UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10K

 (Mark One)

[X]    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE
       ACT OF 1934

       For the fiscal year ended December 31, 1999

                                       OR

[ ]    TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OR 15(d) OF THE  SECURITIES
       EXCHANGE ACT OF 1934

       For the transition period from                   to
                                      ----------------      ----------------


                         Commission file number 1-11238.

                                  NYMAGIC, INC.

             (Exact name of registrant as specified in its charter)

           New York                                              13-3534162
(State or other jurisdiction of                              (I.R.S. Employer
incorporation or organization)                              Identification No.)

330 Madison Avenue, New York, NY                                   10017
(Address of principal executive offices)                        (Zip Code)

       Registrant's telephone number, including area code: (212) 551-0600
                                                           --------------
           Securities registered pursuant to Section 12(b) of the Act:

     Title of each class:             Name of each exchange on which registered:
Common Stock, $1.00 par value                   New York Stock Exchange

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

                                      None

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

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

The  aggregate  market  value of  voting  stock  held by  non-affiliates  of the
registrant, as of March 1, 2000, was approximately $48,740,688.

The number of shares  outstanding of each of the registrant's  classes of common
stock,  as of March 1, 2000,  was 9,422,952  shares of common  stock,  $1.00 par
value.

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions  of the  Company's  Proxy  Statement  for the 2000  Annual  Meeting  of
Shareholders are incorporated by reference in Part III.


                                       1
<PAGE>

                                     Part I

ITEM 1.  BUSINESS.

General
-------

         NYMAGIC, INC., a New York corporation (the "Company" or "NYMAGIC"),  is
a holding  company  which owns and operates the following  insurance  companies,
risk bearing entities and insurance underwriters and managers:

         Insurance Companies and Lloyd's Corporate Capital Vehicle:
         ---------------------------------------------------------

         New York Marine And  General  Insurance  Company - ("New York  Marine")
         Gotham Insurance Company - ("Gotham")
         MMO UK, Ltd.
         MMO EU, Ltd.

         Insurance Underwriters and Managers:
         -----------------------------------

         Mutual Marine Office, Inc. - ("MMO")
         Pacific Mutual Marine Office, Inc. - ("PMMO")
         Mutual Marine Office of the Midwest, Inc. - ("Midwest")
         MMO Underwriting Agency, Ltd.


         New York Marine and Gotham each maintains an A.M. Best insurance rating
of A.

         The Company  specializes in underwriting  ocean marine,  inland marine,
aviation and other liability  insurance  through insurance pools managed by MMO,
PMMO, and Midwest (collectively referred to as "MMO and affiliates") since 1964.
In addition to managing the insurance  pools,  the Company  participates  in the
risks  underwritten  for the pools  through  New York  Marine  and  Gotham.  All
premiums,  losses and expenses are  pro-rated  among pool members in  accordance
with their pool participation percentages.

         On December  31,  1997,  the  Company  acquired  ownership  of Highgate
Managing  Agencies,  Ltd.  which  subsequently  was renamed to MMO  Underwriting
Agency,  Ltd. MMO  Underwriting  Agency Ltd. is a Lloyd's  managing agency which
commenced underwriting in 1998 for the Company's wholly owned subsidiary MMO UK,
Ltd. which is a Lloyd's  corporate capital vehicle providing 100% of the capital
for Syndicate 1265 (collectively  referred to as "Syndicate 1265"). In 1997, The
Company formed MMO EU, Ltd. as a holding Company for MMO UK, Ltd.

         This report contains certain forward-looking  statements concerning the
Company's operations,  economic performance and financial condition,  including,
in  particular  the  likelihood  of the  Company's  success  in  developing  and
expanding its business.  These statements are based upon a number of assumptions
and estimates  which are  inherently  subject to significant  uncertainties  and
contingencies,  many of which are beyond the control of the Company, and reflect
future business decisions which are subject to change. Some of these assumptions
inevitably will not materialize,  and unanticipated events will occur which will
affect the Company's results.

         Such  statements  are made  under  the safe  harbor  provisions  of the
Private Securities  Litigation Reform Act of 1995. These statements may include,
but are not limited to, projections of premium revenue, investment income, other
revenue,  losses,  expenses,  earnings, cash flows, plans for future operations,
common  stockholders'  equity,  investments,  capital  plans,  dividends,  plans
relating to  products or  services,  adequacy  of  Asbestos/Pollution  reserves,
collectability of receivables from Equitas and estimates  concerning the effects
of litigation or other disputes,  as well as assumptions of any of the foregoing
and  are  generally  expressed  with  words  such  as  "believes,"  "estimates,"
"expects,"  "anticipates,"  "plans,"  "projects,"  "forecasts,"  "goals," "could
have," "may have" and similar expressions.

The Pools
---------

         MMO, located in New York,  PMMO,  located in San Francisco and Midwest,
located in Chicago (the "Manager" or the "Managers"), manage the insurance pools
in which the Company participates.


                                       2
<PAGE>


         The Manager accepts, on behalf of the pools, insurance risks brought to
the pools by brokers and others. All premiums,  losses and expenses are prorated
among the pool members in accordance with their percentage participations in the
pools. Pursuant to the pool management agreements,  the pool members have agreed
not to accept  ocean  marine  insurance  (other than ocean  marine  reinsurance)
unless  received  through the Manager and have  authorized the Manager to accept
risks on behalf of the pool members and to effect all transactions in connection
with such risks,  including  the issuance of policies and  endorsements  and the
adjustment of claims.  As compensation for its services,  the Manager receives a
fee of 5.5% of gross premiums  written by the pools and a contingent  commission
of 10% on net underwriting profits, subject to adjustment.

         Inception to date underwriting results for various reinsurance treaties
are used to calculate reinsurance  contingent  commissions on an earned basis in
the period in which the related  profit  commission  is billed.  Adjustments  to
commissions,   resulting  from  revisions  in  coverage,  retroactive  or  audit
adjustments,  are recorded in the period when realized. Subject to review by the
reinsurers,   the  Managers   determine  the  profitability  of  all  contingent
commission agreements placed with various reinsurance companies.

         The Company's  participation in the business underwritten for the pools
by the Manager has  increased  over the years and,  since  January 1, 1997,  the
Company has had a 100%  participation  in all lines of business  produced by the
pools.

         Two  former  pool  members,  Utica  Mutual  Insurance  Company  ("Utica
Mutual") and Arkwright Mutual Insurance Company ("Arkwright")  withdrew from the
pools and retained liability for their effective pool participation for all loss
reserves,  including  IBNR  (incurred  but not  reported)  and unearned  premium
reserves,  incurred on policies  effective  prior to their  withdrawal  from the
pools.

         The  Company  is not aware of any  uncertainties  with  respect  to any
possible defaults by either Arkwright or Utica Mutual with respect to their pool
obligations  which  might  impact  liquidity  or  results of  operations  of the
Company.

         Assets and liabilities resulting from the insurance pools are allocated
to the members of the insurance pools based upon the pro-rata  participation  of
each member in each pool which is set forth in the management  agreement entered
into by and between the pool participants and the Managers.

Investment Policy
-----------------

         The Company  follows an investment  policy which is reviewed  quarterly
and revised periodically.

         The  investment  policy for New York Marine as of December 31, 1999 was
as follows:

         1.       LIQUID FUNDS - MINIMUM  7-1/2% OF INVESTABLE  FUNDS.  In cash,
                  certificates  of deposit,  prime  bankers  acceptances,  prime
                  commercial  paper,  tax-exempts  rated  Aa3/AA-  or  MIG  2 or
                  better,  tax-exempts  rated  Aa3 or AA-  by  one  service  and
                  unrated by the other,  not to exceed  $5,000,000  par value in
                  any one  institution;  obligations of the U.S.  Government and
                  its agencies due in one year or less;  tax-exempt notes with a
                  split  A1/AA- or Aa3/A+  rating not to exceed  $500,000 in any
                  one institution.


                                       3
<PAGE>


         2.       BOND FUNDS

                  A)       Tax-exempt  securities  and  obligations  of  private
                           corporations  rated  A3/A- or better by each  service
                           which  provides  a rating,  not to exceed  $5,000,000
                           maturity value per issuing entity;  maturities not to
                           exceed December 31 of the 20th year from the purchase
                           date, to include:

                           1)       Pollution  -  control  bonds  guaranteed  by
                                    industrial   corporations   rated  A3/A-  or
                                    better.

                           2)       Pre-refunded bonds.

                           3)       Housing   issues   sponsored   by  the  U.S.
                                    Government  and  its  agencies   secured  by
                                    underlying    mortgage    securities    with
                                    maturities  not in  excess  of 30 years  and
                                    average  maturities  not  in  excess  of  20
                                    years.

                  B)       Preferred  stocks with sinking funds,  rated A3/A- or
                           better,  limited to $500,000 par value per issuer for
                           new   issues;   to   $500,000   purchase   price  for
                           outstanding issues.

                  C)       Obligations of the U.S. Government and its agencies.

         3.       EQUITY FUNDS

                  A)       Equities  (including  convertible  securities)  - Not
                           more  than  25%  of   policyholders'   surplus,   and
                           investment in any one  institution not to exceed five
                           percent (5%) of policyholders' surplus at the time of
                           purchase  as  last  reported  to the New  York  State
                           Insurance Department.

                  B)       Subsidiaries  -  New  York  Marine's  investments  in
                           subsidiary    companies   are   excluded   from   the
                           requirements  of the  New  York  Marine's  Investment
                           Program.

          The investment  policy of Gotham is similar to that of New York Marine
except  that  Gotham  is  limited  to  $2,000,000  maturity  value  for its bond
investments and $1,000,000 for short-term investments in any one institution for
liquid funds.

          The investments of the Company's subsidiaries must also conform to the
requirements contained in the New York State Insurance Law and Regulations.

          The Company's  investments are monitored by management and the Finance
Committee of the Board of Directors. New York Marine's fixed income portfolio is
managed by J.P. Morgan Investment Management,  Inc. ("JPMIM"). New York Marine's
equity  portfolio is managed,  in part, by JPMIM and, in part, by Groupama Asset
Management.  Gotham  has its fixed  income  portfolio  managed  by JPMIM and its
equity  portfolio  managed  by  Rorer  Asset  Management.   The  Company's  U.K.
operations   investments  are  managed  by  Aberdeen  Asset  Managers  Ltd.  See
"Subsidiaries".

          As of December 31, 1999,  the Company's  fixed  maturities  and equity
securities were invested as follows:

                                     New York Marine   Gotham   Syndicate 1265
                                     ---------------   ------   --------------
                                                   (In thousands)

         Bonds Rated A- or better       $221,611      $69,023      $6,659
            Equities                    $ 52,729      $18,953         -0-


         Segments
         --------

          The Company conducts its business operations and evaluates its overall
performance through three main segments: domestic insurance companies,  domestic
insurance agencies and Syndicate 1265.


                                       4
<PAGE>


          The domestic  insurance  companies  segment,  which  includes New York
Marine and Gotham,  underwrite  insurance  business by accepting risks generally
through insurance brokers.  The domestic insurance  companies engage in business
in all 50 states as well as accept business risks in such world-wide  regions as
Europe, Asia, and Latin America. See "Regulation."

          The domestic insurance agencies segment,  which includes MMO, PMMO and
Midwest,  underwrite  all the  business for the  domestic  insurance  companies.
Revenues  from this segment  include  contingent  commissions  from  reinsurance
transactions and intercompany  management  commissions which are eliminated on a
consolidated basis. Expenses include general and administrative expenses.

          Syndicate 1265 segment includes the Company's Lloyd's of London agency
and insurance  operations.  Syndicate  1265  underwrites  insurance  business by
accepting risks generally  through  insurance  brokers under worldwide  licenses
provided by Lloyd's.

          Business  obtained  through  the  domestic  insurance   companies  and
agencies  segments  includes the  underwriting  of ocean marine,  inland marine,
aircraft and non-marine  liability  lines of insurance.  Ocean marine  insurance
covers a broad  range of  classes,  including  marine  hull,  primary and excess
marine   liabilities,   drilling  rig,  marine  cargo,  war  risks  and  assumed
reinsurance.  Inland marine insurance includes, among other things,  differences
in  condition  ("DIC"),   excess  property  packages,   miscellaneous   property
insurance, inland cargo shipments and assumed reinsurance.  DIC insurance covers
those perils not included with a fire and extended  coverage  policy,  including
burglary,  collapse, flood, volcano and earthquake.  Aircraft insurance includes
hull and engine  insurance,  liability  insurance as well as products  liability
insurance. Non-marine liability insurance includes, among other things, umbrella
(excess casualty) insurance, and excess and surplus line risks written primarily
through Gotham.

          Business  obtained through Syndicate 1265 includes the underwriting of
ocean marine  insurance which includes  coverage for hull,  cargo,  energy,  war
risks, marine liability, and marine excess of loss risks.

          The  following  tables  set forth  the  pools'  gross and net  written
premiums including business from Syndicate 1265. Insurance premiums written on a
calendar year basis may be attributable to various policy years. Therefore,  the
Company's  gross and net written  premiums cannot be obtained by multiplying the
amounts below by the Company's percentage  participation in each year since some
of the calendar year premiums written may arise from policies  incepting in 1996
and prior when the Company had a different  participation in the pools. However,
the tables below,  which set forth calendar year  premiums,  do reflect the size
and mix of business produced by the Managers for the years so indicated.

<TABLE>
<CAPTION>

Gross Premiums Written by
    Line of Business                                                          Year Ended December 31,
-------------------------                                                          -----------------------

                                                         1999                      1998                      1997
                                                         ----                      ----                      ----
                                                                              (In thousands)
<S>                                                 <C>                 <C>   <C>                 <C>   <C>                 <C>
Ocean marine  (a) ...............................   $  71,018           60%   $  78,768           60%   $  72,995           59%
Inland marine ...................................         739           --        1,321            1%       1,117            1%
Aircraft ........................................      44,571           38%      36,594           28%      45,853           37%
Other liability .................................       2,084            2%       3,176            2%       3,897            3%
Other ...........................................           6           --       12,337            9%         207           --
                                                    ---------    ---------    ---------    ---------    ---------    ---------
Total ...........................................   $ 118,418          100%   $ 132,196          100%   $ 124,069          100%

Net Premiums Written by
    Line of Business                                                          Year Ended December 31,
-----------------------                                                       -----------------------

                                                         1999                      1998                      1997
                                                         ----                      ----                      ----
                                                                              (In thousands)
Ocean marine  (b) ...............................   $  49,176           87%   $  58,800           82%   $  49,666           79%
Inland marine ...................................         255           --         (355)          --         (217)          --
Aircraft ........................................       5,114            9%         (55)          --        9,568           15%
Other liability .................................       2,046            4%       2,977            4%       3,864            6%
Other ...........................................         (25)          --       10,587           14%         207           --
                                                    ---------    ---------    ---------    ---------    ---------    ---------
Total ...........................................   $  56,566          100%   $  71,954          100%   $  63,088          100%
</TABLE>


(a)  Includes gross premiums  written from Syndicate 1265 of $23,273 and $17,817
     for 1999 and 1998, respectively.

(b)  Includes net premiums  written from  Syndicate  1265 of $17,365 and $16,832
     for 1999 and 1998, respectively.


                                       5
<PAGE>


Reinsurance Ceded
-----------------

         A  reinsurance  transaction  takes  place  when  an  insurance  company
transfers (cedes) a portion or all of its exposure on insurance written by it to
another insurer.  The reinsurer  assumes the exposure in return for a portion or
all of the premium.  The ceding of  reinsurance  does not legally  discharge the
insurer from its primary liability for the full amount of the policies,  and the
ceding company is required to pay the loss if the assuming company fails to meet
its obligations under the reinsurance agreement. The Company, through the pools,
cedes the greater part of its reinsurance through annual reinsurance  agreements
(treaties) with other insurance  companies.  These treaties,  which are drawn by
lines or classes of insurance, allow the Company to automatically reinsure risks
without having to cede insurance on a risk by risk (facultative) basis, although
facultative reinsurance is utilized on occasion.

         Generally,  the Managers place reinsurance with companies which have an
A.M. Best rating of A- or greater or which have sufficient  financial  strength,
in management's opinion, to warrant being used for reinsurance protections.  The
Managers  also  examine  financial  statements  of  reinsurers  and review  such
statements  for  profitability,  reasonable  leverage and adequate  surplus.  In
addition, the Company, through the pools, withholds funds and may obtain letters
of credit  under  reinsurance  treaties.  The Company  continues  to monitor the
financial  status of all  reinsurers on an annual  basis,  as well as the timely
receipt of cash, to assess the ability of reinsurers to pay reinsurance claims.

          The Company,  through the pools,  attempts to limit its exposure  from
losses on any one occurrence  through the use of various  excess of loss,  quota
share and  facultative  reinsurance  arrangements  and to  minimize  the risk of
default by a reinsurer by reinsuring risks with many different  reinsurers.  The
Company utilizes many separate  reinsurance treaties each year with a range of 8
to 20 reinsurers  participating on each treaty.  Many reinsurers  participate on
multiple  treaties.  The Company  utilizes quota share  reinsurance  treaties in
which  the  reinsurers  participate  on a set  proportional  basis  in both  the
premiums  and  losses.  Additionally,   the  Company  utilizes  excess  of  loss
reinsurance treaties in which the reinsurers, in exchange for a minimum premium,
subject to upward  adjustment  based upon premium volume,  agree to pay for that
part of each loss in excess of an agreed upon amount. The Company's retention of
exposure,  net of these  treaties,  varies  between  its  different  classes  of
business  and from year to year,  depending  on several  factors  including  the
pricing  environment  on both the  direct  and ceded  book of  business  and the
availability of reinsurance.  In general,  reinsurance is obtained for each line
of business when  necessary to reduce the Company's  exposure to a maximum of $2
million  for any one  insured on any one  occurrence.  The Company can and does,
from time to time,  carry a maximum exposure in excess of $2 million for any one
insured  on any one  occurrence.  Such  instances,  when they  occur,  generally
reflect a business  decision  regarding  the cost of further  reductions  in the
Company's  exposure  and/or  the  availability  of  reinsurance.  In  2000,  the
Company's  net  retention  in its  aviation  line of  business  may,  in certain
instances,  increase to $3 million  per  occurrence.  The  Company is  currently
evaluating  and  negotiating  reinsurance  proposals  to lower the  aviation net
retention. However, no assurance can be given as to the ultimate outcome of such
negotiations.

         The Company  attempts to limit its exposure from  catastrophes  through
the purchase of general excess of loss  reinsurance  which provides  coverage in
the event that multiple  insureds incur losses arising from the same occurrence.
These coverages require the Company to pay a minimum premium,  subject to upward
adjustment based upon premium volume. The treaties,  which extend in general for
a twelve month  period,  obligate the  reinsurers  to pay for the portion of the
Company's aggregate losses (net of specific  reinsurance) which fall within each
treaty's layer or exposure. The Company's retention on any one occurrence, after
it obtains the benefit of its excess of loss  reinsurance,  has not  exceeded $2
million  during the past three  years.  In the event of a loss,  the Company may
incur  additional   reinstatement   premium  charges  for  its  excess  of  loss
reinsurance, to the extent that such treaties incur a portion of the loss and in
an amount not greater than the original cost of the reinsurance. Every effort is
made to purchase sufficient  reinsurance coverage to protect the Company against
the cumulative  impact of several losses arising from a single  occurrence,  but
there is no guarantee that such limits will prove sufficient.


                                       6
<PAGE>


         The  Company   reinsures  risks  with  several   domestic  and  foreign
reinsurers as well as syndicates  including Lloyd's of London  ("Lloyd's").  The
Company's  consolidated  domestic insurance companies' largest reinsurers,  on a
statutory  basis as of December  31,  1999,  were  Arkwright,  Lloyd's and Utica
Mutual,  with  aggregate net  recoverables  of $42 million,  $23 million and $16
million, respectively. The 1999 A.M. Best ratings for Arkwright and Utica Mutual
are each A. Lloyd's maintains a trust fund which was established for the benefit
of all United States ceding companies. For the three most recent years for which
Lloyd's has reported  results,  1996, 1995 and 1994,  Lloyd's reported gains for
each of those years. The Company has not experienced  difficulties in collecting
amounts due from  Lloyd's  and the timing of cash  receipts  has not  materially
affected the Company's liquidity. However, given the uncertainty surrounding the
sufficiency  of assets in Equitas to meet its ultimate  obligations,  there is a
reasonable  possibility  that the Company's  collection  efforts relating to its
Lloyd's  recoverables might be adversely affected in the future. At December 31,
1999, the Company's net exposure to reinsurers,  other than  Arkwright,  Lloyd's
and Utica Mutual, was approximately $153 million,  including amounts recoverable
for paid losses,  outstanding losses,  IBNR and unearned premium reserves.  This
amount  is  recoverable   collectively  from  approximately  830  reinsurers  or
syndicates,  no single one of which was liable to the Company  for an  unsecured
amount in excess of approximately $5.8 million.

Reserves
--------

         The applicable  insurance laws under which the Company operates require
that  reserves  be  maintained  for the  payment of losses  and loss  adjustment
expenses  with  respect to both  reported  and IBNR claims  under its  insurance
policies.  IBNR claims are those losses,  based upon  historical  experience and
other relevant data,  that the Company  estimates will be reported or ultimately
develop on risks undertaken by the Company. Case loss reserves are determined by
evaluating reported claims on the basis of the type of loss involved,  knowledge
of the circumstances  surrounding the claim, and the policy provisions  relating
to the type of loss.  IBNR  claims  are  estimated  on the basis of  statistical
information  with  respect to the probable  number and nature of claims  arising
from occurrences which have not yet been reported. The establishment of reserves
acts to reduce  income  while the downward  adjustment  or reduction of reserves
increases income.


