/2009 (e)			3/31/2009 (e)			2008			2007			2006			2005			2004			2003
REVENUE
Premiums earned	$	76,294		$	77,327		$	78,737		$	70,970		$	64,645		$	64,723		$	63,090		$	56,065
Investment income, net of investment expense		5,381			5,298			5,335			5,324			4,677			4,444			4,278			4,058
Realized investment (losses) gains, net		(7,828	)		(7,627	)		(5,819	)		(702	)		349			424			936			833
Other income		301			282			411			508			345			277			301			371

Total revenue		74,148			75,280			78,664			76,100			70,016			69,868			68,605			61,327

LOSSES AND EXPENSES
Losses and loss adjustment expenses		54,564			56,343			57,390			49,783			43,766			40,242			42,910			35,822
Underwriting and administrative expenses (a)		26,056			26,414			26,562			24,163			23,296			29,221			24,359			22,911
Interest expense		253			213			184			125			222			195			51			56
Other expenses, net		379			376			365			184			314			266			82			101

Total losses and expenses		81,252			83,346			84,501			74,255			67,598			69,924			67,402			58,890

Income from continuing operations		(7,104	)		(8,066	)		(5,837	)		1,845			2,418			(56	)		1,203			2,437


Income taxes expense (benefit)		(1,765	)		(2,074	)		(1,378	)		396			506			(296	)		(4	)		587


Net income (loss) from continuing operations		(5,339	)		(5,992	)		(4,459	)		1,449			1,912			240			1,207			1,850


Discontinued Operations:
Pre-tax (loss) income on discontinued ops		(3,081	)		(3,104	)		(3,090	)		(489	)		292			385			240			340
Income tax (benefit) expense		641			632			(170	)		(126	)		124			151			63			143

(Loss) income on discontinued ops		(3,722	)		(3,736	)		(2,920	)		(363	)		168			234			177			197

Net income		(9,061	)		(9,728	)		(7,379	)		1,086			2,080			474			1,384			2,047

Operating Ratios
Loss ratio (b)		71.5	%		72.9	%		72.9	%		70.1	%		67.7	%		62.2	%		68.0	%		63.9	%
Expense ratio (c)		34.2	%		34.2	%		33.7	%		34.0	%		36.0	%		45.1	%		38.6	%		40.9	%
Combined ratio (d)		105.7	%		107.0	%		106.6	%		104.2	%		103.7	%		107.3	%		106.6	%		104.8	%


Notes:

(a)		Includes amortization of deferred policy acquisition costs.

(b)		Losses and loss adjustment expenses divided by premiums earned.

(c)		Underwriting and administrative expenses divided by premiums earned.

(d)		Sum of the loss ratio and the expense ratio.

(e)		Represents the trailing twelve month period.

Source: Financial reports prepared by management and reviewed by KPMG. Statutory financials provided in Exhibit V.

Exhibit V-1
Penn Millers Mutual Holding Company (b)
Historical Balance Sheets — Statutory Basis (a)
(Dollars in Thousands)


	12/31/2008			12/31/2007			12/31/2006			12/31/2005			12/31/2004			12/31/2003
ASSETS

Investments:
Bonds		120,538			110,972			99,628			93,879			89,641			82,441
Stocks		1			13,411			13,697			12,329			12,819			11,267
Real estate		2,694			2,788			2,909			1,199			1,204			1,076
Receivables for securities					91			—			—			—			—

Total investments		123,233			127,262			116,234			107,407			103,664			94,784

Cash and cash equivalents (cash overdraft)		11,695			10,034			12,911			9,459			10,996			14,365
Premiums and considerations		31,950			32,416			30,396			26,730			29,076			23,919
Reinsurance receivables		3,074			917			1,120			1,114			838			1,036
Accrued investment income		1,431			1,499			1,439			1,302			1,225			1,236
Other receivables		1,160			1,723			1,524			1,682			1,490			926
PP&E		642			857			508			152			194			295
Income taxes receivable		1,406			646			—			10			13			—
Deferred income taxes		5,190			4,893			4,242			4,071			3,820			3,747
Receivable from parent		186			557			219			361			204			250
Aggregate write-ins for other than invested assets		2,973			3,011			1,960			1,761			981			517


Total assets		182,941			183,815			170,553			154,049			152,501			141,075


LIABILITIES AND SURPLUS
Loss and loss adjustment expense reserves		85,439			77,222			69,317			61,033			55,805			48,072
Unearned premiums		41,061			42,499			39,221			36,348			39,102			35,122
Accounts due reinsurers and provisions		5			22			276			227			100			287
Commissions payable, contingent commissions		1,488			2,515			2,581			2,292			2,867			2,154
Other expenses		6,411			6,532			6,110			6,124			5,480			5,361
Ceded reinsurance premiums payable		2,024			3,686			1,275			614			2,482			2,782
Funds held by company under reinsurance treaties		2,616			—			677			73			114			2,191
Amounts withheld or retained by company		55			47			67			78			68			130
Payable for securities		—			414			472			—			—			—
Aggregate write ins for liabilities		—			—			—			—			811			273
Payable to parent		15			83			32			44			227			371


Total liabilities		139,115			133,020			120,028			106,833			107,056			96,743

Aggregate write-ins for special surplus funds		2,250			2,250			2,250			2,250			2,250			2,250
Common capital stock		5,000			5,000			5,000			5,000			5,000			5,000
Gross paid in and contributed surplus		5,000			5,000			5,000			5,000			5,000			5,000
Unassigned surplus		30,576			38,545			38,275			34,966			33,195			32,082


Total surplus		42,826			50,795			50,525			47,216			45,445			44,332


Total liabilities and surplus		181,941			183,815			170,553			154,049			152,501			141,075


Performance and Capital Ratios
Return on assets		-2.43	%		0.50	%		0.85	%		2.07	%		0.43	%		0.43	%
Return on surplus		-9.53	%		1.73	%		2.81	%		6.84	%		1.41	%		1.37	%
Surplus to total assets		23.41	%		27.63	%		29.62	%		30.65	%		29.80	%		31.42	%

Notes:


(a)		Statutory financials do not include the effects of discontinued operations.

(b)		Statutory financial statements represent the results of operations of PMHC.

Source: Statutory prepared financial statements.

