MLAN Midland Co (MM)

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APPENDIX A—AGREEMENT AND PLAN OF MERGER, DATED AS OF OCTOBER 16, 2007, AMONG MUNICH-AMERICAN HOLDING CORPORATION, MONUMENT CORPORATION AND THE MIDLAND COMPANY

APPENDIX B—VOTING AGREEMENT DATED AS OF OCTOBER 16, 2007 EXECUTED BY CERTAIN PERSONS IN FAVOR OF MUNICH-AMERICAN HOLDING CORPORATION

APPENDIX C—OPINION OF UBS SECURITIES, LLC

APPENDIX D—SECTION 1701.85 OF THE OHIO REVISED CODE

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QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER

The following questions and answers are intended to address briefly some commonly asked questions regarding the special meeting and the proposed merger. These questions and answers may not address all questions that may be important to you as a shareholder. You should read the more detailed information contained elsewhere in this proxy statement, the appendices to this proxy statement and the documents referred to in this proxy statement.

Except as otherwise specifically noted in this proxy statement, “we,” “our,” “us” and similar words in this proxy statement refer to the Company. In addition, we refer to Munich-American Holding Corporation as “Munich-American” and to Monument Corporation as “Merger Sub.”

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The Midland Company

7000 Midland Boulevard

Amelia, Ohio 45102

Attention: Michael L. Flowers,

Secretary

Email: mflowers@amig.com

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SUMMARY TERM SHEET

This summary term sheet highlights only selected information from this proxy statement relating to the merger of Merger Sub into the Company and may not contain all of the information about the merger and related transactions that is important to you as a Company shareholder. Accordingly, we encourage you to carefully read this entire document, including the appendices, and the documents to which we have referred you, including the merger agreement attached as Appendix A. The information contained in this summary is qualified in its entirety by the more detailed information contained in this proxy statement. Page references are included in parentheses to direct you to a more complete discussion of the topics presented in this summary.

The Parties to the Merger

The Midland Company

7000 Midland Boulevard

Amelia, Ohio 45102-2608

The Midland Company, which is headquartered in Cincinnati, Ohio, is a provider of specialty insurance products and services through its wholly owned subsidiary, American Modern Insurance Group, which typically accounts for approximately 95 percent of Midland’s consolidated revenue. American Modern specializes in writing physical damage insurance and related coverages on manufactured housing and has expanded to other specialty insurance products including coverage for site-built homes, motorcycles, watercraft, snowmobiles, recreational vehicles, physical damage on long-haul trucks, extended service contracts, excess and surplus lines coverage, credit life and related products as well as collateral protection and mortgage fire products sold to financial institutions and their customers. Midland also owns a niche transportation business, M/G Transport Group, which operates a fleet of dry cargo barges for the movement of dry bulk commodities on the inland waterways in the United States. Midland’s common stock is traded on the Nasdaq Global Select Market under the symbol “MLAN”.

Munich-American Holding Corporation

555 College Road East

Princeton, New Jersey 08540

Munich-American Holding Corporation, a Delaware corporation, is a holding corporation for Munich Re America Corporation, a member of the Munich Re Group of Companies (collectively, the “Munich Re Group”). The Munich Re Group operates worldwide. In the financial year 2007, it achieved a profit of € 3.9bn, the highest in its corporate history. Its premium income amounted to approximately € 37bn and its investments amounted to approximately € 174bn. The Munich Re Group operates in all lines of business, with around 37,000 employees at over 50 locations throughout the world, and is characterized by particularly pronounced diversification, client focus and earnings stability. Munich Re America Corporation, a member of the Munich Re Group, is one of the leading providers of reinsurance in the United States. Through its subsidiaries, it writes treaty and facultative reinsurance and insurance, and provides related services to insurance companies, other large businesses, government agencies, pools and other self-insurers.

Monument Corporation

c/o Munich-American Holding Corporation

555 College Road East

Princeton, New Jersey 08540

Monument Corporation, an Ohio corporation, is a direct, wholly owned subsidiary of Munich-American and was formed solely for the purpose of consummating the merger. Merger Sub is not engaged in any business except as contemplated by the merger agreement. It is anticipated that, subject to the terms and conditions of the

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merger agreement, Merger Sub will be merged with and into the Company resulting with the Company becoming a wholly owned subsidiary of Munich-American. Merger Sub’s separate existence will end upon the consummation of the merger.

The Special Meeting

(page 16)

Date, Time and Place (page 16)

The special meeting will be held on March 24, 2008 at 10:00 a.m., Eastern Daylight Time, at The Midland Company’s headquarters, 7000 Midland Boulevard, Amelia, Ohio 4501.

Matters to be Considered (page 16)

You will be asked to consider and vote upon (i) a proposal to adopt the merger agreement, (ii) a proposal to approve the adjournment or postponement of the special meeting, if necessary or appropriate, to solicit additional proxies in the event there are not sufficient votes represented in person or by proxy to adopt the merger agreement at the time of the special meeting and (iii) the transaction of such other business as may properly come before the special meeting. If any other matters are properly presented at the special meeting for action, the persons named in the enclosed proxy will have discretion to vote on such matters in accordance with their best judgment.

Record Date and Quorum (page 16)

If you own Company common shares at the close of business on February 22, 2008, the record date for the special meeting, you will be entitled to vote at the special meeting. You have one vote for each Company common share owned on the record date. As of February 22, 2008, there were 19,470,622 common shares outstanding.

Required Vote (page 16)

Adoption of the merger agreement requires the affirmative vote of a majority of the issued and outstanding Company common shares as of the close of business on the record date. As a condition to the execution of the merger agreement, certain members of the Hayden and LaBar families executed a voting agreement pursuant to which they agreed to vote in favor of adoption of the merger agreement and against any proposal made in opposition to, or in competition with, the consummation of the merger, subject to certain exceptions. These shareholders collectively are entitled to vote 6,363,189 shares, or approximately 33%, of Midland’s outstanding shares of common stock. Because the affirmative vote of a majority of the issued and outstanding common shares as of the close of business on the record date is needed to adopt the merger agreement, the failure to submit your proxy or vote in person will have the same effect as a vote against the merger agreement. Abstentions and broker non-votes also will have the same effect as a vote against adoption of the merger agreement.

The proposal to adjourn or postpone the special meeting, if necessary or appropriate, requires the affirmative vote of a majority of the issued and outstanding common shares represented in person or by proxy at the special meeting. Broker non-votes will not apply to the proposal to adjourn or postpone the special meeting. Abstentions will count as votes cast against the proposal to adjourn or postpone the special meeting.

Accordingly, the Company’s Board of Directors urges you to complete, date, sign and return the accompanying proxy card, or, in the event you hold your shares through a broker or other nominee, by following the separate voting instructions received from your broker or nominee. If you intend to submit your proxy by mail it must be received by the Company prior to the commencement of voting at the special meeting.

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Voting by Proxy (page 17)

If you are a registered shareholder (that is, if you hold your Company common shares in certificate form) or if you own Company common shares through your participation in the Company’s Dividend Reinvestment Plan or Employee 401(k) Savings Plan, the enclosed proxy represents the number of shares held on your account in those plans as well as shares held of record by you. With respect to participants in the Employee 401(k) Savings Plan, the proxy also serves as the voting instruction card to the plan trustee and represents your proportional interest in shares beneficially held by the trustee.

You may submit your proxies by mail. Instructions for submitting your proxies are included on the proxy card.

If you hold your shares through a broker or other nominee, you should follow the separate voting instructions, if any, provided by the broker or other nominee with the proxy statement. Please contact your broker or nominee to determine how to vote.

Revocability of Proxy (page 17)

You may revoke your proxy at any time before it is voted, except as otherwise described below. If you do not hold your shares through a broker or other nominee, you may revoke your proxy before it is voted by:

The Midland Company

7000 Midland Boulevard

Amelia, Ohio 45102

Attention: Michael L. Flowers,

Secretary

Email: mflowers@amig.com

Adjournments and Postponements (page 19)

Although it is not currently expected, the special meeting may be adjourned or postponed if a quorum is not present or for the purpose of soliciting additional proxies if there are insufficient votes at the time of the special meeting to approve the adoption of the merger agreement. If the special meeting is adjourned or postponed, no notice of the adjourned or postponed meeting is required to be given to shareholders, other than an announcement at the special meeting of the place, date and time to which the special meeting is adjourned or postponed. The record date will not change due to an adjournment or postponement unless the directors of the Company, in their discretion, establish a new record date.

Shares Owned by Company Directors and Executive Officers (page 18)

As of February 22, 2008, our directors and executive officers owned approximately 39.3% of the outstanding Company common shares (including options exercisable within 60 days).

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The Merger

(Page 20)

Background of the Merger (page 21)

A description of the process we undertook, which led to the proposed merger, including our discussions with Munich-American, is included in the proxy statement under “The Merger—Background of the Merger.”

Reasons for the Merger; Recommendation of the Board of Directors (pages 28, 31)

Our board of directors has approved the merger agreement and determined that the merger is fair to and in the best interests of the Company and its shareholders. Our board recommends that shareholders vote “FOR” the adoption of the merger agreement at the special meeting. Our board also recommends that you vote “FOR” the proposal to adjourn or postpone the special meeting, if necessary or appropriate, to solicit additional proxies in the event there are not sufficient votes represented in person or by proxy to adopt the merger agreement at the time of the special meeting.

Structure of the Merger (page 46)

Upon the terms and subject to the conditions of the merger agreement, Merger Sub, a subsidiary of Munich-American, will be merged with and into the Company. As a result of the merger, we will become a wholly owned subsidiary of Munich-American.

Effects on the Company and our Shareholders if the Merger is not Completed (page 38)

If the merger is not approved by our shareholders or if the merger is not completed for any other reason, our shareholders will not receive any payment for their shares in connection with the merger. Instead, the Company will remain an independent public company. In addition, if the merger agreement is terminated under certain circumstances, the Company may be obligated to pay a $40 million termination fee to Munich-American.

Merger Consideration (page 47)

In the merger, for each Company common share you hold immediately prior to the merger, you will receive $65.00 in cash, without interest. In addition, equity based awards will be treated as follows:

In the case of the conversion and cancellation of equity based awards, applicable tax withholding will be subtracted from the amounts payable.

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Conditions to the Closing of the Merger (page 56)

Before the merger can be completed, a number of conditions must be satisfied or waived. These include:

The waiting period for the filing made pursuant to the HSR Act with respect to the merger expired at midnight, Eastern Standard Time, on December 20, 2007. We expect to complete the merger shortly after all conditions to the merger have been satisfied or waived. We expect to complete the merger in the second quarter of 2008, but we cannot be certain when or if the conditions will be satisfied or, to the extent permitted, waived. The Company anticipates that all necessary insurance regulatory approvals will be received in time to allow for a closing in the second quarter of 2008.

Opinion of UBS Securities, LLC (page 31 and Appendix C)

UBS Securities, LLC (“UBS”), has delivered its opinion, dated October 16, 2007, to the special committee of the Company’s board of directors, which we refer to as the “special committee” as defined in “Background of the Merger” on page 21, to the effect that, as of such date and based on and subject to various assumptions, matters considered and limitations described in its opinion, the $65.00 per share cash consideration to be received by the holders of Midland common stock (other than the Hayden Shareholders) in the proposed merger was fair, from a financial point of view, to such holders. As used herein, the term “Hayden Shareholders” means J.P. Hayden, Jr., William T. Hayden, John W. Hayden, Joseph P. Hayden III, Thomas R. Hayden, their respective spouses, and any partnership, trust or other entity owning or holding Company common shares with respect to which any of such persons had, as of the date of UBS’ opinion, beneficial ownership.

The full text of UBS ’ written opinion to the special committee, which sets forth the assumptions made, procedures followed, matters considered and limitations on the review undertaken by UBS is attached to this proxy statement as Appendix C and is incorporated by reference in its entirety into this proxy statement. Holders of Company common shares are urged to read UBS ’ opinion carefully in its entirety. UBS provided its opinion solely for the benefit of the special committee in connection with its evaluation of the proposed merger. UBS ’ opinion is directed only to the fairness, from a financial point of view and as of the date of such opinion, of the $65.00 per share cash consideration to be received by the holders of Company common shares (other than the Hayden Shareholders) in the proposed merger, and does not address any other aspect of the merger or any related transaction. The opinion does not address the relative merits of the merger or any related transaction as compared to other business strategies or transactions that might be available with respect to the Company or the Company’s underlying business decision to effect the merger or any related transaction. UBS ’ opinion does not constitute a recommendation to any shareholder as to how such shareholder should vote or act with respect to the merger or any related transaction and should not be relied upon by any shareholder as such.

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No Solicitation by the Company (page 52)

The merger agreement restricts our ability to solicit or engage in discussions or negotiations with third parties regarding specified transactions involving the Company or our subsidiaries. Notwithstanding these restrictions, under certain circumstances and subject to certain conditions, our Board of Directors may, prior to the approval of the adoption of the merger agreement by our shareholders, respond to a takeover proposal, change its recommendation or terminate the merger agreement and enter into an agreement with respect to a superior proposal after paying the termination fee specified in the merger agreement.

Termination of the Merger Agreement (page 57)

The Company and Munich-American may agree in writing to terminate the merger agreement at any time prior to completing the merger, even after our shareholders have adopted it. The merger agreement may also be terminated at any time prior to the effective time of the merger under specified circumstances, including:

Termination Fees if the Merger Is Not Completed (page 58)

We must pay Munich-American a termination fee of $40 million if the merger agreement is terminated under certain circumstances. For more information on the termination fee, please see the section entitled “The Merger Agreement—Termination Fee.”

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Interests of Our Directors and Executive Officers in the Merger (page 39)

Our directors and executive officers have interests in the merger that are different from, or in addition to, their interests as Company shareholders. These interests include:

In addition, the following Agreements are described in the section entitled “Change in Control and Other Agreements”:

Governmental and Regulatory Approvals (page 38)

Under the provisions of the HSR Act, the merger may not be completed until we and Munich-American have made certain filings with the United States Federal Trade Commission and the United States Department of Justice and the applicable waiting period has expired or been terminated. On November 20, 2007, we and Munich-American filed notification reports under the HSR Act with the Federal Trade Commission and the Department of Justice. The waiting period for the filing made pursuant to the HSR Act with respect to the merger expired at midnight, Eastern Standard Time, on December 20, 2007.

State insurance laws and regulations generally require that, prior to the acquisition of an insurance company domiciled or, in some cases commercially domiciled, in that jurisdiction, the acquiring company must obtain the approval of the insurance commissioner of that jurisdiction. As of the date of this proxy statement Munich-American has made all necessary pre-acquisition filings with all appropriate insurance commissioners, including, but not necessarily limited to, those of Arizona, Arkansas, Ohio, Oklahoma, Missouri, Texas and Florida, the states in which the Company’s insurance subsidiaries are domiciled. In addition, the insurance laws and regulations of certain U.S. states require that, prior to an acquisition of an insurance company doing business in that state or licensed by that state, a notice filing disclosing certain market share data in the applicable jurisdiction must be made and an applicable waiting period must expire or be terminated. To the extent they are required, notification filings will also be made with certain foreign regulatory authorities in connection with the merger.