                                       7
<PAGE>


         The loss  settlement  period on insurance  claims may be many years and
during  this  period it often  becomes  necessary  to  adjust  the  estimate  of
liability  on a claim either  upward or  downward.  Among the classes of marine,
aviation and non-marine liability insurance written by the Company are liability
classes which  historically  have had long lead times  between  occurrence of an
insurable event, reporting of the claim to the Company and final settlement.  In
such  cases,  the Company is forced to estimate  reserves  over long  periods of
time, with the possibility of several  adjustments.  Other classes of insurance,
such as property and claims-made non-marine liability classes, historically have
had shorter lead times between  occurrence of an insurable  event,  reporting of
the claim to the Company and final settlement. The reserves with respect to such
classes are less likely to be readjusted.

         The Company,  from time to time, has increased its participation in the
pools.  The effect of each such increase is  prospective  in nature and does not
affect the loss  reserves  herein set forth for the years prior to the effective
date of any such change in participation percentage.

         The insurance pools  participated in the issuance of umbrella  casualty
insurance  for various  Fortune 1000  companies in the period from 1978 to 1983.
Depending on the accident  year,  the  insurance  pools'  maximum  retention per
occurrence  ranged from  $250,000 to  $500,000.  The  Company's  effective  pool
participation  on such risks varied from 11% in 1978 to 30% in 1983. At December
31, 1999 and 1998, the Company's  gross,  ceded and net loss and loss adjustment
expense  reserves for  Asbestos/Pollution  policies  amounted to $27.8  million,
$18.1  million  and $9.7  million,  and $24.3  million,  $15.3  million and $9.0
million,  respectively.  As of December 31, 1999, the Company had  approximately
355  policies  which  had at least  one  claim  relating  to  Asbestos/Pollution
exposures.    The   Company   believes   that   the   uncertainty    surrounding
Asbestos/Pollution  exposures,  including  issues as to  insureds'  liabilities,
ascertainment of loss date, definitions of occurrence, scope of coverage, policy
limits and application and interpretation of policy terms, including exclusions,
all affect the estimation of ultimate losses.  Under such  circumstances,  it is
difficult to determine the ultimate loss for Asbestos/Pollution  related claims.
Given the  uncertainty  in this area,  losses  from  Asbestos/Pollution  related
claims may develop adversely.  However, the Company believes that, in aggregate,
the net unpaid loss and loss  adjustment  expense  reserves  as of December  31,
1999,  allow for an adequate  provision and that the ultimate  resolution of the
Asbestos/Pollution  claims  will not have a  material  impact  on the  Company's
financial position.

         The following  table sets forth  NYMAGIC's net case reserve  experience
for Asbestos/Pollution policies for each of the past three years:

<TABLE>
<CAPTION>

                                                                   1999       1998       1997
                                                                 -------    -------    -------
                                                                         (In thousands)
Asbestos

<S>                                                              <C>        <C>        <C>
Case reserves at beginning of period .........................   $   802    $ 1,067    $ 1,103
Incurred loss and loss adjustment expenses ...................       986        (27)        52
Payments .....................................................      (194)      (238)       (88)
                                                                 -------    -------    -------
Case reserves at end of period ...............................   $ 1,594    $   802    $ 1,067
                                                                 =======    =======    =======


                                                                   1999       1998       1997
                                                                 -------    -------    -------

                                                                         (In thousands)
Pollution

Case reserves at beginning of period .........................   $ 1,155    $ 1,417    $ 2,323
Incurred loss and loss adjustment expenses ...................       503        351       (486)
Payments .....................................................      (615)      (613)      (420)
                                                                 -------    -------    -------
Case reserves at end of period ...............................   $ 1,043    $ 1,155    $ 1,417
                                                                 =======    =======    =======
</TABLE>


                                        8
<PAGE>


         The following  table sets forth  NYMAGIC's net loss and loss adjustment
expense  experience for  Asbestos/Pollution  policies for each of the past three
years:

<TABLE>
<CAPTION>

                                                                   1999        1998        1997
                                                                 --------    --------    --------
                                                                          (In thousands)

Asbestos/Pollution

<S>                                                              <C>         <C>         <C>
Unpaid loss and loss adjustment expenses
 (Including IBNR) at beginning of period .....................   $  9,017    $  9,029    $  8,500
Incurred loss and loss adjustment expenses ...................      1,489         839       1,037
Payments .....................................................       (809)       (851)       (508)
                                                                 --------    --------    --------
Unpaid loss and loss adjustment expenses
 (Including IBNR) at end of period ...........................   $  9,697    $  9,017    $  9,029
                                                                 ========    ========    ========
</TABLE>

         The  loss  and  loss  adjustment  payments  related  to  the  Company's
Asbestos/Pollution exposures have not been material in relation to the Company's
total loss and loss adjustment expense payments as shown in the table below:

<TABLE>
<CAPTION>

                                                                   1999        1998       1997
                                                                 --------    --------   --------
                                                                         (In thousands)

<S>                                                              <C>         <C>         <C>
Total loss and loss adjustment expense
 payments for the year ended December 31, ....................   $ 53,379    $ 58,983    $ 55,483
Asbestos/Pollution loss and loss adjustment expense
 payments for the year ended December 31, ....................        809         851         508
</TABLE>



         The insurance pools have written primary insurance relating to products
liability  since 1985.  The insurance  pools' maximum loss per risk is generally
limited to $1,000,000 and the Company's participation percentage ranges from 59%
to 100% based upon  policy  year.  The  Company  believes  that,  based upon the
maximum amount per risk and the Company's  conservative  reserving posture,  the
reserves currently  established are adequate to cover the ultimate resolution of
all product liability claims.

         The following table shows changes in reserves in subsequent  years from
the prior loss estimates  based upon experience as of the end of each succeeding
year. The estimate is increased or decreased as more  information  becomes known
about the frequency and severity of losses for  individual  years.  A redundancy
means the original estimate of the Company's  consolidated  liability was higher
than the current  estimate;  a  deficiency  means that the  current  estimate is
higher than the original estimate.

         The first line of the table  presents,  for each of the last ten years,
the estimated  liability for net unpaid losses and loss  adjustment  expenses at
the end of the year,  including  IBNR  losses.  The first  section  of the table
shows,  by year,  the  cumulative  amounts  of net  losses  and loss  adjustment
expenses paid as of the end of each succeeding  year,  expressed as a percentage
of the estimated liability for such amounts.

         The second  section sets forth the  re-estimates  in later years of net
incurred losses, including net payments, as a percentage of the estimate for the
years  indicated.  The net cumulative  redundancy  represents as of December 31,
1999,  the  aggregate  change  in  the  estimates  over  all  prior  years.  The
redundancies have been reflected in income over the periods shown.




                                       9
<PAGE>



<TABLE>
<CAPTION>

                                                                     Year Ended December 31,
                            --------------------------------------------------------------------------------------------------------
                            1989      1990      1991      1992      1993      1994      1995      1996      1997      1998      1999
                            ----      ----      ----      ----      ----      ----      ----      ----      ----      ----      ----
                                                                     (Dollars in thousands)

<S>                      <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>
Estimated Liability
for Net Unpaid Losses
and Loss Adjustment
Expenses                 138,920   156,533   170,744   203,735   208,366   212,377   229,916   227,370   222,335   213,589   196,865



Cumulative Amount of
Net Liability Paid
As a Percentage of
Estimate Through:

      1  Year Later          17%       18%       19%       20%       22%       20%       20%       17%       19%       20%
      2  Years Later         32%       36%       37%       37%       37%       34%       32%       30%       32%
      3  Years Later         46%       49%       52%       48%       49%       44%       42%       42%
      4  Years Later         57%       62%       61%       58%       57%       53%       51%
      5  Years Later         66%       69%       69%       64%       64%       62%
      6  Years Later         72%       75%       74%       70%       71%
      7  Years Later         75%       78%       78%       76%
      8  Years Later         77%       81%       84%
      9  Years Later         79%       85%
     10  Years Later         82%


Net Liability Reestimated
including Cumulative
Net Paid Losses and
Loss Adjustment Expenses
As a Percentage of
Estimate As of:

      1  Year Later          96%      100%       99%       99%       99%       97%       94%       90%       91%       94%
      2  Years Later         98%      100%       99%       97%       96%       95%       87%       87%       87%
      3  Years Later         96%       98%       99%       95%       95%       91%       86%       85%
      4  Years Later         94%       98%       97%       95%       93%       91%       86%
      5  Years Later         91%       96%       98%       94%       94%       92%
      6  Years Later         90%       96%       96%       95%       95%
      7  Years Later         91%       95%       97%       96%
      8  Years Later         90%       97%       99%
      9  Years Later         92%       98%
     10  Years Later         93%


Net Cumulative Redundancy  9,082     2,766     2,316     8,396    10,424    16,383    32,327    33,657    28,257    12,183





Gross Unpaid Losses and Loss Adjustment Expenses                 407,321  $435,072  $417,795  $411,837  $388,402  $401,584  $425,469
Reinsurance Recoverable on Unpaid Losses and Loss                198,955   222,695   187,879   184,467   166,067   187,995   228,604
  Adjustment Expenses
Reserve Re-estimated Gross                                       382,155   404,954   392,348   366,149   393,044   426,369
Reserve Re-estimated Reinsurance Recoverable                     188,331   212,722   193,401   160,653   190,175   224,963
Gross Cumulative Redundancy (Deficiency)                          25,166    30,118    25,447    45,688    -4,643   -24,785
</TABLE>


                                       10
<PAGE>


         The Company  makes no specific  provision  for  inflation in connection
with  reserve  estimates,   but  does  each  year  consider  the  adjustment  of
outstanding  case reserves and current  inflationary  indices in determining the
adequacy of the overall  loss  reserve.  The Company  monitors  historical  loss
payments to determine the sufficiency of this provision.

         The  following  table  provides a  reconciliation  of the  consolidated
liability  for losses and loss  adjustment  expenses at the beginning and end of
1999, 1998 and 1997:

<TABLE>
<CAPTION>

                                                                 Year ended December 31,

                                                                1999       1998       1997
                                                             --------   --------   --------
                                                                     (In thousands)
<S>                                                          <C>        <C>        <C>
Net liability for losses and loss adjustment
  expenses at beginning of year ..........................   $213,589   $222,335   $227,370
                                                             --------   --------   --------
Provision for losses and loss adjustment
  expenses occurring in current year .....................     48,838     69,703     72,322
Decrease in estimated losses and loss
  adjustment expenses for claims occurring
  in prior years (1) .....................................    (12,183)   (19,466)   (21,874)
Deferred income-loss portfolio
  assumption(2) ..........................................        198        275        320
                                                             --------   --------   --------
Total losses and loss adjustment expenses
  incurred ...............................................     36,853     50,512     50,768
                                                             --------   --------   --------
Less:
Losses and loss adjustment expense payments
  for claims occurring during:
      current year .......................................     11,517     17,407     17,029
      prior years ........................................     41,862     41,576     38,454
                                                             --------   --------   --------
                                                               53,379     58,983     55,483
Plus:
Deferred income-loss portfolio assumption(2) .............       (198)      (275)      (320)
                                                             --------   --------   --------
Net liability for losses and loss adjustment
  expenses at year end ...................................    196,865    213,589    222,335
                                                             --------   --------   --------
Ceded unpaid losses and loss adjustment
  expenses ...............................................    228,604    187,995    166,067
                                                             --------   --------   --------
Gross unpaid losses and loss adjustment
  expenses at year end ...................................   $425,469   $401,584   $388,402
                                                             ========   ========   ========
</TABLE>

         (1) The  adjustment to the  consolidated  liability for losses and loss
adjustment  expenses for losses occurring in prior years reflects the net effect
of the  resolution  of losses for other than full reserve  value and  subsequent
readjustments  of loss values.  The decrease in estimated losses is attributable
to the ocean  marine and  aviation  lines of business  as a result of  favorable
payout trends due , in part, to lower retention levels per loss.

         (2) Deferred income-loss portfolio assumption represents the difference
between  cash  received  and  unpaid  loss  reserves  assumed as a result of the
assumption  of net pool  obligations  from two  former  pool  members  which was
initially  capitalized  and is being  amortized  over the  payout  period of the
related losses.

         The principal differences between the consolidated liability for unpaid
losses and loss  adjustment  expenses as reported in the Annual  Statement filed
with  state  insurance  departments  in  accordance  with  statutory  accounting
principles and the liability based on generally accepted  accounting  principles
shown in the above tables is due to the assumption of loss reserves arising from
former  participants  in the MMO insurance  pools,  the  Company's  reserves for
Syndicate 1265,  reserves for uncollectible  reinsurance and unpaid  unallocated
loss  adjustment  expenses  based  upon  management  commissions  payable to the
Managers which are eliminated on a consolidated  basis.  The loss reserves shown
in the above  tables  reflect in each year salvage and  subrogation  accruals of
approximately  1% to 6%. The estimated  accrual for salvage and  subrogation  is
based on the line of business and historical  salvage and  subrogation  recovery
data. In neither statutory nor generally accepted accounting principles are loss
and loss adjustment expense reserves discounted.


                                       11
<PAGE>


         The following table sets forth the  reconciliation  of the consolidated
net  liability  for  losses  and loss  adjustment  expenses  based on  statutory
accounting  principles  for  the  domestic  insurance  companies  and  based  on
generally accepted accounting principles as of December 31, 1999, 1998 and 1997:

<TABLE>
<CAPTION>
                                                                                      Year ended December 31,
                                                                                      -----------------------
                                                                                       1999       1998       1997
                                                                                   --------   --------   --------
                                                                                           (In thousands)
<S>                                                                                <C>        <C>        <C>
Liability for losses and loss adjustment expenses
  reported based on statutory accounting principles ............................   $170,664   $193,680   $217,016
Liability for losses and loss adjustment expenses assumed
  from two former pool members .................................................      4,911      4,529      4,469
 (excludes $3,684, $4,636 and $5,580 at  December 31, 1999,
  1998 and 1997, accounted for in the  statutory liability for
   losses and loss adjustment expenses)
Syndicate 1265 .................................................................     18,401     13,504         --
Other, net .....................................................................      2,889      1,876        850
                                                                                   --------   --------   --------
Net liability for losses and loss adjustment expenses reported
  based on generally accepted accounting principles ............................    196,865    213,589    222,335
Ceded liability for unpaid losses and loss adjustment expenses .................    228,604    187,995    166,067
                                                                                   --------   --------   --------
Gross liability for unpaid losses and loss adjustment expenses .................   $425,469   $401,584   $388,402
                                                                                   ========   ========   ========
</TABLE>


Regulation
----------

         The Company is regulated by the  insurance  regulatory  agencies of the
states in which it is authorized to do business.  New York Marine is licensed to
engage in the insurance business in all states.

         Gotham is permitted to write  excess and surplus  lines  insurance on a
non-admitted basis in all of the states except Arkansas, Massachusetts,  Nevada,
New  Jersey,  New  Hampshire  and  Vermont.  Gotham is licensed to engage in the
insurance  business in the state of New York and, as such,  cannot  write excess
and surplus business in that state.

         Many  aspects  of the  Company's  insurance  business  are  subject  to
regulation.  For example,  minimum  capitalization  must be maintained;  certain
forms of policies must be approved before they may be offered;  reserves must be
established in relation to the amounts of premiums  earned and losses  incurred;
and, in some cases, schedules of premium rates must be approved.

         The  domestic  insurance  company   subsidiaries  also  file  statutory
financial  statements  with each state in the format  requested  by the National
Association  of  Insurance   Commissioners  (the  "NAIC").   The  NAIC  provides
accounting  guidelines  for  companies to report and provides  minimum  solvency
standards for all companies in the form of risk-based capital requirements.  The
Company  believes that the surplus of each of the  insurance  companies is above
the minimum amount required by the NAIC.

         The NAIC's project to codify  statutory  accounting  principles,  which
will ultimately change currently prescribed statutory accounting principles, was
approved  by the NAIC in March  1998.  The  approval  included a  provision  for
commissioner  discretion in  determining  appropriate  statutory  accounting for
insurers  in their  state.  The NAIC  indicated  that  codification  will become
effective on January 1, 2001. The Company is examining how  implementation  will
affect its statutory financial statements.

         New York Marine and Gotham are subject to  examination by the Insurance
Department  of the State of New  York.  The  insurance  companies'  most  recent
examination was for the year ended December 31, 1995.  There were no significant
adjustments which resulted from that examination.


                                       12
<PAGE>


         Syndicate 1265 operates in a highly  regulated  environment  within the
overall Lloyd's market. Lloyd's maintains regulatory departments that review the
management  and operation of all agencies and syndicates to ensure that business
is conducted in accordance  with Lloyd's  standards.  Syndicates are required to
maintain  trust  funds for  insurance  transactions  with strict  guidelines  on
withdrawals  from  such  funds.  Annual  solvency  tests are  conducted  whereby
syndicates must maintain minimum capital  requirements in accordance with ratios
prescribed by Lloyd's.

         The following  table shows,  for the periods  indicated,  the Company's
consolidated  domestic  insurance  companies'  statutory  ratios of net premiums
written (gross premiums less premiums ceded) to policyholders' surplus:

<TABLE>
<CAPTION>

                                                            Year Ended December 31,
                                          --------------------------------------------------------
                                              1999        1998        1997        1996        1995
                                          --------    --------    --------    --------    --------
                                                           (Dollars in thousands)

<S>                                       <C>         <C>         <C>         <C>         <C>
Net premiums written .................    $ 38,741    $ 45,333    $ 62,221    $ 90,513    $ 97,817
Policyholders' surplus ...............     200,899     196,745     181,844     160,929     148,785
                                          --------    --------    --------    --------    --------
Ratio ................................    .19 to 1    .23 to 1    .34 to 1    .56 to 1    .66 to 1
</TABLE>


          While there are no statutory  requirements  applicable  to the Company
which establish permissible premium to surplus ratios, guidelines established by
the National Association of Insurance  Commissioners  provide that the statutory
net  premiums  written to surplus  ratio  should be no greater  than 3 to 1. The
Company is well within those guidelines. Syndicate 1265 maintained a capacity to
write  approximately a U.S.  dollar  equivalent of $32.2 million of net premiums
written in 1999.

          Policyholders'   surplus  is  not  a  substitute   for  the  Company's
shareholders'  equity computed in accordance with Generally Accepted  Accounting
Principles (GAAP). It excludes the effect on shareholders' equity from dividends
declared,  accumulated other comprehensive income, common stock, treasury stock,
additional  paid-in capital and the effect of consolidating all Non-Domestic and
Non-Insurance  subsidiaries.  The definition of  policyholders'  surplus used by
NYMAGIC may differ from  definitions  of  policyholders'  surplus  used by other
public holding companies of property and casualty insurers.

          Net premiums  written  (gross  premiums less premiums  ceded) is not a
substitute for the Company's net premiums  written  computed in accordance  with
GAAP.  It  excludes  the effect on net  premiums  written of  consolidating  all
Non-Domestic  subsidiaries.  The  definition  of net  premiums  written  used by
NYMAGIC may differ from definitions of net premiums written used by other public
holding companies of property and casualty insurers.

         Statutory  ratios of net premiums written (gross premiums less premiums
ceded) to  policyholders'  surplus is not  promulgated  under GAAP.  It includes
statutory gross, net and ceded premiums written and  policyholders'  surplus for
the domestic  insurance  companies only. The definition of net premiums  written
(gross premiums less premiums ceded) to  policyholders'  surplus used by NYMAGIC
may differ  from  definitions  of net  premiums  written  (gross  premiums  less
premiums ceded) to policyholders' surplus used by other public holding companies
of property and casualty insurers.

          The domestic insurance company subsidiaries are limited under New York
law in the  amount of  dividends  they can pay to the parent  company,  NYMAGIC,
without prior approval of the Insurance Department of the State of New York.

          NYMAGIC's   principal   source  of  income  is   dividends   from  its
subsidiaries,  which  is used  for  payment  of  operating  expenses,  including
interest  expense,  loan  repayments  and  payment  of  dividends  to  NYMAGIC's
shareholders. The maximum amount of dividends that may be paid to NYMAGIC by the
domestic  insurance  company  subsidiaries  is  limited  to the lesser of 10% of
statutory  surplus or 100% of net investment  income,  as defined under New York
insurance  law. The maximum amount which could be paid to the Company out of the
domestic  insurance  companies'  surplus  was  approximately  $19,630,000  as of
December  31,  1999.  Dividends  can be paid from  Syndicate  1265 to the extent
solvency  margins are maintained and after the closing of a calendar year, which
occurs three years following each calendar year.

          Insurance  companies are being  regulated more strictly by the various
states in recent years.  Many states have also  increased  regulation of surplus
lines insurance thereby requiring stricter standards for authorization.  Several
states have  established  guaranty funds which serve to provide the assured with
payments  due under  policies  issued by  insurance  companies  that have become
insolvent.  Insurance  companies  that are  authorized  to write in  states  are
assessed a fee,  normally  based on direct  writings in a particular  state,  to
cover any payments drawn from insolvency  funds.  New York Marine and Gotham are
subject to such assessments in the various states.

Subsidiaries
------------

         NYMAGIC's largest insurance company subsidiary is New York Marine which
was formed in 1972. NYMAGIC was formed in 1989 to serve as a holding company for
the subsidiary insurance  companies.  NYMAGIC's other domestic insurance company
subsidiary,  Gotham,  was  organized  in 1986 as a means of  expanding  into the
excess and surplus lines marketplace.  New York Marine and Gotham entered into a
Reinsurance  Agreement,  effective  January 1, 1987, under terms of which Gotham
will cede 100% of its gross direct writings to New York Marine and assume 15% of
New York Marine's total retained business,  beginning with the 1987 policy year.
Accordingly,  for  policy  year  1987  and  subsequent,   Gotham's  underwriting
statistics  are similar to New York  Marine's.  As of December 31, 1999, 75% and
25%  of  Gotham's  common  stock  is  owned  by New  York  Marine  and  NYMAGIC,
respectively.