Exhibit V-2
Penn Millers Mutual Holding Company (e)
Historical Income Statements — Statutory Basis (d)
(Dollars in Thousands)


	2008			2007			2006			2005			2004			2003
REVENUE
Premiums earned		78,737		$	70,970		$	64,645		$	64,723		$	63,090		$	56,065
Investment income, net of investment expense		5,085			5,104			4,370			4,131			4,052			4,097
Realized investment (losses) gains, net		(5,778	)		(431	)		232			262			937			833


Total revenue		78,044			75,643			69,247			69,116			68,079			60,995

LOSSES AND EXPENSES
Losses and loss adjustment expenses		57,391			49,774			43,770			40,242			42,910			35,822
Underwriting and administrative expenses		25,256			24,059			23,525			24,427			24,407			23,407
Other expenses, net		39			(318	)		(31	)		(114	)		(219	)		(212	)


Total losses and expenses		82,686			73,515			67,264			64,555			67,098			59,017

Income from continuing operations		(4,642	)		2,128			1,983			4,561			981			1,978


Income taxes expense (benefit)		(181	)		1,250			609			1,390			347			1,369


Net income (loss)		(4,461	)		878			1,374			3,171			634			609


Operating Ratios
Loss ratio (a)		72.9	%		70.1	%		67.7	%		62.2	%		68.0	%		63.9	%
Expense ratio (b)		32.1	%		33.9	%		36.4	%		37.7	%		38.7	%		41.7	%
Combined ratio (c)		105.0	%		104.0	%		104.1	%		99.9	%		106.7	%		105.6	%

Notes:


(a)		Losses and loss adjustment expenses divided by net premiums earned.

(b)		Underwriting expenses divided by net premiums earned.

(c)		Sum of the loss ratio and the expense ratio.

(d)		Statutory financials do not include the effects of discontinued operations.

(e)		Statutory financial statements represent the results of operations of PMHC.

Source: Statutory prepared financial statements.

Exhibit VI-1 (Continued)
Penn Millers Mutual Holding Company
Financial Performance Data for Publicly Traded Property and Casualty Companies


													Cash and		Cash and		Policy				Tangible		Net Prem				GAAP		GAAP
			Total Assets		Total Policy		Total Equity		Tangible Equity		Total Policy		Investments		Investments /		Reserves /		Total Equity		Equity /		Writ/ Avg		GAAP Loss		Expense		Combined
Company Name	Ticker		($000)		Reserves ($000)		($000)		($000)		Revenue ($000)		($000)		Assets		Equity		/ Assets		Assets		Equity (x)		Ratio (%)		Ratio (%)		Ratio (%)		ROAA (%)		ROAE (%)