Although the Company and Munich-American do not expect these regulatory authorities to raise any significant concerns in connection with their review of the merger, there is no assurance that the Company and Munich-American will obtain all required regulatory approvals, or that those approvals will not include terms, conditions or restrictions that may have an adverse effect on the Company or Munich-American. The Company anticipates that all necessary insurance regulatory approvals will be received in time to allow for a closing in the second quarter of 2008.

Material U.S. Federal Income Tax Consequences (page 36)

The merger will be a taxable transaction for U.S. federal income tax purposes to U.S. holders of Company common shares. For U.S. federal income tax purposes, you generally will recognize gain or loss from the merger

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in an amount equal to the difference between the amount of cash you receive in the merger and the aggregate adjusted tax basis of your Company common shares.

Dissenters’ Rights (page 43 and Appendix D)

Under Ohio law, if you do not vote for adoption of the merger agreement and comply with the other statutory requirements of the Ohio Revised Code (“ORC”), you may elect to receive, in cash, the fair cash value of your shares of stock in lieu of the $65.00 merger consideration. Fair cash value: (i) will be determined as of the day prior to the special meeting, (ii) will be the amount a willing seller and willing buyer would accept or pay with neither being under compulsion to sell or buy, (iii) will not exceed the amount specified in the shareholder’s written demand, and (iv) will exclude any appreciation or depreciation in market value resulting from the merger.

To perfect your right to appraisal, you must:

The Company will not notify shareholders of the expiration of this ten-day period. The common shares held by any shareholder who desires to demand their dissenters’ rights but fails to perfect or who effectively withdraws or loses the right to appraisal will be converted into the right to receive the merger consideration to be received by shareholders under the merger agreement. A copy of Section 1701.85 of the ORC, “Dissenting shareholders—compliance with section—fair cash value of shares,” is attached as Appendix D to this proxy statement.

Litigation Relating to the Merger (Page 45)

As of the date of this proxy statement, the Company’s directors and Munich-American have been named as defendants in a purported class action pending in the Court of Common Pleas, Clermont County, Ohio, General Division, on behalf of the public shareholders of the Company alleging certain breaches of fiduciary duties owed by the Midland directors, purportedly procured by Munich-American. Among other things, the lawsuit seeks declaratory relief and unspecified damages.

Market Price of Company Common Shares (page 61)

Our common shares are listed on Nasdaq Global Select Market under the trading symbol “MLAN.” On October 15, 2007, which was the last trading day before the Company announced the signing of the merger agreement, our common shares closed at $56.38 per share. On February 21, 2008, which was the last trading day before the printing of this proxy statement, our common shares closed at $64.40 per share. On September 14, 2007 and July 16, 2007, which were the trading days one month and three months prior to the announcement of the signing of the merger agreement, respectively, our common shares closed at $53.91 and $46.46, respectively.

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Information both included and incorporated by reference in this proxy statement may contain statements that are considered “forward-looking” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are identified by their use of terms such as: “expect(s),” “intend(s),” “may,” “plan(s),” “should,” “believe(s),” “anticipate(s),” “will,” “project(s),” “estimate(s),” “continue,” “potential,” “opportunity,” “on track,” or similar terms. We or our representatives may also make similar forward-looking statements from time to time orally or in writing. We cannot guarantee that we will achieve these plans, intentions or expectations, including completing the merger on the terms summarized in this proxy statement. All statements regarding our expected financial position and business are forward-looking statements. The reader is cautioned that these forward-looking statements are subject to a number of risks, uncertainties, or other factors that may cause (and in some cases have caused) actual results to differ materially from those described in the forward-looking statements. These risks and uncertainties include, but are not limited to, the following:

These factors may not constitute all factors that could cause actual results to differ materially from those discussed in any forward-looking statement. Our Company operates in a continually changing business environment and new factors emerge from time to time. We cannot predict such factors nor can we assess the impact, if any, of such factors on our financial position or our results of operations. Accordingly, forward-looking statements should not be relied upon as a predictor of actual results.

Additional factors that may affect the future results of the Company are set forth in our filings with the Securities and Exchange Commission, which are available at http://www.midlandcompany.com/. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

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All forward-looking statements included in this proxy statement speak only as of the date of this proxy statement and all forward-looking statements incorporated by reference into this proxy statement speak only as of the date of the document in which they were included. We expressly disclaim any obligation to release publicly any revision or updates to any forward-looking statements, except to the extent required by law. All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are qualified by the cautionary statements in this section.

All information contained in this proxy statement concerning Munich-American, Merger Sub and their affiliates has been supplied by Munich-American and has not been independently verified by us.

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THE SPECIAL MEETING

General; Date, Time and Place

This proxy statement is being furnished to Company shareholders as part of the solicitation of proxies by the Company’s Board of Directors for use at the special meeting to be held at 10:00 a.m., Eastern Daylight Time, on March 24, 2008, at The Midland Company’s headquarters and principal executive offices, 7000 Midland Boulevard, Amelia, Ohio 45102.

Matters to be Considered

The purpose of the special meeting will be to consider and vote upon a proposal to adopt the merger agreement. In addition, we are also asking for you to approve the adjournment or postponement of the special meeting, if necessary or appropriate, to solicit additional proxies in the event there are not sufficient votes represented in person or by proxy to adopt the merger agreement at the time of the special meeting. If any other matters are properly presented at the special meeting for action, the persons named in the enclosed proxy will have discretion to vote on such matters in accordance with their best judgment.

Record Date and Quorum

The holders of record of Company common shares as of the close of business on February 22, 2008, the record date, will be entitled to receive notice of, and to vote at, the special meeting or any adjournment or postponement thereof. As of the record date, there were 19,470,622 Company common shares outstanding.

A quorum of shareholders is necessary to take action at the special meeting. A majority of the outstanding shares of the Company, represented in person or by proxy, will constitute a quorum. Votes cast by proxy or in person at the special meeting will be tabulated by the inspectors of election appointed for the special meeting. The inspectors of election will determine whether a quorum is present at the special meeting. In the event that a quorum is not present at the special meeting, we expect that the meeting will be adjourned or postponed to solicit additional proxies.

Abstentions and “broker non-votes” will be treated as present for purposes of determining the presence of a quorum. Once a share is represented at the special meeting, it will be counted for the purpose of determining a quorum at the special meeting and any adjournment or postponement of the special meeting, unless the holder is present solely to object at the beginning of the special meeting to the transaction of any business because the meeting is not lawfully called or convened. However, if a new record date is set for the adjourned or postponed special meeting, then a new quorum will have to be established.

The record date of the special meeting is earlier than the date of the special meeting and the date that the merger is expected to be completed. If you transfer your common shares after the record date but before the special meeting, you will retain the right to vote at the special meeting, but you will have transferred the right to receive the merger consideration. In order to receive the merger consideration, you must beneficially own your common shares through completion of the merger.

Required Vote

Each outstanding common share on the record date entitles the holder to one vote at the special meeting. Completion of the merger requires, among other conditions, the adoption of the merger agreement by the affirmative vote of a majority of the issued and outstanding common shares as of the close of business on the record date. As a condition to the execution of the merger agreement, certain members of the Hayden and LaBar families executed a voting agreement pursuant to which they agreed to vote in favor of approval of the merger and the merger agreement and against any proposal made in opposition to, or in competition with, the consummation of the merger, subject to certain exceptions. These shareholders collectively are entitled to vote 6,363,189 shares, or approximately 33%, of Midland’s outstanding shares of common stock.

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In the event the special meeting will need to be adjourned or postponed, if necessary or appropriate, to solicit additional proxies in the event there are not sufficient votes represented in person or by proxy at the time of the special meeting to adopt the merger agreement, approval of the holders of a majority of the common shares represented at the meeting will be required .

In order for your Company common shares to be included in the vote, you must submit your proxy by returning the enclosed proxy card, or you must vote in person at the special meeting. If you hold your shares through a broker or other nominee, you may receive separate voting instructions with the proxy statement. Please contact your broker or nominee to determine how to vote.

If you are a participant in the Company’s Dividend Reinvestment or Employee 401(k) Savings Plan the enclosed proxy represents the number of shares held in your account in those plans as well as shares you hold of record. With respect to participants in the Employee 401(k) Savings Plan, the proxy also serves as the voting instruction card to the Plan trustee and represents your proportional interest in shares beneficially held by the trustee.

Voting by Proxy; Revocability of Proxy

Each copy of this proxy statement mailed to Company shareholders is accompanied by a form of proxy and a self-addressed envelope. Instead of attending the special meeting and voting your shares in person, you may choose to submit your proxies by mail. If you choose to vote by mail, simply complete the enclosed proxy card, date and sign it, and return it in the postage-paid envelope provided. If you intend to submit your proxy by mail it must be received by the Company prior to the commencement of voting at the special meeting. If you sign your proxy card and return it without marking any voting instructions, your shares will be voted “FOR” the adoption of the merger agreement and approval of the merger and “FOR” the approval of the adjournment or postponement of the special meeting, if necessary or appropriate, to solicit additional proxies.

If you hold your shares through a broker or other nominee, you should follow the separate voting instructions, if any, provided by the broker or other nominee with the proxy statement. Please contact your broker or nominee to determine how to vote.

You can revoke your proxy at any time before the vote is taken at the special meeting, except as otherwise described below. If you do not hold your shares through a broker or other nominee, you may revoke your proxy before the proxy is voted by:

The Midland Company

7000 Midland Boulevard

Amelia, Ohio 45014

Attention: Michael L. Flowers,

Secretary

Email: mflowers@amig.com

If your Company common shares are held in street name, you should follow the instructions of your broker or nominee regarding the revocation of proxies.

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All shares represented by valid, unrevoked proxies we receive through this solicitation will be voted in accordance with your instructions on the proxy card.

If other matters do properly come before the special meeting, or at any adjournment or postponement thereof, we intend that shares represented by properly submitted proxies will be voted, or not voted, by and at the discretion of the persons named as proxies on the proxy card. In addition, the grant of a proxy will confer discretionary authority on the persons named as proxies on the proxy card to vote in accordance with their best judgment on procedural matters incidental to the conduct of the special meeting, such as a motion to adjourn or postpone in the absence of a quorum or a motion to adjourn or postpone for other reasons. However, proxies that indicate a vote against the adoption of the merger agreement or against any adjournment or postponement of the special meeting will not be voted in favor of any adjournment or postponement of the special meeting for the purpose of soliciting additional votes in favor of adoption of the merger agreement.

Shareholders should NOT send share certificates with their proxy cards. If the merger is completed, shareholders of record will receive a letter of transmittal with instructions informing them how to send in any share certificates to the paying agent appointed by Munich-American with the Company’s prior approval, which we refer to in this proxy statement as the paying agent, in order to receive the shareholder’s cash payment. Shareholders should use the letter of transmittal to exchange share certificates for the cash payment to which they are entitled as a result of the merger. PLEASE DO NOT SEND IN SHARE CERTIFICATES WITH THE PROXY CARD.

Effect of Abstentions and Broker Non-Votes

Absent specific instructions from the beneficial owner of shares, brokers may not vote the shares with respect to the adoption of the merger agreement. For purposes of determining adoption of the merger agreement, abstentions and broker non-votes will have the same effect as a vote against adoption of the merger agreement. Broker non-votes will not apply to the proposal to adjourn or postpone the special meeting. Abstentions will count as votes cast against the proposal to adjourn or postpone the special meeting, since this vote is based on the number of shares represented at the special meeting.

Accordingly, the Company’s Board of Directors urges shareholders to complete, date, sign and return the accompanying proxy card, or, in the event you hold your shares through a broker or other nominee, by following the separate voting instructions received from your broker or nominee.

Shares Owned by Company Directors and Executive Officers

As of February 22, 2008, directors and executive officers of the Company owned, in the aggregate, 7,902,031 Company common shares (including options exercisable within 60 days), or approximately 39.3% of the voting power of the issued and outstanding Company common shares. See the section entitled “Shareholdings of Directors and Management” below.

Solicitation of Proxies

The expense of soliciting proxies will be borne by the Company. Proxies will be solicited by mail and may be solicited, for no additional compensation, by officers, directors or employees of the Company or its subsidiaries, or in person. Brokerage houses and other custodians, nominees and fiduciaries may be requested to forward soliciting material to the beneficial owners of common shares of the Company, and will be reimbursed for their related expenses.

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Adjournments and Postponements

Although it is not currently expected, the special meeting may be adjourned or postponed for the purpose of soliciting additional proxies. Any adjournment or postponement may be made without notice, other than by an announcement made at the special meeting, and the record date will not change due to an adjournment or postponement unless the directors of the Company, in their discretion, establish a new record date. In order for the special meeting to be adjourned or postponed, if necessary or appropriate, to permit further solicitation of proxies on the proposal to adopt the merger agreement, the affirmative votes of a majority of the outstanding Company common shares represented at the special meeting, whether in person or by proxy, is required to approve the proposal to adjourn or postpone the special meeting. The officer of the Company presiding at the special meeting or a majority of Company common shares present in person or represented by proxy at the special meeting may adjourn or postpone the special meeting, whether or not a quorum is present. Any signed proxies received by the Company will be voted in accordance with your instructions on the proxy card. If you make no specification on your properly executed proxy card as to how you want your shares to be voted, your proxy will be voted “FOR” the approval of the adjournment or postponement of the special meeting, if necessary or appropriate, to solicit additional proxies.

Any adjournment or postponement of the special meeting for the purpose of soliciting additional proxies will allow Company shareholders who have already sent in their proxies to revoke them at any time prior to their use at the special meeting as adjourned or postponed, provided that, such revocation is in compliance with the instructions (including as to timing) set forth in the section entitled “—Voting by Proxy; Revocability of Proxy” in the enclosed proxy card.

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THE MERGER

Introduction

The Company is seeking adoption by its shareholders of the merger agreement among Munich-American, Merger Sub and the Company. In connection with the merger, Company shareholders will receive $65.00 in cash, without interest, for each common share of the Company they hold. The discussion of the merger in this proxy statement is qualified in its entirety by reference to the merger agreement, which is attached to this proxy statement as Appendix A. You should read the merger agreement carefully.

The Companies

Midland

The Midland Company

7000 Midland Blvd.

Amelia, Ohio 45102-2608

The Midland Company, which is headquartered in Cincinnati, Ohio, is a provider of specialty insurance products and services through its wholly owned subsidiary, American Modern Insurance Group, which typically accounts for approximately 95 percent of Midland’s consolidated revenue. American Modern specializes in writing physical damage insurance and related coverages on manufactured housing and has expanded to other specialty insurance products including coverage for site-built homes, motorcycles, watercraft, snowmobiles, recreational vehicles, physical damage on long-haul trucks, extended service contracts, excess and surplus lines coverages, credit life and related products as well as collateral protection and mortgage fire products sold to financial institutions and their customers. Midland also owns a niche transportation business, M/G Transport Group, which operates a fleet of dry cargo barges for the movement of dry bulk commodities on the inland waterways in the United States. Midland’s common stock is traded on the Nasdaq Global Select Market under the symbol “MLAN”.