         Gotham  does not assume or cede  business  to or from  other  insurance
companies.  As of December 31, 1999, New York Marine had aggregate  recoverables
due from  Gotham  of  approximately  $28  million  or 14% of New  York  Marine's
statutory surplus. Gotham had aggregate recoverables due from New York Marine as
of December 31, 1999, of approximately $21 million or 34% of Gotham's  statutory
surplus.

         New York  Marine's  and  Gotham's  combined  net income on a GAAP basis
represented  substantially all of the consolidated net income of the Company for
each of the years ended December 31, 1999, 1998 and 1997.


                                       13
<PAGE>


         MMO was acquired in 1991 and was formed in 1964 to underwrite a book of
ocean marine  insurance.  MMO's  activities  expanded  over the years and it now
underwrites a book of ocean marine, inland marine,  aviation and other liability
insurance.

         On December  31,  1997,  the  Company  acquired  ownership  of Highgate
Managing  Agencies,  Ltd. and subsequently  changed its name to MMO Underwriting
Agency,  Ltd. MMO  Underwriting  Agency Ltd. is a Lloyd's  managing agency which
commenced underwriting in 1998 for the Company's wholly owned subsidiary MMO UK,
Ltd. which is a Lloyd's  corporate capital vehicle providing 100% of the capital
for Syndicate 1265.

         Midwest  was  acquired in 1991 and was formed in 1978 to  underwrite  a
varied book of business located in the Midwest region.

         PMMO was acquired in 1991 and was formed in 1975 to underwrite a varied
book of business in the West Coast region.

Competition
-----------

         The insurance  industry is highly  competitive and the companies,  both
domestic and foreign,  against which the Company  competes are often larger with
greater capital  resources than the Company and the pools. The principal methods
of  competition  are  pricing and  responsiveness  to the  individual  insured's
coverage  requirements.  The  competitive  nature  of the  business  intensified
through  1999  as  rates  softened  in the  aviation  and  ocean  marine  lines.
Competition  remains  intense  as a result of excess  capacity  in the  casualty
market.

         The  Company  believes  it  can  successfully   compete  against  other
companies in the insurance market due to its philosophy of underwriting  quality
insurance,  its  reputation as a conservative  well-capitalized  insurer and its
willingness to forego unprofitable business.

Employees
---------

         The Company currently employs approximately 108 persons, of whom 24 are
insurance underwriters.

ITEM 2.  PROPERTIES.

         The Company does not own, directly or indirectly,  any real estate. The
Company leases office space for day to day operations in the following cities:

                New York         -      37,000 square feet
                Chicago          -       3,500 square feet
                San Francisco    -       4,050 square feet
                London           -       1,450 square feet

         The Company's principal executive offices are approximately  37,000 sq.
ft. in size and are  located  in New York  City.  The  lease  for the  Company's
principal  executive  offices expires December 30, 2003. The minimum annual rent
under the lease is $1,184,000  from 2000 until the expiration of the lease.  The
lease  included  an  initial  cash  payment  by the  lessor  to the  Company  of
$1,853,000  of which the benefit was  deferred and is being  amortized  over the
lease term.

ITEM 3.  LEGAL PROCEEDINGS.

         The Company is not currently  involved in any legal  proceedings  other
than litigation all of which,  collectively,  is not expected to have a material
adverse effect on the business,  financial condition or results of operations of
the Company.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

         The Company  did not submit any  matters to a vote of security  holders
during the fourth quarter of 1999.


                                       14
<PAGE>


                                     PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS.

         The Company's  common stock trades on the New York Stock Exchange (NYSE
Symbol: NYM). The following table sets forth high and low closing prices for the
periods indicated as reported on the New York Stock Exchange Composite Tape.



                                           1999                      1998
                                         --------                  --------

                                    High          Low          High         Low
                                    ----          ---          ----         ---

First Quarter ...........       $   20.63    $   13.00    $   30.06    $   24.38

Second Quarter ..........           17.50        12.19        34.25        27.00

Third Quarter ...........           16.00        13.00        28.63        21.75

Fourth Quarter ..........           15.00        12.75        25.25        19.75


         As of March 1, 2000,  there were 89  shareholders  of record.  However,
management  believes there are in excess of 2,500 beneficial owners of NYMAGIC's
common stock.

Dividend Policy
---------------

         A cash  dividend of ten (10) cents per share was  declared  and paid to
shareholders of record in March,  June,  September,  and December 1999 and 1998.
For a description  of  restrictions  on the ability of the  Company's  insurance
subsidiaries  to  transfer  funds to the Company in the form of  dividends,  see
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations - Liquidity and Capital Resources" and "Business- Regulation."

ITEM 6. SELECTED FINANCIAL DATA.

<TABLE>
<CAPTION>

OPERATING DATA                                          Year Ended December 31,
                                      --------------------------------------------------------
                                          1999        1998        1997        1996        1995
                                      --------    --------    --------    --------    --------
                                               (In thousands, except per share amounts)
Revenues:

<S>                                   <C>         <C>         <C>         <C>         <C>
Net premiums earned ..............    $ 56,155    $ 76,023    $ 87,537    $ 97,036    $103,461
Net investment income ............      18,642      20,803      21,325      21,270      21,659
Commission income ................       1,956         591       1,439       1,981       3,438
Realized investment gains, net....      12,504       8,615      10,425       4,589       4,111
Other income .....................         237         396         293         690         661
                                      --------    --------    --------    --------    --------

Total revenues ...................    $ 89,494    $106,428    $121,019    $125,566    $133,330
                                      --------    --------    --------    --------    --------
</TABLE>


                                       15
<PAGE>


Selected Financial Data (continued)

<TABLE>
<CAPTION>

                                                                             Year Ended December 31,
                                                          ----------------------------------------------------------
                                                               1999        1998         1997        1996        1995
                                                          ---------   ---------    ---------   ---------   ---------
                                                                    (In thousands, except per share amounts)
Expenses:
<S>                                                       <C>         <C>          <C>         <C>         <C>
Losses and loss adjustment
  expenses incurred ...................................   $  36,853   $  50,512    $  50,768   $  59,359   $  69,716
Policy acquisition expenses ...........................      11,077      10,107       16,583      18,828      21,017
General and administrative
  expenses ............................................      19,327      21,531       16,763      16,168      16,236
Interest expense ......................................       1,058       1,374        1,450       1,035         438
                                                          ---------   ---------    ---------   ---------   ---------

Total expenses ........................................   $  68,315   $  83,524    $  85,564   $  95,390   $ 107,407
                                                          ---------   ---------    ---------   ---------   ---------


Income before income taxes ............................      21,179      22,904       35,455      30,176      25,923
                                                          ---------   ---------    ---------   ---------   ---------
Income taxes
  Current......................................               3,189       5,250        8,962       7,495       5,393
  Deferred ............................................       1,577        (869)         125          56         410
                                                          ---------   ---------    ---------   ---------   ---------
Total income taxes ....................................       4,766       4,381        9,087       7,551       5,803
                                                          ---------   ---------    ---------   ---------   ---------

Net income ............................................   $  16,413   $  18,523    $  26,368   $  22,625   $  20,120
                                                          =========   =========    =========   =========   =========

BASIC EARNINGS PER SHARE(1):

Weighted average shares
  outstanding .........................................       9,687       9,679        9,849      10,499      11,299
Basic earnings per share ..............................   $    1.69   $    1.91    $    2.68   $    2.15   $    1.78
                                                          =========   =========    =========   =========   =========

DILUTED EARNINGS PER SHARE(1):

Weighted average shares

  outstanding .........................................       9,687       9,705        9,872      10,524      11,341
Diluted earnings per share ............................   $    1.69   $    1.91    $    2.67   $    2.15   $    1.77
                                                          =========   =========    =========   =========   =========

Dividends declared per share ..........................   $     .40   $     .40    $     .40   $     .40   $     .40
                                                          =========   =========    =========   =========   =========

BALANCE SHEET DATA:

                                                                                  December 31,
                                                          ----------------------------------------------------------
                                                              1999        1998         1997        1996        1995
                                                          ---------   ---------    ---------   ---------   ---------
                                                                                 (In thousands)
Total investments .....................................   $ 396,710   $ 443,022    $ 438,591   $ 409,209   $ 403,306
Total assets ..........................................     764,304     730,320      707,903     714,949     722,250
Unpaid losses and loss
  adjustment  expenses ................................     425,469     401,584      388,402     411,837     417,795
Notes payable .........................................      12,458      17,458       22,458      20,438      12,727
Total shareholders' equity ............................   $ 231,142   $ 228,180    $ 206,519   $ 188,852   $ 182,717
</TABLE>


         For a description of factors that materially  affect the  comparability
of the information  reflected in the Selected  Financial Data, see "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

(1)  Earnings per share data prior to 1997 have been restated as required  under
     Statement of Financial Accounting Standards No. 128, "Earnings Per Share."


                                       16
<PAGE>


ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS.

         Results of Operations
         ---------------------

         The  Company's  results of  operations  are derived from its three main
segments which include the domestic insurance  companies,  the domestic agencies
and Syndicate 1265. The Company's  domestic insurance  companies  participate in
pools of insurance covering ocean marine, inland marine, aircraft and non-marine
liability  insurance  managed by MMO and affiliates.  Effective January 1, 1997,
the  Company's  participation  in the pools  increased to 100%.  Syndicate  1265
underwrites  a book of ocean marine  insurance.  The  following  represents  the
Company's  net  premiums  written and net  premiums  earned for each of the past
three years.

<TABLE>
<CAPTION>

NYMAGIC Net Premiums Written
    by Line of Business                                                Year Ended December 31,
    -------------------                       ---------------------------------------------------------------------
                                                         1999                   1998                   1997
                                                       --------               --------               --------
                                                                           (In thousands)
<S>                                           <C>          <C>         <C>         <C>         <C>        <C>
Ocean marine (a) ..........................   $ 48,564           87%   $ 59,231          81%   $ 48,658         78%
Inland marine .............................        153           --        (350)         --         146         --
Aircraft ..................................      5,319            9%         82          --       9,354         15%
Other liability ...........................      2,064            4%      2,969           4%      3,856          6%
Other .....................................          6           --      10,796          15%        207          1%
                                              --------     --------    --------    --------    --------   --------
Total .....................................   $ 56,106          100%   $ 72,728         100%   $ 62,221        100%
                                              ========     ========    ========    ========    ========   ========

NYMAGIC Net Premiums Earned
    by Line of Business                                                Year Ended December 31,
    -------------------                       ---------------------------------------------------------------------
                                                         1999                   1998                   1997
                                                       --------               --------               --------
                                                                           (In thousands)
Ocean marine (b) ..........................   $ 48,159           86%   $ 60,219          79%   $ 49,984         57%
Inland marine .............................        182         --          (393)       --           443          1%
Aircraft ..................................      5,310            9%      2,005           3%     32,566         37%
Other liability ...........................      2,529            5%      3,393           4%      4,328          5%
Other .....................................        (25)        --        10,799          14%        216       --
                                              --------     --------    --------    --------    --------   --------
Total .....................................   $ 56,155          100%   $ 76,023         100%   $ 87,537        100%
                                              ========     ========    ========    ========    ========   ========
</TABLE>


(a)  Includes net premiums  written from  Syndicate  1265 of $17,365 and $16,832
     for 1999 and 1998, respectively.

(b)  Includes net premiums earned from Syndicate 1265 of $13,614 and $14,832 for
     1999 and 1998, respectively.



         Unlike many types of property and  casualty  insurance,  ocean  marine,
inland  marine,  aviation  and other  liability  premium  rates are not strictly
regulated  by  governmental  authorities.  Consequently,  the Company is able to
adjust premium rates quickly in response to competition, varying degrees of risk
and other  factors.  In  addition,  the Company,  by virtue of its  underwriting
flexibility,  is able to  emphasize  specific  lines of  business in response to
advantageous  premium  rates  and  the  anticipation  of  positive  underwriting
results.

         The Company's general and administrative  expenses consist primarily of
compensation   expense,   employee   benefits  and  rental  expense  for  office
facilities.  The  Company's  policy  acquisition  costs  include both  brokerage
commissions  and premium  taxes which are  primarily  based on a  percentage  of
premiums  written.  Such costs have generally changed in proportion with changes
in premium volume.  Losses and loss adjustment  expenses  incurred in connection
with insurance  claims in any  particular  year depend upon a variety of factors
including the rate of inflation,  accident or claim frequency, the occurrence of
natural catastrophes and the number of policies written.


                                       17
<PAGE>


         The Company estimates  reserves each year based upon, and in conformity
with, the factors discussed under  "Business-Reserves".  Changes in estimates of
reserves  are  reflected  in  operating  results in the year in which the change
occurs.

1999 as Compared to 1998
------------------------

          Net income for the year ended  December 31, 1999,  was  $16,413,000 or
$1.69 per diluted  share  compared  with the year ended  December 31, 1998,  net
income of  $18,523,000  or $1.91 per  diluted  share.  Operating  income,  which
excludes the effects of realized  investment  gains after taxes, was $8,286,000,
or $.86 per share, for the year ended December 31, 1999, versus $12,924,000,  or
$1.33 per share, for the prior year.

         For the  year  ended  December  31,  1999,  net  premiums  earned  were
$56,155,000  as compared with  $76,023,000  for 1998.  The 1998 amount  included
approximately $24.7 million relating to two transactions  involving  assumptions
of ocean marine and casualty  business.  Excluding  these  one-time  items,  net
premiums earned for the year ended December 31, 1999 would have increased 9%.

         Ocean marine net  premiums  earned  increased in 1999 by 5%,  excluding
one-time  items,  and is  largely  attributable  to  business  derived  from the
Syndicate  1265 segment.  Approximately  $13.6  million in net premiums  earned,
mostly ocean marine hull, was produced by Syndicate 1265 in 1999, its first full
year of operations,  when compared to $700,000,  excluding  one-time  items,  in
1998. Net premiums  earned from the domestic  insurance  companies  segment were
down  24% as  competition  generally  remained  intense  in 1999  and  adversely
affected ocean marine premium rates as well as premium renewals. The outlook for
2000  indicates that pricing  pressures will remain as the over capacity  within
this  market  still  exists.  Syndicate  1265 will also  continue  to write at a
cautious pace.

          Aviation gross premium  written grew 22% in 1999 to $44.6 million as a
result of rate increases  obtained in 1999 on accounts with poor loss records as
well as increases in overall line size per account. As the underwriting  climate
for gross premiums has remained soft for several years in the aviation line, the
Company  maintained an adequate  level of reinsurance to protect its exposure to
any one loss. As a result, after excess of loss and quota share reinsurance, the
Company's  net writings  amounted to $5.3 million in 1999.  The Company  expects
premiums  to  increase  in 2000 due in part to the trend in premium  rates which
occurred in the latter half of 1999.

          The other  liability  line decreased 26% in 1999,  excluding  one-time
items,  when compared to 1998 due to the effects of competitive  pricing as well
as a decline in premium  production.  The Company expects the casualty market to
remain competitive in 2000 with premiums likely to decline further.

          Losses and loss  adjustment  expenses  incurred as a percentage of net
premiums  earned were 65.6% for the year ended December 31, 1999, as compared to
56.6%,  excluding  one time items,  for the same  period of the prior year.  The
domestic insurance subsidiaries recorded higher loss ratios in the aviation line
of business  in 1999 due to  increases  in both the  frequency  and  severity of
losses. In addition, the Company's ocean marine line recorded higher loss ratios
in  1999,  primarily  attributable  to the  loss  experience  produced  from our
Syndicate 1265 segment.  Syndicate 1265  experienced a relatively high frequency
of marine hull claims in 1999.

         Commission  and  other  income  increased  substantially  in 1999  when
compared to 1998 and reflected  larger profit  commissions on the reinsurance of
our ocean marine and aviation lines from our domestic insurance agency segment.

         Interest  expense  decreased to $1,058,000  for the year ended December
31, 1999 from  $1,373,000 for the prior year primarily as a result of a decrease
in loan principal outstanding.

         Net investment income for the year ended December 31, 1999 decreased by
10% from the level of net investment  income  achieved in 1998.  Contributing to
the decline  were lower  overall  investment  yields and a reduction in invested
assets  brought  about by the  payments  of a large  number of losses on a gross
basis in the aviation and umbrella lines of business.

         Policy acquisition  expenses as a percentage of net premiums earned for
the year ended December 31, 1999 were 19.7% as compared with 13.3% for the prior
year.  The  increase  in the ratio is due in large part to the two  transactions
involving assumptions of premiums in 1998. Absent such business, the ratio would
have been approximately 19.7% for the year ended December 31 1998.


                                       18
<PAGE>


         General and  administrative  expenses  decreased  by 10.2% in 1999 from
1998. The prior year's amounts included certain non-recurring  expenses incurred
in  connection  with the  assumption  of premiums and the formation of Syndicate
1265. In addition,  larger expenses were recorded for two employee benefit plans
in 1998 within the domestic insurance agencies.

         Realized  investment  gains of $12,504,000  for the year ended December
31, 1999 result in large part from the sale of appreciated equity securities. In
addition,  sales  resulted from  monitoring  the Company's  overall  exposure to
equity securities to be in accordance with its investment guidelines.

         Total  investments  decreased  to $396.7  million at December  31, 1999
primarily due to reductions in unrealized  gains on  investments  as a result of
rising  interest  rates  and  reductions  in the  investment  portfolio  to fund
payments  of aviation  and  umbrella  losses on a gross  basis.  These  payments
contributed  to cash  flow  used in  operations  in 1999 of $33.6  million.  The
Company  maintains an adequate level of reinsurance to prevent any one loss from
significantly  affecting net income.  However,  timing  differences  between the
payment  of gross  losses by the  Company  and cash  collections  received  from
reinsurers may adversely impact cash flow in any one period.

         Reinsurance  receivables  increased  by 28%  to  $255.8  million  as of
December 31, 1999. Increases in gross severity losses in the aviation,  umbrella
and ocean marine lines,  of which  substantial  amounts were ceded under various
reinsurance agreements, accounted for the increase.

         Accumulated other  comprehensive  income decreased to $9.9 million from
$19.4  million in 1998 and  principally  reflects  the adverse  impact of higher
interest  rates  in 1999 on the  Company's  market  value  of its  fixed  income
portfolio.

1998 as Compared to 1997
------------------------

         Net income  decreased to $18.5 million for the year ended  December 31,
1998,  from  $26.4  million  for the  prior  year.  Diluted  earnings  per share
decreased to $1.91 in 1998 as compared to $2.67 in 1997. Operating income, which
excludes realized  investment gains, was $12.9 million in 1998 compared to $19.6
million in 1997.  Operating  earnings per share on a diluted  basis was $1.33 in
1998 compared with $1.98 in 1997.

         The Company's net premiums earned decreased to $76.0 million in 1998 as
compared  to $87.5  million  in 1997.  Premiums  earned in 1998  reflected  very
competitive  markets across all lines of business,  premiums from Syndicate 1265
and the effects of two transactions involving the assumption of premiums.

         Ocean marine earned premiums increased by 20% in 1998 compared to 1997.
The  increase  resulted  from a  reinsurance  transaction  involving  a one-time
assumption  of  approximately  $14.2  million of  premiums  that  emanated  from
Syndicate 1265, which commenced  operations in 1998.  Syndicate 1265 contributed
an additional  $3.6 million in gross direct ocean marine  writings in 1998.  The
domestic  insurance  companies  reported a 9%  decrease  in earned  premiums  as
competition remained intense and adversely affected premium rates.

         Collectively,  other  liability  and other  premiums  earned were $14.0
million in 1998 compared to $4.3 million in 1997. The increase resulted from the
second  reinsurance  transaction in 1998 that included a one-time  assumption of
approximately  $10.5 million of miscellaneous  casualty net premiums.  Excluding
the  effect  of  this   transaction,   premiums   earned  would  have  decreased
approximately  22% in 1998  primarily  as a result of the soft  casualty  market
which led to a decline in premium production.

         The  aviation  line of business  was most  affected by the  competitive
market,  with gross  writings  down by 20%,  and  coupled  with the  purchase of
additional reinsurance protection resulted in premiums earned decreasing to $2.0
million in 1998  compared  with  $32.6  million  in 1997.  Obtaining  additional
reinsurance  protection is consistent with the Company's  strategy of minimizing
risk and  preserving  capital as the  underwriting  climate  for gross  premiums
remained  soft in 1998. In addition,  large  aviation  gross losses  resulted in
additional  reinsurance  reinstatement  costs of approximately $3.7 million that
further contributed to the decline in premiums.

         Inland marine gross premium  writings  increased 15% to $1.3 million in
1998 due in large  part to  writing  policies  that are  ancillary  to its ocean
marine  risks.  Earned  premiums  were  negative  due to  reinsurance  costs for
catastrophe  protection,  reinstatement costs, and quota share reinsurance which
collectively amounted to approximately $1.6 million.


                                       19
<PAGE>


         Losses and loss  adjustment  expenses  incurred as a percentage  of net
premiums  earned were 66.4% for the year ended  December 31, 1998 as compared to
58.0% for the prior year.

         The ocean marine loss ratio for Syndicate 1265's assumption of premiums
in 1998 was  approximately 94% and had the effect of increasing the overall loss
ratio  significantly.  Absent such  business,  the ocean marine loss ratio would
have been  approximately 54% as compared to 57% for the prior year. The domestic
insurance companies recorded favorable net loss experience in the Company's core
ocean marine line largely due to lower retention levels per loss.

         The other  liability loss ratio  increased to 96% from 91% in 1997. The
assumption  of  miscellaneous  net  casualty  premiums in 1998 was  subsequently
commuted in the fourth  quarter of 1998 at a loss ratio of 77%.  Excluding  this
business, the loss ratio would have been approximately 152%. Adverse development
from prior year losses contributed to the increase.

         An  improvement  in the  frequency  of losses  and  favorable  net loss
development contributed to a lower loss ratio in the aviation line in 1998.