21st Century Holding Company	TCHC			204,676		114,701		76,228		76,228		60,429		150,471		0.74		1.50		0.37		0.37		0.68		63.81		47.50		111.31		-3.17		-8.12
ACE Limited	ACE			75,655,000		47,291,000		16,561,000		12,805,000		13,295,000		44,197,000		0.58		2.86		0.22		0.17		0.86		58.90		28.70		87.60		1.58		7.72
Affirmative Insurance Holdings, Inc.	AFFM			811,112		327,695		231,944		51,207		355,658		356,534		0.44		1.41		0.29		0.06		1.63		74.70		24.00		98.70		0.92		3.49
Alleghany Corporation		Y		6,012,686		3,164,484		2,551,029		2,400,723		921,215		4,112,254		0.68		1.24		0.42		0.40		0.32		51.70		30.90		82.60		1.47		3.63
Allied World Assurance Company Holdings, Ltd	AWH			8,892,255		5,598,837		2,491,860		2,152,983		1,167,805		6,710,099		0.75		2.25		0.28		0.24		0.51		45.80		29.50		75.30		2.15		7.92
Allstate Corporation	ALL			133,091,000		95,860,000		15,098,000		14,224,000		28,545,000		97,125,000		0.73		6.35		0.11		0.11		1.76		74.00		24.40		98.40		-1.41		-13.05
American Financial Group, Inc.	AFG			25,842,100		20,189,900		2,678,800		2,396,900		3,237,200		17,949,000		0.69		7.54		0.10		0.09		1.02		46.20		35.80		82.00		0.87		8.35
American Physicians Capital, Inc.	ACAP			972,209		686,173		240,209		240,209		118,889		811,594		0.83		2.86		0.25		0.25		0.45		49.80		25.10		74.90		4.33		17.15
American Physicians Service Group, Inc.	AMPH			288,848		126,792		144,246		141,978		65,415		242,601		0.84		0.88		0.50		0.49		0.50		38.81		17.47		56.28		6.76		14.08
American Safety Insurance Holdings, Ltd.	ASI			1,086,901		714,595		223,150		213,454		174,549		733,395		0.67		3.20		0.21		0.20		0.82		59.40		39.70		99.10		0.01		-0.04
AMERISAFE, Inc.	AMSF			1,157,196		730,190		278,273		278,273		278,843		809,089		0.70		2.62		0.24		0.24		1.08		64.30		21.70		86.00		3.90		17.35
AmTrust Financial Services, Inc.	AFSI			3,183,530		1,825,488		476,853		374,131		494,965		1,410,833		0.44		3.83		0.15		0.12		1.42		56.30		23.40		79.70		2.72		20.95
Arch Capital Group Ltd.	ACGL			16,641,935		9,442,023		4,029,968		3,603,333		2,831,367		11,643,601		0.70		2.34		0.24		0.22		0.78		57.10		29.90		87.00		1.27		5.54
Argo Group International Holdings, Ltd.	AGII			6,919,700		4,056,900		1,459,200		1,208,000		1,362,100		4,103,800		0.59		2.78		0.21		0.17		0.99		60.97		35.05		96.02		0.80		3.76
Aspen Insurance Holdings Limited	AHL			8,022,100		4,304,700		2,972,500		2,964,300		1,788,700		6,002,600		0.75		1.45		0.37		0.37		0.65		55.40		30.60		86.00		1.30		3.49
AXIS Capital Holdings Limited	AXS			15,378,885		9,232,919		4,909,119		4,814,061		2,720,385		11,055,319		0.72		1.88		0.32		0.31		0.59		55.80		27.60		83.40		1.29		4.15
Baldwin & Lyons, Inc.	BWINB			765,742		369,849		345,853		345,853		175,515		543,677		0.71		1.07		0.45		0.45	NA			54.00		35.30		89.30		1.28		3.00
Berkshire Hathaway Inc.	BRK.A			275,646,000		71,596,000		118,837,000		84,915,000		27,753,000		136,838,000		0.50		0.60		0.43		0.31	NA			74.80		22.04		96.84		1.15		2.74
Chubb Corporation	CB			48,572,000		28,435,000		14,504,000		14,037,000		11,520,000		40,297,000		0.83		1.96		0.30		0.29		0.83		56.37		32.24		89.39		2.97		11.33
Cincinnati Financial Corporation	CINF			13,522,000		7,412,000		4,144,000		4,144,000		3,095,610		9,962,000		0.74		1.79		0.31		0.31		0.74		79.40		32.70		112.10		3.09		9.87
CNA Surety Corporation	SUR			1,610,950		685,832		828,677		689,892		427,424		1,203,988		0.75		0.83		0.51		0.43		0.55		29.30		53.30		82.60		6.82		14.03
CRM Holdings, Ltd.	CRMH			452,951		273,506		101,677		98,465		110,733		340,804		0.75		2.69		0.22		0.22		1.04		80.80		51.30		132.10		-3.45		-13.46
Donegal Group Inc.	DGICA			893,824		488,237		371,328		367,428		353,129		638,161		0.71		1.31		0.42		0.41		0.97		72.70		31.20		103.90		1.94		4.74
Eastern Insurance Holdings, Inc.	EIHI			385,487		207,849		137,234		117,736		136,542		273,564		0.71		1.51		0.36		0.31		0.88		66.95		34.77		101.72		-5.35		-13.47
EMC Insurance Group Inc.	EMCI			1,142,746		723,328		307,348		306,406		386,275		1,002,325		0.88		2.35		0.27		0.27		1.29		63.10		36.40		99.50		0.34		1.26
Employers Holdings, Inc.	EIG			3,764,778		2,655,209		459,942		406,392		364,651		2,273,650		0.60		5.77		0.12		0.11		0.86		53.00		46.80		99.80		2.85		23.33
Endurance Specialty Holdings Ltd.	ENH			8,079,345		4,476,916		2,475,597		2,279,724		1,753,852		5,733,830		0.71		1.81		0.31		0.28		0.75		60.40		30.40		90.80		1.88		6.29
Enstar Group Limited	ESGR			4,371,009		2,797,827		860,581		839,359		0		3,477,957		0.80		3.25		0.20		0.19		0.00	NA		NA		NA			2.05		14.05
Erie Indemnity Company	ERIE			2,635,728		1,422,448		829,116		829,116		207,605		1,024,356		0.39		1.72		0.31		0.31	NA			75.20		28.70		103.90		1.58		4.91
Everest Re Group, Ltd.	RE			17,326,935		10,240,069		5,545,415		5,545,415		3,729,431		14,207,305		0.82		1.85		0.32		0.32		0.72		60.20		28.60		88.80		0.77		2.55
Fairfax Financial Holdings Limited	FFH			27,020,900		16,838,000		5,613,200		5,297,700		4,496,000		19,489,900		0.72		3.00		0.21		0.20		0.89		70.14		28.36		98.50		3.82		21.20
First Acceptance Corporation	FAC			447,662		161,513		226,661		82,219		239,924		215,102		0.48		0.71		0.51		0.18	NA			70.10		23.90		94.00		-1.20		-2.44
First Mercury Financial Corporation	FMR			1,045,694		578,191		286,838		223,154		207,640		648,738		0.62		2.02		0.27		0.21		0.79		63.40		30.60		94.00		2.38		8.47
Flagstone Reinsurance Holdings Limited	FSR			2,654,398		976,171		1,306,557		1,253,166		736,955		1,822,043		0.69		0.75		0.49		0.47		0.65		37.30		37.00		74.30		-5.92		-11.72
FPIC Insurance Group, Inc.	FPIC			977,332		639,534		267,438		256,605		161,794		710,581		0.73		2.39		0.27		0.26		0.57		59.10		25.10		84.20		2.84		10.70
GAINSCO, INC.	GAN			246,972		131,732		54,741		54,132		179,266		175,854		0.71		2.41		0.22		0.22		3.11		70.40		25.30		95.70		-0.65		-2.68
Greenlight Capital Re, Ltd.	GLRE			1,312,716		245,454		614,546		614,546		158,315		1,135,430		0.86		0.40		0.47		0.47		0.37		56.30		40.40		96.70		-2.53		-5.28
Hallmark Financial Services, Inc.	HALL			551,279		277,022		190,555		121,220		236,185		368,415		0.67		1.45		0.35		0.22		1.29		62.00		29.50		91.50		2.26		6.52
Hanover Insurance Group, Inc.	THG			7,747,700		4,396,400		2,221,100		2,051,100		2,509,900		4,819,800		0.62		1.98		0.29		0.26		1.25		65.10		33.70		98.80		0.72		3.08
Harleysville Group Inc.	HGIC			3,203,625		2,266,835		692,056		668,656		892,119		2,539,439		0.79		3.28		0.22		0.21		1.30		65.96		34.81		100.77		1.46		6.89
HCC Insurance Holdings, Inc.	HCC			8,876,261		4,691,848		2,809,465		1,961,673		2,011,984		5,469,185		0.62		1.67		0.32		0.22		0.77		60.50		25.00		85.50		3.60		11.57
Hilltop Holdings Inc.	HTH			1,044,775		101,698		791,201		753,659		114,177		915,693		0.88		0.13		0.76		0.72		0.14		48.50		38.00		86.50		-1.33		-1.81
Horace Mann Educators Corporation	HMN			5,828,171		3,795,925		561,839		514,443		658,285		4,231,133		0.73		6.76		0.10		0.09		2.02		73.90		25.30		99.20		0.42		5.00
Infinity Property and Casualty Corporation	IPCC			1,753,151		920,958		560,212		484,937		882,420		1,200,139		0.68		1.64		0.32		0.28		1.55		70.52		21.63		92.15		1.17		3.80
IPC Holdings, Ltd.	IPCR			2,612,668		569,119		2,014,218		2,014,218		407,681		2,308,496		0.88		0.28		0.77		0.77		0.24		15.70		33.50		49.20		5.53		7.34
Kingsway Financial Services Inc.	KFS			3,098,788		2,299,905		370,547		308,069		1,376,335		2,369,038		0.76		6.21		0.12		0.10		1.83		86.70		34.00		120.70		-11.08		-63.37
Markel Corporation	MKL			9,711,499		6,335,786		2,352,425		2,010,751		1,930,520		7,317,021		0.75		2.69		0.24		0.21		0.80		59.13		38.16		97.29		-1.30		-5.54
Meadowbrook Insurance Group, Inc.	MIG			1,878,089		1,193,297		477,442		358,350		482,846		1,142,511		0.61		2.50		0.25		0.19		1.16		58.70		31.50		90.20		2.13		8.66
Mercer Insurance Group, Inc.	MIGP			580,809		385,190		148,430		143,014		145,390		392,632		0.68		2.60		0.26		0.25		1.02		60.90		37.00		97.90		1.59		6.53
Mercury General Corporation	MCY			4,141,871		1,932,709		1,642,546		1,529,467		2,701,993		3,172,892		0.77		1.18		0.40		0.37		1.63		67.20		29.30		96.50		-2.38		-6.02
Montpelier Re Holdings Ltd.	MRH			3,144,100		1,083,400		1,597,000		1,432,500		543,800		2,597,600		0.83		0.68		0.51		0.46		0.41		28.90		38.70		67.60		0.71		1.48

Exhibit VI-1 (Continued)
Penn Millers Mutual Holding Company
Financial Performance Data for Publicly Traded Property and Casualty Companies


								Tangible		Total		Cash and		Cash and		Policy		Total		Tangible		Net Prem				GAAP		GAAP
		Total Asset		Total Policy		Total Equity		Equity		Policy		Investments		Investments		Reserves /		Equity		Equity /		Writ/ Avg		GAAP Loss		Expense		Combined
Company Name	Ticker	($000)		Reserves ($000)		($000)		($000)		Revenue ($000)		($000)		/ Assets		Equity		/ Assets		Assets		Equity (x)		Ratio (%)		Ratio (%)		Ratio (%)		ROAA (%)			ROAE (%)