Munich-American

Munich-American Holding Corporation

555 College Road East

Princeton, New Jersey 08540

Munich-American Holding Corporation, a Delaware corporation, is a holding corporation for Munich Re America Corporation, a member of the Munich Re Group. The Munich Re Group operates worldwide. In the financial year 2007, it achieved a profit of € 3.9bn, the highest in its corporate history. Its premium income amounted to approximately € 37bn and its investments amounted to approximately € 174bn. The Munich Re Group operates in all lines of business, with around 37,000 employees at over 50 locations throughout the world, and is characterized by particularly pronounced diversification, client focus and earnings stability. Munich Re America Corporation, a member of the Munich Re Group, is one of the leading providers of reinsurance in the United States. Through its subsidiaries, it writes treaty and facultative reinsurance and insurance, and provides related services to insurance companies, other large businesses, government agencies, pools and other self-insurers.

Merger Sub

Monument Corporation

c/o Munich-American Holding Corporation

555 College Road East

Princeton, New Jersey 08540

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Monument Corporation, an Ohio corporation, is a direct, wholly owned subsidiary of Munich-American and was formed solely for the purpose of consummating the merger. Merger Sub is not engaged in any business except as contemplated by the merger agreement. It is anticipated that, subject to the terms and conditions of the merger agreement, Merger Sub shall be merged with and into the Company resulting with the Company becoming a wholly owned subsidiary of Munich-American and its affiliates. Merger Sub’s existence will end upon the consummation of the merger.

Background of the Merger

As part of their ongoing evaluation of the Company’s business, our board of directors and our senior management regularly review and assess opportunities to achieve our long-term strategic goals and to maximize shareholder value. As part of this review process, our senior management has periodically made presentations to our board of directors that have included a review of potential opportunities for business combinations, acquisitions and dispositions. From time to time, our board and our senior management have evaluated a variety of options in light of the business trends and regulatory conditions impacting us or expected to impact us and the industries in which we operate.

On June 13, 2007, at a special meeting of our board of directors, Mr. John Hayden, our President, Chief Executive Officer and a member of the board, explained that members of the Hayden family, who together beneficially own approximately 28% of our common stock, were considering reducing or possibly completely divesting their ownership stake in the Company for estate planning and related reasons. Wholly apart from the Hayden family’s future intentions, Mr. Hayden enumerated a variety of reasons why our board of directors might want to consider strategic options, including a possible sale of the Company, at that time, including:

After Mr. Hayden’s presentation, representatives of Cleary Gottlieb Steen & Hamilton LLP (“Cleary Gottlieb”) were invited to join the meeting and reviewed the directors’ fiduciary duties in the context of any change-in-control transaction involving the Company. The representatives of Cleary Gottlieb also discussed the possibility that a conflict of interest could arise between the Company’s public shareholders and the Hayden family and/or the Company’s senior management if the Company decided to move forward with the possibility of a business combination transaction.

Following the presentation by Cleary Gottlieb, Messrs. John Hayden, William Hayden, J.P. Hayden, Jr., Joseph Hayden, III, Michael Conaton and John LaBar left the meeting to allow our independent directors separately to discuss Mr. John Hayden’s presentation. The independent directors discussed the possibility of forming a special committee to evaluate the Company’s strategic alternatives and following that discussion, the independent directors unanimously agreed to recommend that the board form a special committee of independent directors, comprised of Mr. Jerry Grundhofer, Mr. James Bushman and Mr. John O’Mara (the “special committee”), and that the special committee be authorized to consider whether the Company should explore the possibility of a strategic transaction. After Messrs. John Hayden, William Hayden, J.P. Hayden, Jr., Joseph Hayden, III, Michael Conaton and John LaBar rejoined the meeting, the full board unanimously approved the recommendation of the independent directors and authorized the special committee, so constituted, to retain financial and legal advisors and to consider whether the Company should explore the possibility of a strategic transaction.

Immediately following the board meeting on June 13, 2007, the special committee held a meeting. The committee members elected Mr. Jerry Grundhofer to act as chairman and retained Cleary Gottlieb to act as legal counsel to the special committee.

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On June 28, 2007, the special committee held a meeting to identify and retain a financial advisor. Representatives of Cleary Gottlieb attended the meeting. After meeting with representatives of two potential financial advisors, the special committee decided to retain UBS as financial advisor to the special committee in connection with a possible business combination transaction involving the Company and instructed UBS to prepare an analysis for the special committee to assist the special committee in assessing whether it was an appropriate time for the Company to pursue various potential strategic alternatives, including a possible sale of the Company. As authorized by the special committee, UBS consulted with our senior management as necessary in order to develop its analysis.

On July 2, 2007, at a telephonic meeting, representatives of UBS presented its analysis to the special committee. Representatives of Cleary Gottlieb participated in the meeting. The UBS representatives discussed various business considerations regarding the Company and the property and casualty sector generally, including the cyclical nature of the business. The special committee discussed UBS’ presentation and asked questions regarding the possible timeline for a sale process and the identity of potential bidders. At the close of the meeting, the special committee instructed UBS to work with our senior management to prepare a more detailed assessment of the potential range of values the Company might be able to achieve in a sale transaction.

Following the special committee meeting on July 2, 2007, our full board of directors held a telephonic special meeting. Representatives of Cleary Gottlieb and UBS participated in the meeting. Mr. Grundhofer updated the board on the special committee’s activities and, at the request of the special committee, representatives of UBS briefed the full board of directors on its presentation to the special committee as outlined in the preceding paragraph.

From July 3, 2007 through July 15, 2007, representatives of UBS met with members of our senior management and developed an indicative range of potential values the Company might be able to achieve in a sale transaction.

On July 16, 2007, at a telephonic meeting of the special committee with representatives of UBS and Cleary Gottlieb, representatives of UBS discussed a potential range of values for the Company based on financial analyses carried out in consultation with our senior management. The UBS representatives also presented an indicative timeline for a sale process and a preliminary list of 21 parties that might be interested in a business combination transaction with the Company. The special committee members discussed the potential harm to the Company that might result from a public auction process, particularly in terms of the Company’s relationships with customers, employees and agents and decided that a more controlled process would be less disruptive to the Company and could still be effective. After further deliberation, the special committee members unanimously agreed to recommend to the full board that the Company explore the possibility of a sale.

On July 17, 2007, our board of directors held a telephonic special meeting. Representatives of UBS and Cleary Gottlieb participated in the meeting. The special committee presented its unanimous recommendation that the Company initiate a process to explore the possibility of a sale. Representatives of UBS discussed the indicative range of potential values that the Company might be able to achieve in a sale transaction based on its analysis of market conditions and other relevant factors, a preliminary list of parties that might be interested in a business combination transaction with the Company and the expected timing and steps involved in a sale process. Our directors discussed the matters presented by the UBS representatives, expressed general agreement that the indicative range of values described by UBS appeared attractive relative to the market price of the Company’s common shares and unanimously agreed that it was in the best interests of the Company and its shareholders to explore the possibility of a sale transaction. Our board then delegated power and authority to the special committee to:

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Following the board meeting, the special committee requested that our senior management work with UBS to identify an appropriate list of parties that should be approached by UBS regarding their interest in a business combination transaction with the Company. As requested, UBS, in consultation with our senior management, identified 22 parties. In selecting the 22 parties, UBS and our senior management considered their known or potential strategic interest in a transaction and their ability to complete a transaction of this size in a timely manner. Each of the parties was viewed as having business strategies and potential strategic interests that could be consistent with making a bid for the Company. Of the initial 22 parties contacted, 7 were financial buyers, and the remainder were insurance companies.

Beginning July 26 and during the week of July 30, 2007, at the direction of the special committee, UBS contacted representatives of each of the 22 potential bidders that had been identified by UBS and the Company’s senior management. Fourteen potential bidders executed confidentiality agreements with the Company containing customary confidentiality and standstill provisions.

On July 31, 2007 John W. Hayden, Midland’s Chief Executive Officer, acting upon the suggestion of UBS, contacted Giuseppina Albo, a representative of Munich-American, to advise her of the bid process and to ask whether Munich-American might want to participate in it.

During the week of August 6, 2007, each of these parties received a process letter along with confidential information regarding the Company’s operations, financial performance and growth strategy. Interested bidders were asked to submit preliminary non-binding indications of interest by September 6, 2007.

In early August, representatives of one of the potential insurance company bidders informed UBS that it did not plan to submit a preliminary non-binding indication of interest.

On August 13, 2007, the special committee held a telephonic meeting to receive an update regarding discussions with potential bidders. Representatives of Cleary Gottlieb and UBS participated in the meeting. Representatives of UBS explained that several of the companies contacted by UBS had expressed an interest in the Company’s insurance business but not its transport business. These companies had indicated that they might be interested in submitting a bid for the Company but would plan to divest the transport business following any potential strategic transaction. In light of this feedback from certain potential bidders, the special committee considered whether to recommend that our board conduct a separate sale process for the Company’s transport business. The special committee reached no conclusion regarding the matter but determined to request a meeting of the full board of directors in order to consider the question. In order to facilitate the board discussion, Mr. Grundhofer asked UBS to prepare a presentation including indicative valuations for the transport business based on its analysis of market conditions and other relevant factors, both on a stand-alone basis and together with the insurance business.

On August 20, 2007, the special committee held a telephonic meeting to discuss UBS’ presentation regarding the Company’s transport business. Representatives of Cleary Gottlieb participated in the meeting. The committee members expressed concern that initiating a separate sale process for the transport business a few weeks before preliminary non-binding indications of interest were expected would delay and perhaps jeopardize the success of the current process. The special committee decided to discuss the matter with our full board of directors.

Later in the day on August 20, 2007, our board held a telephonic special meeting. Representatives of Cleary Gottlieb participated on the call. The directors discussed the potential advantages and disadvantages of conducting a separate sale process for the Company’s transport business, including considerations relating to

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whether a possible sale of the Company without its transport business would be attractive to potential bidders that were engaged in the insurance business but not the transport business. Our board unanimously agreed to continue soliciting bids only for the Company as a whole and to reconsider the question of conducting a separate sale process for the transport business, if appropriate, after receipt of initial preliminary non-binding indications of interest on September 6, 2007.

During the week of September 3, 2007, representatives of six potential insurance company bidders and five potential financial bidders informed UBS that they did not expect to submit preliminary non-binding indications of interest. Several of the financial bidders explained that recent instability in credit markets influenced their decision to withdraw from the process.

On September 6, 2007, UBS received preliminary non-binding indications of interest from Munich-American and another insurance company bidder, referred to in this proxy statement as Strategic Bidder A. Strategic Bidder A’s preliminary non-binding indication of interest valued the equity of the Company in the range of $1.25 billion to $1.31 billion (equivalent to $61.20–$64.00 per share) while Munich-American’s preliminary non-binding indication of interest valued the equity of the Company at $1.17 billion (or $60.00 per share). Both Strategic Bidder A and Munich-American proposed to pay 100% cash consideration, though Strategic Bidder A indicated that its proposal would be subject to a financing condition. Munich-American’s proposal contained no financing contingency.

On September 7, 2007, the special committee held a telephonic meeting to discuss the preliminary non-binding indications of interest. Representatives of Cleary Gottlieb and UBS participated in the call. The committee members discussed the terms of the two proposals, particularly the proposed offer prices and, in the case of Strategic Bidder A, the financing condition. The special committee unanimously agreed to recommend that both bidders be permitted to proceed with more detailed due diligence with the goal of receiving final bids by early October.

Later in the day on September 7, 2007, our board of directors held a telephonic special meeting, joined by representatives of our senior management, Cleary Gottlieb and UBS. Mr. Grundhofer and representatives of UBS summarized developments in the sale process, including the recent withdrawals of several parties from the process and the two preliminary non-binding indications of interest received. Our board of directors discussed the two preliminary non-binding indications of interest and approved the special committee’s recommendation that both parties be permitted to proceed with more detailed due diligence.

On September 10, 2007, at the special committee’s direction, the Company provided Munich-American and Strategic Bidder A (and their respective advisors) access to an online data room containing information regarding the Company and its businesses.

On September 25, 2007, at the request of the special committee, the UBS representatives provided Munich-American and Strategic Bidder A with copies of a draft merger agreement and draft voting agreement and requested each of the parties to submit its final bid, including mark-ups of the agreements, by no later than October 12, 2007.

On September 24, 2007 and September 26, 2007, our senior management together with representatives of UBS held separate management due diligence meetings with Munich-American and Strategic Bidder A in Cincinnati.

On September 25, 2007, representatives of a private equity firm, referred to in this proxy statement as Private Equity Bidder, contacted UBS to express interest in participating in the sale process. After discussions with representatives of UBS, Cleary Gottlieb and our senior management regarding this development and the identity of Private Equity Bidder, the special committee authorized UBS to request a preliminary non-binding indication of interest from Private Equity Bidder.

On September 28, 2007, Private Equity Bidder entered into a confidentiality and standstill agreement with the Company and received a copy of the same confidential information memorandum that had been provided to the other potential bidders, including Munich-American and Strategic Bidder A. On October 1, 2007, Private

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Equity Bidder submitted a preliminary non-binding indication of interest to UBS, which valued the equity of the Company at between $52 and $57 per share, subject to completion of satisfactory due diligence. On October 2, 2007, the special committee members discussed Private Equity Bidder’s offer price, which the committee members noted was not competitive with the preliminary non-binding indications of interest received from Munich-American and Strategic Bidder A, and instructed UBS not to pursue discussions with Private Equity Bidder.

On October 10, 2007, representatives of Strategic Bidder A contacted UBS and indicated that Strategic Bidder A did not plan to submit a final proposal and was withdrawing from the sale process. On October 12, 2007, UBS received a proposal from Munich-American to acquire 100% of the Company’s shares for $1.3335 billion, or $65.00 per share on a fully-diluted basis, in cash. Munich-American’s proposal, which included a revised draft merger agreement and voting agreement, indicated that it was subject to completion of due diligence and reaching agreement with certain key employees of the Company regarding their employment following any transaction. The proposal included a proposed termination fee payable by the Company to Munich-American in certain circumstances of $50 million. The proposal also provided that, due to certain U.S. legal limitations on the ability of a non-U.S. corporation to operate a U.S. barge business, the closing of the proposed transaction would be subject to the Company’s divestiture of its transport business to a third party or its transfer of the transport business to a passive investment vehicle that would facilitate an orderly sale process for the transport business after the closing of the merger, to ensure Munich-American would not retain ownership of such business thereafter.