         Policy acquisition costs as a percentage of net premiums earned for the
year ended  December  31, 1998 were 13.3% as  compared  with 18.9% for the prior
year.  The  reduction in the ratio is due to the two  transactions  involving an
assumption of premiums in 1998. Excluding the effect of such business, the ratio
would have been approximately  19.7% for 1998. This ratio approximates the ocean
marine line of business ratio as those premiums represent a larger percentage of
total premiums in 1998 than in 1997.

         Net  investment  income in 1998  decreased by 2% to $20.8  million from
$21.3  million  in 1997 as a result of a  decrease  in  investment  yield in the
Company's fixed maturity portfolio caused by additional  purchases of tax-exempt
securities and lower overall interest rates. Although investment yield was lower
in 1998,  Syndicate 1265's  operations  contributed to a larger average invested
asset base in 1998.

         Commission  income in 1998 was $591,448 as compared to  $1,438,606  for
1997.  The prior  year  included  larger  profit  commissions  from  reinsurance
transactions in the aviation and ocean marine lines of business.

         General and administrative expenses increased by 28% in 1998 over 1997.
The increase  included  operating  expenses from Syndicate 1265.  Also,  certain
one-time  expenses were incurred in connection  with the  assumption of premiums
and the  formation  of  Syndicate  1265.  Lastly,  contributing  to the  overall
increase were expenses associated with two employee benefit plans adopted by the
Board of Directors in 1998.

         Interest  expense  decreased 5% for the year ended December  31,1998 to
$1.4  million  primarily  as a result of a decrease  in average  loan  principal
outstanding.

         The Company  was able to realize  investment  gains of $8.6  million in
1998 mainly as a result of the sale of appreciated equity securities in 1998.

         The  Company's  effective  tax rate for 1998 was 19.1% as  compared  to
25.6%  for  1997.  Taxable  income  was  greater  in 1997 as a result  of larger
underwriting  profits  and  realized  investment  gains.  The  decrease  in  the
effective  rate was also due to increased  tax-exempt  income as a percentage of
pre-tax income in 1998.

Liquidity and Capital Resources
-------------------------------

         The Company  monitors cash and short-term  investments in order to have
an adequate  level of funds  available  to satisfy  claims and  expenses as they
become due. As of December 31, 1999, the Company's assets included approximately
$28.8 million in cash and  short-term  investments.  The primary  sources of the
Company's  liquidity are funds  generated  from insurance  premiums,  investment
income and maturing or liquidating investments.

         Historically,  cash flows provided by operating activities were used in
investing and financing  activities.  In 1997 cash inflows  increased as premium
rates were higher in the ocean marine and aviation  lines.  Cash flows were used
in operating  activities in 1999 and 1998 as further  declines in premium rates,
increases in ceded reinsurance premium costs


                                       20
<PAGE>


and  increases in gross  severity  claims  negatively  affected  cash flows from
operations.  The  Company's  maturing book of casualty  business also  adversely
affected cash flows.

         Investing  and financing  activities  occurred as a result of utilizing
the  Company's   revolving  credit  agreement  and  unsecured  credit  facility.
Additional  borrowings of  approximately  $5,000,000 and $9,520,000 were made in
1998 and 1997,  respectively,  to assist in the  payment of gross  losses of the
Company and to repurchase  the  Company's  Common  Stock.  Repayments  under the
Company's existing loan were made at $1,250,000 per quarter through December 31,
1999 and borrowings  under the unsecured credit facility were fully repaid after
collecting recoverables due from reinsurers on such losses.

         In 1998, the Company  entered into an interest rate swap agreement (the
"agreement")  with a bank for purposes of hedging its interest  rate risk on its
existing bank loan.  The  agreement  requires the Company to pay interest to the
bank  at a rate  of  6.50%  on  the  original  notional  amount  outstanding  of
$22,500,000,  which is subsequently adjusted quarterly by notional reductions of
$1,250,000.  The bank is  required  to pay the  Company,  on the  same  notional
amounts  outstanding,  an  amount  equal to the  three  month US  Dollar  London
Interbank  Offered Rate plus .65% which is reset on a quarterly basis.  Interest
expense recorded under the agreement was $91,462 in 1999 and $44,719 in 1998.

         The  Company  adheres  to  investment  guidelines  set by  the  Finance
Committee  of  the  Board  of   Directors.   The   investment   guidelines   are
conservatively  designed to provide the Company with adequate capital growth and
sufficient liquidity to meet existing obligations. Such guidelines consider many
factors including anticipated tax position and regulatory requirements.

         The Company  maintains a large  position in  investments  of bonds from
various  states  and  municipalities.  Such  securities  receive  favorable  tax
treatment  under  existing  tax  laws.  The  investment  position  is  monitored
regularly,  and as a result,  the Company has  reduced  its  investment  in such
securities after consideration of the alternative minimum tax.

         Under the Common Stock  Repurchase Plan, the Company may purchase up to
$55,000,000 of the Company's  issued and  outstanding  shares of common stock on
the open market. As of December 31, 1999, the Company had repurchased a total of
2,124,082 shares of common stock at a total cost of approximately $38,560,659 at
market prices ranging from $13.69 to $28.81 per share.

         NYMAGIC's principal source of cash flow is dividends from its insurance
company  subsidiaries  which  is  used  to fund  operating  expenses,  including
interest expense, loan repayments and payment of dividends to shareholders.  The
Company's domestic insurance company  subsidiaries are limited by statute in the
amount of dividends  that may be declared or paid during a year.  The limitation
restricts  dividends  paid or  declared  to the  lower of 10% of  policyholders'
surplus or 100% of net  investment  income as defined  under New York  insurance
law. The limitations on dividends from the insurance  company  subsidiaries  are
not  expected to have an impact on the  Company's  ability to meet  current cash
obligations  or  materially  limit  the  current  payment  of  dividends  to the
Company's shareholders.  Dividends can be paid from Syndicate 1265 to the extent
solvency  margins are maintained and after the closing of a calendar year, which
occurs three years following each calendar year.

Other matters
-------------

         In 1999,  Vincent  T.  Papa,  a former  President  and Chief  Executive
Officer of the Company, filed suit in the New York Supreme Court seeking damages
from the Company based upon alleged  breaches by the Company of its  obligations
under an employment  agreement with Mr. Papa. The Company intends  vigorously to
defend itself against such claims and believes it has no further  obligations to
Mr. Papa.

Effect of recent accounting pronouncements
------------------------------------------

         Statement of Financial  Accounting  Standards No. 133,  "Accounting for
Derivative  Instruments and Hedging Activities",  ("SFAS 133") was issued by the
Financial  Accounting  Standards  Board ("FASB") in June 1998. SFAS 133 requires
derivatives to be recorded on the balance sheet at fair value.  Derivatives  not
considered as hedges must be recorded at fair value with adjustments recorded in
the income  statement.  For derivatives that qualify as a hedge,  changes in the
fair value of the derivative are offset against changes in the fair value of the
hedged assets or liabilities  and are  recognized in the income  statement or in
other  comprehensive  income  depending on the nature of the hedge.  SFAS 133 is
effective for years beginning after June 15, 1999.


                                       21
<PAGE>


         Statement of Financial  Accounting  Standards No. 137,  "Accounting for
Derivative Instruments and Hedging  Activities-Deferral of the Effective Date of
FASB Statement No. 133",  ("SFAS 137") was issued by the FASB in June 1999. SFAS
137 defers the effective date of SFAS 133 to fiscal years  beginning  after June
15, 2000.

         The Company uses derivatives, in the form of an interest rate swap, for
hedging  purposes as part of its interest rate  management.  The Company has not
yet determined the effect of SFAS 133 on its financial statements.

         The Company  adopted AICPA  Statement of Position 97-3,  "Accounting by
Insurance and other Enterprises for Insurance-Related Assessments," ("SOP 97-3")
effective  January 1, 1999.  This  statement  provides  guidance  for  reporting
guaranty fund and other insurance related assessments.  The adoption of SOP 97-3
did not have a  material  impact  on the  Company's  results  of  operations  or
financial condition.

         The Company adopted AICPA  Statement of Position 98-1,  "Accounting for
the Costs of Computer  Software  Developed or Obtained for Internal  Use," ("SOP
98-1") effective  January 1, 1999. SOP 98-1 provides  standards for capitalizing
certain  internal  costs  incurred  to develop  software  used  internally.  The
adoption of SOP 98-1 did not have a material impact on the Company's  results of
operations or financial condition.

Inflation
---------

         Periods of inflation  have  prompted the pools,  and  consequently  the
Company,  to react  quickly to actual or  potential  imbalances  between  costs,
including  claim  expenses,  and  premium  rates.  These  imbalances  have  been
corrected mainly through improved underwriting  controls,  responsive management
information systems and frequent review of premium rates and loss experience.

         Inflation also affects the final  settlement  costs of claims which may
not be paid for  several  years.  The longer a claim  takes to settle,  the more
significant  the impact of  inflation  on final  settlement  costs.  The Company
periodically reviews outstanding claims and adjusts reserves for the pools based
on a number of factors, including inflation.

ITEM  7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         Market risk  includes the potential for future losses due to reasonably
possible changes in the fair value of financial instruments which relates mainly
to  the  Company's  investment  portfolio.   Those  risks  associated  with  the
investment  portfolio  include the  effects of  exposure  to adverse  changes in
interest rates, credit quality, equity prices and foreign exchange rates.

         The largest  market risk to the Company  relates to interest rate risk.
Interest  rate risk  includes the changes in the fair value of fixed  maturities
based upon changes in interest  rates.  This risk is considered  when developing
benchmarks for evaluating the Company's portfolio. Such benchmarks also consider
the overall  duration of the Company's  loss  reserves.  Through the matching of
cash flows from future  maturing  investments and the ultimate payout pattern of
loss reserves,  the Company believes it can minimize the effect of interest rate
risk.

         The following tabular presentation  outlines the expected cash flows of
fixed  maturities  available  for sale for each of the next  five  years and the
aggregate  cash flows  expected for the remaining  years  thereafter  based upon
maturity dates. Fixed maturities include taxable and tax-exempt  securities with
applicable  weighted  average  interest  rates.  Taxables also include  mortgage
backed  securities  that have  prepayment  features  which may cause actual cash
flows to differ from those based on maturity date.

<TABLE>
<CAPTION>

                                          Future cash flows of expected principal amounts
                                          -----------------------------------------------
                                                       (Dollars in millions)
                                                                                    Total    Total
                                                                          There-  Amortized  Fair
Fixed maturities                  2000    2001    2002    2003    2004    after      Cost    Value
----------------                  ----    ----    ----    ----    ----    ------     ----    -----

<S>                               <C>     <C>     <C>     <C>     <C>     <C>       <C>       <C>
Tax-exempt ...................    $ 11    $ 10    $ 13    $ 27    $ 13    $ 80      $154      $153
         Average interest rate     6.5%    5.8%    5.6%    5.9%    5.6%    6.3%       --        --

Taxables .....................     --       28       2       7      40      70       147       144
         Average interest rate     --      6.4%    5.6%    5.6%    6.5%    7.2%       --        --
                                  ----    ----    ----    ----    ----    ----      ----      ----

Total ........................    $ 11    $ 38    $ 15    $ 34    $ 53    $150      $301      $297

</TABLE>


                                       22
<PAGE>


         Credit  quality  risk  includes  the risk of default by issuers of debt
securities.  The Company's investment guidelines are conservatively designed and
prevent the investment in securities below an A rating. Overall, the Company has
maintained  fixed  maturities  with an average credit quality rating of AA as of
December 31, 1999. The Company's exposure to credit risk is considered minimal.

         Foreign currency risk includes  exposure to changes in foreign exchange
rates  on  the  market  value  and  interest   income  of  foreign   denominated
investments.  Syndicate 1265 operations  maintain  investments in British Pounds
Sterling with a US equivalent of $1.0 million to the extent  business is derived
from  transactions in such currency.  The investment of cash flows from business
written in Pounds  Sterling in securities of the same foreign  currency,  should
ultimately  mitigate the risk associated with changes in foreign  exchange rates
with respect to British Pounds Sterling.

         Equity risk includes the potential  loss from changes in the fair value
of equity securities.  The Company's equity securities are traded on major stock
exchanges and are highly liquid.  The investment in such  securities are limited
by the Company's  investment  guidelines to 25% of statutory surplus in order to
minimize the impact of large changes in the stock market on its surplus.

         The Company  monitors market risks on a regular basis through  meetings
with  investment  advisors,  examining  the  existing  portfolio  and  reviewing
potential  changes in investment  guidelines.  The overall effect of which is to
allow  management to make informed  decisions  concerning the impact that market
risks have on the portfolio.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

         The consolidated financial statements required in response to this item
are included as part of Item 14(a) of this report.

ITEM 9.  CHANGES  IN  AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
         FINANCIAL DISCLOSURE.


                  None.


                                       23
<PAGE>


                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

         The  information  required by this Item is  incorporated  by  reference
herein  from  NYMAGIC's   Proxy   Statement  for  the  2000  Annual  Meeting  of
Shareholders.

ITEM 11.  EXECUTIVE COMPENSATION.

         The  information  required by this Item is  incorporated  by  reference
herein  from  NYMAGIC's   Proxy   Statement  for  the  2000  Annual  Meeting  of
Shareholders.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN
         BENEFICIAL OWNERS AND MANAGEMENT.

         The  information  required by this Item is  incorporated  by  reference
herein  from  NYMAGIC's   Proxy   Statement  for  the  2000  Annual  Meeting  of
Shareholders.

ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         The  information  required by this Item is  incorporated  by  reference
herein  from  NYMAGIC's   Proxy   Statement  for  the  2000  Annual  Meeting  of
Shareholders.

                                     PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

         (a)      1.       Financial Statements
                           --------------------

                           The  list  of  financial  statements  appears  in the
                           accompanying index on page 29.

                  2.       Financial Statement Schedules
                           -----------------------------

                           The list of financial  statement schedules appears in
                           the accompanying index on page 29.

                  3.       Exhibits
                           --------


                  3.1.     Charter. (Incorporated by reference to Exhibit 3-1 to
the Registrant's Registration Statement No. 33-27665.)

                  3.3.     Amended and Restated By-laws.

                  4.0.     Specimen      Certificate     of     common     stock
(Incorporated    by   reference   to Exhibit 4 to the  Registrant's Registration
Statement No. 33-27665.)

         10.2. Restated Management Agreement dated as of January 1, 1986, by and
among Mutual  Marine  Office,  Inc. and  Arkwright-Boston  Manufacturers  Mutual
Insurance  Company,  Utica Mutual  Insurance  Company,  Lumber Mutual  Insurance
Company,  the Registrant and  Pennsylvania  National Mutual  Casualty  Insurance
Company  (Incorporated by reference to Exhibit 10.2 of the  Registrant's  Annual
Report Form 1O-K for the fiscal year ended  December 31, 1986  (Commission  File
No. 1-11238).)

         10.2.2.  Amendment  to  Restated  Management  Agreement,  dated  as  of
December 30, 1988,  and among Mutual Marine  Office,  Inc. and Arkwright  Mutual
Insurance  Company,  Utica Mutual  Insurance  Company,  Lumber Mutual  Insurance
Company,  the Registrant and  Pennsylvania  National Mutual  Casualty  Insurance
Company.  (Incorporated  by reference  to Exhibit  10.2.2.  of the  Registrant's
Report on Form 8-K dated January 6, 1989 (Commission File No. 1-11238).)

         10.2.3.  Amendment  to  Restated  Management  Agreement,  dated  as  of
December 31, 1990,  and among Mutual Marine  Office,  Inc. and Arkwright  Mutual
Insurance Company, Utica Mutual Insurance Company, the Registrant


                                       24
<PAGE>


and Pennsylvania  National Mutual Casualty Insurance  Company.  (Incorporated by
reference to Exhibit 10.2.3. of the Registrant's  Annual Report on Form 10-K for
the fiscal year ended December 31, 1992 (Commission File No. 1-11238).)

         10.4. Restated Management Agreement dated as of January 1, 1986, by and
among Mutual  Inland  Marine  Office,  Inc. and  Arkwright-Boston  Manufacturers
Mutual  Insurance  Company,  Utica  Mutual  Insurance  Company,   Lumber  Mutual
Insurance  Company,  the Registrant and  Pennsylvania  National  Mutual Casualty
Insurance Company (Incorporated by reference to Exhibit 10.4 of the Registrant's
Annual Report Form 10-K for the fiscal year ended December 31, 1986  (Commission
File No. 1-11238).)

         10.4.2.  Amendment  to  Restated  Management  Agreement,  dated  as  of
December 30, 1988,  and among Mutual  Inland Marine  Office,  Inc. and Arkwright
Mutual  Insurance  Company,  Utica  Mutual  Insurance  Company,   Lumber  Mutual
Insurance  Company,  the Registrant and  Pennsylvania  National  Mutual Casualty
Insurance   Company   (Incorporated  by  reference  to  Exhibit  10.4.2  of  the
Registrant's  Report on Form 8-K,  dated  January 6, 1989  (Commission  File No.
1-11238).)

         10.4.3.  Amendment  to  Restated  Management  Agreement,  dated  as  of
December 31, 1990, by and among Mutual Inland Marine Office,  Inc. and Arkwright
Mutual Insurance  Company,  Utica Mutual Insurance  Company,  the Registrant and
Pennsylvania  National  Mutual  Casualty  Insurance  Company.  (Incorporated  by
reference to Exhibit 10.4.3. of the Registrant's  Annual Report on Form 10-K for
the fiscal year ended December 31, 1992 (Commission File No. 1-11238).)

         10.6. Restated Management Agreement dated as of January 1, 1986, by and
among  Mutual   Marine  Office  of  the  Midwest,   Inc.  and   Arkwright-Boston
Manufacturers Mutual Insurance Company,  Utica Mutual Insurance Company,  Lumber
Mutual  Insurance  Company,  the Registrant  and  Pennsylvania  National  Mutual
Casualty  Insurance  Company.  (Incorporated by reference to Exhibit 10.6 of the
Registrant's  Annual Report on Form 10-K for the fiscal year ended  December 31,
1986 (Commission File No. 1-11238).)

         10.6.2. Amendment to Restated Management Agreement dated as of December
30, 1988, by and among Mutual  Marine Office of the Midwest,  Inc. and Arkwright
Mutual  Insurance  Company,  Utica  Mutual  Insurance  Company,   Lumber  Mutual
Insurance  Company,  the Registrant and  Pennsylvania  National  Mutual Casualty
Insurance  Company.   (Incorporated  by  reference  to  Exhibit  10.6.2  of  the
Registrant's  Report on Form 8-K,  dated  January 6, 1989  (Commission  File No.
1-11238).)

         10.6.3. Amendment to Restated Management Agreement dated as of December
31, 1990, by and among Mutual  Marine Office of the Midwest,  Inc. and Arkwright
Mutual Insurance  Company,  Utica Mutual Insurance  Company,  the Registrant and
Pennsylvania  National  Mutual  Casualty  Insurance  Company.  (Incorporated  by
reference to Exhibit 10.6.3. of the Registrant's  Annual Report on Form 10-K for
the fiscal year ended December 31, 1992 (Commission File No. 1-11238).)

         10.8. Restated Management Agreement dated as of January 1, 1986, by and
among Pacific  Mutual Marine  Office,  Inc. and  Arkwright-Boston  Manufacturers
Mutual  Insurance  Company,   Lumber  Mutual  Insurance  Company,  Utica  Mutual
Insurance  Company,  the Registrant and  Pennsylvania  National  Mutual Casualty
Insurance   Company.   (Incorporated   by  reference  to  Exhibit  10.8  of  the
Registrant's  Annual Report on Form 10-K for the fiscal year ended  December 31,
1986 (Commission File No. 1-11238).)

         10.8.2. Amendment to Restated Management Agreement dated as of December
30, 1988, by and among Pacific Mutual Marine Office,  Inc. and Arkwright  Mutual
Insurance  Company,  Lumber Mutual  Insurance  Company,  Utica Mutual  Insurance
Company,  the Registrant and  Pennsylvania  National Mutual  Casualty  Insurance
Company. (Incorporated by reference to Exhibit 10.8.2 of the Registrant's Report
on Form 8-K, dated January 6, 1989 (Commission File No. 1-11238).)

         10.8.3. Amendment to Restated Management Agreement dated as of December
31, 1990, by and among Pacific Mutual Marine Office,  Inc. and Arkwright  Mutual
Insurance  Company,   Utica  Mutual  Insurance   Company,   the  Registrant  and
Pennsylvania  National  Mutual  Casualty  Insurance  Company.  (Incorporated  by
reference to Exhibit 10.8.3. of the Registrant's  Annual Report on Form 10-K for
the fiscal year ended December 31, 1992 (Commission File No. 1-11238).)

         10.9 1991 Option Plan  (Incorporated  by reference to the  Registrant's
Proxy Statement for its 1991 Annual Meeting of Shareholders (Commission File No.
1-11238).)

         10.10 Form of Indemnification Agreement.


                                       25
<PAGE>


         10.11 1999 NYMAGIC, INC. Phantom Stock Plan.

         21. Subsidiaries of the Registrant.

         23. Consent of KPMG LLP.

         27. Financial Data Schedule.

         (b)      Reports on Form 8-K
                  -------------------

                  None.


                                       26
<PAGE>


                                   SIGNATURES

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

                                               NYMAGIC, INC.
                                               (Registrant)



                                               By: /s/ ROBERT W. BAILEY
                                                  -----------------------------
                                                  Robert W. Bailey
                                                  Chief Executive Officer


                                               Date: March 30, 2000
                                                     -----------------



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


Name                             Title                     Date
----                             -----                     ----

/s/ JOHN R. ANDERSON             Director                  March 30, 2000
-------------------------
John R. Anderson


/s/ ROBERT W. BAILEY             Director, Chief           March 30, 2000
-------------------------        Executive Officer
Robert W. Bailey                 and Chairman


/s/ JONATHAN S. BANNETT          Director                  March 30, 2000
-------------------------
Jonathan S. Bannett


/s/ JOHN N. BLACKMAN, JR.        Director                  March 30, 2000
-------------------------
John N. Blackman, Jr.