National Interstate Corporation	NATL		969,243		584,812		243,547		243,547		290,380		572,988		0.59		2.40		0.25		0.25		1.29		56.60		23.80		80.40		2.15			9.80
National Security Group, Inc.	NSEC		125,054		70,927		35,045		35,045		54,898		93,511		0.75		2.02		0.28		0.28	NA			76.47		41.98		118.44		-3.36			-11.53
Navigators Group, Inc.	NAVG		3,403,633		2,374,350		712,454		705,922		653,182		1,951,428		0.57		3.33		0.21		0.21		0.99		60.80		32.00		92.80		1.22			5.96
NYMAGIC, INC.	NYM		977,190		651,829		187,572		187,572		158,247		617,900		0.63		3.48		0.19		0.19		0.87		48.01		48.39		96.40		-7.14			-28.43
Odyssey Re Holdings Corp.	ORH		10,150,029		6,096,231		3,138,352		3,138,352		1,999,887		8,090,058		0.80		1.94		0.31		0.31		0.70		67.30		29.20		96.50		3.58			12.60
Old Republic International Corporation	ORI		13,718,600		8,869,000		3,753,100		3,753,100		3,225,000		9,277,200		0.68		2.36		0.27		0.27	NA			81.30		41.00		122.30		-1.84			-6.42
OneBeacon Insurance Group, Ltd.	OB		7,494,400		5,136,600		1,305,400		1,305,400		1,937,900		3,821,100		0.51		3.93		0.17		0.17		1.52		57.60		35.80		93.40		-2.74			-16.95
PartnerRe Ltd.	PRE		16,974,071		10,714,780		4,767,678		4,338,159		3,755,311		12,070,176		0.71		2.25		0.28		0.26		0.88		54.80		30.50		85.30		3.38			13.04
Platinum Underwriters Holdings, Ltd.	PTP		4,968,138		2,585,087		1,952,704		1,952,704		1,035,177		4,399,258		0.89		1.32		0.39		0.39		0.53		56.00		22.50		78.50		4.08			10.95
PMA Capital Corporation	PMACA		2,525,231		1,518,619		368,998		338,833		413,580		806,945		0.32		4.12		0.15		0.13		1.17		70.45		43.01		113.46		0.22			1.58
ProAssurance Corporation	PRA		4,598,409		2,752,983		1,527,671		1,398,036		454,568		3,784,506		0.82		1.80		0.33		0.30		0.32		58.80		22.70		81.50		4.15			12.89
Progressive Corporation	PGR		19,087,600		10,578,500		4,925,000		4,925,000		13,678,200		13,611,300		0.71		2.15		0.26		0.26		3.10		70.10		21.00		91.10		-0.23			-0.96
RenaissanceRe Holdings Ltd.	RNR		8,805,437		3,007,377		4,104,164		4,033,321		1,382,902		6,385,938		0.73		0.73		0.47		0.46		0.37		22.50		26.90		49.40		2.20			4.74
RLI Corp.	RLI		2,482,685		1,508,800		763,602		737,388		508,678		1,800,089		0.73		1.98		0.31		0.30		0.68		44.30		39.40		83.70		1.87			6.39
Safety Insurance Group, Inc.	SAFT		1,417,938		751,793		601,689		601,689		545,462		1,061,367		0.75		1.25		0.42		0.42		0.87		67.20		30.20		97.40		3.97			9.53
SeaBright Insurance Holdings, Inc.	SBX		911,125		498,059		341,811		336,425		254,270		594,029		0.65		1.46		0.38		0.37		0.83		67.20		30.30		97.50		2.39			6.27
Selective Insurance Group, Inc.	SIGI		5,030,875		3,545,857		946,375		916,738		1,461,312		3,631,093		0.72		3.75		0.19		0.18		1.54		68.00		31.60		99.60		-0.05			-0.27
Specialty Underwriters’ Alliance, Inc.	SUAI		462,500		297,700		140,700		130,000		143,695		266,400		0.58		2.12		0.30		0.28		1.06		62.80		43.65		106.45		0.49			1.62
State Auto Financial Corporation	STFC		2,501,600		1,383,100		780,300		778,300		1,144,300		2,115,000		0.85		1.77		0.31		0.31		1.52		77.80		33.40		111.20		-1.33			-4.16
Tower Group, Inc.	TWGP		2,576,254		1,356,288		847,299		571,929		573,548		1,581,576		0.61		1.60		0.33		0.22		1.31		52.80		32.70		85.50		4.37			17.25
Transatlantic Holdings, Inc.	TRH		14,084,507		9,731,716		3,549,291		3,549,291		4,032,304		11,298,456		0.80		2.74		0.25		0.25		1.27		67.50		26.80		94.30		0.60			2.59
Travelers Companies, Inc.	TRV		111,326,000		72,008,000		26,920,000		22,919,000		21,536,000		73,725,000		0.66		2.67		0.24		0.21		0.84		60.50		31.40		91.90		2.17			9.39
Unico American Corporation	UNAM		182,340		96,150		76,226		76,226		32,643		149,331		0.82		1.26		0.42		0.42	NA			61.00		26.00		87.00		2.88			7.27
United America Indemnity, Ltd.	INDM		2,505,401		1,550,201		763,362		754,090		322,050		1,678,754		0.67		2.03		0.30		0.30		0.44		59.90		39.70		99.60		-4.63			-16.81
United Fire & Casualty Company	UFCS		2,806,189		2,074,826		653,183		652,663		495,150		2,355,893		0.84		3.18		0.23		0.23		0.73		77.10		30.70		107.80		-1.24			-5.09
Universal Insurance Holdings, Inc.	UVE		621,498		365,086		109,260		109,260		150,079		333,474		0.54		3.34		0.18		0.18		1.64		54.10	NA		NA			6.67			38.21
Validus Holdings, Ltd.	VR		5,008,450		2,168,073		2,151,969		2,006,440		1,302,316		3,530,566		0.70		1.01		0.43		0.40		0.66		39.70		33.80		73.50		3.12			7.17
W.R. Berkley Corporation	WRB		16,656,495		11,099,715		3,295,699		3,187,707		4,020,940		12,855,598		0.77		3.37		0.20		0.19		1.23		62.60		32.00		94.60		0.55			2.88
Wesco Financial Corporation	WSC		2,718,686		403,777		2,117,734		1,839,939		290,881		1,786,949		0.66		0.19		0.78		0.68		0.15		60.92		29.28		90.20		2.62			3.36
White Mountains Insurance Group, Ltd.	WTM		15,551,000		8,704,200		3,851,400		3,789,100		3,668,900		9,535,200		0.61		2.26		0.25		0.24		0.99		59.24		33.49		92.73		-1.38			-6.23
Zenith National Insurance Corp.	ZNT		2,507,708		1,276,498		1,049,916		1,028,931		528,533		2,009,704		0.80		1.22		0.42		0.41		0.50		72.20		45.20		117.40		1.15			2.84

Group Aggregate
Overall P&C Insurance Group Mean			12,858,005		6,817,464		3,718,911		3,113,906		2,421,404		8,342,222		0.70		2.28		0.31		0.29		0.97		60.31		32.30		92.70		0.91			3.16
Overall P&C Insurance Group Median			2,952,489		1,687,845		828,897		766,195		544,631		2,194,325		0.71		2.02		0.29		0.26		0.86		60.80		31.30		93.70		1.29			4.45