On October 13, 2007, the special committee held a telephonic meeting. Representatives of our senior management, Cleary Gottlieb and UBS participated in the meeting. The special committee members discussed the terms of the Munich-American proposal. Representatives of UBS noted that the offer price represented a 12.3% premium to the closing price on the prior day and a 39.9% premium over the share price on the day prior to the commencement of the sale process. Representatives of Cleary Gottlieb reviewed certain provisions of the revised merger agreement and the conditions contained in Munich-American’s bid letter. The special committee members expressed concern that certain of Munich-American’s conditions could significantly delay any potential sale transaction and instructed UBS, Cleary Gottlieb and our senior management to work directly with Munich-American and its legal and financial advisors with the goal of resolving or eliminating the conditions relating to due diligence, employee retention and divestiture or transfer of the Company’s transport business.

Immediately following the special committee meeting on October 13, 2007, our board of directors held a telephonic special meeting. Representatives of Cleary Gottlieb, UBS and our senior management joined the call. Mr. Grundhofer briefed the full board on the Munich-American proposal, including the conditions outlined in the bid. UBS discussed the financial terms of Munich-American’s offer and Cleary Gottlieb reviewed certain terms of the proposed revised merger agreement. Members of our senior management left the meeting and our independent directors, meeting in separate session, discussed the employment arrangements requested by Munich-American with certain of our key executives, including Mr. John Hayden and Mr. Joseph Hayden, III. Mr. Grundhofer advised the other directors that all such employment arrangements, when ultimately determined, would be disclosed to the special committee and the full board of directors as one of the factors to be considered when assessing any potential sale transaction with Munich-American.

In the afternoon of October 13, 2007, representatives of Cleary Gottlieb and Dewey & LeBoeuf LLP (“Dewey & LeBoeuf”), legal counsel to Munich-American, discussed Munich-American’s comments to the draft merger agreement and voting agreement by conference telephone call. Also during the afternoon of October 13, 2007, representatives of UBS, together with John Hayden, Joseph Hayden, III and other members of our senior management, held discussions with Munich-American and its advisors regarding the conditions contained in Munich-American’s proposal.

In the evening of October 13, 2007, Cleary Gottlieb circulated a revised draft of the merger agreement to Munich-American and its advisors.

Cleary Gottlieb and Dewey & LeBoeuf continued negotiating the terms of the merger agreement on October 14, 2007, including Munich-American’s proposed closing conditions relating to the divestiture or transfer of the Company’s transport business.

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Representatives of UBS and our senior management held discussions with Munich-American and its financial advisor, Lehman Brothers, throughout the day on October 14, 2007 in order to address due diligence matters as well as Munich-American’s concerns regarding retention of key employees.

On the evening of October 14, 2007, Munich-American circulated a revised proposal letter to representatives of the Company, indicating that Munich-American had satisfactorily completed its remaining due diligence and that it was prepared to eliminate all closing conditions relating to divestiture or transfer of the Company’s transport business. The revised Munich-American proposal requested a change to the merger agreement to permit extension by 30 days of the outside date by which the closing must occur if a definitive agreement with respect to divestiture or transfer of the transport business has been executed but remains subject to regulatory approval. Munich-American agreed to accept undertakings from the Company to cooperate between signing and closing with Munich-American’s efforts to identify a strategy reasonably satisfactory to Munich-American so that the Company’s operation of the transport business after the merger would not violate applicable laws. In addition, Joseph Hayden, III and certain key employees of our transport business agreed on an individual basis to certain post-merger employment arrangements and also agreed to assist Munich-American with either disposal of the transport business or restructuring of its ownership in order to permit Munich-American’s compliance with applicable U.S. laws upon consummation of the proposed merger. Munich-American’s memorandum also outlined its revised proposal regarding other key terms of the merger agreement, including a reduction in the proposed termination fee payable by the Company in certain circumstances from $50 million to $40 million.

Later in the evening of October 14, 2007, representatives of Cleary Gottlieb, Dewey & LeBoeuf, UBS, Lehman Brothers and Munich-American briefly discussed Munich-American’s revised proposal.

Following the discussion on the evening of October 14, 2007, the special committee held a telephonic meeting with representatives of Cleary Gottlieb and UBS. Representatives of Cleary Gottlieb and UBS summarized developments on October 13 and October 14 and Munich-American’s revised proposal. The special committee discussed the revised proposal and, in light of Munich-American’s willingness to eliminate several of the conditions contained in its October 12th bid, authorized and directed UBS and Cleary Gottlieb to proceed expeditiously with negotiations with Munich-American and its advisors regarding the merger agreement.

At the direction of the special committee, UBS and Cleary Gottlieb contacted Lehman Brothers later in the evening on October 14, 2007. Lehman Brothers was advised that the special committee had authorized Cleary Gottlieb and UBS to proceed with negotiations with Munich-American.

On October 15 and 16, 2007, Cleary Gottlieb and Dewey & LeBoeuf continued negotiating the terms of the merger agreement, and Munich-American negotiated with certain key employees of the Company regarding terms of their employment arrangements post-merger.

In the evening of October 15, 2007, Cleary Gottlieb circulated a revised draft of the merger agreement, reflecting negotiations during that day. Prior to 5:00 p.m. Eastern Daylight Time on October 16, 2007, Cleary Gottlieb and Dewey & LeBoeuf had completed their negotiation of the material terms of the merger agreement and the voting agreement and Munich-American had completed its discussions with certain key employees of the term sheets for employment agreements with such key employees. On the evening of October 16, 2007, the special committee held a meeting to review the terms for the merger proposed by Munich-American as negotiated. Representatives of UBS, Cleary Gottlieb and Katz Teller Brant & Hild (“Katz Teller”), counsel to certain key employees of the Company, participated in the meeting. At Mr. Grundhofer’s request, Cleary Gottlieb reviewed the principal terms of the proposed merger agreement with Munich-American and responded to questions from the special committee regarding various terms.

A representative of Katz Teller summarized the proposed terms of the employment arrangements that had been agreed to between Munich-American and certain key employees of the Company, including Mr. John Hayden and Mr. Joseph Hayden III.

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The special committee meeting was recessed so that members of the special committee could participate in a meeting of the full board of directors in order to hear UBS’ financial presentation regarding the Munich-American offer. Representatives of UBS then reviewed with the full board their financial analysis of the consideration to be received in the proposed merger and indicated that UBS was prepared to render its opinion to the special committee to the effect that, as of such date and based on and subject to various assumptions, matters considered and limitations described in its opinion, the $65.00 per share cash consideration to be received by the holders of the Company’s common shares (other than the Hayden Shareholders) in the proposed merger was fair, from a financial point of view, to such holders (for a full discussion of the UBS opinion see—Opinion of UBS Securities LLC beginning on page 31). The full text of UBS’ written opinion to the special committee, dated as of October 16, 2007, which sets forth the assumptions made, procedures followed, matters considered, and limitations on the review undertaken by UBS, is attached to this proxy statement as Appendix C and is incorporated by reference in its entirety into this proxy statement. Holders of the Company’s common shares are urged to read UBS’ opinion carefully in its entirety.

Representatives of Cleary Gottlieb then summarized the material terms of the proposed merger agreement, including the proposed transaction structure, the treatment of options, restricted stock and other equity-incentive programs, the terms of the representations, warranties and covenants contained in the merger agreement, including the ability of the Company to consider and accept superior offers and the termination fee payment and expense reimbursement obligations of each of the Company and Munich-American. Representatives of Cleary Gottlieb also reviewed the fiduciary duties of the board when considering strategic alternatives, including a sale of the Company.

A representative of Katz Teller summarized for the full board of directors the terms of the employment arrangements that had been agreed to between Munich-American and certain key employees of the Company, including Mr. John Hayden. In addition, Katz Teller described the terms of an incentive arrangement that had been agreed between Munich-American and Mr. Joseph Hayden, III pursuant to which Mr. Hayden agreed to assist Munich-American in identifying a buyer for our transport business in exchange for certain incentive payments.

The meeting of the board of directors was then recessed and the members of the special committee resumed their meeting with representatives of Cleary Gottlieb and UBS. UBS delivered to the special committee an oral opinion, confirmed by delivery of a written opinion dated October 16, 2007, to the effect that, as of such date and based on and subject to various assumptions, matters considered and limitations described in its opinion, the $65.00 per share cash consideration to be received by the holders of the Company’s common shares (other than the Hayden Shareholders) in the proposed merger was fair, from a financial point of view, to such holders (for a full discussion of the UBS opinion see—Opinion of UBS Securities LLC beginning on page 31). After deliberation and based upon the totality of the information considered during its evaluation of the merger and the merger agreement, the special committee unanimously determined that the merger is fair to the holders of the Company’s common shares and that it is in the best interests of such holders for the Company to enter into the merger agreement and to consummate the transactions contemplated by the merger agreement, including the merger. In addition, the special committee determined to recommend that the merger agreement and the merger should be recommended for adoption and approval by the board of directors and that the board should recommend that the Company’s shareholders vote to approve the merger and the adoption of the merger agreement.

Immediately following the special committee meeting on October 16, 2007, the full board reconvened with representatives of UBS and Cleary Gottlieb. Mr. Grundhofer presented the special committee’s recommendation. Messrs. John Hayden, William Hayden, J.P. Hayden, Jr., Joseph Hayden, III, Michael Conaton and John LaBar were then excused from the meeting so that the independent directors could separately discuss the transaction, including the employment arrangements offered by Munich-American to Mr. John Hayden, Mr. Joseph Hayden, III and certain other senior managers. The full board then reconvened. Following a discussion regarding the recommendation of the special committee and the proposed resolutions, the board unanimously approved the

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merger agreement and the transactions contemplated by the merger agreement and unanimously resolved to recommend that the shareholders of the Company vote to adopt the merger agreement and approve the merger.

Later in the evening on October 16, 2007, the Company, Munich-American and Merger Sub executed the merger agreement, and certain members of the Hayden family, Mr. John Labar and their spouses, collectively representing approximately 33% of our common shares, executed voting agreements with Munich-American. Before the trading markets opened in Germany on October 17, 2007, the Company and Munich-American each issued a press release announcing the merger.

Reasons for the Merger

The Special Committee

The special committee, acting with the advice and assistance of its financial and legal advisors and of our senior management, evaluated and negotiated the merger, including the terms and conditions of the merger agreement, with Munich-American. The special committee unanimously determined that the merger is fair to and that it is in the best interests of the holders of the Company’s common shares to consummate the transactions contemplated by the merger agreement, including the merger. In addition, the special committee determined that the merger agreement and the merger should be approved and declared advisable by the board of directors and that the board should recommend that the Company’s shareholders vote to approve the merger and adopt the merger agreement. In reaching its determination, the special committee considered a number of factors and potential benefits of the merger, including the following:

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The special committee has also considered and balanced against the potential benefits of the merger a variety of risks and other potentially negative factors concerning the merger. These factors included the following:

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This discussion summarizes the material factors considered by the special committee in its consideration of the merger. After considering these factors, the special committee concluded that the positive factors relating to the merger agreement and the merger outweighed the potential negative factors. In view of the wide variety of factors considered by the special committee, and the complexity of these matters, the special committee did not find it practicable to quantify or otherwise assign relative weights to the foregoing factors. In addition, individual members of the special committee may have assigned different weights to various factors. The special committee approved and recommended the merger agreement and the merger based upon the totality of the information presented to and considered by it.

The Board of Directors

On October 16, 2007, the special committee, by unanimous vote, determined to recommend that our board approve the proposed merger agreement and merger. Immediately after the special committee resolved to recommend that the board approve the proposed merger and the merger agreement, our full board:

See “—Background of the Merger” beginning on page 21 for additional information on the recommendation of our board.

Such approvals, determinations and recommendations were approved by all of the members of the board. Our board determined that the merger is fair to and that it is in the best interests of the holders of the Company’s common shares to consummate the transactions contemplated by the merger agreement, including the merger. In reaching these conclusions, our board considered:

The foregoing discussion of the information and factors considered by the board is not intended to be exhaustive but, we believe, includes all material factors considered by the board. In view of the wide variety of factors considered by the board in evaluating the merger and the complexity of these matters, our board did not assign relative weights to the above factors or the other factors considered by it. In addition, the board did not reach any specific conclusion on each factor considered, but conducted an overall analysis of these factors. Individual members of the board may have given different weights to different factors.

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Recommendation of the Board of Directors

Based on the factors outlined above, the Company’s Board of Directors determined that the merger agreement and the transactions contemplated by the merger agreement, including the merger, are advisable, fair to, and in the best interests of the Company and its shareholders and approved the merger agreement and the transactions contemplated by the merger agreement, including the merger.

Accordingly, the Company’s Board of Directors unanimously recommends that you vote “FOR” the adoption of the merger agreement at the special meeting. The Company’s Board of Directors also unanimously recommends that you vote “FOR” the proposal to adjourn or postpone the special meeting, if necessary or appropriate, to solicit additional proxies in the event there are not sufficient votes represented in person or by proxy in order for the shareholders to adopt of the merger agreement.

Opinion of UBS Securities LLC

UBS acted as financial advisor to the special committee in connection with the merger. On October 16, 2007, at a meeting of the special committee held to evaluate the proposed merger, UBS delivered to the special committee its oral opinion, which opinion was confirmed by delivery of a written opinion dated October 16, 2007, to the effect that, as of that date and based on and subject to various assumptions, matters considered and limitations described in its opinion, the $65.00 per share cash consideration to be received by the holders of Company common shares (other than the Hayden Shareholders) in the proposed merger was fair, from a financial point of view, to such holders.

The full text of the opinion of UBS describes the assumptions made, procedures followed, matters considered and limitations on the review undertaken by UBS. UBS’ opinion is attached as Appendix C to this proxy statement and is incorporated herein by reference and is available to the holders of Company common shares for inspection and copying at the principal executive offices of the Company during its regular business hours. UBS’ opinion is directed only to the fairness, from a financial point of view and as of the date of such opinion, of the $65.00 per share cash consideration to be received by the holders of Company common shares (other than the Hayden Shareholders) in the proposed merger and does not address any other aspect of the merger or any related transaction. The opinion does not address the relative merits of the merger or any related transaction as compared to other business strategies or transactions that might be available with respect to the Company or the Company’s underlying business decision to effect the merger or any related transaction. The opinion does not constitute a recommendation to any shareholder as to how such shareholder should vote or act with respect to the merger or any related transaction. The holders of Company common shares are encouraged to read UBS’ opinion carefully in its entirety. The summary of UBS’ opinion described below is qualified in its entirety by reference to the full text of its opinion.

In arriving at its opinion, UBS, among other things:

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At the request of the special committee, UBS contacted third parties to solicit indications of interest in a possible transaction with the Company and held discussions with certain of these parties prior to the date of UBS’ opinion.