/s/ MARK W. BLACKMAN             Director                  March 30, 2000
-------------------------
Mark W. Blackman


/s/ JEAN H. GOULDING             Director                  March 30, 2000
-------------------------
Jean H. Goulding







                                       27
<PAGE>



Name                             Title                     Date
----                             -----                     ----

/s/ JOHN KEAN, JR.               Director                  March 30, 2000
-------------------------
John Kean, Jr.


/s/ COSTA N. KENSINGTON          Director                  March 30, 2000
-------------------------
Costa N. Kensington


/s/ CHARLES A. MITCHELL          Director                  March 30, 2000
-------------------------
Charles A. Mitchell


/s/ WILLIAM R. SCARBROUGH        Director                  March 30, 2000
-------------------------
William R. Scarbrough


/s/ WILLIAM A. THORNE            Director                  March 30, 2000
-------------------------
William A. Thorne


/s/ BENNETT H. TOLLEFSON         Director                  March 30, 2000
-------------------------
Bennett H. Tollefson


/s/ LOUISE B. TOLLEFSON          Director                  March 30, 2000
-------------------------
Louise B. Tollefson


/s/ EDWARD J. WAITE III          Director                  March 30, 2000
-------------------------
Edward J. Waite III


/s/ GLENN R. YANOFF              Director                  March 30, 2000
-------------------------
Glenn R. Yanoff


/s/ THOMAS J. IACOPELLI          Principal Accounting      March 30, 2000
-------------------------        Officer and Chief
Thomas J. Iacopelli              Financial Officer




                                       28
<PAGE>






                                  NYMAGIC, INC.
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

     Independent Auditors' Report.......................................     30

     Consolidated Balance Sheets........................................     31

     Consolidated Statements of Income..................................     32

     Consolidated Statements of Shareholders' Equity....................     33

     Consolidated Statements of Cash Flows..............................     34

     Notes to Consolidated Financial Statements.........................     35

     Financial Statement Schedule II....................................     53

     Financial Statement Schedule V.....................................     55

     Financial Statement Schedule VI....................................     56





                                       29
<PAGE>






                          INDEPENDENT AUDITORS' REPORT
                          ----------------------------

The Board of Directors and Shareholders
NYMAGIC, INC.:

     We have audited the  accompanying  consolidated  balance sheets of NYMAGIC,
INC.  and  subsidiaries  as of  December  31,  1999 and  1998,  and the  related
consolidated statements of income,  shareholders' equity and cash flows for each
of the years in the  three-year  period ended  December 31, 1999.  In connection
with our audits of the consolidated  financial statements,  we have also audited
the financial  statement  schedules as listed in the accompanying  index.  These
consolidated  financial  statements  and financial  statement  schedules are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these  consolidated  financial  statements  and  financial  statement
schedules based on our audits.

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

     In our opinion,  the consolidated  financial  statements  referred to above
present fairly, in all material respects, the consolidated financial position of
NYMAGIC,  INC.  and  subsidiaries  as of  December  31,  1999 and 1998,  and the
consolidated  results of their  operations  and their cash flows for each of the
years in the  three-year  period  ended  December  31, 1999 in  conformity  with
generally  accepted  accounting  principles.  Also, in our opinion,  the related
financial  statement  schedules,  when  considered  in  relation  to  the  basic
consolidated  financial  statements  taken as a whole,  present  fairly,  in all
material respects, the information set forth therein.


                            /s/ KPMG LLP
                            KPMG LLP
New York, New York
February 15, 2000


                                       30
<PAGE>


<TABLE>
<CAPTION>

                                  NYMAGIC, INC
                           CONSOLIDATED BALANCE SHEETS

                                                                                         December 31,
                                                                               ------------------------------
                                                                                    1999             1998
                                                                               -------------    -------------

                                     ASSETS
<S>                                                                            <C>              <C>
Investments:
Fixed maturities available for sale at fair value
   (amortized cost $300,687,622 and $342,583,525) ...........................  $ 297,293,353    $ 353,403,303
Equity securities at fair value
   (cost $52,922,679 and $54,368,172) .......................................     71,681,895       73,418,473
Short-term investments ......................................................     27,734,786       16,200,606
                                                                               -------------    -------------
    Total investments........................................................    396,710,034      443,022,382
                                                                               -------------    -------------
Cash.........................................................................      1,016,945        1,583,390
Accrued investment income ...................................................      5,195,227        6,189,866
Premiums and other receivables, net .........................................     56,003,308       41,422,913
Reinsurance receivables .....................................................    255,761,760      199,730,802
Deferred policy acquisition costs..........................................        4,850,587        4,277,430
Prepaid reinsurance premiums.............................................         28,597,355       19,393,546
Deferred income taxes .......................................................      9,311,335        5,811,741
Property, improvements & equipment, net .....................................      1,792,876        2,341,021
Other assets ................................................................      5,064,631        6,547,403
                                                                               -------------    -------------
    Total assets ............................................................  $ 764,304,058    $ 730,320,494
                                                                               =============    =============

                                   LIABILITIES

Unpaid losses and loss adjustment expenses ..................................  $ 425,469,125    $ 401,584,146
Reserve for unearned premiums................................................     56,033,281       46,878,550
Ceded reinsurance payable ...................................................     29,445,275       23,795,992
Notes payable ...............................................................     12,458,413       17,458,413
Other liabilities ...........................................................      8,787,820       11,454,977
Dividends payable ...........................................................        967,785          968,549
                                                                               -------------    -------------
    Total liabilities........................................................    533,161,699      502,140,627
                                                                               -------------    -------------

                              SHAREHOLDERS' EQUITY

Common stock.................................................................     15,017,892       15,017,892
Paid-in capital .............................................................     27,935,907       28,029,410
Accumulated other comprehensive income ......................................      9,931,438       19,436,591
Retained earnings............................................................    220,736,910      208,198,204
                                                                               -------------    -------------
                                                                                 273,622,147      270,682,097
Treasury stock, at cost, 5,340,040 and 5,332,400 shares .....................    (42,479,788)     (42,502,230)
                                                                               -------------    -------------
    Total shareholders' equity ..............................................    231,142,359      228,179,867
                                                                               -------------    -------------

    Total liabilities and shareholders' equity ..............................  $ 764,304,058    $ 730,320,494
                                                                               =============    =============
</TABLE>





         The  accompanying  notes  are an  integral  part of these  consolidated
financial statements.




                                       31
<PAGE>



<TABLE>
<CAPTION>

                                  NYMAGIC, INC.
                        CONSOLIDATED STATEMENTS OF INCOME

                                                                   Year ended December 31,
                                                            -------------------------------------
                                                            1999            1998             1997
                                                            ----            ----             ----
  Revenue:
<S>                                                    <C>             <C>              <C>
    Net premiums earned ..........................     $  56,155,156   $  76,022,663    $  87,536,906
    Commission income ............................         1,956,276         591,448        1,438,606
    Net investment income ........................        18,641,619      20,803,433       21,325,065
    Realized investment gains,net ................        12,503,731       8,615,058       10,425,133
    Other income .................................           237,701         395,560          292,918
                                                       -------------   -------------    -------------
      Total revenues .............................        89,494,483     106,428,162      121,018,628
                                                       -------------   -------------    -------------

  Expenses:
    Losses and loss adjustment expenses incurred..        36,853,012      50,512,063       50,768,248
    Policy acquisition expenses ..................        11,077,382      10,107,327       16,582,623
    General and administrative expenses ..........        19,326,472      21,531,287       16,763,699
    Interest expense .............................         1,057,993       1,373,408        1,449,770
                                                       -------------   -------------    -------------
      Total expenses .............................        68,314,859      83,524,085       85,564,340
                                                       -------------   -------------    -------------

  Income before income taxes .....................        21,179,624      22,904,077       35,454,288
                                                       -------------   -------------    -------------
    Income tax provision:
    Current ......................................         3,189,162       5,250,123        8,962,799

    Deferred .....................................         1,577,201        (869,462)         123,749
                                                       -------------   -------------    -------------
      Total income taxes .........................         4,766,363       4,380,661        9,086,548
                                                       -------------   -------------    -------------

    Net income ...................................     $  16,413,261   $  18,523,416    $  26,367,740
                                                       =============    =============   =============


  Weighted average number of shares of
    common stock outstanding-basic ...............         9,687,466       9,678,802        9,848,959
                                                       =============   =============    =============

  Basic earnings per share .......................     $        1.69   $        1.91    $        2.68
                                                       =============   =============    =============

  Weighted average number of shares of
    common stock outstanding-diluted .............         9,687,466       9,705,433        9,871,586
                                                       =============   =============    =============

  Diluted earnings per share .....................     $        1.69   $        1.91    $        2.67
                                                       =============   =============    =============
</TABLE>



             The accompanying  notes are an integral part of these  consolidated
financial statements.


                                       32
<PAGE>


<TABLE>
<CAPTION>
                                  NYMAGIC, INC.
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

                                                                                   Year ended December 31,
                                                                      -----------------------------------------------
                                                                           1999             1998             1997
                                                                      -------------    -------------    -------------
Retained earnings:
<S>                                                                   <C>              <C>              <C>
    Balance, beginning of year ....................................   $ 208,198,204    $ 193,547,346    $ 171,089,462
    Net income ....................................................      16,413,261       18,523,416       26,367,740
    Dividends declared ............................................      (3,874,555)      (3,872,558)      (3,909,856)
                                                                      -------------    -------------    -------------
         Balance, end of year......................................     220,736,910      208,198,204      193,547,346
                                                                      =============    =============    =============

Accumulated other comprehensive income:

    Balance, beginning of year ....................................      19,436,591       12,931,785        8,150,910
    Unrealized (loss) gain on securities,
          net of reclassification adjustment ......................      (9,428,336)       6,489,767        4,774,875
    Foreign currency translation adjustments ......................         (76,817)          15,039            6,000
                                                                      -------------    -------------    -------------
    Other comprehensive income (loss) .............................      (9,505,153)       6,504,806        4,780,875
                                                                      -------------    -------------    -------------
         Balance, end of year .....................................       9,931,438       19,436,591       12,931,785
                                                                      =============    =============    =============

Common stock:
    Balance, beginning of year ....................................      15,017,892       14,991,992       14,911,992
    Shares issued .................................................            --             25,900           80,000
                                                                      -------------    -------------    -------------
         Balance, end of year .....................................      15,017,892       15,017,892       14,991,992
                                                                      =============    =============    =============

Paid-in capital:
    Balance, beginning of year.....................................      28,029,410       27,529,877       26,258,259
    Shares issued and other .......................................         (93,503)         499,533        1,271,618
                                                                      -------------    -------------    -------------
         Balance, end of year .....................................      27,935,907       28,029,410       27,529,877
                                                                      =============    =============    =============

Treasury stock, at cost:
    Balance, beginning of year ....................................     (42,502,230)     (42,481,657)     (31,558,897)
    Net repurchase of common stock ................................          22,442          (20,573)     (10,922,760)
                                                                      -------------    -------------    -------------
         Balance, end of year......................................     (42,479,788)     (42,502,230)     (42,481,657)
                                                                      =============    =============    =============

Total Shareholders' Equity ........................................   $ 231,142,359    $ 228,179,867    $ 206,519,343
                                                                      =============    =============    =============

Comprehensive income:
    Net income ....................................................      16,413,261       18,523,416       26,367,740
    Other comprehensive income (loss) .............................      (9,505,153)       6,504,806        4,780,875
                                                                      -------------    -------------    -------------
         Comprehensive income......................................       6,908,108    $  25,028,222    $  31,148,615
                                                                      =============    =============    =============


                                                                                     Number of Shares
                                                                                     ----------------
Common stock, par value $1 each:

    Issued, beginning of year .....................................      15,017,892       14,991,992       14,911,992
    Shares Issued .................................................            --             25,900           80,000
                                                                      -------------    -------------    -------------
         Issued, end of year.......................................      15,017,892       15,017,892       14,991,992
                                                                      =============    =============    =============

Common stock, authorized shares,
    par value $1 each .............................................      30,000,000       30,000,000       30,000,000
                                                                      =============    =============    =============

Common stock, shares outstanding ..................................       9,677,852        9,685,492        9,660,306
                                                                      =============    =============    =============

Dividends declared per share.......................................   $         .40    $         .40    $         .40
                                                                      =============    =============    =============
</TABLE>


         The  accompanying  notes  are an  integral  part of these  consolidated
financial statements.


                                       33
<PAGE>


                                  NYMAGIC, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                        Year ended December 31,
                                                                --------------------------------------
                                                                1999             1998             1997
                                                                ----             ----             ----

     Cash flows from operating activities:

<S>                                                        <C>              <C>              <C>
     Net income ......................................     $  16,413,261    $  18,523,416    $  26,367,740
                                                           -------------    -------------    -------------
     Adjustments to reconcile net income to
       net cash (used in) provided by operating
       activities:
       Provision for deferred taxes ..................         1,577,201         (869,462)         123,749
       Realized investment gains .....................       (12,503,731)      (8,615,058)     (10,425,133)
       Net bond amortization .........................         2,136,408        2,220,565        1,895,355
       Depreciation and other, net ...................           699,107          733,950          582,126
     Changes in:
       Premiums and other receivables ................       (14,580,395)        (787,749)      22,404,229
       Reinsurance receivables .......................       (56,030,958)     (24,072,850)      22,330,121
       Ceded reinsurance payable .....................         5,649,283       (3,511,137)       7,553,186
       Accrued investment income .....................           994,639          132,504         (362,173)
       Deferred policy acquisition costs .............          (573,157)       1,290,058        5,336,753
       Prepaid reinsurance premiums ..................        (9,203,809)       5,021,074      (13,852,407)
       Other assets ..................................         1,482,772       (1,677,794)      (1,523,783)
       Unpaid losses and loss adjustment expenses ....        23,884,979       13,182,598      (23,435,433)
       Reserve for unearned premiums .................         9,154,731       (8,309,731)     (11,463,652)
       Foreign currency translation adjustments ......           (76,817)          15,039            6,000
       Other liabilities .............................        (2,667,157)       4,392,882          660,632
                                                           -------------    -------------    -------------
           Total adjustments .........................       (50,056,904)     (20,855,111)        (170,430)
                                                           -------------    -------------    -------------
     Net cash (used in) provided by operating
      activities .....................................       (33,643,643)      (2,331,695)      26,197,310
                                                           -------------    -------------    -------------

     Cash flows from investing activities:

       Fixed maturities acquired .....................      (105,025,752)     (77,604,001)    (205,891,607)
       Equity securities acquired ....................       (60,300,853)     (51,440,490)     (50,578,073)
       Net (purchase) sale of short-term investments..       (11,540,504)       1,890,059          178,516
       Fixed maturities matured ......................        26,005,874       34,682,127       25,059,072
       Fixed maturities sold .........................       118,911,079       51,905,388      167,867,245
       Equity securities sold ........................        74,124,696       52,514,190       49,858,725
       Acquisition of property & equipment, net ......          (150,962)        (709,318)        (840,692)
                                                           -------------    -------------    -------------
     Net cash provided by (used in) investing
      activities .....................................        42,023,578       11,237,955      (14,346,814)
                                                           -------------    -------------    -------------

     Cash flows from financing activities:

       Proceeds from stock issuance and other ........           (93,503)         525,433        1,351,618
       Cash dividends paid to stockholders ...........        (3,875,319)      (3,870,040)      (3,958,130)
       Net repurchase of common stock ................            22,442          (20,573)     (10,922,760)
       Proceeds from borrowings ......................              --          5,000,000        9,520,000
       Loan principal payments .......................        (5,000,000)     (10,000,000)      (7,500,000)
                                                           -------------    -------------    -------------
       Net cash used in financing activities .........        (8,946,380)      (8,365,180)     (11,509,272)
                                                           -------------    -------------    -------------

       Net (decrease) increase in cash ...............          (566,445)         541,080          341,224
         Cash at beginning of year ...................         1,583,390        1,042,310          701,086
                                                           -------------    -------------    -------------
         Cash at end of year .........................     $   1,016,945    $   1,583,390    $   1,042,310
                                                           =============    =============    =============
</TABLE>



         The  accompanying  notes  are an  integral  part of these  consolidated
financial statements.


                                       34
<PAGE>


                                  NYMAGIC, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1)      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

         Nature of Operations
         --------------------

         NYMAGIC,  through its subsidiaries,  specializes in underwriting  ocean
marine, inland marine,  aviation and other liability insurance through insurance
pools  managed by Mutual  Marine  Office,  Inc.("MMO"),  Pacific  Mutual  Marine
Office, Inc. ("PMMO"), and Mutual Marine Office of the Midwest, Inc.("Midwest").
MMO, located in New York, PMMO located in San Francisco, and Midwest, located in
Chicago,   manage  the  insurance   pools  in  which  the  Company's   insurance
subsidiaries,  New York Marine And General Insurance Company ("New York Marine")
and Gotham Insurance Company ("Gotham"),  participate.  All premiums, losses and
expenses  are  prorated  among  pool  members  in  accordance  with  their  pool
participation  percentages.  Effective January 1, 1997, the Company increased to
100% its participation in the business produced by the pools.

         On  December  31,  1997,  the  Company  acquired  100% of the  stock of
Highgate Managing Agency, a Lloyd's of London  underwriting  agent for a nominal
amount and  renamed  the Company  MMO  Underwriting  Agency Ltd ("MMO UA").  The
acquisition was accounted for under the purchase method of accounting.  In 1997,
the Company formed MMO EU Ltd, a holding  company,  and MMO UK LTD, a Lloyd's of
London corporate vehicle for Lloyd's Syndicate #1265. The assets and liabilities
and results of operations of MMO EU, MMO UK and MMO UA (collectively referred to
as "Syndicate 1265") are included in the consolidated financial statements.

         Basis of Reporting
         ------------------

         The consolidated  financial  statements have been prepared on the basis
of generally  accepted  accounting  principles  which differ in certain material
respects  from  the  accounting  principles  prescribed  or  permitted  by state
insurance  regulatory  authorities  for the  Company's  two  domestic  insurance
subsidiaries.  The  principal  differences  recorded  under  generally  accepted
accounting  principles are deferred policy  acquisition  costs, an allowance for
doubtful accounts,  deferred income taxes and fixed maturities held for sale are
carried at fair value.

         The  preparation of financial  statements  requires  management to make
estimates that affect the reported amounts of assets, liabilities,  revenues and
expenses. Actual amounts could differ from those amounts previously estimated.

         Consolidation
         -------------

         The  consolidated  financial  statements  include  the  accounts of the
Company,  two insurance  subsidiaries,  New York Marine and Gotham, three agency
subsidiaries  hereinafter  collectively referred to as ("MMO") and the Company's
UK  operations.  Gotham is owned 25% by the Company and 75% by New York  Marine.
All other  subsidiaries are wholly owned by NYMAGIC.  All intercompany  accounts
and transactions have been eliminated in consolidation.

         Investments
         -----------

         Fixed  maturities  held for sale are  carried at fair value and include
those bonds where the Company's intent to carry such investments to maturity may
be  affected  in future  periods  by  changes  in market  interest  rates or tax
position.  Equity securities (common stocks and non-redeemable preferred stocks)
are  carried at fair  value.  Short-term  investments  are carried at cost which
approximates  fair  value.  Fair  value  is  based  upon  quotes  obtained  from
independent sources.

         Realized  investment  gains  and  losses  (determined  on the  basis of
specific  identified  cost)  also  include  any  declines  in  value  which  are
considered to be other than temporary.  Unrealized  appreciation or depreciation
of  investments,   net  of  related  deferred  income  taxes,  is  reflected  in
accumulated other comprehensive income in shareholders' equity.


                                       35
<PAGE>


                                  NYMAGIC, INC.
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

         Derivatives
         -----------

         In 1998,  an interest  rate  agreement was entered into for purposes of
hedging interest rate risk on the Company's existing note payable. Cash flows as
a result of the hedge are recorded as adjustments to interest expense.

         Premium and policy acquisition cost recognition
         -----------------------------------------------

         Premiums  and  policy  acquisition  costs are  reflected  in income and
expense on a monthly pro rata basis over the terms of the  respective  policies.
Accordingly,  unearned  premium  reserves  are  established  for the  portion of
premiums  written  applicable to unexpired  policies in force,  and  acquisition
costs,  consisting  mainly  of net  brokerage  commissions,  and  premium  taxes
relating to these unearned premiums are deferred to the extent recoverable.  The
Company has provided an  allowance  for  uncollectible  premium  receivables  of
$450,000  and  $650,000 as of  December  31,  1999 and 1998,  respectively.  The
determination  of  acquisition  costs to be deferred  considers  historical  and
current loss and loss adjustment expense experience. Consideration is also given
to  anticipated  investment  income in measuring the carrying  value of deferred
policy acquisition costs.

         Revenue recognition
         -------------------

         Management  commission  income on policies written by the MMO insurance
pools is recognized  primarily as of the effective date of the policies  issued.
Adjustments to the policies,  resulting principally from changes in coverage and
audit adjustments, are recorded in the period reported.

         Contingent  profit  commission  revenue  derived  from the  reinsurance
transactions  of the  insurance  pools is  recognized  when such amount  becomes
billable to the respective reinsurers.

         Reinsurance
         -----------

         The Company's insurance subsidiaries participate in various reinsurance
agreements on both an assumed and ceded basis  through the MMO insurance  pools.
The Company uses various types of reinsurance including  quota-share,  excess of
loss  and  facultative  agreements  to  spread  the risk of loss  among  several
reinsurers  and to limit its  exposure  from losses on any one  occurrence.  Any
recoverable  due from  reinsurers is recorded in the period in which the related
gross liability is established.