P&C Group Mean > $1.2 Bil. Total Assets			18,193,881		9,639,118		5,252,511		4,392,122		3,402,992		11,791,322		0.70		2.42		0.31		0.28		0.94		59.58		32.08		91.67		1.01			3.24
P&C Group Median > $1.2 Bil. Total Assets			5,828,171		3,164,484		2,014,218		1,952,704		1,362,100		4,103,800		0.72		1.98		0.30		0.26		0.84		60.30		31.45		92.44		1.29			4.74

P&C Group Mean < $1.2 Bil. Total Assets			692,207		384,094		222,301		199,573		183,383		478,275		0.69		1.97		0.33		0.29		1.05		61.96		32.83		95.12		0.70			2.98
P&C Group Median < $1.2 Bil. Total Assets			765,742		365,086		223,150		143,014		161,794		392,632		0.71		2.02		0.28		0.25		0.97		62.80		30.90		96.05		1.28			3.49

P&C Group Mean > $500 m Total Revenue			14,404,930		7,637,688		4,163,807		3,486,688		2,705,912		9,344,584		0.70		2.36		0.31		0.28		0.95		59.64		32.01		91.73		1.12			3.95
P&C Group Mean > $500 m Total Revenue			3,403,633		2,266,835		1,049,916		1,028,931		736,955		2,539,439		0.71		2.03		0.28		0.26		0.86		60.30		31.20		92.73		1.46			4.91

P&C Group Mean < $500 m Total Revenue			310,721		164,541		110,306		90,225		113,727		211,960		0.71		1.68		0.35		0.31		1.21		65.68		34.65		100.33		(0.78	)		(3.19	)
P&C Group Median < $500 m Total Revenue			288,848		131,732		101,677		82,219		110,733		215,102		0.74		1.51		0.36		0.28		0.96		66.95		34.77		101.72		(1.20	)		(2.68	)

Source: SNL Financial.

Exhibit VI-2
Penn Millers Mutual Holding Company
Market Valuation Data for Publicly Traded Property and Casualty Companies



				Total Diluted								(a)
				Shares						Price /		Price /		(a)						Current		One-Year
				Outstand.		Total Market		Price / Book		Tangible		Operating		Price / LTM		Price / LTM		Price / Total		Dividend		Price Change
Company Name		Closing price		(000’S)		value (000’s)		(%)		Book (%)		EPS (x)		EPS (x)		Revenue (x)		Assets (%)		Yield (%)		(%)

21st Century Holding Company	TCHC		4.66		8,014		37,345		48.99		48.99	Neg		Neg			0.59		18.25		15.55		(25.80	)
ACE Limited	ACE		50.54		337,508		17,057,669		103.00		133.21		6.81		14.48		1.24		22.55		2.04		(6.60	)
Affirmative Insurance Holdings, Inc.	AFFM		3.95		15,415		60,889		26.25		118.91		32.92	Neg			0.13		7.51		2.53		(40.78	)
Alleghany Corporation	Y		272.36		9,208		2,507,997		98.31		104.47		23.50	NA			2.87		41.71	NA			(11.80	)
Allied World Assurance Company Holdings, Ltd	AWH		42.56		51,258		2,181,536		87.55		101.33		4.69		10.06		1.82		24.53		1.77		9.55
Allstate Corporation	ALL		27.79		540,600		15,023,274		99.51		105.62		13.92	Neg			0.50		11.29		5.01		(40.48	)
American Financial Group, Inc.	AFG		25.17		116,500		2,932,305		109.46		122.34		6.04		10.19		0.67		11.35		2.19		(13.65	)
American Physicians Capital, Inc.	ACAP		32.74		11,275		369,144		153.68		153.68		8.42		9.09		2.42		37.97		0.83		(1.88	)
American Physicians Service Group, Inc.	AMPH		21.90		7,007		153,453		106.38		108.08		6.54		8.11		2.00		53.13		1.39		10.05
American Safety Insurance Holdings, Ltd.	ASI		15.92		10,524		167,534		75.08		78.49		530.67	Neg			0.87		15.41	NA			(2.69	)
AMERISAFE, Inc.	AMSF		17.10		19,242		329,040		118.24		118.24		5.86		7.99		1.13		28.43	NA			(5.05	)
AmTrust Financial Services, Inc.	AFSI		11.72		59,735		700,094		146.82		187.13		5.25		8.31		1.11		21.99		1.72		(17.58	)
Arch Capital Group Ltd.	ACGL		62.70		62,626		3,926,670		97.44		108.97		8.15		23.14		1.36		23.60	NA			(10.25	)
Argo Group International Holdings, Ltd.	AGII		35.62		30,795		1,096,907		75.17		90.80		10.87		21.20		0.74		15.85	NA			(2.17	)
Aspen Insurance Holdings Limited	AHL		24.15		85,646		2,068,354		69.58		69.78		13.45		20.82		1.09		25.78		2.47		(8.76	)
AXIS Capital Holdings Limited	AXS		28.72		149,861		4,304,008		87.67		89.40		12.64		30.88		1.59		27.99		2.75		(14.32	)
Baldwin & Lyons, Inc.	BWINB		21.08		14,733		310,572		89.80		89.80		13.43		29.69		1.75		40.56		5.50		1.79
Berkshire Hathaway Inc.	BRK.A		108,100.00		1,552		167,740,932		141.15		197.54		18.80		57.17		1.60		60.85	NA			(6.61	)
Chubb Corporation	CB		48.15		357,400		17,208,810		118.65		122.60		8.81		11.07		1.37		35.43		2.59		(1.59	)
Cincinnati Financial Corporation	CINF		24.63		162,556		4,003,762		96.62		96.62		20.25		9.51		1.01		29.61		5.37		(12.72	)
CNA Surety Corporation	SUR		16.81		44,412		746,566		90.09		108.21		6.95		6.98		1.57		46.34	NA			20.59
CRM Holdings, Ltd.	CRMH		1.10		16,775		18,453		18.15		18.74	Neg		Neg			0.14		4.07	NA			(69.44	)
Donegal Group Inc.	DGICA		15.75		25,475		401,238		108.06		109.20		21.44		23.16		1.06		44.89		2.50		(8.16	)
Eastern Insurance Holdings, Inc.	EIHI		9.90		9,009		89,189		64.99		75.75	Neg		Neg			0.69		23.14		3.49		(34.09	)
EMC Insurance Group Inc.	EMCI		23.10		13,236		305,750		99.48		99.79		13.28		74.52		0.75		26.76		2.81		(7.08	)
Employers Holdings, Inc.	EIG		14.88		46,506		692,005		150.45		170.28		7.19		8.00		1.59		18.38		1.45		(14.97	)
Endurance Specialty Holdings Ltd.	ENH		32.21		58,895		1,897,008		76.63		83.21		9.32		15.19		1.03		23.48		3.28		(2.28	)
Enstar Group Limited	ESGR		59.52		13,788		820,635		95.36		97.77		9.43		10.16		13.87		18.77	NA			(48.23	)
Erie Indemnity Company	ERIE		37.79		57,363		2,167,751		261.45		261.45		19.12		53.23		2.05		82.24		4.78		(19.25	)
Everest Re Group, Ltd.	RE		83.09		61,265		5,090,509		91.80		91.80		9.18		39.01		1.38		29.38		2.52		(0.41	)
Fairfax Financial Holdings Limited	FFH		335.75		17,564		5,897,150		105.06		111.32		4.22		5.90		0.80		21.82		1.60		33.10
First Acceptance Corporation	FAC		2.48		48,865		121,185		53.47		147.39	Neg		Neg			0.43		27.07	NA			(35.08	)
First Mercury Financial Corporation	FMR		12.41		18,042		223,907		78.06		100.34		7.99		9.85		0.89		21.41	NA			—
Flagstone Reinsurance Holdings Limited	FSR		11.10		85,163		945,309		72.35		75.43	Neg		Neg			1.70		35.61		1.64		(10.27	)
FPIC Insurance Group, Inc.	FPIC		34.40		7,533		259,135		96.90		100.99		7.10		9.56		1.45		26.51	NA			(33.85	)
GAINSCO, INC.	GAN		14.37		4,741		68,127		124.45		125.85		24.32	Neg			0.35		27.58	NA		NA
Greenlight Capital Re, Ltd.	GLRE		18.79		36,690		689,400		112.18		112.18	Neg		Neg			5.51		52.52	NA			(12.40	)
Hallmark Financial Services, Inc.	HALL		6.69		20,873		139,640		73.28		115.20		6.88		11.53		0.52		25.33	NA			(31.66	)
Hanover Insurance Group, Inc.	THG		40.01		51,400		2,056,514		92.59		100.26		15.43		33.34		0.76		26.54		1.05		(10.33	)
Harleysville Group Inc.	HGIC		31.31		28,116		880,319		127.20		131.65		10.26		19.09		0.92		27.48		3.46		(14.85	)
HCC Insurance Holdings, Inc.	HCC		26.30		112,520		2,959,276		105.33		150.85		9.14		9.81		1.29		33.34		1.87		4.91
Hilltop Holdings Inc.	HTH		12.45		56,495		703,363		88.90		93.33	Neg		Neg			6.12		67.32	NA			19.14
Horace Mann Educators Corporation	HMN		11.58		40,532		469,361		83.54		91.24		9.09		19.97		0.55		8.05		2.29		(21.49)