In connection with its review, with the consent of the special committee, UBS did not assume any responsibility for independent verification of any of the information provided to or reviewed by UBS for the purpose of its opinion and, with the consent of the special committee, UBS relied on such information being complete and accurate in all material respects. In addition, with the consent of the special committee, UBS did not make any independent evaluation or appraisal of any of the assets or liabilities, contingent or otherwise, of the Company, and was not furnished with any such evaluation or appraisal (other than the Statements of Actuarial Opinion dated as of February 23, 2007, June 20, 2007 and June 23, 2007 issued by Oliver Wyman Actuarial Consulting, Inc.). UBS’ services did not include any actuarial determinations or evaluations by it, nor did it make any attempt to evaluate actuarial assumptions. UBS did not rely on any actuarial valuation, opinion or appraisal of the Company for purposes of its opinion, nor did it express any views as to matters relating to the reserves of the Company, including, without limitation, the adequacy of such reserves. With respect to the financial forecasts and estimates prepared by the Company’s management, UBS assumed, at the direction of the special committee, that they had been reasonably prepared on a basis reflecting the best currently available estimates and judgments of the management of the Company as to the future financial performance of the Company. UBS’ opinion was necessarily based on economic, monetary, market and other conditions as in effect on, and the information made available to UBS as of, the date of its opinion.

At the direction of the special committee, UBS was not asked to, and it did not, offer any opinion as to the terms, other than the $65.00 per share cash consideration to the extent expressly specified in UBS’ opinion, of the merger agreement or any related documents or the form of the merger or any related transaction. In rendering its opinion, UBS assumed, with the consent of the special committee, that (i) the final executed form of the merger agreement would not differ in any material respect from the draft examined by UBS, (ii) Munich-American and the Company would comply with all the material terms of the merger agreement, and (iii) the merger would be consummated in accordance with the terms of the merger agreement without any adverse waiver or amendment of any material term or condition thereof. UBS also assumed that all governmental, regulatory or other consents and approvals necessary for the consummation of the merger would be obtained without any material adverse effect on the Company or the merger. Except as described above, the special committee imposed no other instructions or limitations on UBS with respect to the investigations made or the procedures followed in rendering its opinion.

In connection with rendering its opinion to the special committee, UBS performed a variety of financial and comparative analyses which are summarized below. The following summary is not a complete description of all analyses performed and factors considered by UBS in connection with its opinion. The preparation of a fairness opinion is a complex process involving subjective judgments and is not necessarily susceptible to partial analysis or summary description. With respect to the selected public companies analysis and the selected precedent transactions analysis summarized below, no company or transaction used as a comparison is either identical or directly comparable to the Company or the merger. These analyses necessarily involve complex considerations and judgments concerning financial and operating characteristics and other factors that could affect the public trading or acquisition values of the companies concerned.

UBS believes that its analyses and the summary below must be considered as a whole and that selecting portions of its analyses and factors or focusing on information presented in tabular format, without considering all analyses and factors or the narrative description of the analyses, could create a misleading or incomplete view of the processes underlying UBS’ analyses and opinion. UBS did not draw, in isolation, conclusions from or with

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regard to any one factor or method of analysis for purposes of its opinion, but rather arrived at its ultimate opinion based on the results of all analyses undertaken by it and assessed as a whole.

The estimates of the future performance of the Company provided by the Company’s management in or underlying UBS’ analyses are not necessarily indicative of future results or values, which may be significantly more or less favorable than those forecasts and estimates. In performing its analyses, UBS considered industry performance, general business and economic conditions and other matters, many of which were beyond the control of the Company. Estimates of the financial value of companies do not purport to be appraisals or necessarily reflect the prices at which such companies actually may be sold.

The merger consideration was determined through negotiation between the special committee and Munich-American, and the decision to enter into the merger was solely that of the special committee and the Company’s board of directors. UBS’ opinion and financial analyses were only one of many factors considered by the special committee and the Company’s board of directors in their evaluation of the merger and should not be viewed as determinative of the views of the special committee or the Company’s board of directors with respect to the merger or the $65.00 per share cash consideration.

The following is a summary of the material financial analyses performed by UBS and reviewed with the special committee and the Company’s board of directors on October 16, 2007 in connection with its opinion relating to the proposed merger. The financial analyses summarized below include information presented in tabular format. In order to fully understand UBS’ financial analyses, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses. Considering the data below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of UBS’ financial analyses.

Selected Public Companies Analysis

UBS compared selected financial and stock market data of the Company with corresponding data, to the extent publicly available, of the following seven selected publicly traded property and casualty insurance companies:

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Based on publicly available historical financial information, market information as of October 15, 2007 and median earnings estimates provided by the Institutional Brokerage Estimate System, or IBES (a data service that compiles estimates issued by securities analysts), UBS calculated, for each of the selected public companies, current market price to book value as of the end of the most recent quarter (“MRQ”) for which data were publicly available, and current market price to earnings ratios using last twelve months (“LTM”) earnings per share through June 30, 2007 and using estimated earnings per share for each of 2007 and 2008. UBS compared these market multiples for the selected public companies to corresponding multiples implied for the Company based on the closing price of Company common shares on October 15, 2007 of $56.38 and the $65.00 per share cash consideration, utilizing historical financial information as well as both internal forecasts prepared by the Company’s management and median IBES earnings estimates for the Company. This analysis indicated the following implied high, mean, median and low multiples for the selected public companies, as compared to corresponding multiples implied for the Company:

Notes:

Although none of the selected public companies was directly comparable to the Company, the companies involved were chosen because they are publicly traded property and casualty insurance companies with certain businesses, end markets or operations that, for purposes of analysis, could be considered similar to certain businesses, end markets or operations of the Company.

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For each of the selected transactions and for the merger, UBS calculated and compared the transaction value as a multiple of the next twelve months (“NTM”) earnings of the target company and the book value of the target company as of the end of the most recent quarter prior to the transaction date, based on publicly available financial and market information at the time of the relevant transaction. Multiples implied for the Company were calculated based on the $65.00 per share cash consideration, utilizing the book value of the Company as of June 30, 2007 and estimated NTM earnings based on both management forecasts and median IBES NTM earnings estimates. The following table presents the results of this analysis:

Although none of the selected transactions nor the companies involved in them was directly comparable to the merger or the Company, the transactions were chosen because they involved property and casualty insurance companies with certain businesses, end markets or operations that, for purposes of analysis, could be considered similar to certain businesses, end markets or operations of the Company.

Discounted Cash Flow Analysis

UBS calculated a reference range of implied equity values per share for the Company by performing a discounted cash flow analysis of the Company’s insurance subsidiaries and then adding an estimate of the present value of the Company’s transport business based on its estimated 2007 earnings before interest, taxes, depreciation and amortization (“EBITDA”). For the discounted cash flow analysis for the insurance subsidiaries, UBS used operating forecasts for the Company’s insurance businesses for fiscal years 2007 through 2011 provided by the Company’s management to calculate estimated cash available for shareholder dividends through December 31, 2011. UBS also estimated a range of terminal values for the Company’s insurance subsidiaries as of December 31, 2011 by applying price-to-book multiples ranging from 1.50x to 1.80x to the Company’s projected GAAP book equity as of December 31, 2011. These estimated free cash flows and terminal values then were discounted to present value at October 16, 2007, using discount rates ranging from 11.0% to 13.0%. UBS also calculated an estimate of the present value of the Company’s transport business by applying a 7.0x multiple to the 2007 estimated EBITDA for that business provided by management. Based on these analyses, UBS arrived at a range of implied equity values per share for the Company of approximately $51 to $61, as compared to the per share cash consideration of $65.00.

UBS Compensation and Relationships

Under the terms of UBS’ engagement, the Company has agreed to pay UBS a fee for its services of up to approximately $14.5 million. A portion of such fee is payable in connection with UBS’ opinion and a significant portion of it is contingent upon consummation of the merger. In addition, the Company has agreed to reimburse UBS for its reasonable expenses, including fees, disbursements and other charges of counsel, and to indemnify UBS and related parties against liabilities, including liabilities under federal securities laws, relating to, or arising out of, its engagement. In the past, UBS and its affiliates have provided investment banking services to an affiliate of Munich-American unrelated to the proposed merger, for which UBS and its affiliates received compensation. UBS and its affiliates may, in the future, provide investment banking services to Munich-American and its affiliates, unrelated to the proposed merger, for which UBS and its affiliates may receive

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compensation. Munich-American and UBS are unable to estimate the amount of any such future fees at this time because no such future services have been determined or agreed to as of the date of this proxy statement. UBS and its affiliates did not provide any services to the Company in the past two years other than the services provided in connection with the merger. In the ordinary course of business, UBS, its successors and affiliates may hold or trade, for their own accounts and the accounts of their customers, securities of the Company and/or Munich Re Group and its affiliates and, accordingly, may at any time hold a long or short position in such securities. The special committee selected UBS as its financial advisor in connection with the merger because UBS is an internationally recognized investment banking firm with substantial experience in similar transactions. UBS is continually engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, leveraged buyouts, negotiated underwritings, competitive bids, secondary distributions of listed and unlisted securities and private placements.

Material U.S. Federal Income Tax Consequences

The following is a general discussion of certain material U.S. federal income tax consequences to “U.S. holders” (as defined below) of Company common shares of the receipt of cash in exchange for such shares pursuant to the merger. This summary is based upon the provisions of the Internal Revenue Code of 1986, as amended (the “Code”), applicable current and proposed United States Treasury Regulations promulgated thereunder (the “Treasury Regulations”), judicial authorities, and administrative rulings and practice, all as in effect as of the date of this proxy statement and all of which are subject to change, possibly on a retroactive basis.

For purposes of this discussion, the term “U.S. holder” means a beneficial owner of Company common shares that, for U.S. federal income tax purposes, is: (i) an individual citizen or resident of the United States; (ii) a corporation, or other entity treated as a corporation for U.S. federal income tax purposes, created or organized in or under the laws of the United States or any State thereof or the District of Columbia; (iii) a trust (a) the administration of which is subject to the primary supervision of a court within the United States and for which one or more U.S. persons have the authority to control all substantial decisions of the trust or (b) for which a valid election is in effect under applicable Treasury Regulations to be treated as a U.S. person; or (iv) an estate the income of which is subject to U.S. federal income tax regardless of its source.

Holders of Company common shares who are not U.S. holders may have different tax consequences from those described below and are urged to consult their own tax advisors regarding the tax treatment to them under U.S. and non-U.S. tax laws.

If a partnership (including any entity treated as a partnership for U.S. federal income tax purposes) holds Company common shares, the U.S. federal income tax treatment of a partner in such partnership generally will depend upon the status of the partner and the activities of the partnership. A holder of Company common shares that is a partnership, and partners in such partnership, should consult their own tax advisors regarding the tax consequences of the receipt of cash in exchange for Company common shares pursuant to the merger.

This discussion assumes that a U.S. holder holds Company common shares as a capital asset within the meaning of Section 1221 of the Code (generally, property held for investment). This discussion does not address all aspects of U.S. federal income taxation that may be relevant to a U.S. holder in light of the U.S. holder’s particular circumstances, or those U.S. holders subject to special treatment under the Code (including, without limitation, insurance companies, dealers or brokers in securities or currencies, traders in securities who elect to apply a mark-to-market method of accounting, tax-exempt organizations, financial institutions, mutual funds, U.S. expatriates and shareholders subject to the alternative minimum tax), U.S. holders who hold Company common shares as part of a “hedging,” “straddle,” “conversion” or other integrated transaction for U.S. federal income tax purposes, U.S. holders who acquired their Company common shares through the exercise of employee stock options or other compensation arrangements or U.S. holders who exercise statutory dissenters’ rights. In addition, this discussion does not address any aspect of foreign, state, local, estate or gift taxation that may be applicable to a U.S. holder. U.S. holders are urged to consult their own tax advisors to determine the particular tax consequences to them (including the application and effect of any state, local or foreign income and other tax laws) of the receipt of cash in exchange for Company common shares pursuant to the merger.

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The receipt of cash in exchange for Company common shares pursuant to the merger will be a taxable transaction for U.S. federal income tax purposes (and also may be a taxable transaction under applicable state, local and foreign income and other tax laws). In general, for U.S. federal income tax purposes, a U.S. holder will recognize capital gain or loss equal to the difference between the amount of cash received and the U.S. holder’s aggregate adjusted tax basis in the Company common shares converted to cash in the merger. Gain or loss will be calculated separately for each block of Company common shares (i.e., shares acquired at the same cost in a single transaction) converted to cash in the merger. If, at the effective time of the merger, the U.S. holder’s Company common shares were held for more than one year, the gain or loss will be long-term capital gain or loss, and any such long-term capital gain generally will be subject (in the case of U.S. holders who are individuals) to tax at a maximum U.S. federal income tax rate of 15%. If, however, at the effective time of the merger, the U.S. holder’s Company common shares were held for one year or less, the gain or loss will be short-term capital gain or loss. The deductibility of capital losses by U.S. holders is subject to limitations under the Code.

In general, dissenting U.S. holders who exercise their right to appraisal also will recognize gain or loss. Any U.S. holder considering exercising statutory dissenters’ rights should consult with such U.S. holder’s own tax advisor regarding the tax consequences thereof.

Under the U.S. federal income tax backup withholding rules, unless an exemption applies, the paying agent or Munich-American generally is required to and will withhold and remit to the United States Treasury 28% of all payments to which a Company shareholder or other payee is entitled pursuant to the merger, unless the Company shareholder or other payee (1) is a corporation or comes within other exempt categories and, when required, demonstrates this fact and otherwise complies with the applicable requirements of the backup withholding rules or (2) provides such shareholder’s correct taxpayer identification number (i.e., the shareholder’s social security number, in the case of an individual shareholder, or the shareholder’s employer identification number, in the case of other shareholders) and certifies, under penalties of perjury, that the number is correct (or properly certifies that the shareholder is awaiting a taxpayer identification number) and certifies that such shareholder is exempt from backup withholding and otherwise complies with the applicable requirements of the backup withholding rules. Each Company shareholder and, if applicable, each other payee should complete and sign the substitute Form W-9 that will be part of the letter of transmittal to be returned to the paying agent in order to provide the information and certification necessary to avoid backup withholding, unless an applicable exemption exists and is proved in a manner satisfactory to the exchange agent. Company shareholders who are neither U.S. citizens nor U.S. resident aliens should complete, sign and submit a Form W-8BEN, “Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding.” Backup withholding is not an additional tax. Generally, any amounts withheld under the backup withholding rules described above will be refunded or credited against a Company shareholder’s U.S. federal income tax liability, if any, provided that the required information is furnished to the United States Internal Revenue Service in a timely manner.

The discussion above of certain material U.S. federal income tax consequences is included for general information purposes only. Company shareholders are urged to consult their own tax advisors to determine the particular tax consequences to them (including the application and effect of any state, local or foreign income and other tax laws) of the receipt of cash in exchange for Company common shares pursuant to the merger.

Certain Effects of the Merger

If the merger agreement is adopted by the Company’s shareholders and certain other conditions to the closing of the merger are either satisfied or waived, Merger Sub will be merged with and into the Company. As a result of the merger, the separate corporate existence of Merger Sub will cease, and the Company will continue as the surviving entity.

