<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                    FORM 10-K
(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, 2003

   / /    Transition report pursuant to Section 13 or 15(d) of the Securities
          Exchange Act of 1934 For the Period From _________ to __________.

                       Commission File Number: 001-14593

                          THE MIIX GROUP, INCORPORATED
             (Exact name of Registrant as specified in its charter)


                    DELAWARE                                22-3586492
(State or other jurisdiction of incorporation or         (I.R.S. employer
                  organization)                        identification number)


               TWO PRINCESS ROAD, LAWRENCEVILLE, NEW JERSEY 08648
              (Address of principal executive offices and zip code)

                                 (609) 896-2404
              (Registrant's telephone number, including area code)

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


    ------------------------------------- ------------------------------------
                                          Name of Each Exchange on Which
    Title of Each Class                   Registered
    ------------------------------------- ------------------------------------
    Common Stock, par value
    $0.01 per share                       None
    ------------------------------------- ------------------------------------

        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 periods as the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

                                 YES / / NO /X/

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

        Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Act).

                                 YES / / NO /X/

        The aggregate market value on October 28, 2004 of the voting stock held
by non-affiliates of the registrant was $1,119,474.

        As of October 28, 2004, the number of outstanding shares of the
Registrant's Common Stock was 13,993,425.

<PAGE>

THE MIIX GROUP, INCORPORATED
2003 FORM 10-K
TABLE OF CONTENTS


PART I   ......................................................................2

ITEM 1.  BUSINESS..............................................................2
ITEM 2.  PROPERTIES...........................................................20
ITEM 3.  LEGAL PROCEEDINGS....................................................20
ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..................21

PART II  .....................................................................21

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
         MATTERS..............................................................21
ITEM 6.  SELECTED FINANCIAL DATA..............................................25
ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
         AND RESULTS OF OPERATION.............................................26
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK...........38
ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA..........................38
ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE.................................................38
ITEM 9A. CONTROLS AND PROCEDURES..............................................38
ITEM 9B. OTHER INFORMATION....................................................38

PART III .....................................................................38

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT...................38
ITEM 11. EXECUTIVE COMPENSATION...............................................39
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.......44
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.......................49
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES...............................51

PART IV  .....................................................................51

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K......51

SIGNATURES....................................................................60

INDEX TO FINANCIAL STATEMENTS AND SCHEDULES..................................F-1




                                                                               1

<PAGE>

                           FORWARD-LOOKING STATEMENTS

This Form 10-K contains forward-looking statements that are based on the
Company's estimates and expectations concerning future events and anticipated
results and are subject to certain risks and uncertainties that could cause
actual results to differ materially from those reflected in the forward-looking
statements. In particular, the Company anticipates that its capital reserves and
liquidity are insufficient to allow it to continue to operate. This and other
risks are set forth in the Company's filings made from time to time with the
Securities and Exchange Commission. The words "believe," "expect," "anticipate,"
"project" and similar expressions identify forward-looking statements. The
Company's expectations regarding future earnings, wind-down initiatives,
underwriting, cost controls, adequacy of loss and loss adjustment expense
reserves, and enhancing shareholder value depend on a variety of factors,
including economic, competitive and market conditions which may be beyond the
Company's control and are thus difficult or impossible to predict. In light of
the significant uncertainties inherent in the forward-looking information
herein, the inclusion of such information should not be regarded as a
representation by the Company or any other person that the Company's objectives
or plans will be realized. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of their dates. The
Company undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise.

PART I

ITEM 1.  BUSINESS

The MIIX Group, Incorporated ("The MIIX Group") was organized as a Delaware
corporation in October 1997 and, until September 28, 2004 (see "Subsequent
Events" below), was the parent company of a group of medical malpractice
insurance and insurance-related subsidiaries. Upon its formation, The MIIX Group
succeeded to the business of its predecessor. Until about 1991, the Company's
business was based primarily in New Jersey and written through its largest
insurance subsidiary, MIIX Insurance Company ("MIIX"). During 1991-2000, the
Company expanded to 24 other states, writing through both MIIX and Lawrenceville
Property and Casualty Company ("LP&C"). The MIIX Group began operating as a
publicly traded company on July 30, 1999.

As a result of net losses reported in 2000 and 2001, the insurance subsidiaries
ceased writing new or renewal business in all states by September 1, 2002,
consistent with the withdrawal requirements of individual states. By December
31, 2003, all insurance policies written by MIIX had expired.

Since ceasing to write new insurance policies in 2002, the Company's business
has consisted principally of managing the runoff of existing claims, the
Company's investment portfolio, and the operations of a New Jersey insurance
company, MIIX Advantage Insurance Company of New Jersey, which was renamed
"MDAdvantage Insurance Company of New Jersey"("MDAdvantage").