Exhibit VI-2 (Continued)
Penn Millers Mutual Holding Company
Market Valuation Data for Publicly Traded Property and Casualty Companies



				Total Diluted								(a)
				Shares						Price /		Price /		(a)						Current		One-Year
				Outstand.		Total Market		Price / Book		Tangible		Operating		Price / LTM		Price / LTM		Price / Total		Dividend		Price Change
Company Name		Closing price		(000’S)		value (000’s)		(%)		Book (%)		EPS (x)		EPS (x)		Revenue (x)		Assets (%)		Yield (%)		(%)

Infinity Property and Casualty Corporation	IPCC		41.54		13,828		574,415		102.54		118.45		7.66		28.26		0.65		32.76		0.94		(9.30	)
IPC Holdings, Ltd.	IPCR		30.60		55,991		1,713,323		85.06		85.06		8.24		14.43		4.00		65.58		2.94		(4.58	)
Kingsway Financial Services Inc.	KFS		3.48		55,091		191,717		51.74		62.23	Neg		Neg			0.14		6.19		4.37		(58.12	)
Markel Corporation	MKL		309.46		9,825		3,040,445		129.25		151.21		18.19	Neg			1.74		31.31	NA			(16.36	)
Meadowbrook Insurance Group, Inc.	MIG		7.48		57,517		430,225		90.11		120.06		8.36		11.33		0.77		22.91		1.24		5.35
Mercer Insurance Group, Inc.	MIGP		18.50		6,298		116,521		78.50		81.48		8.76		12.85		0.75		20.06		2.37	NA
Mercury General Corporation	MCY		36.52		55,320		2,020,281		123.00		132.09		19.04	Neg			0.80		48.78		5.04		(28.34	)
Montpelier Re Holdings Ltd.	MRH		15.90		86,400		1,373,760		86.02		95.90		11.62		99.38		2.61		43.69		1.79		(1.30	)
National Interstate Corporation	NATL		18.55		19,359		359,109		147.45		147.45		8.82		16.71		1.22		37.05		1.34		8.42
National Security Group, Inc.	NSEC		8.50		2,467		20,966		59.83		59.83	Neg		Neg			0.35		16.77		6.57		(41.58	)
Navigators Group, Inc.	NAVG		50.32		16,993		855,088		120.02		121.13		11.64		18.30		1.26		25.12	NA			2.26
NYMAGIC, INC.	NYM		18.42		8,625		158,874		84.70		84.70	Neg		Neg			1.47		16.26		1.68		(3.46	)
Odyssey Re Holdings Corp.	ORH		46.52		59,298		2,758,531		87.90		87.90		17.04		8.02		1.08		27.18		0.58		25.90
Old Republic International Corporation	ORI		11.51		235,563		2,711,327		72.24		72.24	Neg		Neg			0.76		19.76		5.70		6.57
OneBeacon Insurance Group, Ltd.	OB		12.96		95,100		1,232,496		94.42		94.42		7.78	Neg			0.82		16.45		8.05		(32.50	)
PartnerRe Ltd.	PRE		69.62		57,469		4,000,992		83.92		92.23		7.84		7.79		0.91		23.57		2.58		(1.96	)
Platinum Underwriters Holdings, Ltd.	PTP		34.24		51,594		1,766,579		90.47		90.47		8.60		9.33		1.41		35.56		0.89		(4.76	)
PMA Capital Corporation	PMACA		5.41		32,231		174,372		47.26		51.46		7.98		30.06		0.34		6.91	NA			(43.82	)
ProAssurance Corporation	PRA		51.82		33,186		1,719,699		112.57		123.01		8.29		9.63		3.07		37.40	NA			(3.95	)
Progressive Corporation	PGR		16.37		674,600		11,043,202		224.23		224.23		11.69	Neg			0.87		57.86	NA			(16.78	)
RenaissanceRe Holdings Ltd.	RNR		50.58		61,322		3,101,651		75.57		76.90		13.28		42.50		2.39		35.22		1.78		(1.60	)
RLI Corp.	RLI		51.64		21,721		1,121,672		146.89		152.11		10.81		23.80		2.25		45.18		1.70		(8.86	)
Safety Insurance Group, Inc.	SAFT		32.87		15,648		514,362		85.49		85.49		8.83		9.21		0.85		36.28		4.20		(24.37	)
SeaBright Insurance Holdings, Inc.	SBX		9.81		21,413		210,058		61.45		62.44		7.11		10.33		0.76		23.05	NA			(14.25	)
Selective Insurance Group, Inc.	SIGI		16.55		53,234		881,023		93.09		96.10		16.09	Neg			0.57		17.51		2.27		(29.81	)
Specialty Underwriters’ Alliance, Inc.	SUAI		6.53		15,917		103,938		73.87		79.95		13.89		50.23		0.68		22.47	NA			29.05
State Auto Financial Corporation	STFC		17.38		39,600		688,248		88.20		88.43	Neg		Neg			0.58		27.51		2.00		(42.03	)
Tower Group, Inc.	TWGP		23.81		40,606		966,837		114.11		169.05		10.14		8.88		1.33		37.53		0.71		17.87
Transatlantic Holdings, Inc.	TRH		44.67		66,803		2,984,090		84.08		84.08		8.10		35.45		0.74		21.19		1.90		(24.10	)
Travelers Companies, Inc.	TRV		47.46		579,800		27,517,308		102.22		120.06		9.83		11.60		1.15		24.72		2.65		6.92
Unico American Corporation	UNAM		8.05		5,607		45,137		59.21		59.21		8.43		8.47		1.00		24.75	NA		NA
United America Indemnity, Ltd.	INDM		6.47		50,863		329,085		43.11		43.64		32.20	Neg			0.96		13.14	NA			(53.32	)
United Fire & Casualty Company	UFCS		17.47		26,592		464,558		71.12		71.18	Neg		Neg			0.81		16.55		1.93		(39.15	)
Universal Insurance Holdings, Inc.	UVE		5.08		40,530		205,891		188.44		188.44		4.79		5.84		1.10		33.13		32.92		33.68
Validus Holdings, Ltd.	VR		24.40		78,942		1,926,187		89.51		96.00		9.39		14.35		1.40		38.46		3.63		5.72
W.R. Berkley Corporation	WRB		23.48		166,226		3,902,986		118.43		122.44		8.96		44.30		0.92		23.43		0.87		(0.04	)
Wesco Financial Corporation	WSC		309.00		7,120		2,200,021		103.89		119.57		23.70		30.26		2.59		80.92		0.53		(16.26	)
White Mountains Insurance Group, Ltd.	WTM		287.90		8,857		2,549,930		66.21		67.30	Neg		Neg			0.81		16.40		0.39		(35.07	)
Zenith National Insurance Corp.	ZNT		24.84		37,342		927,575		88.35		90.15		23.62		31.85		1.52		36.99		6.64		(31.89	)