Following the merger, all outstanding shares of the Company will be directly owned by Munich-American. When the merger is completed, each common share of the Company (other than common shares owned by the

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Company and its subsidiaries or Munich-American and its subsidiaries and dissenting shares) issued and outstanding immediately prior to the effective time of the merger will be converted into the right to receive $65.00 in cash, without interest. At the effective time of the merger, the Company’s shareholders will cease to have ownership interests in the Company or rights as shareholders of the Company. Therefore, the current shareholders of the Company will not participate in any future earnings or growth of the Company and will not benefit from any appreciation in value of the Company.

The Company’s common shares are currently registered under the Exchange Act and are listed on the Nasdaq Global Select Market under the symbol “MLAN”. As a result of the merger, the Company’s common shares will cease to be listed on Nasdaq and there will be no public market for the Company’s common shares. In addition, the registration of the Company common shares under the Exchange Act will be terminated, and the Company will no longer be required to file periodic and other reports with the SEC.

The benefit of the merger to our shareholders is the right to receive $65.00 in cash, without interest, for each common share of the Company. This represents a premium of approximately 15.3% over the closing price of $56.38 per Company common share on October 15, 2007, the last trading day prior to the announcement of the merger. The principal detriments are that our shareholders will cease to participate in our future earnings and growth, if any, and that their receipt of payment for their shares generally will be a taxable transaction for federal income tax purposes. See “The Merger—Material U.S. Federal Income Tax Consequences.”

Effects on the Company and Our Shareholders If the Merger Is Not Completed

In the event that the merger agreement is not adopted by the Company’s shareholders or if the merger is not completed for any other reason, the Company’s shareholders will not receive any payment for their shares in connection with the merger. Instead, the Company will remain an independent public company, and the Company’s common shares will continue to be listed and traded on Nasdaq and registered under the Exchange Act. In that event, we expect that management will operate the business generally in a manner similar to that in which it is being operated today and that the Company’s shareholders will continue to be subject to the same general risks and opportunities as they currently are, including, among other things, those arising from economic and market conditions.

Finally, if the merger agreement is terminated under certain circumstances, the Company may be obligated to pay a $40 million termination fee to Munich-American or reimburse Munich-American for its out-of-pocket expenses. For a description of the circumstances obligating payment of the termination fee and expenses, see “The Merger Agreement—Termination Fee.”

Governmental and Regulatory Approvals

U.S. Antitrust Filing

Transactions such as the merger frequently are reviewed and scrutinized by the United States Department of Justice and the United States Federal Trade Commission to determine whether they comply with applicable antitrust laws. Under the provisions of the HSR Act, the merger may not be completed until the expiration of a 30-day waiting period following the filing of completed notification reports with the Department of Justice and the Federal Trade Commission by Munich-American and the Company, unless a request for additional information or documentary material is received from the Federal Trade Commission or the Department of Justice, or unless early termination of the waiting period is granted by the reviewing agencies. Munich-American and the Company filed notification reports with the Department of Justice and Federal Trade Commission under the HSR Act on November 20, 2007. The waiting period for the filing made pursuant to the HSR Act with respect to the merger expired at midnight, Eastern Standard Time, on December 20, 2007.

At any time before or after the merger, the Department of Justice or the Federal Trade Commission could take action under the antitrust laws as it deems necessary or desirable in the public interest, including seeking to

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enjoin the merger or seeking divestiture of substantial assets of Munich-American or the Company or their subsidiaries. Private parties, foreign competition authorities, and state attorneys general also may bring an action under the antitrust laws under certain circumstances. There can be no assurance that a challenge to the merger on antitrust grounds will not be made or, if a challenge is made, of the result.

Insurance Laws and Regulations

State insurance laws and regulations generally require that, prior to the acquisition of an insurance company domiciled or, in some cases, commercially domiciled in that jurisdiction, the acquiring company must obtain the approval of the insurance commissioner of that jurisdiction. Munich-American has made all necessary pre-acquisition filings with all appropriate insurance commissioners, including, but not necessarily limited to, those of Arizona, Arkansas, Ohio, Oklahoma, Missouri, Texas and Florida, the domiciliary states of the Company. The Company anticipates that all necessary insurance regulatory approvals will be received in time to allow for a closing in the second quarter of 2008.

In addition, the insurance laws and regulations of certain U.S. states require that, prior to an acquisition of an insurance company doing business in that state or licensed by that state (or the acquisition of its holding company), a notice filing disclosing certain market share data in the applicable jurisdiction must be made and an applicable waiting period must expire or be terminated. These notice filings have been made in the applicable jurisdictions. To the extent required, notification filings will also be made with certain foreign regulatory authorities in connection with the merger.

Although the Company and Munich-American do not expect these regulatory authorities to raise any significant concerns in connection with their review of the merger, there is no assurance that the Company and Munich-American will obtain all required regulatory approvals, or that those approvals will not include terms, conditions or restrictions that may have an adverse effect on the Company or Munich-American and which may cause either the Company or Munich-American to abandon the merger.

Other than the filings described above, neither the Company nor Munich-American is aware of any regulatory approvals required to be obtained, or waiting periods to expire, to complete the merger. If the parties discover that other approvals or waiting periods are necessary, they will seek to obtain or comply with them. If any additional approval or action is needed, however, the Company or Munich-American may not be able to obtain it, as is the case with respect to the other necessary approvals. Even if the Company or Munich-American obtain all necessary approvals, and the merger agreement is adopted by the Company’s shareholders, conditions may be placed on any such approval that could cause either the Company or Munich-American to abandon the merger.

Interests of Our Directors and Executive Officers in the Merger

Our directors and executive officers may be deemed to have financial interests in the merger that are in addition to, or different from, their interests as shareholders of the Company. Our Board of Directors and the special committee were aware of these interests and considered them, among other matters, in approving the merger and the merger agreement.

Company Stock Options

Under the terms of the merger agreement, each stock option held by our employees (including our executive officers) and directors that was issued under a Company stock plan and is outstanding immediately prior to the effective time of the merger, whether vested or unvested, will be cancelled and converted into the right to receive a cash amount equal to (i) the number of common shares underlying the unexercised stock option, multiplied by (ii) the excess, if any, of $65.00 over the exercise price per common share, less any required withholding taxes.

The following table identifies, for our current directors and executive officers, the aggregate number of common shares subject to outstanding vested and unvested stock options held as of February 22, 2008, the

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aggregate number of common shares subject to outstanding unvested stock options that will become fully vested in connection with the merger, and the cash-out value of such unvested options and the aggregate cash-out value of vested and unvested stock options.

Performance-Based Awards

Key employees (including our executive officers) hold stock-based performance awards granted pursuant to the Company’s incentive plans. At the effective time, the right to receive shares of common stock in respect of outstanding performance-based awards under the incentive plans, whether or not vested, shall be cancelled and shall entitle the holder of such performance-based award to receive, as soon as reasonably practicable after the effective time of the merger (but in any event no later than three business days after such effective time), a cash payment from Munich-American or the Company equal to (i) the number of shares issuable pursuant to the performance-based award calculated at 100% of the “target level” for 2008 and 2009, multiplied by (ii) $65.00, less any required withholding taxes.

The following table shows, for each of our executive officers, the estimated cash-out value of all stock-based performance awards held by such executive officer as of February 22, 2008, assuming an April 1, 2008 close:

Director Share Equivalents

Immediately prior to the effective time of the merger, the Company shall make additional contributions to the account of each non-employee director under the Company’s Non-Employee Director Deferred Compensation Plan. At the effective time of the merger, and after giving effect to the preceding sentence, the

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director share equivalents contained in each non-employee director’s deferred compensation account under the plan shall as of the effective time of the merger entitle the beneficiary to receive, as soon as reasonably practicable after the effective time of the merger (but in any event no later than three business days after the effective time of the merger), an amount in cash equal to (i) the total number of director share equivalents, multiplied by (ii) $65.00, less any required withholding taxes.

The following table shows, for each of our participating directors, the estimated cash-out value of all director share equivalents.

Insurance and Indemnification

In the merger agreement, Munich-American and the Company agreed that the surviving corporation’s organizational documents shall contain provisions no less favorable with respect to exculpation from liabilities and indemnification of the present and former directors, officers, employees and agents of the Company than are currently provided in the Company’s organizational documents, and that they shall not be amended, repealed or otherwise modified in a manner that would adversely affect these rights until the expiration of the statutes of limitations applicable to such matters or unless amendment, modification or repeal is required by applicable laws.

Munich-American and the Company also agreed that from and after the effective time Munich-American shall indemnify and hold harmless, to the fullest extent permitted by law, all past and present directors, officers, employees and agents of the Company and its subsidiaries against all claims, losses, liabilities, damages, judgments, inquiries, fines, amounts paid in settlement and reasonable fees, costs and expenses, including reasonable attorneys’ fees and disbursements, incurred in connection with any proceeding, arising out of, pertaining to or in connection with the fact that the such party is or was an officer, director, employee, fiduciary or agent of the Company or any of its subsidiaries, or of another entity if such service was at the request of the Company, whether asserted or claimed prior to, at or after the effective time of the merger, to the fullest extent permitted under applicable law.

The Company shall purchase, and Munich-American shall cause the surviving corporation to maintain, tail policies to the current directors’ and officers’ liability insurance policies maintained on the date of the merger agreement by the Company and with respect to the directors and officers who are currently covered by the Company’s directors’ and officers’ liability insurance policies, which tail policies (i) shall not have a premium in excess of 300% of the annual premium most recently paid by the Company prior to the date of the merger agreement to maintain the existing policies, (ii) shall be effective for a period of at least six years from and after the effective time of the merger with respect to claims arising from facts or events that existed or occurred prior to such effective time, and (iii) shall contain coverage that is at least as protective to such directors and officers as the coverage provided by such existing policies; provided , however , that, if equivalent coverage cannot be obtained or can be obtained only by paying an aggregate premium in excess of 300% of such amount, the Company shall only be required to obtain (and the surviving corporation shall only be required to maintain) as much coverage as can be obtained by paying an aggregate premium equal to 300% of such amount.

Change in Control and Other Agreements

In order to provide incentives to a number of employees of Midland to provide services to it in connection with the Company’s consideration and consummation of a strategic transaction, including the proposed merger

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with Munich- American, Midland arranged for certain payments and benefits to be received by such employees. These arrangements included severance, retention or change in control agreements, stay agreements and retention plans. Many of these agreements were entered into with employees of the Company who are not executive officers or directors. In addition, certain of the Company’s executive officers are parties to change in control agreements. Under the terms of our Employee Retention Agreements (each a “Retention Agreement”), an executive officer is eligible to receive the following severance payments and benefits if his employment with the Company and its subsidiaries is terminated for any reason other than death, disability or cause, or for good reason, the executive officer resigns. Presently, agreements for Joseph P. Hayden III and John W. Hayden remain in effect. The terms of these agreements provide for the following (“CIC payments”):

Joseph P. Hayden III signed a term sheet for the benefit of Merger Sub for an Incentive Agreement effective October 16, 2007 pursuant to which he is entitled to a prorated portion of his 2007 base salary, which is $595,000, and is eligible for a prorated bonus based on his 2007 bonus, which is $505,750 at 100% target, while he remains employed during the period beginning on the date of closing and continuing for up to nine months thereafter. Under the term sheet, he would also have been paid an additional lump-sum bonus of $505,750 if the closing of the sale of our transport business had occurred on or before December 31, 2007, but the closing did not occur within that time period. Under the agreement, Munich-American will make a €250,000 contribution to a 501(c)(3) charitable organization in Cincinnati, Ohio on behalf of Mr. Hayden upon the closing of the sale of our transport business. If the closing of the sale of the transport business occurs before the closing of the merger, Munich-American will make an additional €250,000 contribution to the same Cincinnati-area charity on behalf of Mr. Hayden. Such charitable donations shall be made by Munich-American only if Mr. Hayden is employed by the Company at the time of the closing of the sale of the transport business. The identities of the recipients of the charitable donations have not been determined prior to the date of this proxy statement. In addition, if the net pre-tax proceeds from the sale of our transport business exceed a specified amount, Mr. Hayden will be paid a lump sum equal to 1.5% of such excess if he is employed with the Company on the date such sale closes. Mr. Hayden’s Incentive Agreement does not affect his rights to receive payments pursuant to his Retention Agreement with the Company upon the earlier to occur of (a) the closing of the sale of the Company’s transport business and (b) the date that is nine months following the closing of the merger. Pursuant to his Retention Agreement, upon the occurrence of a change in control and a qualifying termination (as defined in the Retention Agreement), Mr. Hayden shall be entitled to receive the CIC payments described above. In addition, the Retention Agreement entitles Mr. Hayden to receive a lump sum cash payment of any unpaid base salary, a lump sum equal to a pro-rata portion of his annual bonus amount based on the target amount but regardless of actual performance, a lump sum cash payment equal to any accrued but not taken vacation and any payments or benefits which employees of the Company are entitled to receive under the Company’s plans, programs and policies in effect at the time of the qualifying termination.

John W. Hayden signed a term sheet for the benefit of Merger Sub for a Post-Merger Employment Agreement, which provides for a three-year initial term of employment following the closing of the merger

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which may be extended for an additional two years at the Company’s option. Under the agreement he is entitled to receive a base salary not less than Mr. Hayden’s base salary at the time of closing of the merger, an annual and long-term bonus, both in amounts to be determined (but not be less than the economic equivalent of current levels). John Hayden’s Post-Merger Employment Agreement provides for a retention bonus amount of $7,500,000, to be paid as a lump sum on the 3 ^rd anniversary of the date of closing (or on a prorated basis if he terminates employment due to death or disability), and a severance payment equal to the lump-sum retention bonus if terminated by the Company other than for cause or disability or if he terminates employment for good reason prior to the 3 ^rd anniversary of the date of closing. Upon the consummation of the merger and the execution of the Post-Merger Employment Agreement, Mr. Hayden’s rights under his prior agreements with the Company relating to severance, retention or stay benefits, including under his Retention Agreement with the Company, will be waived and terminated.

Effective May 7, 2007, the Employee Retention Agreements for John I. Von Lehman and Paul T. Brizzolara were terminated in connection with Mr. Brizzolara’s transition into serving the Company in a non-executive capacity and Mr. Von Lehman’s recently announced retirement.

Effective October 16, 2007, Messrs. Von Lehman and Brizzolara each entered into certain Stay Agreements with the Company. Under these agreements both Messrs. Von Lehman and Brizzolara agreed to continue their employment with the Company in return for a lump sum payment of $562,500 and $421,500, respectively, to be paid upon the closing of the merger, or if the closing does not occur prior to July 19, 2008, then on that date. If either Mr. Von Lehman or Mr. Brizzolara are terminated without cause prior to July 19, 2008, then that executive will be entitled to the lump sum payment at that time.