For purposes of this Annual Report on Form 10-K, the "Company" refers at all
times to The MIIX Group and its subsidiaries, collectively; the term "The MIIX
Group" refers at all times to The MIIX Group, Incorporated, excluding its
subsidiaries. "MIIX" refers to MIIX Insurance Company. "MIIX Advantage" and
"MDAdvantage" both refer to MIIX Advantage Insurance Company of New Jersey,
renamed in August 2004 to MDAdvantage Insurance Company of New Jersey.
MDAdvantage is not owned by the Company, rather it has a contractual arrangement
for its management with New Jersey State Medical Underwriters, Inc. (the
"Underwriter"), a subsidiary of The MIIX Group. See Part I, Item 13 of this Form
10-K.

SUBSEQUENT EVENTS. In furtherance of the ongoing monitoring of the runoff of
MIIX's insurance operations, the New Jersey Department of Banking and Insurance
("New Jersey Department") appointed an Administrative Supervisor in April 2004.
MIIX continued to operate in voluntary solvent runoff until September 28, 2004
when it was placed in rehabilitation by the New Jersey Department. See
"Regulation - Order of Rehabilitation" on page 17 of this Form 10-K.

MIIX's excess reinsurance contracts currently in place contain a provision
allowing reinsurers to offer additional reinsurance coverage that MIIX is
obligated to accept. In September and October 2004, the reinsurers initiated
requests for

                                                                               2
<PAGE>

additional premiums in accordance with contract terms. MIIX is without
sufficient surplus to purchase the requested coverage. See "Reinsurance -
Reinsurance Ceded."

During the summer of 2004, the Company retained financial advisors to assist in
exploring all of its alternatives. In connection with that exploration, the
financial advisors have contacted more than 50 prospective purchasers of assets
of MIIX or investors in MIIX. As a consequence of that effort, the Company has
received one indication of interest from MDAdvantage to acquire certain assets
of the Underwriter and one additional possible offer. The Company is proceeding
to negotiate with MDAdvantage the documentation relating to a possible sale of
the Underwriter's assets, subject to the receipt of all necessary approvals and
"higher or better offers" prior to closing. The Company is also continuing to
seek other buyers for its assets. Lawrenceville Re, Ltd. ("Lawrenceville Re") is
the sole remaining operating asset of the Company, and it has minimal activity.
The Company anticipates that its current cash position will not allow it to
continue to operate and that it will be required to wind up its business.

Significant aspects of the description of the Company's business contained in
this report are historical in nature and are not necessarily reflective of the
Company's current activities.

OVERVIEW

HISTORY OF BUSINESS

Medical professional liability insurance, also known as medical malpractice
insurance, insures the physician, other medical professionals or health care
institutions against liabilities arising from the rendering, or failure to
render, medical professional services. Under the typical medical professional
liability policy, the insurer also is obligated to defend the insured against
alleged claims.

The Company had total revenues and a net loss of $15.4 million and $314.7
million, respectively, in 2003, total revenues and a net loss of $165.0 million
and $116.0 million, respectively, in 2002 and total revenues and a net loss of
$233.3 million and $157.6 million, respectively, in 2001. As of December 31,
2003, the Company had total assets of $1.3 billion and a deficiency in total
stockholders' equity of $(278.5) million.

RESERVE ADJUSTMENTS

In 2001 and 2002, prior year gross loss and Loss Adjustment Expense ("LAE")
reserves were adjusted by $117.9 million and $161.2 million, respectively, to
reflect adverse development on several lines of business including New Jersey
and other states' physicians, Pennsylvania hospitals and hospital excess. The
adjustments were related to increases in severity and frequency. These trends
continued in 2003 and were complicated by acceleration in the claims process
attributable to tort and judicial reform in Pennsylvania and New Jersey and the
impact of MIIX and LP&C entering voluntary solvent runoff in 2002. Loss and LAE
reserves for 2003 were established by the Company as a result of an internal
actuarial review, an external opining actuarial review and an external actuarial
review performed in conjunction with the filing of MIIX's Annual Audited
Statutory Financial Statements ("Audited Report"). As a result of these reviews,
prior year gross loss and LAE reserves were increased by $353.0 million. The
increase was attributable to adverse development and increased severity in the
New Jersey and Pennsylvania physician and hospital excess lines of business.

As of December 31, 2003, MIIX's Total Adjusted Capital, as filed in its Audited
Report, was a deficit of $(305.6) million, which is below the Mandatory Control
Level. MIIX continued to operate in voluntary solvent runoff until September 28,
2004 when the State of New Jersey entered an Order of Rehabilitation of MIIX.
See "Regulation - Order of Rehabilitation." Additionally, MIIX completed the
merger of LP&C into MIIX on December 31, 2003.

