2005 was a most tumultuous year for your company. It was filled with both significant success, and also, some failures; with much that was positive, but also a good deal that was negative; with great joy and deep sadness; and with substantial transition.

Our biggest failure and greatest negative was our “bottom line” at year end. Last year represents the largest loss year in company history – $4,133,703. This result occurred in spite of the fact that TNCRRG posted record gross written premiums and earned premiums; earned investment income that exceeded our budgeted expectations by 8%; and controlled general and administrative expenses to keep TNCRRG 4% under budget in this arena. The one area that we can’t completely control – loss results – is specifically the element that “hammered” TNCRRG in 2005. We experienced record incurred loss expenses of $12,553,815. These loss results were comprised by two major automobile losses; one premises liability fatality loss; and one set of related sexual misconduct claims. Our actuary, board of directors and company management all agree that these loss results do not establish any frightening new loss trend for TNCRRG, but rather, are consistent with the fact that TNCRRG writes very broad coverage terms, with quite high limits, in an excess carrier role, so that its results are characterized not by frequency of loss, but instead, by severity of loss. Put quite simply, our full expectation is that TNCRRG will get “hammered” by losses every so often. Last year was one of those years.

Nevertheless, TNCRRG results for 2005 reflect many highly positive accomplishments.

On the financial front, we further increased TNCRRG operational stability by adding a fourth reinsurer – Odyssey Re, rated A XIV by Best’s – to our already very solid portfolio of reinsurer partners. TNCRRG’s claims and underwriting operations were audited by home office teams from two of its reinsurers and TNCRRG passed both times “with flying colors.” Similarly, the state of Vermont (TNCRRG’s legal domicile) undertook a complete financial, claims and underwriting examination of TNCRRG in 2005. While the final report had not been produced as of this writing, the senior examiners involved did indicate that they were pleased with the examination results.

Marketing results were also very good in 2005. TNCRRG added its 65th shareholder, the Diocese of Raleigh, on July 1st and also underwrote and placed four new excess coverage layers. We extend a very sincere and heartfelt welcome to our newest shareholder!

VIRTUS^® results in 2005 were again outstanding and can be reviewed in detail on page five of this report. National Catholic remains far and away the undisputed leader in the provision of safe environment programs for the Church.

TNCRRG also experienced two highly significant transitions in 2005.

In November, TNCRRG’s Director of Claims Management, Douglas W. Grund, was called home to the Lord after a 14-month battle against cancer. Doug was a great industry professional, a very faithful Churchman and a devoted friend to many. We will always miss him. Doug’s successor, Stephen J. Henne, joined the company in mid-December. Steve comes to us with very extensive industry experience, education and credentials. Finally, in December, our Board Chair, Rev. Edward J. Arsenault – Moderator of the Curia and Secretary for Administration for the Diocese of Manchester – submitted his resignation after almost eight years of outstanding service to TNCRRG as Chairman of the Board. The Board of Directors and company management, for themselves and on behalf of the shareholders of TNCRRG, extend our most sincere thanks and gratitude to Father Ed.

In closing, I want to thank all of our shareholders and other friends for your support, confidence and encouragement. Rest assured that we will always do our very best to serve you and our Church.

Michael J. Bemi
President & CEO