         The  Company  accounts  for all  reinsurance  recoverables  and prepaid
reinsurance premiums as assets.

         Depreciation
         ------------

         Property,  equipment and leasehold  improvements are depreciated  using
both straight line and accelerated methods over their estimated useful lives.

         Income Taxes
         ------------

         The  Company  and its  subsidiaries  file a  consolidated  Federal  tax
return.  The Company  provides  deferred  income taxes on temporary  differences
between the financial  reporting basis and the tax basis of the Company's assets
and  liabilities  based upon  enacted  tax rates.  The effect of a change in tax
rates is recognized in income in the period of change.

         Fair Values of Financial Instruments
         ------------------------------------

         The fair value of the Company's fixed maturity investments is disclosed
in  Note  2.  The  Company's  other  financial  instruments  include  short-term
receivables,  notes  payable  and  other  payables  which  are  recorded  at the
underlying transaction value and approximate fair value.


                                       36
<PAGE>


                                  NYMAGIC, INC.
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

         Goodwill
         --------

         The excess of purchase price over the fair value of net assets acquired
is amortized to income on a straight line basis over five years.

         Foreign currency translation
         ----------------------------

         The assets and liabilities of the Company's UK operations,  recorded in
Pounds  Sterling,  are translated to U.S. dollars at exchange rates in effect at
the balance sheet date and the resulting adjustments are recorded in accumulated
other comprehensive  income in shareholders'  equity.  Revenues and expenses are
translated to U.S. dollars using the average exchange rates for the year.

         Incurred losses
         ---------------

         Unpaid  losses  are  based on  individual  case  estimates  for  losses
reported.  A provision is also included,  based on past  experience,  for losses
incurred  but not  reported,  salvage and  subrogation  recoveries  and for loss
adjustment  expenses.  The method of making such estimates and for  establishing
the  resulting  reserves  is  continually  reviewed  and updated and any changes
resulting therefrom are reflected in operating results currently.

         Basic and diluted earnings per share
         ------------------------------------

         Basic EPS is calculated by dividing net income by the weighted  average
number of common shares  outstanding  during the year. Diluted EPS is calculated
by  dividing  net  income  by the  weighted  average  number  of  common  shares
outstanding  during the year and the  dilutive  effect of assumed  stock  option
exercises.  See  Note  12 for a  reconciliation  of the  shares  outstanding  in
determining basic and diluted EPS.

         Reclassification
         ----------------

         Certain  accounts in the prior year's  financial  statements  have been
reclassified to conform to the 1999 presentation.

         Effects of recent accounting pronouncements
         -------------------------------------------

         Statement of Financial  Accounting  Standards No. 133,  "Accounting for
Derivative  Instruments and Hedging  Activities" ("SFAS 133"), was issued by the
Financial  Accounting  Standards  Board ("FASB") in June 1998. SFAS 133 requires
derivatives to be recorded on the balance sheet at fair value.  Derivatives  not
considered as hedges must be recorded at fair value with adjustments recorded in
the income  statement.  For derivatives that qualify as a hedge,  changes in the
fair value of the derivative are offset against changes in the fair value of the
hedged assets or liabilities  and are  recognized in the income  statement or in
other  comprehensive  income  depending on the nature of the hedge.  SFAS 133 is
effective for years beginning after June 15, 1999.

         Statement of Financial  Accounting  Standards No. 137,  "Accounting for
Derivative Instruments and Hedging  Activities-Deferral of the Effective Date of
FASB Statement No. 133",  ("SFAS 137") was issued by the FASB in June 1999. SFAS
137 defers the effective date of SFAS 133 to fiscal years  beginning  after June
15, 2000.

         The Company uses derivatives, in the form of an interest rate swap, for
hedging  purposes as part of its interest rate  management.  The Company has not
yet determined the effect of SFAS 133 on its financial statements.

         The Company  adopted AICPA  Statement of Position 97-3,  "Accounting by
Insurance and Other Enterprises for Insurance-Related Assessments," ("SOP 97-3")
effective  January 1, 1999.  This  statement  provides  guidance  for  reporting
guaranty fund and other insurance related assessments.  The adoption of SOP 97-3
did not have a  material  impact  on the  Company's  results  of  operations  or
financial condition.


                                       37
<PAGE>


                                  NYMAGIC, INC.
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

         The Company adopted AICPA  Statement of Position 98-1,  "Accounting for
the Costs of Computer  Software  Developed or Obtained for Internal  Use," ("SOP
98-1") effective  January 1, 1999. SOP 98-1 provides  standards for capitalizing
certain  internal  costs  incurred  to develop  software  used  internally.  The
adoption of SOP 98-1 did not have a material impact on the Company's  results of
operations or financial condition.

(2)      INVESTMENTS:

         A summary of investment components at December 31, 1999 consists of the
following:

<TABLE>
<CAPTION>

                                                                                               Amount at which
                                                                                     Fair       shown in the
Type of Investment                                                    Cost           Value      balance sheet
------------------                                                    ----           -----      -------------

<S>                                                               <C>            <C>            <C>
Fixed maturities available for sale:
  Bonds:
    United States Government and
         government agencies and authorities ..................   $ 88,757,727   $ 86,969,559   $ 86,969,559
    States, municipalities and
         political subdivisions ...............................    153,794,424    153,409,400    153,409,400
    Public utilities ..........................................     12,401,385     12,363,000     12,363,000
    All other corporate bonds .................................     45,734,086     44,551,394     44,551,394
                                                                  ------------   ------------   ------------
    Total fixed maturities
         available for sale ...................................    300,687,622    297,293,353    297,293,353
                                                                  ------------   ------------   ------------
Equity securities:
  Common stocks:
  Public utilities ............................................      1,577,810      2,585,152      2,585,152
  Banks, trusts and insurance companies .......................      4,692,428      4,618,997      4,618,997
  Industrial, miscellaneous and all other .....................     46,652,441     64,477,746     64,477,746
                                                                  ------------   ------------   ------------
    Total equity securities ...................................     52,922,679     71,681,895     71,681,895
                                                                  ------------   ------------   ------------
Short term investments ........................................     27,734,786     27,734,786     27,734,786
                                                                  ------------   ------------   ------------
    Total investments .........................................   $381,345,087   $396,710,034   $396,710,034
                                                                  ============   ============   ============
</TABLE>


         Unrealized   depreciation  or   appreciation  of  investments   (before
applicable income taxes) at December 31, 1999 and 1998 included gross unrealized
gains on equity  securities of $20,331,826 and  $19,915,191,  respectively;  and
gross  unrealized  losses on  equity  securities  of  $1,572,610  and  $864,890,
respectively;  and gross unrealized gains on fixed maturities available for sale
of $957,805 and  $10,841,711  at December 31, 1999 and 1998,  respectively;  and
gross unrealized losses on fixed maturities available for sale of $4,352,074 and
$21,933 as of December 31, 1999 and 1998, respectively.

         Included in  investments at December 31, 1999 are bonds on deposit with
various  regulatory  authorities  as  required  by  law  with a  fair  value  of
$8,752,500.

         There were no non-income  producing fixed maturity investments for each
of the years ended December 31, 1999, 1998 and 1997.

         All  mortgage  backed  securities  as of December 31, 1999 and 1998 are
obligations of various U.S.  Government  agencies and consist of GNMA,  FHLMC or
FNMA pass through securities. These securities are readily marketable.


                                       38
<PAGE>


                                  NYMAGIC, INC.
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

         The gross unrealized gains and losses on debt securities as of December
31, 1999 and 1998 are as follows:

<TABLE>
<CAPTION>

                                                                                    1999
                                                      ----------------------------------------------------------------
                                                                           Gross         Gross
                                                       Amortized         Unrealized    Unrealized            Fair
                                                          Cost              Gains         Losses             Value
                                                      -----------       ------------  ---------------   --------------

<S>                                                  <C>                <C>           <C>               <C>
Fixed maturities available for sale:

U.S. Treasury securities and
  obligations of U.S. government
  corporations and agencies...................       $  88,757,727      $    17,501   $  (1,805,669)    $ 86,969,559

Obligations of states and
  political subdivisions......................         153,794,424          854,048      (1,239,072)     153,409,400

Corporate securities .........................          58,135,471           86,256      (1,307,333)      56,914,394
                                                     -------------      -----------    ------------     ------------

         Totals ..............................       $ 300,687,622      $   957,805   $  (4,352,074)    $297,293,353
                                                     =============      ===========   ==============    ============


                                                                                    1998
                                                      ----------------------------------------------------------------
                                                                           Gross         Gross
                                                       Amortized         Unrealized    Unrealized            Fair
                                                          Cost              Gains         Losses             Value
                                                      -----------       ------------  ---------------   --------------

Fixed maturities available for sale:

U.S. Treasury securities and
  obligations of U.S. government
  corporations and agencies...................       $  55,934,951      $ 1,521,904   $      (4,953)    $ 57,451,902

Obligations of states and
  political subdivisions......................         252,371,231        8,054,549         (16,980)     260,408,800

Corporate securities .........................          34,277,343        1,265,258             --        35,542,601
                                                     -------------      -----------    ------------     ------------

         Totals ..............................       $ 342,583,525      $10,841,711   $     (21,933)    $353,403,303
                                                     =============      ===========   ==============    ============
</TABLE>


                                       39
<PAGE>


                                  NYMAGIC, INC.
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

         The  amortized  cost and fair value of debt  securities at December 31,
1999, by contractual maturity,  are shown below. Expected maturities will differ
from  contractual  maturities  because  borrowers  may have the right to call or
prepay obligations with or without call or prepayment penalties.

                                                 Fixed maturities available
                                                          for sale
                                                -----------------------------
                                                  Amortized          Fair
                                                     Cost            Value
                                                -----------------------------


Due in one year or less.....................    $ 11,107,583    $ 11,222,752

Due after one year
through five years .........................     136,083,543     135,165,742

Due after five years
through ten years ..........................      53,294,395      52,372,127

Due after ten years ........................      54,984,653      54,175,654
                                                ------------    ------------
                                                 255,470,174     252,936,275

Mortgage backed securities .................      45,217,448      44,357,078
                                                ------------    ------------

Totals......................................    $300,687,622    $297,293,353
                                                ============    ============


         The  investment  portfolio has exposure to market risks which  includes
the effect of adverse changes in interest rates,  credit quality,  equity prices
and foreign  exchange  rates on the  portfolio.  Interest rate risk includes the
changes in the fair value of fixed  maturities  based upon  changes in  interest
rates.  Credit  quality  risk  includes  the risk of  default by issuers of debt
securities.  Foreign  currency  risk  includes  exposure  to  changes in foreign
exchange  rates on the market value and interest  income of foreign  denominated
investments.  Equity risk includes the  potential  loss from changes in the fair
value of equity securities.


                                       40
<PAGE>


                                  NYMAGIC, INC.
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

         Proceeds from sales of investments in debt securities during 1999, 1998
and 1997 were $118,911,079,  $51,905,388 and $167,867,245,  respectively.  Gross
gains of $929,242,  $1,105,100 and  $1,365,460 and gross losses of $ 797,483,  $
14,246  and $  868,944  were  realized  on those  sales in 1999,  1998 and 1997,
respectively.

         Realized  gains  (losses)  and   unrealized   investment   appreciation
(depreciation)  on fixed  maturities  and equity  securities for the years ended
December 31, 1999, 1998 and 1997 are as follows:

<TABLE>
<CAPTION>

                                                                                           Year ended December 31,
                                                                              ----------------------------------------------
                                                                                   1999            1998             1997
                                                                              ----------------------------------------------

<S>                                                                           <C>             <C>               <C>
     Realized gains (losses) on sale
     of investments
       Fixed maturities...................................................    $   131,759     $   1,090,854     $    496,516
       Equity securities..................................................     12,378,350         7,516,080       10,044,741
       Short-term investments ............................................         (6,378)            8,124         (116,124)
                                                                              ------------     ------------     ------------
       Realized investments gains ........................................      12,503,731        8,615,058       10,425,133
       Less: applicable income taxes .....................................      (4,376,306)      (3,015,270)      (3,648,797)
                                                                              ------------     ------------     ------------
     Net realized investment gains .......................................    $  8,127,425     $  5,599,788     $  6,776,336
                                                                              ============     ============     ============

     Change in unrealized investment appreciation (depreciation)
      of securities:

       Fixed maturities ..................................................    $(14,214,047)    $  2,266,766     $  4,200,177
       Equity securities..................................................        (291,085)       7,717,489        3,145,784
                                                                              ------------     ------------     ------------
       Unrealized investment gains (losses) ..............................     (14,505,132)       9,984,255        7,345,961
       Less:  applicable deferred income taxes ...........................       5,076,796       (3,494,488)      (2,571,086)
                                                                              ------------     ------------     ------------
       Net unrealized investment gains (losses) ..........................    $ (9,428,336)    $  6,489,767     $  4,774,875
                                                                              ============     ============     ============
</TABLE>


         Net investment  income from each major category of investments  for the
years indicated is as follows:

<TABLE>
<CAPTION>

                                                                                          Year ended December 31,
                                                                              ----------------------------------------------
                                                                                  1999             1998             1997
                                                                              ----------------------------------------------

<S>                                                                            <C>             <C>              <C>
     Fixed maturities.....................................................     $17,686,462     $ 18,740,628     $ 20,192,031
     Short-term investments ..............................................         994,215        2,021,670        1,089,128
     Equity securities....................................................         815,161          846,610          814,341
                                                                              ------------     ------------     ------------
         Total investment income .........................................      19,495,838       21,608,908       22,095,500
     Investment expenses .................................................        (854,219)        (805,475)        (770,435)
                                                                              ------------     ------------     ------------
         Net investment income ...........................................    $ 18,641,619     $ 20,803,433     $ 21,325,065
                                                                              ============     ============     ============
</TABLE>





                                       41
<PAGE>




                                  NYMAGIC, INC.
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

(3)      FIDUCIARY FUNDS:

         The  Company's   insurance  agency   subsidiaries   maintain   separate
underwriting accounts which record all the underlying insurance  transactions of
the insurance  pools which they manage.  These  transactions  primarily  include
collecting  premiums  from  the  insured,   collecting  paid  recoverables  from
reinsurers,  paying claims as losses become payable, paying reinsurance premiums
to reinsurers and remitting net account balances to member  insurance  companies
in the pools which MMO manages.  Unremitted  amounts to members of the insurance
pools are held in a fiduciary  capacity and interest income earned on such funds
inure to the  benefit  of the  members  of the  insurance  pools  based on their
pro-rata participation in the pools.

         A summary of the pools'  underwriting  accounts as of December 31, 1999
and 1998 is as follows:

                                                             December 31,
                                                    ----------------------------
                                                        1999             1998
                                                    -----------      -----------

         Cash and short-term investments ....       $   556,542      $ 5,264,642
         Premiums receivable ................        40,151,568       36,384,613
         Reinsurance and other recoverables..        51,698,589       27,525,077
                                                    -----------      -----------

         Total Assets .......................       $92,406,699      $69,174,332
                                                    ===========      ===========

         Due to insurance pool members ......        51,454,673       29,705,029
         Reinsurance payable ................        29,718,908       26,500,070
         Funds withheld from reinsurers .....         8,174,400        6,447,912
         Other liabilities ..................         3,058,718        6,521,321
                                                    -----------      -----------

         Total Liabilities ..................       $92,406,699      $69,174,332
                                                    ===========      ===========

         A portion of the pools' underwriting  accounts above have been included
in the Company's  insurance  subsidiaries  operations  based upon their pro-rata
participation in the MMO insurance pools.

(4)      INSURANCE OPERATIONS:

         Reinsurance Transactions
         ------------------------

         Approximately 53%, 45% and 50% of the Company's insurance subsidiaries'
direct and assumed gross premiums written for the years ended December 31, 1999,
1998 and  1997,  respectively,  have been  reinsured  by the  pools  with  other
companies on both a treaty and a facultative basis.

         In the event that all or any of the pool  companies  might be unable to
meet their obligations to the pools, the remaining companies would be liable for
such  defaulted  amounts on a pro rata pool  participation  basis.  A contingent
liability also exists with respect to reinsurance  ceded since such transactions
generally  do  not  relieve  the  Company  of  its  primary  obligation  to  the
policyholder  and  such  reinsurance  ceded  would  become  a  liability  of the
Company's insurance subsidiaries in the event that any reinsurer might be unable
to meet the obligations assumed under the reinsurance agreements. All reinsurers
must meet certain minimum standards of financial condition as established by the
pools.  The Company's  largest  reinsurers at December 31, 1999,  were Arkwright
Mutual Insurance Company ("Arkwright"),  Lloyd's of London ("Lloyd's") and Utica
Mutual Insurance  Company ("Utica Mutual"),  with aggregate  recoverables of $42
million, $23 million and $16 million,  respectively.  The 1999 A.M. Best ratings
for Arkwright and Utica Mutual are each A. Lloyd's  maintains a trust fund which
was  established  for the benefit of all United  States  ceding  companies.  The
Company has not  experienced  difficulty in collecting  amounts due from Lloyd's
and the settlement of recoverables  due the Company has not materially  impacted
its liquidity. However,


                                       42
<PAGE>


                                  NYMAGIC, INC.
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

given the  uncertainty  surrounding the sufficiency of assets in Equitas to meet
its ultimate obligations,  there is a reasonable  possibility that the Company's
collection  efforts  relating to its  Lloyd's  recoverables  might be  adversely
affected  in the  future.  The  Company's  exposure  to  reinsurers,  other than
Arkwright,   Lloyd's  and  Utica   Mutual   include   reinsurance   recoverables
collectively from approximately 830 reinsurers or syndicates, and as of December
31,  1999,  no single one was liable to the Company for an  unsecured  amount in
excess of approximately $5.8 million.

         Funds withheld and letters of credit obtained under various reinsurance
treaties  amounted  to  approximately  $116  million as of  December  31,  1999.
Reinsurance  receivables  as of December 31, 1999 and 1998 included an allowance
for  uncollectible   reinsurance  recoverables  of  $7,871,000  and  $6,823,000,
respectively.

         In 1998, the Company entered into a reinsurance  transaction  involving
the  assumption of  approximately  $14.2  million in ocean marine  premiums that
emanated from the Company's  Syndicate 1265. In addition,  a second  reinsurance
transaction   involving  the  assumption  of  approximately   $10.5  million  in
miscellaneous  casualty  net  premiums  was  written by the  Company's  domestic
insurance  company  subsidiary in 1998. The second  transaction was subsequently
commuted resulting in total payments of approximately $7.5 million.

         Reinsurance  ceded and assumed  relating to  premiums  written  were as
follows:

<TABLE>
<CAPTION>

                               Gross            Ceded              Assumed                         Percentage
                              (direct)          to other          from other                       of assumed
    Year Ended                 amount          companies          companies        Net amount        to net
    ----------              ------------       ---------          ---------        ----------      ----------
<S>                         <C>                <C>                <C>              <C>                  <C>
    December 31, 1999       $82,065,506        $62,303,230        $36,343,802      $56,106,078          65%
    December 31, 1998        85,489,133         59,408,755         46,647,604       72,727,982          64%
    December 31, 1997        89,396,181         61,728,408         34,553,074       62,220,847          56%
</TABLE>

         Reinsurance  ceded and  assumed  relating  to  premiums  earned were as
follows:

<TABLE>
<CAPTION>

                               Gross            Ceded              Assumed                         Percentage
                              (direct)         to other           from other                       of assumed
    Year Ended                 amount          companies          companies        Net amount        to net
    ----------              -----------        ---------          ---------        ----------      ----------
<S>                         <C>                <C>                <C>              <C>                  <C>
    December 31, 1999       $75,856,987        $53,099,421        $33,397,590      $56,155,156          59%
    December 31, 1998        93,908,920         64,431,374         46,545,117       76,022,663          61%
    December 31, 1997        97,920,323         47,875,999         37,492,582       87,536,906          43%
</TABLE>

         Losses  and  loss  adjustment   expenses  incurred  are  net  of  ceded
reinsurance  recoveries of  $129,021,415,  $83,487,279,  and $26,912,355 for the
years ended December 31, 1999, 1998, and 1997, respectively.

         Unpaid Losses
         -------------

         Unpaid  losses  are  based on  individual  case  estimates  for  losses
reported  and include a provision  for losses  incurred but not reported and for
loss adjustment  expenses.  The following table provides a reconciliation of the
consolidated  liability for losses and loss adjustment expenses at the beginning
and end of 1999, 1998 and 1997:


                                       43
<PAGE>



                                  NYMAGIC, INC.
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

<TABLE>
<CAPTION>

                                                                                  Year ended December 31,
                                                                             --------------------------------
                                                                               1999        1998        1997
                                                                               ----        ----        ----
                                                                                      (in thousands)
<S>                                                                          <C>         <C>         <C>
Net liability for losses and loss adjustment
  expenses at beginning of year .........................................    $213,589    $222,335    $227,370
                                                                             --------    --------    --------
Provision for losses and loss adjustment
 expenses occurring in current year .....................................      48,838      69,703      72,322
Decrease in estimated losses and loss
  adjustment expenses for claims occurring
  in prior years (1).....................................................     (12,183)    (19,466)    (21,874)
Deferred income-loss portfolio
  assumption(2) .........................................................         198         275         320
                                                                             --------    --------    --------
Total losses and loss adjustment expenses incurred ......................      36,853      50,512      50,768
                                                                             --------    --------    --------
Less:
Losses and loss adjustment expense payments for claims occurring during:
      current year.......................................................      11,517      17,407      17,029
      prior years........................................................      41,862      41,576      38,454
                                                                             --------    --------    --------
                                                                               53,379      58,983      55,483
Add:
Deferred income-loss portfolio assumption (2) ...........................        (198)       (275)       (320)
                                                                             --------    --------    --------
Net liability for losses and loss adjustment
  expenses at year end ..................................................     196,865     213,589     222,335
                                                                             --------    --------    --------
Ceded unpaid loss and loss adjustment
 expenses................................................................     228,604     187,995     166,067
                                                                             --------    --------    --------
Gross unpaid losses and loss adjustment
  expenses at year end ..................................................    $425,469    $401,584    $388,402
                                                                             ========    ========    ========
</TABLE>


         (1) The  adjustment to the  consolidated  liability for losses and loss
         adjustment  expenses for losses  occurring in prior years  reflects the
         net effect of the  resolution  of losses  for other  than full  reserve
         value and  subsequent  readjustments  of loss  values.  The decrease in
         estimated losses is attributable to the ocean marine and aviation lines
         of business as a result of favorable payout trends in part due to lower
         retention levels per loss.