As a result of the losses occurring in 2001 and 2002, the Company's various
insurance subsidiaries were required by the New Jersey Department and other
applicable state regulatory bodies to cease writing insurance by September 1,
2002. As a result, the Company's business activities since that date have been
limited to managing claims, managing its investment portfolio and, through its
underwriting subsidiary, providing claims management and underwriting and
related services to MIIX and MDAdvantage. By December 31, 2003, all insurance
policies written by the Company had expired.

                                                                               3
<PAGE>

OTHER RECENT DEVELOPMENTS:  2003-2004

Primarily as a result of the dramatic increases in reserves over the past three
years, the Company has experienced a number of adverse developments. The
following are among the most significant.

During 2003, MIIX entered into an Order with the New Jersey Department that set
forth the framework for the regulatory monitoring of MIIX and established
certain operating limitations on MIIX. On September 28, 2004, the Superior Court
of New Jersey entered an Order placing MIIX into rehabilitation. See "Regulation
- Order of Rehabilitation" on page 17 of this Form 10-K.

The trading of The MIIX Group's common stock was suspended at the opening of
business on April 28, 2003 by the New York Stock Exchange ("NYSE") because The
MIIX Group was "below criteria" as its total capitalization was less than $50
million over a 30-day trading period and stockholders' equity was less than $50
million. The MIIX Group's common stock now trades on the Over-The-Counter
("OTC") Bulletin Board under the ticker symbol "MIIX." See "Risks and
Uncertainties."

During 2002, the Company engaged financial advisors to assist it in obtaining
offers for the Company's assets. No viable offers to make a significant
investment in the Company or to purchase all of the Company were received. In
2004, the Company engaged additional financial advisors to assist it in
exploring all available alternatives, and the Company continues to be interested
in entertaining any and all offers by any interested parties for its assets
and/or for investment in the Company. In connection with that exploration, the
financial advisors have contacted more than 50 prospective purchasers of assets
of the Company or investors in the Company. As a consequence of that effort, the
Company has received one indication of interest from MDAdvantage to acquire
certain assets of the Underwriter and one additional possible offer. The Company
is proceeding to negotiate with MDAdvantage the documentation relating to a
possible sale of the Underwriter's assets, subject to the receipt of all
necessary approvals and "higher or better offers" prior to closing. The Company
is also continuing to seek other buyers for its assets.

CLAIMS

Although entry of the Order of Rehabilitation for MIIX on September 28, 2004,
gave the New Jersey Department authority over claims, the Company's Claims
Department was responsible for claims investigation, establishment of
appropriate case reserves for loss and Allocated Loss Adjustment Expense
("ALAE"), defense planning and coordination, supervision of attorneys engaged by
the Company to defend a claim and negotiation of the settlement or other
disposition of a claim at December 31, 2003. All of the Company's primary
policies require it to defend its insureds. Medical malpractice claims often
involve the evaluation of highly technical medical issues, severe injuries and
conflicting medical opinions. In almost all cases, the person bringing the claim
against the insured is already represented by legal counsel when the claim is
reported to the Company.

Litigation defense has historically been provided almost exclusively by private
law firms with lawyers whose primary focus is defending malpractice cases.

LOSS AND LAE RESERVES

As discussed above, the Company has recorded substantial increases in its loss
and LAE Reserves in each of the past three years. In consequence, the Company
ceased writing medical malpractice insurance in New Jersey as of September 1,
2002, and in all other states in accordance with their respective specific
requirements. In September 2004, MIIX was determined by the New Jersey
Department to be in hazardous financial condition, and on September 28, 2004, an
Order of Rehabilitation was entered with respect to MIIX. The discussion that
follows summarizes the methodology employed by the Company in establishing loss
and LAE reserves and some of the adverse developments experienced by the Company
over the past few years.

Loss reserves recorded by the Company include estimates of amounts to be paid
for losses and for LAE. LAE consists of two types of costs, ALAE and Unallocated
Loss Adjustment Expenses ("ULAE"). ALAE are settlement costs that can be
allocated to a specific claim such as attorney fees and court costs. ULAE
consists of costs that are general in nature and cannot be allocated to any
specific claim, including

                                                                               4
<PAGE>

mainly salaries and overhead associated with the Company's Claims Department.
ULAE reserves recorded by the Company represent management's best estimate of
the internal costs necessary to settle all incurred claims, including Incurred
But Not Reported ("IBNR") claims.

The determination of loss and LAE reserves involves the projection of ultimate
losses through quarterly actuarial analyses. Included in the Company's claims
history are losses and LAE paid by the Company in prior periods, and case
reserves for anticipated losses and ALAE developed by the Company's Claims
Department as claims are reported and investigated. Management relies primarily
on such historical loss experience in determining reserve levels on the
assumption that historical loss experience provides a good indication of future
loss experience despite the uncertainties in loss trends and the delays in
reporting and settling claims.