Exhibit VI-2 (Continued)
Penn Millers Mutual Holding Company
Market Valuation Data for Publicly Traded Property and Casualty Companies



		Total Diluted							(a)
		Shares					Price /		Price /		(a)						Current		One-Year
		Outstand.	Total Market		Price / Book		Tangible		Operating		Price / LTM		Price / LTM		Price / Total		Dividend		Price Change
Company Name	Closing price	(000’S)	value (000’s)		(%)		Book (%)		EPS (x)		EPS (x)		Revenue (x)		Assets (%)		Yield (%)		(%)

Group Aggregate
Overall P&C Insurance Group Mean				4,350,300		96.87		107.15		19.44		21.30		1.45		29.72		3.42		(11.94	)
Overall P&C Insurance Group Median				880,671		90.29		100.02		9.25		14.35		1.04		26.53		2.29		(9.30	)
P&C Group Mean > $1.2 Bil. Total Assets				6,170,984		101.16		110.88		11.83		22.05		1.58		30.68		2.62		(12.11	)
P&C Group Median > $1.2 Bil. Total Assets				1,926,187		93.09		100.26		9.41		14.84		1.11		27.18		2.12		(10.27	)
P&C Group Mean < $1.2 Bil. Total Assets				199,138		87.10		98.65		40.59		19.20		1.14		27.56		6.11		(11.49	)
P&C Group Median < $1.2 Bil. Total Assets				158,874		78.50		99.79		8.59		10.33		0.87		25.33		2.53		(6.07	)
P&C Group Mean > $500 m Total Revenue				7,702,236		99.01		108.39		11.66		23.25		1.18		28.75		2.72		(10.07	)
P&C Group Mean > $500 m Total Revenue				2,344,766		92.84		96.36		10.14		18.69		1.05		27.33		2.27		(9.08	)
P&C Group Mean < $500 m Total Revenue				469,110		94.40		105.72		29.91		18.81		1.76		30.86		4.70		(14.29	)
P&C Group Median < $500 m Total Revenue				282,443		89.35		100.66		8.42		10.33		1.03		25.04		2.44		(12.40	)

Source: SNL Financial and market data provided by CapitalIQ.



(a)		Price / Operating EPS and Price / EPS is reported as “Neg” if the company has negative earnings.

Exhibit VII-1
Penn Millers Mutual Holding Company
Pro Forma Assumptions for Conversion Valuation


B-1		The initial offering price is $10.00 per share and the number of shares offered is calculated by dividing the estimated pro forma market value by the offering price.

B-2		Conversion and offering expenses are estimated at $2.570 million plus commission and fees of 1.5% of the total gross proceeds in the subscription and community offerings. Also assumes that no shares are sold in a syndicated community offering.

B-3		It is assumed that 10% of the shares offered for sale, less one share, will be acquired by the employee stock ownership plan (“ESOP”). Pro forma adjustments have been made to earnings and equity to reflect the impact of the ESOP. Under generally accepted accounting principles, the aggregate purchase price of shares of common stock to be purchased by the ESOP in the offering represents unearned compensation and is reflected as a reduction in capital. It is further assumed that the ESOP purchase is funded by a loan from PMHC. No reinvestment is assumed on proceeds used to fund the ESOP. The amount of this borrowing has been reflected as a reduction from gross proceeds to determine the estimated net funds available for reinvestment. The ESOP expense reflects recognition of expense based upon shares committed to be allocated under the ESOP. For purposes of this calculation, the average market value was assumed to be equal to the initial offering price of $10.00.

B-4		The net investable proceeds is fully invested at the beginning of the applicable period. The net investable proceeds are invested to yield a return of 3.52%, which represents the estimated yield on the 10 year U.S. Treasury bond at the end of July 2009. The effective income tax rate was assumed to be 35.0%, resulting in an after-tax yield of 2.26%.

B-5		The net increase in earnings excludes after-tax ESOP amortization over 10 years.

B-6		No effect has been given in the pro forma equity calculation for the assumed earnings on the net proceeds.

B-7		For the earnings per share (“EPS”) calcluations, pro forma per share amounts have been computed by dividing pro forma amounts by the total outstanding number of shares of stock, adjusted to give effect to the purchase of ESOP shares in accordance with Statement of Position (“SOP”) 93-6. Under SOP 93-6, the weighted average of the ESOP shares that have not been committed for release are subtracted from total shares outstanding when calculated EPS.

B-8		For the book value calcluations, pro forma per share amounts have been computed by dividing pro forma amounts by the total outstanding number of shares of stock.

B-9		The additional shares that Penn Millers expects to issue after the Conversion in conjunction with the grant of options or restricted stock awards under the stock-based incentive plan have not been considered in our analysis.