         (2) Deferred income-loss portfolio assumption represents the difference
         between cash received and unpaid loss  reserves  assumed as a result of
         the assumption of net pool  obligations  from two former members of the
         pools which was initially  capitalized  and is being amortized over the
         payout period of the related losses.

         The insurance pools  participated in the issuance of umbrella  casualty
insurance  for various  Fortune 1000  companies in the period from 1978 to 1983.
Depending on the accident  year,  the  insurance  pools'  maximum  retention per
occurrence  ranged from  $250,000 to  $500,000.  The  Company's  effective  pool
participation  on such risks varied from 11% in 1978 to 30% in 1983. At December
31, 1999 and 1998, the Company's  gross,  ceded and net loss and loss adjustment
expense  reserves for  Asbestos/Pollution  policies  amounted to $27.8  million,
$18.1  million  and $9.7  million,  and $24.3  million,  $15.3  million and $9.0
million,  respectively. Net paid losses resulting from Asbestos/Pollution losses
during  1999,  1998  and 1997  amounted  to  $809,000,  $851,000  and  $508,000,
respectively.  As of  December  31,  1999,  the Company  had  approximately  355
policies which had at least one claim relating to Asbestos/Pollution  exposures.
Unpaid  losses and loss  adjustment  expenses are  recorded for reported  claims
regarding  Asbestos/Pollution  exposures,   including  the  cost  of  litigation
expenses,  when sufficient information is present to indicate the involvement of
a specific  insurance  policy  and the  Company  can  reasonably  estimate  this
liability.    The   Company   believes   that   the   uncertainty    surrounding
Asbestos/Pollution  exposures,  including  issues as to  insureds'  liabilities,
ascertainment of loss date, definitions of occurrence, scope of coverage, policy
limits and application and interpretation of policy terms, including exclusions,
all affect the estimation of ultimate losses.  Under such  circumstances,  it is
difficult to determine the ultimate loss for Asbestos/Pollution  related claims.
Given the  uncertainty  in this area,  losses  from  Asbestos/Pollution  related
claims may develop adversely.  However, the Company believes that, in aggregate,
the net unpaid loss and loss  adjustment  expense  reserves  as of December  31,
1999,  allow for an adequate  provision and that the ultimate  resolution of the
Asbestos/Pollution  claims  will not have a  material  impact  on the  Company's
financial position.



                                       44
<PAGE>




                                  NYMAGIC, INC.
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

         Salvage and Subrogation
         -----------------------

         Estimates  of salvage  and  subrogation  recoveries  on paid and unpaid
losses  have  been  recorded  as a  reduction  of  unpaid  losses  amounting  to
$5,884,591 and $6,354,281 at December 31, 1999 and 1998, respectively.

         Deferred Policy Acquisition Costs
         ---------------------------------

         Deferrable   acquisition   costs   amortized  to  income   amounted  to
$11,077,382,  $10,107,327 and $16,582,623 for the years ended December 31, 1999,
1998 and 1997, respectively.

(5)      PROPERTY, IMPROVEMENTS AND EQUIPMENT, NET:

         Property,  improvements  and  equipment,  at December 31, 1999 and 1998
include the following.

<TABLE>
<CAPTION>

                                                                          1999                 1998
                                                                     ------------          -----------

<S>                                                                  <C>                   <C>
         Office furniture and equipment........................      $  1,499,397          $  1,492,011
         Computer equipment....................................         2,313,591             2,174,561
         Leasehold improvements................................         2,351,498             2,433,141
                                                                     ------------          ------------
                                                                        6,164,486             6,099,713

         Less:  accumulated depreciation and amortization......        (4,371,610)           (3,758,692)
                                                                     ------------           -----------

                Property, improvements and equipment, net......      $  1,792,876          $  2,341,021
                                                                     ============           ===========
</TABLE>

         Depreciation  and  amortization  and other expenses for the years ended
         December 31,  1999,  1998 and 1997  amounted to $699,107,  $733,950 and
         $582,126, respectively.

(6)      INCOME TAXES:

         The  components of deferred tax assets and  liabilities  as of December
31, 1999 and 1998 are as follows:

<TABLE>
<CAPTION>

                                                                                December 31,
                                                                     -----------------------------------
                                                                          1999                  1998
                                                                     -------------         -------------

<S>                                                                  <C>                   <C>
         Deferred Tax Assets:

         Loss reserve discounting..............................      $  10,561,268         $  13,128,970
         Unearned premiums.....................................          1,920,515             1,923,950
         Equity securities write-down..........................            820,578               764,692
         Income tax carryforwards..............................          2,667,328             1,175,845
         Deferred rent liability...............................            333,874               374,215
         Bad debt reserve......................................          2,912,486             2,615,459
         Other.................................................            490,508               272,841
                                                                     -------------         -------------
         Deferred tax assets...................................         19,706,557            20,255,972
                                                                     -------------         -------------

         Less: Valuation allowance.............................          2,191,576             1,187,445
                                                                     -------------         -------------

         Total deferred tax assets.............................         17,514,981            19,068,527
                                                                     -------------         -------------
</TABLE>




                                       45
<PAGE>



                                  NYMAGIC, INC.
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued


<TABLE>
<CAPTION>

                                                                                 December 31,
                                                                          ------------------------
                                                                             1999          1998
                                                                          ------------------------

<S>                                                                        <C>           <C>
        Deferred Tax Liabilities:

Deferred policy acquisition costs.....................................     1,697,705     1,497,101
Unrealized appreciation of investments ...............................     5,377,732    10,454,527
Deferred income-loss portfolio assumption ............................        74,753       144,167
Discount on accrued salvage and subrogation ..........................       311,200       348,111
Other ................................................................       742,256       812,880
                                                                          -----------   -----------
Total deferred tax liabilities .......................................     8,203,646    13,256,786
                                                                          -----------   -----------
Net deferred tax assets ..............................................    $9,311,335   $ 5,811,741
                                                                          ===========   ===========
</TABLE>

         The last year for which the  income  tax  carryforwards  can be carried
forward against future tax liabilities is the year 2019.

         The Company's  valuation allowance account with respect to the deferred
tax asset is related to income tax  carryforwards  and the change in the account
is as follows:

<TABLE>
<CAPTION>

                                                  1999          1998          1997
                                               --------------------------------------

<S>                                            <C>           <C>           <C>
Balance, beginning of year .................   $1,187,445    $     --      $  516,716
Change in valuation allowance ..............    1,004,131     1,187,445      (516,716)
                                               ----------    ----------    ----------
Balance, end of year ......................    $2,191,576    $1,187,445    $     --
                                               ==========    ==========    ==========
</TABLE>


         The  Company  believes  that the  total  deferred  tax asset net of the
recorded  valuation  allowance  account as of December 31, 1999 will more likely
than not be fully realized.

         Income tax provisions  differ from the amounts computed by applying the
Federal statutory rate to income before income taxes as follows:

<TABLE>
<CAPTION>

                                                                        Year ended December 31,
                                                                        -----------------------
                                                                       1999      1998      1997
                                                                       ----      ----      ----

<S>                                                                    <C>       <C>        <C>
Income taxes at the Federal statutory rate ......................      35.0%     35.0%      35.0%
Tax exempt interest .............................................     (20.8)    (21.7)     (12.5)
Valuation allowance .............................................       4.7       5.2       (1.5)
State taxes .....................................................      (2.4)     (3.9)      (0.5)
Net bond amortization............................................       3.4       3.3        1.9
Investment income proration .....................................       2.8       2.9        1.7
Other, net ......................................................      (0.2)     (1.7)       1.5
                                                                       ----      ----       ----
Income tax provisions ...........................................      22.5%     19.1%      25.6%
                                                                       ====      ====       ====
</TABLE>


         Federal  income tax payments  amounted to  $3,694,794,  $5,328,181  and
$9,335,632 for the years ended December 31, 1999, 1998 and 1997, respectively.

         Federal  income tax  payable at  December  31,  1999  included in other
liabilities  amounted to $409,939.  Federal income taxes recoverable at December
31, 1998 included in other assets amounted to $181,667.


                                       46
<PAGE>


                                  NYMAGIC, INC.
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

(7)      STATUTORY INCOME AND SURPLUS:

         The Company's domestic insurance subsidiaries are limited, based on the
lesser of 10% of statutory  basis surplus or 100% of net investment  income,  as
defined under New York  Insurance Law, in the amount of dividends they could pay
without regulatory approval. The maximum amount which may be paid to the holding
company out of December 31, 1999 surplus is approximately $19,630,000.

         Consolidated  statutory net income,  surplus and dividends  declared by
the Company's  domestic  insurance  subsidiaries were as follows for the periods
indicated:

<TABLE>
<CAPTION>

                                       Consolidated              Consolidated              Dividends
                                        Statutory                 Statutory                 Declared
         Year Ended                     Net Income                 Surplus                 To Parent
         ----------                     ----------                 -------                 ---------
<S>                                 <C>                      <C>                         <C>
         December 31, 1999          $    25,476,000          $   200,899,000             $ 19,175,000
         December 31, 1998               30,223,000              196,745,000               18,367,000
         December 31, 1997               36,758,000              181,844,000               17,850,262
</TABLE>


(8)      EMPLOYEE RETIREMENT PLANS:

         The  Company   maintains  two  retirement  plans  for  the  benefit  of
employees.  Both plans provide for 100% vesting upon  completion of two years of
service.  The Money Purchase Plan provides for a contribution equal to 7-1/2% of
an employee's cash  compensation,  including  bonuses,  for each year of service
during which the employee has completed 1000 hours of service and is employed on
the last day of the plan year.  The Profit  Sharing  Plan does not  require  any
specific  contribution but any contribution  made is subject to the restrictions
set  forth  above  for  the  Money  Purchase  Plan.  Contributions  and  related
administrative  expenses for the years ended  December  31, 1999,  1998 and 1997
amounted to $600,346, $1,017,551, and $978,997, respectively.

(9)      DEBT:

          The Company  maintains a credit  agreement  with a bank.  The interest
rate on the loan is fixed, at the Company's  option,  for a period of one to six
months.  The  Company  has  elected  to pay  interest  at an  effective  rate of
approximately  6.275%  on the  outstanding  principal  balance  of the  loan  at
December  31, 1999 of  $12,458,413.  The  interest  rate was equal to the bank's
Adjusted  London  Interbank  Offered  Rate  at the  time  of the  interest  rate
adjustment  period,  plus .65 of 1%. Principal  repayments are paid quarterly in
equal  installments  of $1,250,000 and end on June 30, 2002. The Company has the
option to prepay amounts in excess of the required repayments.  At the Company's
option,  the interest rate may be based on either the higher of the bank's prime
rate or the  applicable  Federal  Funds  Rate,  plus  1/2 of 1%,  or the  bank's
adjusted certificate of deposit rate, plus .775 of 1%.

         The bank loan agreement  requires the Company to maintain a minimum net
worth of  $125,000,000  plus 50% of net  profits  earned  during  each year on a
cumulative basis. In addition,  other significant  covenants include limitations
on total indebtedness,  investment  purchases,  pledging and sales of assets and
requires the Company's  insurance  subsidiaries to maintain a certain  statutory
surplus,  gross and net premiums written to surplus ratios and total liabilities
to surplus ratio. The Company was in compliance with all financial  covenants as
stipulated  in the bank loan  agreement  as of  December  31,  1999.  The credit
agreement  also  provides  for a  facility  fee of .15 of 1% on the  outstanding
balance of the loan.


                                       47
<PAGE>


                                  NYMAGIC, INC.
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

         Interest paid amounted to $1,057,993, $1,347,653 and $1,464,240 for the
years ended December 31, 1999, 1998 and 1997, respectively.

         In 1998, the Company  entered into an interest rate swap agreement (the
"agreement")  with a bank for purposes of hedging its interest  rate risk on its
existing bank loan.  The  agreement  requires the Company to pay interest to the
bank  at a rate  of  6.50%  on  the  original  notional  amount  outstanding  of
$22,500,000,  which is subsequently adjusted quarterly by notional reductions of
$1,250,000.  The bank is  required  to pay the  Company,  on the  same  notional
amounts  outstanding,  an  amount  equal to the  three  month US  Dollar  London
Interbank  Offered Rate plus .65% which is reset on a quarterly basis.  Interest
expense recorded under the agreement was $91,462 in 1999 and $44,719 in 1998.

(10)     COMMITMENTS:

         The Company  maintains various operating leases to occupy office space.
The lease terms expire on various dates through April, 2004.

         The aggregate  minimum annual rental  payments under various  operating
leases for office facilities as of December 31, 1999 are as follows:

                                                               Amount
                                                               ------

         2000.........................................     $  1,351,030

         2001.........................................        1,351,030

         2002.........................................        1,351,030

         2003.........................................        1,351,030

         Thereafter...................................            2,723
                                                           ------------

         Total........................................     $  5,406,843
                                                           ============

         The operating  leases also include  provisions for additional  payments
based on certain  annual  cost  increases.  Rent  expenses  for the years  ended
December  31,  1999,  1998 and  1997  amounted  to  $1,285,950,  $1,131,951  and
$1,049,119, respectively.

         In 1999,  Vincent  T.  Papa,  a former  President  and Chief  Executive
Officer of the Company, filed suit in the New York Supreme Court seeking damages
from the Company based upon alleged  breaches by the Company of its  obligations
under an employment  agreement with Mr. Papa. The Company intends  vigorously to
defend itself against such claims and believes it has no further  obligations to
Mr. Papa.

     The Company is not  involved in any other  litigation  which would  require
disclosure  in the financial  statements or would have a material  impact on the
Company's financial statements.

         In  connection  with the formation of MMO UK LTD, in 1997, as corporate
capital for Syndicate 1265, the Company  obtained an unsecured  letter of credit
from a bank in pounds  sterling  with a US dollar  equivalent  of  approximately
$22.4 million as of December 31, 1999.




                                       48
<PAGE>




                                  NYMAGIC, INC.
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

(11)     COMPREHENSIVE INCOME:

         The Company's comparative comprehensive income is as follows:

<TABLE>
<CAPTION>

                                                                   Year ended December 31,
                                                            -----------------------------------
                                                            1999            1998           1997
                                                            ----            ----           ----

<S>                                                     <C>           <C>            <C>
Net Income .........................................    $16,413,261   $  18,523,416  $  26,367,740

Unrealized holding gains (losses) on securities,
    net of deferred tax benefit (expense) of
     $700,490, $(6,509,758), and $(6,219,883) ......     (1,300,911)     12,089,555     11,551,211

Less: reclassification adjustment for gains realized
    in net income, net of  tax expense of
    $(4,376,306), $(3,015,270), and $(3,648,797) ...      8,127,425       5,599,788      6,776,336
Foreign currency translation .......................        (76,817)         15,039          6,000
                                                        -----------     -----------    -----------

Comprehensive income ...............................    $ 6,908,108     $25,028,222    $31,148,615
                                                        ===========     ===========    ===========
</TABLE>

         The Company  recorded  unrealized  holding gains on securities,  net of
deferred  taxes, of $9,987,216 and $19,415,552 as of December 31, 1999 and 1998,
respectively.  The Company recorded foreign currency translation  adjustments of
$(55,778) and $21,039 as of December 31, 1999 and 1998, respectively.

(12)     COMMON STOCK REPURCHASE PLAN AND SHAREHOLDERS' EQUITY:

         The Company has a common stock  repurchase  plan which  authorizes  the
repurchase of up to $55,000,000,  at prevailing  market prices, of the Company's
issued and outstanding shares of common stock on the open market. As of December
31, 1999,  the Company had  repurchased  a total of  2,124,082  shares of common
stock under this plan at a total cost of  $38,560,659  at market prices  ranging
from $13.69 to $28.81 per share.

         In connection  with the  acquisition  of MMO in 1991,  the Company also
acquired  3,215,958 shares of its own common stock held by MMO and recorded such
shares as treasury stock at MMO's original cost of $3,919,129.

         A  reconciliation  of basic and diluted EPS for each of the  year ended
December 31, 1999, 1998 and 1997 is as follows:

<TABLE>
<CAPTION>

                                                      (In thousands except for per share amounts)
                                         1999                            1998                            1997
                              ---------------------------    ----------------------------    -----------------------------
                                       Weighted                         Weighted                       Weighted
                                        Average                         Average                         Average
                                Net      Shares     Per      Net         Shares     Per      Net         Shares     Per
                              Income  Outstanding   Share    Income   Outstanding   Share    Income   Outstanding   Share
                              ------  -----------   -----    ------   -----------   -----    ------   -----------   -----

<S>                          <C>          <C>       <C>      <C>         <C>        <C>      <C>         <C>       <C>
Basic EPS: ..............    $16,413      9,687     $1.69    $18,523     9,679      $1.91    $26,368     9,849     $ 2.68

Effect of
Dilutive Securities:

Stock Options ...........       --        --           --       --          26         --         --        23       (.01)
                             -------    -------     ------   -------   --------     -----    -------     -----     -------

Diluted EPS .............    $16,413      9,687     $1.69    $18,523     9,705      $1.91    $26,368     9,872     $ 2.67
                             =======    =======     ======   =======   ========     =====    =======     =====     =======
</TABLE>


                                       49
<PAGE>


                                  NYMAGIC, INC.
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

(13)     STOCK PLANS:

         The Company has a stock option plan, which was approved by shareholders
in 1991,  and  provides  a means  whereby  the  Company,  through  the  grant of
non-qualified  stock options to key officers,  may attract and retain persons of
ability as officers to exert their best  efforts on behalf of the  Company.  The
plan  authorizes the issuance of options to purchase up to 500,000 shares of the
Company's  common  stock at not less than 95 percent of the fair market value at
the date of grant.  Options are exercisable  over a period as determined in each
option agreement and expire at a maximum term of ten years.

         A summary of activity  under the stock  option plan for the years ended
December 31, 1999, 1998, and 1997 follows:

<TABLE>
<CAPTION>

                                         1999                        1998                     1997
                               -------------------------------------------------------------------------------
                                Number        Option         Number       Option       Number       Option
Shares Under                      of           Price           of          Price         of          Price
  Option                        Shares       Per Share       Shares      Per Share     Shares      Per Share
  ------                       --------      ---------       ------      ---------     ------      ---------

<S>                             <C>        <C>    <C>       <C>        <C>    <C>      <C>       <C>    <C>
Outstanding,
beginning of year ..........    228,200    $15.56-$22.92    243,100    $13.78-$22.92   373,200   $13.78-$22.92

Granted ....................    140,000    $12.05-$15.00     30,000    $       20.25      --        --    --

Exercised ..................       --        --    --       (25,900)   $13.78-$15.79   (80,000)  $13.78-$15.79

Forfeited ..................   (112,700)   $15.56-$22.92    (19,000)   $15.56-$15.79   (50,100)  $15.56-$22.92
                               --------                     -------                    -------

Outstanding,
end of year ................    255,500    $12.05-$20.25    228,200    $15.56-$22.92   243,100   $13.78-$22.92
                               ========                     =======                    =======

Exercisable,
end of year ................    138,000    $15.56-$20.25    115,367    $15.56-$22.92    95,356   $13.78-$22.92
                               ========                     =======                    =======
</TABLE>


         The Company has elected to measure  compensation  expense for  employee
stock options under APB No. 25 as permitted by SFAS 123,  "Accounting  for Stock
Based Compensation." Under SFAS 123, the Company is required to disclose the pro
forma  effects  on net  income of  applying  a fair  value  method of  measuring
compensation expense.

         The pro forma effect on the years ended  December  31,  1999,  1998 and
1997 is as follows:

<TABLE>
<CAPTION>

                                            1999                  1998                  1997
                                        -----------           -----------           -----------
<S>                                     <C>                   <C>                   <C>
     Net income - as reported           $16,413,261           $18,523,416           $26,367,740

     Net income - pro forma             $16,280,784           $18,414,657           $26,261,229

     Diluted EPS - as reported                $1.69                 $1.91                 $2.67

     Diluted EPS - pro forma                  $1.68                 $1.90                 $2.66
</TABLE>


         In  determining  the pro forma effect on net income,  the fair value of
options  granted in 1999,  1998,  1996 and 1995 was  estimated at the grant date
using the Black-Scholes option-pricing model with the following weighted average
assumptions in 1999, 1998, 1996 and 1995, respectively;  dividend yield of 3.0%,
1.9%,  2.2% and 2.4%;  expected  volatility of 25%,  28%, 25% and 28%;  expected
lives of 5 years for each year and a risk-free  interest  rate of 6.48%,  4.56%,
6.00% and 5.38%. There were no options granted in 1997.

         The full impact of calculating  compensation  expense for stock options
under SFAS 123 is not  reflected in the pro forma net income  amounts  presented
above because options granted prior to January 1, 1995 are not considered in the
determination of the compensation expense.


                                       50
<PAGE>


                                  NYMAGIC, INC.
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

         In 1999, the Company  established the NYMAGIC,  Inc. Phantom Stock Plan
(the  "Plan"),  the  purpose  of the  Plan is to  build  and  retain  a  capable
experienced  long-term  management team and key personnel to promote the success
of the Company. Each share of phantom stock granted under the Plan constitutes a
right to receive in cash the  appreciation in the fair market value of one share
of the Company's  stock,  as determined on the date of exercise of such share of
phantom stock over the measurement value of such phantom stock. In 1999, 100,000
shares of phantom  stock were  granted to  employees  with a  five-year  vesting
schedule. The Company recorded an expense of $263,750 in 1999 under this plan.