Other senior managers were parties to an Employee Retention Plan, under which they would have received payments of approximately 1.5 times their current compensation in the event of a change in control. While W. Todd Gray and Paul F. Gelter were both parties to that plan, the Board terminated that plan effective October 25, 2007.

Messrs. Gray and Gelter each signed a term sheet for the benefit of Merger Sub for a Post-Merger Employment Agreement, which provides for a three-year term of employment following the closing of the merger. Under the agreements, each will receive a base salary, an annual and long term bonus, a retention bonus to be paid in four equal, annual installments beginning on the date of closing, and a severance payment equal to 1.5 times the sum of their then annual base salary and target annual bonus if terminated by the Company other than for cause or if the executive terminates employment for good reason.

None of the above-referenced Post-Merger Employment Agreements become effective until the effective date of the merger. The Incentive Agreement with Joseph P. Hayden III became effective upon execution of the merger agreement.

In addition, as a result of the change in control, the timing of the payments under the Company’s Nonqualified Self-Directed Retirement Plan, Nonqualified Savings Plan and Supplemental Retirement Plan will be accelerated and paid at the time of the change in control or within a certain period of time thereafter. John W. Hayden, Joseph P. Hayden III, W. Todd Gray, John I. Von Lehman and Paul F. Gelter are participants in these plans and expect to receive payments in the aggregate in approximate amounts of $1,721,317, $2,409,456, $273,836, $535,457 and $344,458, respectively.

Dissenters’ Rights

The following is a summary of the steps that you must take if you wish to exercise dissenters’ rights with respect to the merger. This description is not complete. You should read Section 1701.85 of the ORC for a more complete discussion of the procedures. That section is attached as Appendix D to this document. If you fail to take any one of the required steps, your dissenters’ rights may be terminated under Ohio law. If you are considering dissenting, you should consult your own legal advisor.

To exercise dissenters’ rights, you must satisfy five conditions:

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All demands should be sent to The Midland Company, 7000 Midland Boulevard, Amelia, Ohio 45102, Attention: Michael L. Flowers, Secretary.

“Fair cash value” is the amount that a willing seller who is under no compulsion to sell would be willing to accept and that a willing buyer who is under no compulsion to purchase would be willing to pay. Fair cash value is determined as of the day before the special meeting, excluding any appreciation or depreciation in market value of your shares resulting from the merger. The fair cash value of your shares may be higher, the same as, or lower than the market value of the Company common shares on the date of the merger. In no event will the fair cash value be in excess of the amounts specified in the dissenting shareholder’s demand.

The following is a more detailed description of the conditions you must satisfy to perfect your dissenters’ rights:

If you vote in favor of the adoption of the merger agreement, you will lose your dissenters’ rights. If you sign a proxy and return it but do not indicate a voting preference on the proxy, the proxy will be voted in favor of the adoption of the merger agreement and will constitute a waiver of dissenters’ rights.

Your right to receive the fair cash value of your dissenting shares will terminate if:

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All rights accruing from Company common shares, including voting and dividend and distribution rights, are suspended from the time a dissenting shareholder makes a demand for appraisal with respect to such shares until the termination or satisfaction of the rights and obligations of the dissenting shareholder and the Company arising from such demand. During this period of suspension, any dividend or distribution paid on the common shares will be paid to the record owner as a credit upon the fair cash value thereof. If a shareholder’s dissenters’ rights are terminated other than by purchase by the Company of the dissenting shareholder’s common shares, then at the time of termination all rights will be restored and all distributions that would have been made, but for suspension, will be made.

LITIGATION RELATING TO THE MERGER

The Company’s directors and Munich-American have been named as defendants in a purported class action on behalf of the public shareholders of the Company challenging the proposed merger. On or about December 7, 2007, plaintiff filed the First Amended Class Action Complaint, which is pending in the Court of Common Pleas, Clermont County, Ohio, General Division captioned Superior Partners v. Bushman et al., Case No. 2007CVH2224. Among other things, plaintiff alleges that the director defendants have breached their fiduciary duties to the Company’s shareholders in pursuing the proposed merger, including by acting to cause or facilitate the proposed transaction through a materially deficient proxy statement; and that the filing of such proxy caused the SEC to publicize a proxy statement in connection with the proposed transaction which failed to disclose certain material information which a reasonable shareholder would find material in determining whether to vote for the proposed merger; plaintiff also asserts a claim against Munich-American for aiding and abetting the directors’ alleged breach of fiduciary duties. Plaintiff seeks, among other things, declaratory relief in connection with such claim and the proposed transaction and unspecified damages.

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THE MERGER AGREEMENT

The following summary describes the material provisions of the merger agreement, and is qualified in its entirety by reference to the complete text of the merger agreement, a copy of which is attached as Appendix A to this proxy statement. The provisions of the merger agreement are extensive and not easily summarized. Accordingly, this summary may not contain all of the information about the merger agreement that is important to you. The merger agreement is incorporated by reference in this proxy statement. We encourage you to read the merger agreement carefully and in its entirety for a more complete understanding of the terms of the merger.

Additional information about Munich-American and the Company may be found elsewhere in this proxy statement and in the other public filings that the Company makes with the SEC. See “Where You Can Find More Information” beginning on page 65.

The merger agreement contains representations and warranties that the parties to the merger agreement made to and solely for the benefit of each other. The assertions embodied in those representations and warranties are subject, in some cases, to specified exceptions, qualifications, limitations and supplemental information, including knowledge qualifiers and contractual standards of materiality, such as materiality qualifiers and the occurrence of a material adverse effect, that are different from those generally applicable under federal securities law, as well as detailed information set forth in disclosure schedules provided in connection with signing the merger agreement. While the Company does not believe that the disclosure schedules contain non-public information that the securities laws require to be publicly disclosed, our disclosure schedule does contain detailed information that modifies, qualifies and creates exceptions to our representations and warranties set forth in the merger agreement. In addition, some representations and warranties may have been included in the merger agreement for the purpose of allocating risk between the Company and Munich-American rather than to establish matters as facts. The merger agreement is described in this proxy statement, and included as Appendix A hereto, only to provide you with information regarding its terms and conditions, and not to provide any other factual information regarding the Company or the business. Accordingly, you should not rely on the representations and warranties as characterizations of the actual state of facts, since (i) they were only made as of the date of the merger agreement or a prior, specified date, (ii) in some cases they are subject to knowledge, materiality and material adverse effect qualifiers, and (iii) they are modified in important part by detailed information included in the disclosure schedules. Finally, information concerning the subject matter of the representations and warranties may have changed since the date of the merger agreement, which subsequent information may or may not be fully reflected in the Company’s public disclosures.

Structure of the Merger

Under the merger agreement, Merger Sub will merge with and into the Company, with the Company continuing as the surviving entity. The officers of the Company immediately prior to the merger will remain as the initial officers of the surviving entity after the effective time of the merger. The directors of Merger Sub immediately prior to the merger will be the initial directors of the Company after the effective time. The effective time of the merger is sometimes referred to in this proxy statement as the effective time.

The articles of incorporation and code of regulations of Merger Sub in effect immediately prior to the effective time shall be the articles of incorporation and code of regulations of the surviving corporation until thereafter amended as provided therein or by applicable law.

Closing of the Merger

The closing of the merger will take place on the third business day following the satisfaction or waiver of the conditions to closing set forth in the merger agreement (other than those conditions that by their terms are to be satisfied at closing, but subject to the satisfaction or waiver of those conditions at such time) or at such other time as the parties may agree. The parties will file a certificate of merger with the Secretary of State of the State

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of Ohio on the closing date of the merger. The merger will become effective when the certificate of merger is filed or at such later time as we and Munich-American may agree upon and specify in the certificate of merger. Subject to the receipt of all necessary regulatory approvals, we currently anticipate the closing will occur in the second quarter of 2008.

Merger Consideration and Conversion of the Company Common Shares

At the effective time of the merger, each common share of the Company issued and outstanding immediately prior to the effective time (other than common shares owned by the Company and its subsidiaries and Munich-American and its subsidiaries and dissenting shares) will be converted into the right to receive $65.00 in cash.

Treatment of Company Equity Awards

At the effective time of the merger, the awards discussed below will be converted into the right to receive cash in the manner and amounts described. In each case, applicable taxes will be withheld from the total payment.

Options

Each outstanding stock option to purchase Company common shares that was issued under a Company stock plan, whether or not vested, will be cancelled and converted into the right to receive a cash payment in an amount equal to the product of (i) the number of common shares underlying the unexercised stock option, (ii) multiplied by the excess, if any, of $65.00 over the per share exercise price of such option.

Restricted Shares

Immediately before the effective time, the Company will waive all restrictions and vesting conditions applicable to restricted stock granted by the Company under its equity incentive plans. At the effective time, each such share will be converted into the right to receive $65.00 in cash.

Director Share Equivalents

Share equivalents held in the non-employee directors’ deferred compensation plan that are outstanding and have not been converted into cash prior to the effective time will be cancelled and converted into the right to receive an amount in cash equal to (i) the total number of such director share equivalents, multiplied by (ii) $65.00.

Performance Based Awards

Each right to receive common shares of the Company granted under the Company’s long-term incentive plans will be cancelled and converted into the right to receive a cash payment in an amount equal to (i) the number of shares issuable pursuant to the performance-based award calculated at 100% of the “target level” for 2008 and 2009, multiplied by (ii) $65.00.

See “ Interests of Our Directors and Executive Officers in the Merger ” starting on page 39 of this proxy statement.

Exchange of Share Certificates

Prior to the closing of the merger, Munich-American will engage a paying agent to handle the exchange of the Company share certificates for cash. Promptly following the effective time, the paying agent will send a letter of transmittal and instructions to each former Company shareholder explaining the procedure for surrendering Company share certificates for the applicable cash payment.

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Shareholders should not return their stock certificates with the enclosed proxy card, and they should not forward their stock certificates to the paying agent without a letter of transmittal.

After the effective time, each certificate that previously represented Company shares will only represent the right to receive payment in the amount that the holder is entitled to receive pursuant to the merger agreement, less any required withholdings under tax or other applicable laws. After the effective time, there will be no further registration of transfers of the Company’s shares.

No consideration will be paid to a holder of Company shares until the holder’s shares are surrendered to the paying agent, together with a duly completed and validly executed letter of transmittal and any other documents as the paying agent may reasonably require. No interest will be paid or will accrue on the cash payable upon surrender of any certificate. The consideration may be paid to a person other than the person in whose name the corresponding certificate is registered if the certificate is properly endorsed or is otherwise in the proper form for transfer and is accompanied by reasonable evidence that any applicable stock transfer taxes have been paid, are not applicable or will be paid by such transferee. Shareholders no longer in possession of their share certificates because they have been lost, stolen or destroyed may, in exchange for the merger consideration, deliver an affidavit and, if required, place a bond or provide customary indemnitees against potential claims with respect to the missing certificates in a reasonable amount, as Munich-American, the paying agent or the surviving entity in the merger, may direct.

None of Munich-American, the Company, Merger Sub, the surviving entity or the paying agent will be liable to any shareholder for any amounts delivered to a public official pursuant to any applicable abandoned property, escheat or similar laws. All funds held by the paying agent for payment to the holders of shares that are not disbursed nine months after the effective time of the merger will be delivered to Munich-American. Thereafter, each holder of a certificate formerly representing Company shares entitled to the merger consideration who has not received the merger consideration must look only to Munich-American for payment of the merger consideration that may be payable upon due surrender of the certificates held by them, without interest. Any merger consideration remaining unclaimed five years after the effective time of the merger shall, to the extent permitted by applicable law, become the property of the surviving entity free and clear of any claims or interest of any person previously entitled thereto.

Representations and Warranties

The merger agreement contains representations and warranties made by the Company relating to, among other things, the following:

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The representations and warranties of Munich-American and Merger Sub are more limited and relate to, among other things, the following:

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Certain of the representations and warranties of the Company and of Munich-American and Merger Sub are qualified as to “materiality,” “material adverse effect” or, with respect to the Company only, “Company Material Adverse Effect.” For purposes of the merger agreement, “Company Material Adverse Effect” means any material adverse effect on (i) the business, assets, liabilities, financial condition, or results of operations of the Company and its subsidiaries, taken as a whole, or (ii) the ability of the Company, on or before the outside date, to perform its obligations under the merger agreement that are required to be performed on or before the outside date or to consummate the transactions contemplated by the merger agreement to be consummated on or before the outside date; provided, however, that, in the case of clause (i) only, changes, effects, events or occurrences shall not be deemed to constitute or contribute to a Company Material Adverse Effect to the extent resulting from (1) changes in general economic, political or financial market conditions or changes that are results of acts of war, armed hostilities or terrorism; (2) the announcement or pendency of the merger agreement or the transactions contemplated by the merger agreement; (3) change in applicable laws or regulations or applicable accounting principles; (4) changes that are a result of factors generally affecting the insurance and insurance services industries or the admiralty shipping industries in the geographic areas in which the Company and its subsidiaries operate; (5) compliance with the terms of, or the taking of any action required by the merger agreement, or the failure to take any action prohibited by the merger agreement; (6) effects of natural disasters on the insurance business of the Company and its subsidiaries; (7) changes in trading price of the Company common shares or the failure to meet financial forecasts or estimates (whether internal or published analyst estimates), in and of themselves (provided that the underlying cause of any such change or failure shall not be excluded from the determination of a Company Material Adverse Effect by virtue of this clause (7)); or (8) any litigation arising from allegations of a breach of fiduciary duty or allegations of other violations of applicable laws relating to the merger agreement or the transactions contemplated thereby; and provided, further that notwithstanding the foregoing, any matter described in clauses (1), (3) and (4) above shall not be excluded from the determination of a Company Material Adverse Effect to the extent that such matter disproportionately affects the Company or its subsidiaries as compared to other persons engaged in the insurance and insurance services industries or the admiralty shipping industries, as appropriate, in the geographic areas in which the Company and its subsidiaries operate or in similar geographic areas.

The “outside date” under the merger agreement is July 31, 2008, subject to extension to October 31, 2008, or 30 calendar days thereafter, in certain circumstances.

The representations and warranties in the merger agreement do not survive the closing of the merger.

Covenants Relating to Conduct of Business

The Company has agreed to covenants in the merger agreement that affect the conduct of its business between the date the merger agreement was signed and the effective time of the merger. Prior to the effective time, subject to specified exceptions, the Company and each of its subsidiaries are required to conduct business in the ordinary course and consistent with past practices, use reasonable best efforts to preserve their business organization and goodwill and relationships with customers, agents, and others having business dealings with them, and to keep available the services of their officers and employees. In addition, absent the written consent of Munich-American and subject to specified exceptions, the Company will not, and will not permit any of its subsidiaries to (or agree to) among other things:

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Regulatory Approvals

The merger agreement provides that Munich-American and the Company will use reasonable best efforts to take all actions and do all things advisable, proper or necessary under applicable laws to consummate the merger and the other transactions contemplated by the merger agreement. Without limitation, this includes taking the appropriate actions to obtain the required approvals under the HSR Act and to obtain approvals from and give notices to applicable state insurance departments and other governmental entities. In addition, Munich-American and the Company are each required to cooperate with the other in obtaining, and to use reasonable best efforts to take all lawful steps as are necessary or appropriate to secure regulatory approvals.