Exhibit VII-2
Penn Millers Mutual Holding Company
Pro Forma Conversion Valuation Range
(Dollars in Thousands, except per share data)


	Minimum			Midpoint			Maximum
Total implied shares offered		4,505,000			5,300,000			6,095,000
Offering price (b-1)	$	10.00		$	10.00		$	10.00


Implied gross proceeds:	$	45,050		$	53,000		$	60,950
Less: estimated expenses (b-2)		(3,246	)		(3,365	)		(3,484	)

Implied net offering proceeds		41,804			49,635			57,466
Less: ESOP purchase (b-3)		(4,505	)		(5,299	)		(6,094	)

Net investable proceeds (b-4)	$	37,300		$	44,336		$	51,371


Net income:
LTM ended 6/30/2009 (a)		(5,339	)		(5,339	)		(5,339	)
Pro forma income on net proceeds (b-4)		853			1,014			1,175
Pro forma ESOP adjustment (b-5)		(293	)		(344	)		(396	)

Pro forma net income		(4,778	)		(4,669	)		(4,560	)
Pro forma earnings per share (b-8)		(1.18	)		(0.98	)		(0.83	)

Total Revenue:
LTM ended 6/30/2009 (a)		74,148			74,148			74,148
Pro forma revenue on net proceeds, pre-tax		1,313			1,561			1,808

Pro forma total revenue		75,461			75,709			75,956

Total Equity:
Total equity at 6/30/2009		51,972			51,972			51,972
Net offering proceeds		41,804			49,635			57,466
Less: ESOP purchase		(4,505	)		(5,299	)		(6,094	)

Pro forma total equity (b-6)		89,272			96,308			103,343
Pro forma book value per share (b-7)		19.82			18.17			16.96

Tangible Equity:
Total tangible equity at 6/30/2009		51,972			51,972			51,972
Net offering proceeds		41,804			49,635			57,466
Less: ESOP purchase		(4,505	)		(5,299	)		(6,094	)

Pro forma tangible equity		89,272			96,308			103,343
Pro forma tangible book value per share (b-7)		19.82			18.17			16.96

Total Assets:
Total assets at 6/30/2009		228,385			228,385			228,385
Net offering proceeds		41,804			49,635			57,466
Less: ESOP purchase		(4,505	)		(5,299	)		(6,094	)

Pro forma total assets		265,685			272,721			279,756

Pro Forma Ratios:
Price / LTM EPS		-8.49	x		-10.22	x		-12.03	x
Price / LTM Revenue		0.60	x		0.70	x		0.80	x
Price / Book Value		50.46	%		55.03	%		58.98	%
Price / Tangible Book Value		50.46	%		55.03	%		58.98	%
Price / Total Assets		16.96	%		19.43	%		21.79	%
Total Equity / Assets		33.60	%		35.31	%		36.94	%
Tangible Equity / Assets		33.60	%		35.31	%		36.94	%


Notes:

(a)		Excludes income from discontinued operations.

(b)		See Exhibit VII-1 for explanation of assumptions.


I.		Statement of General Assumptions and Limiting Conditions

II.		Certification

III.		Overview of Curtis and Qualifications of Appraisers

IV-1.		Balance Sheets — GAAP Basis

IV-2.		Income Statements — GAAP Basis

IV-3.		Investment Portfolio — GAAP Basis

V-1.		Balance Sheets — Statutory Basis

V-2		Income Statements — Statutory Basis

VI-1.		Financial Performance Data for Public P&C Insurance Companies

VI-2.		Market Valuation Data for Public P&C Insurance Companies

VII-1.		Pro Forma Assumptions for Conversion Valuation

VII-2.		Pro Forma Conversion Valuation Range


	6/30/2009				12/31/2008				12/31/2007				12/31/2006
	Amortized		Estimated		Amortized		Estimated		Amortized		Estimated		Amortized		Estimated
	Cost		Fair Value		Cost		Fair Value		Cost		Fair Value		Cost		Fair Value
ASSETS
Fixed Securities:
U.S. government and agencies		24,796		25,744		23,459		25,399		26,360		26,984		27,509		27,461
State and political subdivisions		31,654		33,163		31,775		32,957		30,321		31,134		26,538		27,047
Mortgage backed		26,423		26,745		25,374		25,305		20,636		20,724		11,618		11,488
Corporate		48,524		49,131		39,930		38,253		33,656		33,927		33,964		33,910

Total fixed securities		131,397		134,783		120,538		121,914		110,973		112,769		99,629		99,906

Equity		—		—		—		—		10,525		13,409		10,476		13,697

Total investment securities		131,397		134,783		120,538		121,914		121,498		126,178		110,105		113,603


I. RECENT FINANCIAL PERFORMANCE			1
Financial Condition			1
Income and Expense Trends			3
III. INDUSTRY UPDATE			11
IV. COMPARISONS WITH PUBLICLY-TRADED COMPANIES			13
Recent Financial Comparisons			13
V. MARKET CONDITIONS AND MARKET VALUE ADJUSTMENTS			17
Stock Price Performance and Market Conditions			17
VI. VALUATION ANALYSIS AND CONCLUSIONS			19
Valuation Review			19
Valuation Analysis			19
Valuation Conclusion			22


Source: Curtis calculation based on Penn Millers’ GAAP financial statements.

*		Note: ROAA and ROAE are calculated using net income for the trailing twelve month period and the average assets and equity book values at the ending twelve month period and corresponding prior year period.


	Estimated Pro Forma Market Valuation Range
	Minimum			Midpoint			Maximum


August 7, 2009 Appraisal
Financial Data as of June 30, 2009
Gross Proceeds	$	45,050		$	53,000		$	60,950

Price / Book Value		50.5	%		55.0	%		59.0	%
Price / Tangible Book Value		50.5	%		55.0	%		59.0	%
Price / Total Assets		17.0	%		19.4	%		21.8	%
Price / LTM EPS	neg			neg			neg

June 5, 2009 Appraisal
Financial Data as of March 31, 2009
Gross Proceeds	$	45,050		$	53,000		$	60,950

Price / Book Value		50.9	%		55.5	%		59.4	%
Price / Tangible Book Value		50.9	%		55.5	%		59.4	%
Price / Total Assets		17.0	%		19.4	%		21.8	%
Price / LTM EPS	neg			neg			neg

	•		the facts and data reported by the reviewer and used in the review process are true and correct;

	•		the analyses, opinions, and conclusions in this report are limited only by the assumptions and limiting conditions stated in this review report, and are our personal, impartial and unbiased professional analyses, opinions and conclusions;

	•		we have no present or prospective interest in the property that is the subject of this review report, and we have no personal interest or bias with respect to the parties involved;

	•		our engagement in this assignment was not contingent upon developing or reporting predetermined results;

	•		our compensation is not contingent on an action or event resulting from the analyses, opinions, or conclusions in, or the use of, this report;

	•		We have made a personal visit to the headquarters of Penn Millers.


	Respectfully submitted,

	Curtis Financial Group, LLC




	Anthony A. Latini, Jr.




	Paul M. Yeakel, Jr.




	Laura E. Anastasio