(14)     SEGMENT INFORMATION:

         The Company's  subsidiaries  include two domestic insurance  companies,
three domestic agency  subsidiaries,  and Syndicate 1265. The Company  considers
these operating companies as appropriate segments for purposes of evaluating the
Company's overall performance. The Company evaluates revenues and income or loss
by these segments.  Revenues include premiums earned,  commissions  income,  and
investment income.  Net income or loss includes total revenues,  less the sum of
losses incurred, policy acquisition costs, other expenses, and income taxes.

         The prior year's segment disclosure has been restated to conform to the
current year's presentation as a result of management's reassessment of its main
business segments.

         The financial information by segment is as follows:

<TABLE>
<CAPTION>

                                                                                       1999        1998        1997
                                                                                     --------------------------------
                                                                                             (in thousands)
     Revenues, excluding net investment income and realized gains:

<S>                                                                                  <C>         <C>         <C>
         Domestic Insurance Companies ............................................   $ 42,603    $ 61,392    $ 87,826
         Domestic Insurance Agencies .............................................      9,076       8,649      10,879
         Syndicate 1265 ..........................................................     14,446      15,262        --
         Other (includes corporate operations and consolidating adjustments) .....     (7,776)     (8,293)     (9,437)
                                                                                     --------    --------    --------
                    Total ........................................................   $ 58,349    $ 77,010    $ 89,268
                                                                                     ========    ========    ========

     Net investment income:
         Domestic Insurance Companies ............................................   $ 17,904    $ 19,695    $ 21,304
         Domestic Insurance Agencies .............................................       --          --          --
         Syndicate 1265 ..........................................................        721       1,108        --
         Other (includes corporate operations and consolidating adjustments) .....         17        --            21
                                                                                     --------    --------    --------
                    Total ........................................................   $ 18,642    $ 20,803    $ 21,325
                                                                                     ========    ========    ========

     Realized gains (losses) on investments:

         Domestic Insurance Companies ............................................   $ 12,589    $  8,615    $ 10,425
         Domestic Insurance Agencies .............................................       --          --          --
         Syndicate 1265 ..........................................................        (85)       --          --
         Other (includes corporate operations and consolidating adjustments) .....       --          --          --
                                                                                     --------    --------    --------
                    Total ........................................................   $ 12,504    $  8,615    $ 10,425
                                                                                     ========    ========    ========

     Income (loss) before tax expense:

         Domestic Insurance Companies ............................................   $ 30,412    $ 35,965    $ 39,481
         Domestic Insurance Agencies .............................................     (4,959)     (8,066)     (1,851)
         Syndicate 1265 ..........................................................     (1,119)        132        --
         Other (includes corporate operations and consolidating adjustments) .....     (3,154)     (5,127)     (2,176)
                                                                                     --------    --------    --------
                    Total ........................................................   $ 21,180    $ 22,904    $ 35,454
                                                                                     ========    ========    ========
</TABLE>



                                       51
<PAGE>




<TABLE>
<CAPTION>

                                  NYMAGIC, INC.
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued



                                                                                        1999         1998         1997
                                                                                     ------------------------------------
                                                                                                (in thousands)

Income tax expense (benefit):
<S>                                                                                  <C>          <C>          <C>
    Domestic Insurance Companies .................................................   $   7,155    $   8,769    $  10,440
    Domestic Insurance Agencies ..................................................      (1,706)      (2,787)        (599)
    Syndicate 1265 ...............................................................        (116)          60         --
    Other (includes corporate operations and consolidating adjustments) ..........        (567)      (1,661)        (754)
                                                                                     ---------    ---------    ---------
               Total .............................................................   $   4,766    $   4,381    $   9,087
                                                                                     =========    =========    =========

Net income (loss):
    Domestic Insurance Companies .................................................   $  23,257    $  27,196    $  29,041
    Domestic Insurance Agencies ..................................................      (3,253)      (5,279)      (1,251)
    Syndicate 1265 ...............................................................      (1,003)          72         --
    Other (includes corporate operations and consolidating adjustments) ..........      (2,588)      (3,466)      (1,422)
                                                                                     ---------    ---------    ---------
               Total .............................................................   $  16,413    $  18,523    $  26,368
                                                                                     =========    =========    =========

Identifiable assets:
    Domestic Insurance Companies .................................................   $ 724,923    $ 702,927    $ 694,224
    Domestic Insurance Agencies ..................................................       1,576        1,495        3,507
    Syndicate 1265 ...............................................................      32,404       22,144        4,227
    Other (includes corporate operations and consolidating adjustments) ..........       5,401        3,754        5,945
                                                                                     ---------    ---------    ---------
               Total .............................................................   $ 764,304    $ 730,320    $ 707,903
                                                                                     =========    =========    =========
</TABLE>


     The  Company's  gross  written   premiums  cover  risks  in  the  following
geographic locations:

<TABLE>
<CAPTION>

                                                                                         1999        1998        1997
                                                                                     ---------------------------------
                                                                                               (in thousands)

<S>                                                                                  <C>          <C>          <C>
                United States ....................................................   $  72,881    $  93,460    $  80,896
                Europe ...........................................................      20,146       18,480       18,339
                Asia .............................................................      15,302       11,948       12,860
                Latin America ....................................................       2,798        2,970        4,028
                Other ............................................................       7,282        5,279        7,826
                                                                                     ---------    ---------    ---------
                        Total Gross Written Premiums .............................   $ 118,409    $ 132,137    $ 123,949
                                                                                     =========    =========    =========
</TABLE>



(15)     Related Party Transactions:

         The Company made payments of $212,259 in 1999 to the firm of Kensington
& Ressler  L.L.C.  for legal  services.  Costa  Kensington,  a  director  of the
Company, is a partner in the firm of Kensington & Ressler L.L.C.


                                       52
<PAGE>


                          FINANCIAL STATEMENT SCHEDULES
            SCHEDULE II-CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                                  NYMAGIC, INC.
                                 Balance Sheets
                                (Parent Company)

<TABLE>
<CAPTION>

                                                                            December 31,
                                                                  ------------------------------
                                                                        1999            1998
                                                                  ------------------------------

Assets:

<S>                                                               <C>              <C>
Cash...........................................................   $      55,745    $      47,116
Short term investments ........................................       7,767,122             --
Investment in subsidiaries ....................................     219,744,413      229,680,280
Due from subsidiaries and MMO insurance pools .................      15,203,952       14,664,300
Other assets...................................................       2,456,387        2,471,346
                                                                  -------------    -------------
         Total assets..........................................   $ 245,227,619    $ 246,863,042
                                                                  =============    =============

Liabilities:

Notes payable..................................................   $  12,458,413    $  17,458,413
Dividends payable .............................................         967,785          968,549
Other liabilities .............................................         659,062          256,213
                                                                  -------------    -------------
    Total Liabilities..........................................      14,085,260       18,683,175
                                                                  -------------    -------------

Shareholders' equity:

Common stock ..................................................      15,017,892       15,017,892
Paid in capital................................................      27,935,907       28,029,410
Accumulated other comprehensive income ........................       9,931,438       19,436,591
Retained earnings .............................................     220,736,910      208,198,204
Treasury stock.................................................     (42,479,788)     (42,502,230)
                                                                  -------------    -------------
         Total shareholders' equity ...........................     231,142,359      228,179,867
                                                                  -------------    -------------
         Total liabilities and shareholders' equity ...........   $ 245,227,619    $ 246,863,042
                                                                  =============    =============
</TABLE>


<TABLE>
<CAPTION>

                              Statements of Income
                                (Parent Company)

                                                                             Year Ended December 31,
                                                                  --------------------------------------------
                                                                       1999           1998            1997
                                                                  ------------    ------------    ------------

Revenues:

<S>                                                                <C>            <C>             <C>
Cash dividends from subsidiary.................................    $19,175,000    $ 18,367,000    $ 17,850,262
Net investment income .........................................         17,122          74,122          21,070
                                                                  ------------    ------------    ------------
                                                                    19,192,122      18,441,122      17,871,332
                                                                  ------------    ------------    ------------
Expenses:

Operating expenses.............................................      2,799,957       5,200,857       2,197,039
Income tax benefit.............................................       (451,810)     (1,661,488)       (754,480)
                                                                  ------------    ------------    ------------
                                                                     2,348,147       3,539,369       1,442,559
                                                                  ------------    ------------    ------------

Income before equity income ...................................     16,843,975      14,901,753      16,428,773
Equity in undistributed earnings
(loss) of subsidiaries ........................................       (430,714)      3,621,663       9,938,967
                                                                  ------------    ------------    ------------

Net income ....................................................   $ 16,413,261    $ 18,523,416    $ 26,367,740
                                                                  ============    ============    ============
</TABLE>


                                       53
<PAGE>


            SCHEDULE II-CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                                  NYMAGIC, INC.
                            Statements of Cash Flows
                                (Parent Company)

<TABLE>
<CAPTION>

                                                                                        Year Ended December 31,
                                                                            --------------------------------------------
                                                                                1999            1998            1997
                                                                            ------------    ------------    ------------

     Cash flows from operating activities:
<S>                                                                         <C>             <C>             <C>
     Net income .........................................................   $ 16,413,261    $ 18,523,416    $ 26,367,740
                                                                            ------------    ------------    ------------

     Adjustments to reconcile net income
         to cash provided by operating activities:
         Equity in undistributed earnings of
              subsidiaries ..............................................        430,714      (3,621,663)     (9,938,967)
         Decrease (increase) in other assets ............................         14,959         192,184        (834,339)
         (Increase) decrease in due from subsidiaries ...................       (539,652)    (11,997,928)       (439,365)
         (Decrease) increase in other liabilities .......................        402,849         100,592          19,219
                                                                            ------------    ------------    ------------

     Net cash provided by operating activities ..........................     16,722,131       3,196,601      15,174,288
                                                                            ------------    ------------    ------------

     Cash flows from investing activities:

         Short term investments acquired ................................     (7,767,122)     (2,870,000)    (13,800,000)
         Short term investments matured .................................           --         8,870,000      12,800,000
         Investment in subsidiaries .....................................           --          (989,821)     (2,476,500)
                                                                            ------------    ------------    ------------
         Net cash provided by (used in) investing
              activities ................................................     (7,767,122)      5,010,179      (3,476,500)
                                                                            ------------    ------------    ------------

     Cash flows from financing activities:

         Proceeds from stock issued and other ...........................        (93,503)        525,433       1,351,618
         Cash dividends paid to stockholders ............................     (3,875,319)     (3,870,040)     (3,958,130)
         Net repurchase of common stock .................................         22,442         (20,573)    (10,922,760)
         Proceeds from borrowings .......................................           --         5,000,000       9,520,000
         Loan principal payments.........................................     (5,000,000)    (10,000,000)     (7,500,000)
                                                                            ------------    ------------    ------------
         Net cash used in financing activities ..........................     (8,946,380)     (8,365,180)    (11,509,272)
                                                                            ------------    ------------    ------------

     Net increase (decrease) in cash ....................................          8,629        (158,400)        188,516

     Cash at beginning of period ........................................         47,116         205,516          17,000
                                                                            ------------    ------------    ------------

     Cash at end of period...............................................   $     55,745    $     47,116    $    205,516
                                                                            ============    ============    ============
</TABLE>



           The condensed  financial  information of NYMAGIC,  INC. for the years
ended December 31, 1999,  1998 and 1997 should be read in  conjunction  with the
consolidated  financial  statements of NYMAGIC,  INC. and subsidiaries and notes
thereto.




                                       54
<PAGE>




                                  NYMAGIC, INC.
                  SCHEDULE V-VALUATION AND QUALIFYING ACCOUNTS
                     YEARS ENDED DECEMBER 31, 1999 AND 1998

<TABLE>
<CAPTION>

     COLUMN A                      COLUMN B          COLUMN C          COLUMN D         COLUMN E
--------------------------------------------------------------------------------------------------

     DESCRIPTION                   Balance at                                           Balance
                                   beginning                                            close of
                                   of period         Additions         Deductions       period
--------------------------------------------------------------------------------------------------


<S>                                <C>               <C>               <C>              <C>
     December 31, 1999:
     Allowance for
        doubtful accounts......    $7,472,739        $2,158,060        $(1,309,411)     $8,321,388

     December 31, 1998:
     Allowance for
       doubtful accounts.......    $6,485,000        $1,456,160        $  (468,421)     $7,472,739
</TABLE>


                                       55
<PAGE>


                                  NYMAGIC, INC.
  SCHEDULE VI - SUPPLEMENTAL INFORMATION CONCERNING PROPERTY/CASUALTY INSURANCE
                                   OPERATIONS.
                                 (In Thousands)

<TABLE>
<CAPTION>

                                                                                  CLAIMS AND CLAIMS  AMORTIZATION
                                                                                  EXPENSES INCURRED       OF        PAID
               DEFERRED     RESERVE FOR                                              RELATED TO        DEFERRED    CLAIMS
AFFILIATION     POLICY     UNPAID CLAIMS          UNEARNED   NET        NET       -----------------     POLICY      AND
   WITH      ACQUISITION    AND CLAIMS            PREMIUM   EARNED   INVESTMENT   CURRENT     PRIOR  ACQUISITION   CLAIMS  PREMIUMS
REGISTRANT      COSTS        EXPENSES   DISCOUNT  RESERVE  PREMIUMS    INCOME     YEAR        YEAR      COSTS     EXPENSES WRITTEN
-----------------------------------------------------------------------------------------------------------------------------------

<S>                   <C>     <C>                 <C>      <C>       <C>         <C>      <C>         <C>         <C>      <C>
DECEMBER 31, 1999     $4,851  $425,469      --    $56,033  $56,155   $ 18,624    $48,838  $(12,183)   $11,077     $53,379  $56,106
CONSOLIDATED
SUBSIDIARIES

DECEMBER 31, 1998      4,277   401,584      --     46,879   76,023     20,729     69,703   (19,466)    10,107      58,983   72,728
CONSOLIDATED
SUBSIDIARIES

DECEMBER 31, 1997      5,567   388,402      --     55,188   87,537     21,304     72,322   (21,874)    16,583      55,483   62,221
CONSOLIDATED
SUBSIDIARIES
</TABLE>


                                       56


<PAGE>


                                 EXHIBIT INDEX

3.1.      Charter. (Incorporated by reference to Exhibit 3-1 to the Registrant's
          Registration Statement No. 33-27665.)

3.3.      Amended and Restated By-laws.

4.0.      Specimen  Certificate  of common stock  (Incorporated  by reference to
          Exhibit 4 to the Registrant's Registration Statement No. 33-27665.)

10.2.     Restated  Management  Agreement  dated as of January  1, 1986,  by and
          among Mutual Marine Office,  Inc. and  Arkwright-Boston  Manufacturers
          Mutual  Insurance  Company,  Utica Mutual  Insurance  Company,  Lumber
          Mutual Insurance  Company,  the Registrant and  Pennsylvania  National
          Mutual  Casualty  Insurance  Company  (Incorporated  by  reference  to
          Exhibit  10.2 of the  Registrant's  Annual  Report  Form  1O-K for the
          fiscal year ended December 31, 1986 (Commission File No. 1-11238).)

10.2.2.   Amendment to Restated Management  Agreement,  dated as of December 30,
          1988,  and among  Mutual  Marine  Office,  Inc. and  Arkwright  Mutual
          Insurance  Company,  Utica Mutual  Insurance  Company,  Lumber  Mutual
          Insurance  Company,  the Registrant and  Pennsylvania  National Mutual
          Casualty  Insurance  Company.  (Incorporated  by  reference to Exhibit
          10.2.2.  of the Registrant's  Report on Form 8-K dated January 6, 1989
          (Commission File No. 1-11238).)

10.2.3.   Amendment to Restated Management  Agreement,  dated as of December 31,
          1990,  and among  Mutual  Marine  Office,  Inc. and  Arkwright  Mutual
          Insurance Company,  Utica Mutual Insurance Company, the Registrant and
          Pennsylvania National Mutual Casualty Insurance Company. (Incorporated
          by reference to Exhibit 10.2.3.  of the Registrant's  Annual Report on
          Form 10-K for the fiscal year ended December 31, 1992 (Commission File
          No. 1-11238).)

10.4.     Restated  Management  Agreement  dated as of January  1, 1986,  by and
          among  Mutual  Inland  Marine   Office,   Inc.  and   Arkwright-Boston
          Manufacturers   Mutual  Insurance  Company,   Utica  Mutual  Insurance
          Company,   Lumber  Mutual  Insurance   Company,   the  Registrant  and
          Pennsylvania  National Mutual Casualty Insurance Company (Incorporated
          by reference to Exhibit 10.4 of the  Registrant's  Annual  Report Form
          10-K for the fiscal year ended December 31, 1986  (Commission File No.
          1-11238).)

10.4.2.   Amendment to Restated Management  Agreement,  dated as of December 30,
          1988, and among Mutual Inland Marine Office, Inc. and Arkwright Mutual
          Insurance  Company,  Utica Mutual  Insurance  Company,  Lumber  Mutual
          Insurance  Company,  the Registrant and  Pennsylvania  National Mutual
          Casualty  Insurance  Company  (Incorporated  by  reference  to Exhibit
          10.4.2 of the  Registrant's  Report on Form 8-K, dated January 6, 1989
          (Commission File No. 1-11238).)

10.4.3.   Amendment to Restated Management  Agreement,  dated as of December 31,
          1990,  by and among Mutual Inland  Marine  Office,  Inc. and Arkwright
          Mutual  Insurance  Company,   Utica  Mutual  Insurance  Company,   the
          Registrant  and  Pennsylvania   National  Mutual  Casualty   Insurance
          Company.   (Incorporated  by  reference  to  Exhibit  10.4.3.  of  the
          Registrant's  Annual  Report on Form 10-K for the  fiscal  year  ended
          December 31, 1992 (Commission File No. 1-11238).)

10.6.     Restated  Management  Agreement  dated as of January  1, 1986,  by and
          among Mutual Marine Office of the Midwest,  Inc. and  Arkwright-Boston
          Manufacturers   Mutual  Insurance  Company,   Utica  Mutual  Insurance
          Company,   Lumber  Mutual  Insurance   Company,   the  Registrant  and
          Pennsylvania National Mutual Casualty Insurance Company. (Incorporated
          by reference to Exhibit 10.6 of the Registrant's Annual Report on Form
          10-K for the fiscal year ended December 31, 1986  (Commission File No.
          1-11238).)

10.6.2.   Amendment to Restated  Management  Agreement  dated as of December 30,
          1988,  by and among  Mutual  Marine  Office of the  Midwest,  Inc. and
          Arkwright Mutual Insurance  Company,  Utica Mutual Insurance  Company,
          Lumber Mutual  Insurance  Company,  the  Registrant  and  Pennsylvania
          National Mutual Casualty Insurance Company. (Incorporated by reference
          to  Exhibit  10.6.2 of the  Registrant's  Report  on Form  8-K,  dated
          January 6, 1989 (Commission File No. 1-11238).)

10.6.3.   Amendment to Restated  Management  Agreement  dated as of December 31,
          1990,  by and among  Mutual  Marine  Office of the  Midwest,  Inc. and
          Arkwright Mutual Insurance  Company,  Utica Mutual Insurance  Company,
          the Registrant and  Pennsylvania  National Mutual  Casualty  Insurance
          Company.   (Incorporated  by  reference  to  Exhibit  10.6.3.  of  the
          Registrant's  Annual  Report on Form 10-K for the  fiscal  year  ended
          December 31, 1992 (Commission File No. 1-11238).)

10.8.     Restated  Management  Agreement  dated as of January  1, 1986,  by and
          among  Pacific  Mutual  Marine  Office,   Inc.  and   Arkwright-Boston
          Manufacturers  Mutual  Insurance  Company,   Lumber  Mutual  Insurance
          Company,   Utica  Mutual   Insurance   Company,   the  Registrant  and
          Pennsylvania National Mutual Casualty Insurance Company. (Incorporated
          by reference to Exhibit 10.8 of the Registrant's Annual Report on Form
          10-K for the fiscal year ended December 31, 1986  (Commission File No.
          1-11238).)

10.8.2.   Amendment to Restated  Management  Agreement  dated as of December 30,
          1988, by and among Pacific  Mutual Marine  Office,  Inc. and Arkwright
          Mutual  Insurance  Company,  Lumber Mutual  Insurance  Company,  Utica
          Mutual Insurance  Company,  the Registrant and  Pennsylvania  National
          Mutual  Casualty  Insurance  Company.  (Incorporated  by  reference to
          Exhibit 10.8.2 of the  Registrant's  Report on Form 8-K, dated January
          6, 1989 (Commission File No. 1-11238).)

10.8.3.   Amendment to Restated  Management  Agreement  dated as of December 31,
          1990, by and among Pacific  Mutual Marine  Office,  Inc. and Arkwright
          Mutual  Insurance  Company,   Utica  Mutual  Insurance  Company,   the
          Registrant  and  Pennsylvania   National  Mutual  Casualty   Insurance
          Company.   (Incorporated  by  reference  to  Exhibit  10.8.3.  of  the
          Registrant's  Annual  Report on Form 10-K for the  fiscal  year  ended
          December 31, 1992 (Commission File No. 1-11238).)

10.9      1991 Option Plan  (Incorporated  by reference the  Registrant's  Proxy
          Statement for its 1991 Annual Meeting of Shareholders (Commission File
          No. 1-11238).)

10.10     Form of Indemnification Agreement.



10.11     1999 NYMAGIC, INC. Phantom Stock Plan.

21.       Subsidiaries of the Registrant.

23.       Consent of KPMG LLP.

27.       Financial Data Schedule.