No Solicitation by the Company

Under the terms of the merger agreement, subject to certain exceptions described below, the Company has agreed that it will not, and will not permit its subsidiaries to, and will direct their respective representatives not to directly or indirectly:

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Under the merger agreement, an “acquisition proposal” is any inquiry, offer or proposal, written or oral, or any indication of interest in making an offer or proposal, made by a person or group at any time after the date of the merger agreement relating to, or that could reasonably be expected to lead to:

Within 24 hours of receipt of any acquisition proposal, any proposal that could reasonably be expected to lead to an acquisition proposal or any related inquiry or contact, the Company must provide oral and written notice to Munich-American of such proposal setting forth the material terms and conditions of such proposal, including the identity of the party making the proposal and any documents evidencing the proposal. Additionally, the Company is required to keep Munich-American reasonably informed of the current status of any such acquisition proposal.

If, prior to approval of the merger by the Company’s shareholders, the Company receives a written and unsolicited acquisition proposal and the Board determines in good faith and in consultation with outside legal and financial advisors that the acquisition proposal is, or is reasonably likely to lead to, a superior proposal (as described below), then the Company may, if the Board and the Special Committee first conclude in good faith after consultation with outside legal counsel that the failure to do so would violate its fiduciary duties to shareholders under applicable laws and provides Munich-American with notice of its intent to do so:

A “superior proposal” is any acquisition proposal (with the applicable percentages changed from 20% to 50%) that the Special Committee and the Company’s Board of Directors determine in good faith, after consultation with counsel and its financial advisor, (A) is reasonably likely to be consummated in accordance with its terms and (B) if consummated, would result in a transaction that the Company Board and the Special Committee have determined is more favorable, from a financial point of view, to the Company’s shareholders than the merger, taking into account all of the terms and conditions of the proposal and of the merger agreement (including any proposal by Munich-American to amend the terms of the merger agreement), and whether the proposal is reasonably capable of being consummated on the terms so proposed, taking into account all financial, regulatory, legal and other aspects of the proposal.

Changes in the Company Board’s Recommendation

The Company’s Board of Directors and the special committee have agreed to recommend that the Company’s shareholders adopt the merger agreement and to not (i) withdraw, modify or qualify, or propose publicly to withdraw, modify or qualify, in a manner adverse to Munich-American or Merger Sub, the Company

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Board’s recommendation or the declaration of advisability by the Company Board of the merger agreement, the merger or the other transactions contemplated thereby, (ii) recommend, adopt or approve, or propose publicly to recommend, adopt or approve, any acquisition proposal (any of the foregoing, a “change in recommendation”). Prior to the approval of the merger by the Company’s shareholders, the Board, however, may make a change in recommendation and/or terminate the merger agreement to enter into a definitive agreement with respect to a superior proposal if the special committee or the Company’s Board of Directors determines in good faith, after consultation with outside counsel, that a written acquisition proposal if received constitutes a superior proposal and that the failure to do so would violate its fiduciary duties under applicable law, provided, however, that the Board of Directors may not make a change in recommendation unless (A) the Company has not breached its non-solicitation obligations under the merger agreement and (B) the Company provides three business days’ prior written notice to Munich-American of its intention to effect a change in recommendations or terminate the merger agreement and informs Munich-American of the terms and conditions of the superior proposal, including the identity of the party making such proposal, during such three business day notice period the Company and its legal and financial advisors negotiate in good faith with Munich-American regarding any revisions to the merger agreement so that the acquisition proposal ceases to constitute a superior proposal, and the acquisition proposal continues to be a superior proposal after taking into account any amendment to the merger agreement agreed to by Munich-American during the three business day period.

Employee Benefits and Plans

Munich-American and the Company have agreed in the merger agreement that following the closing of the merger, Munich-American will cause the surviving corporation to honor, in accordance with their terms, all existing employment, change in control and severance agreements between the Company or any of its subsidiaries and any officer, director or employee of the Company or any of its subsidiaries; provided that the aggregate of all payments under such agreements triggered by the merger will not exceed $21,000,000.

Munich-American will provide or will cause to be provided to employees of the Company and its subsidiaries who continue to be employed by Munich-American, the Company or any of their subsidiaries for two years following the closing of the merger, compensation and employee benefits that are at least as favorable in the aggregate to those in effect at the Company and its subsidiaries immediately prior to the effective time, provided that Munich-American will not be obligated to provide any equity-based arrangements.

In connection with providing the agreed-upon employee benefits and subject to exceptions stated in the merger agreement, to the extent employees participate in a Munich-American health employee benefit plan, Munich-American will waive applicable pre-existing condition exclusions and waiting periods with respect to participation and coverage requirements in any replacement or successor welfare benefit plan, and give credit for co-payments and deductibles, to the extent that the exclusions, waiting periods, co-payments or deductibles were inapplicable to, or had been satisfied by, eligible employees prior to the effective time under the analogous welfare benefit plan. Munich-American has also agreed to recognize prior service for vesting and eligibility purposes (but not for accrual purposes, except for vacation and severance, if applicable) to the extent such service was recognized under the analogous welfare benefit plan prior to the effective time.

If the closing occurs on or before December 31, 2007, all of the Company’s obligations under its Annual Incentive Plan, Sales Incentive Plan, and Profit Sharing Plan for 2007 shall be calculated as if the closing occurred on January 1, 2008 with the intended effect that employees participating in the plan will receive their full award for 2007 regardless of when closing occurs.

Munich-American and the Company have agreed that none of the above-described benefits will be treated as an amendment or modification of any benefit plan, or will limit the right of Munich-American or its subsidiaries to amend, terminate or otherwise modify any of the benefit plans after the closing date.

Indemnification and Insurance

In the merger agreement, Munich-American and the Company agreed that the surviving corporation’s organizational documents shall contain provisions no less favorable with respect to exculpation from liabilities

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and indemnification of the present and former directors, officers, employees and agents of the Company than are currently provided in the Company’s organizational documents, and that they shall not be amended, repealed or otherwise modified in a manner that would adversely affect these rights until the expiration of the statutes of limitations applicable to such matters or unless amendment, modification or repeal is required by applicable laws.

Munich-American and the Company also agreed that from and after the effective time Munich-American shall indemnify and hold harmless, to the fullest extent permitted by law, all past and present directors, officers, employees and agents of the Company and its subsidiaries against all claims, losses, liabilities, damages, judgments, inquiries, fines, amounts paid in settlement and reasonable fees, costs and expenses, including reasonable attorneys’ fees and disbursements, incurred in connection with any proceeding, arising out of, pertaining to or in connection with the fact that the such party is or was an officer, director, employee, fiduciary or agent of the Company or any of its subsidiaries, or of another entity if such service was at the request of the Company, whether asserted or claimed prior to, at or after the effective time, to the fullest extent permitted under applicable law.

The Company shall purchase, and Munich-American shall cause the surviving corporation to maintain, tail policies to the current directors’ and officers’ liability insurance policies maintained on the date of the merger agreement by the Company and with respect to the directors and officers who are currently covered by the Company’s directors’ and officers’ liability insurance policies, which tail policies (i) shall not have a premium in excess of 300% of the annual premium most recently paid by the Company prior to the date of the merger agreement to maintain the existing policies, (ii) shall be effective for a period of at least six years from and after the effective time with respect to claims arising from facts or events that existed or occurred prior to the effective time, and (iii) shall contain coverage that is at least as protective to such directors and officers as the coverage provided by such existing policies; provided , however , that, if equivalent coverage cannot be obtained or can be obtained only by paying an aggregate premium in excess of 300% of such amount, the Company shall only be required to obtain (and the surviving corporation shall only be required to maintain) as much coverage as can be obtained by paying an aggregate premium equal to 300% of such amount.

Other Covenants and Agreements

The merger agreement contains other covenants and agreements, including covenants and agreements relating to cooperation between Munich-American and the Company in the preparation of the proxy statement, public announcements regarding the merger, holding the special meeting of the Company’s shareholders to adopt the merger agreement, efforts to render anti-takeover laws inapplicable and matters relating to the sale of the Company’s transport business.

With respect to matters relating to the sale of the Company’s transport business, the Company agreed to cooperate with Munich-American to effect a strategy reasonably satisfactory to Munich-American so that the Company’s operation of the barge business following the effective time of the merger will not result in a violation of certain provisions of federal law known as the Jones Act. Such strategy may (without limitation) consist of one of the following, to become effective immediately prior to the effective time of the merger:

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On February 15, 2008, the Company entered into a Stock Purchase Agreement with M/G Transport Holdings LLC, a Delaware limited liability company and affiliate of Brooklyn NY Holdings LLC (the “Buyer”) pursuant to which the Company agreed to sell its transport business. Pursuant to this agreement, the transport business would be sold to the Buyer for an aggregate purchase price of approximately $112.8 million, subject to a working capital adjustment. The agreement contemplates that the purchase price will be deposited with an escrow agent on February 29, 2008 in connection with the closing, which is expected to occur on the same day as the merger. The sale of the transport business is conditional upon the consummation of the merger and clearance of the sale of the transport business under the HSR Act, as well as other customary closing conditions. Concurrent with the negotiations of the agreement, the Buyer required that certain other agreements be entered into between the Buyer and the management team of the transport business, including Joseph P. Hayden III, the Company’s Chairman and Chief Operating Officer, and that an agreement be entered into with Mr. Hayden regarding a minority investment by Mr. Hayden in the transport business. It is contemplated that Mr. Hayden’s minority investment shall be financed by a loan from an affiliate of the Buyer to him. The agreement relating to the transport business sale contains certain termination rights for both the Company and the Buyer and provides that, upon termination of the agreement under certain circumstances (i.e., as result of the termination of the merger agreement or as a result of the transport business sale failing to close by July 31, 2008), the Company will be obligated to pay the Buyer a termination fee of approximately $1.13 million. Under certain circumstances in which the merger agreement is terminated, Munich-American has agreed to reimburse the Company for either all or half of this termination fee.

Conditions to the Closing of the Merger

The obligations of Munich-American, Merger Sub and the Company to complete the merger are subject to the satisfaction or waiver of the following conditions:

Munich-American’s and Merger Sub’s obligation to close is also conditioned on the satisfaction or waiver of the following conditions:

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The Company’s obligation to close is also conditioned on the satisfaction or waiver of the following conditions:

Transaction Fees and Expenses

Munich-American and the Company have agreed that, whether or not the merger is closed, all expenses incurred in connection with the merger agreement and the transactions contemplated by the merger agreement will be paid by the party incurring the expenses; except that (i) the parties agree that each shall pay one-half of the costs and expenses incurred in connection with obtaining necessary approvals under the HSR Act and applicable insurance laws and (ii) under certain circumstances, upon termination of the merger agreement, the Company will reimburse Munich-American’s out-of-pocket expenses not to exceed $3,750,000.

Termination of the Merger Agreement

The merger agreement may be terminated and the transactions contemplated thereby abandoned at any time prior to the effective time under the following circumstances:

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Termination Fee

The Company will pay Munich-American a $40 million termination fee if the merger agreement is terminated under the following circumstances:

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For purposes of determining whether a termination fee is payable in circumstances described in the last three bullet points above, the merger agreement provides that “40%” shall be substituted for “20%” in the definition of an “acquisition proposal”.

In addition, under certain circumstances upon termination of the merger agreement, the Company will reimburse Munich-American’s out-of-pocket expenses not to exceed $3,750,000.

Governing Law

The merger agreement is governed by the laws of the State of New York except to the extent that the law of the State of Ohio is mandatorily applicable, and provides that any litigation relating to the merger agreement or the transactions contemplated by the merger agreement will be maintained in New York state courts and federal courts located in New York.

Amendments, Extensions and Waivers of the Merger Agreement

Munich-American and the Company have agreed that the merger agreement may be amended by the parties, as authorized by their respective Boards of directors, at any time before adoption of the merger agreement by the Company’s shareholders. After adoption of the merger agreement by the Company’s shareholders, no amendment may be made to the merger agreement without shareholder approval if such approval is required by law or under rules of any relevant stock exchange.

THE VOTING AGREEMENT

This section describes the voting agreement among Munich-American and certain shareholders of the Company. The description is not complete, and you should read the voting agreement for a more complete understanding of its terms. The complete text of the voting agreement is attached to this proxy statement as Appendix B and is incorporated by reference into this proxy statement.

Concurrently with the execution of the merger agreement, certain members of the Hayden and LaBar families, including Joseph P. Hayden, Jr., Lois T. Hayden, Joseph Hayden III, John W. Hayden, William T. Hayden, Thomas R. Hayden, John R. LaBar and Carol LaBar, on behalf of themselves and, in some cases, in their representative capacities, entered into a voting agreement with Munich-American. They agreed, among other things and subject to certain exceptions, to vote all of their shares of common stock:

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In the event that any shareholder should become the beneficial owner of additional shares entitling the holder thereof to vote or give consent to any of the foregoing matters or as a result of any stock dividend, stock split, recapitalization, reclassification, combination or exchange of shares, then the terms of the voting agreement shall apply to those shares held by the shareholder immediately following those events as if they were shares held at time of the voting agreement.

Subject to certain exceptions, from and after October 16, 2007 and continuing until the termination date of the voting agreement, the shareholders have agreed not to directly or indirectly, without the consent of Munich-American:

At all times during the term of the voting agreement the shareholders agree to hold the shares free and clear of liens except for any liens, claims understandings, or arrangements created by the voting agreement or that do not limit or impair the shareholder’s ability to perform its obligations under the voting agreement.

The shareholders agree that from and after October 16, 2007 they have and will have on the date of the shareholders’ meeting sole voting and dispositive power over all of their shares, not including any shares of common stock the shareholder is entitled to receive upon the exercise of a Company option.

Prior to the termination date of the voting agreement, the shareholders may not:

The voting agreement will terminate upon the earliest of:

Notwithstanding the foregoing, the voting agreement does not limit or affect the ability of any shareholder who is an officer or director of the Company from fulfilling the obligations of such office (including the performance of obligations required by the fiduciary obligations of such shareholder acting in his or her capacity as an officer or director of the Company).

Pursuant to the voting agreement, the shareholders agreed not to assert appraisal, dissenters’ or similar rights that they may have with respect to the merger and other transactions contemplated by the merger agreement.

For a more complete description of the voting agreement, you should refer to the voting agreement attached as Appendix B to this proxy statement.

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MARKET PRICE OF THE COMMON SHARES AND DIVIDEND DATA

The Company’s common shares are traded on the Nasdaq Global Select Market under the symbol “MLAN”. The following table shows the high and low sales prices for the Company’s common shares for each quarterly period within the Company’s last three fiscal years, and through February 21, 2008:

High/Low Market Price Per Share (in U.S. Dollars)