There are significant uncertainties in estimating ultimate losses in the
casualty insurance business. The uncertainties are even greater for companies
writing long-tail casualty insurance, such as medical malpractice insurance, and
in particular the occurrence-like coverage that make up a substantial portion of
the Company's current reserves. These additional uncertainties are due primarily
to the longer period of time during which an insured may seek coverage for a
claim with respect to an occurrence-like policy as opposed to a claims-made
policy. In 2004, the Company is still experiencing development on claims
associated with coverage written in the 1970's. With the longer claim reporting
and development period, reserves are more likely to be affected by, among other
factors, changes in judicial liability standards and interpretation of insurance
contracts, changes in the rate of inflation and changes in the propensities of
individuals to file claims.

These uncertainties inherent in estimating losses have been exacerbated by
several factors in the past several years. The Company's entry into runoff in
2002 resulted in a continuous decline of policies in force during 2003, with no
policies remaining in force as of December 31, 2003. This caused a significant
and continuing decrease in new claim reports as well as an overall significant
decrease in total pending claims. The decreased pending claims, and especially
the decreased new claim reports, which consumed disproportionately longer set-up
time, have allowed a greatly increased time for each claim handler to work on
existing claims. This has resulted in an acceleration in the setting up of case
reserves, departing significantly from the historic patterns the Company has
relied upon to estimate future development and IBNR.

Simultaneously, significant changes in the litigation environment in New Jersey,
which represents approximately 50% of the Company's reserves, resulted in faster
processing of claims and a corresponding acceleration in case reserving. The
court system in New Jersey instituted its "Best Practices" initiative in
September 2000 which was intended to speed cases through the courts. This
initiative has substantially speeded up trials in New Jersey and thus has
affected the entire claims management process. In June 2003, the courts issued a
public report stating that the court system in New Jersey had reached its lowest
level of backlogged cases since 1980.

As a result of these various uncertainties, estimates reflected in earlier loss
reserves may be revised, as has been the case in each of the past three years.

METHODOLOGIES. The Company sets and adjusts financial statement loss and LAE
reserves beginning with the claims adjudication process. Claims examiners
establish case reserves by a process that includes extensive development and use
of statistical information that allows for comparison of individual claim
characteristics against historical patterns and emerging trends. This process
also provides critical information for use in establishing the IBNR component of
the financial statement reserves.

The determination of loss and LAE reserves involves the projection of ultimate
loss and ALAE through various actuarial techniques, including:

        o       Incurred Development Method
        o       Berquist-Sherman Method
        o       Bornhuetter-Ferguson Method
        o       Frequency-Severity Method
        o       ALAE-to-Indemnity Ratio Method
        o       Audit Method

                                                                               5
<PAGE>

ULAE reserves are projected through a Paid-to-Paid Ratio Method.

A brief description of each of these methods follows:

        o       Incurred Development Method: Historical patterns of loss and
                ALAE emergence are observed and selections of period-to-period
                development factors are made to estimate the relative
                development within a Coverage Year from one maturity point to
                the next. These selected factors are applied to the latest
                reported incurred loss and ALAE amounts for each Coverage Year.
                This method is used mainly for relatively mature Coverage Years.
        o       Berquist-Sherman Method: Changing conditions in the claim
                management process can cause significant distortions in reserve
                projections. The Berquist-Sherman Method adjusts the historical
                data to the conditions inherent in the most recent data. This
                allows selections of period-to-period development factors which
                take into account the changes in conditions.
        o       Bornhuetter-Ferguson Method: This method relies on the
                assumption that the remaining unreported loss and ALAE amounts
                are a function of the total expected amounts rather than a
                function of the latest reported incurred loss and ALAE amounts.
                Expected future development amounts are added to current
                reported incurred loss and ALAE amounts for each Coverage Year.
                The expected future development amounts for each Coverage Year
                are derived by multiplying an a-priori expected ultimate loss
                and ALAE amount by the estimated percentage of ultimate loss and
                ALAE unreported, to date. This percentage is based on the
                factors selected within the Incurred Development Method. The
                a-priori expected ultimate loss and ALAE amount is derived via
                either of two approaches: (1) it is assumed to match the prior
                quarter's selected ultimate loss and ALAE amount; or (2) it is
                based upon a more mature Coverage Year's selected ultimate loss
                and ALAE amount as a ratio to earned premium, the current
                Coverage Year's earned premium and estimated effects of rate and
                mix-of-business differences between the more mature and current
                Coverage Years. This method is used mainly for relatively
                immature Coverage Years.
        o       Frequency-Severity Method: Ultimate reported claim counts and
                ultimate average loss and ALAE per claim are projected
                separately, and then multiplied together. Ultimate claim counts
                are derived in a manner similar to the Incurred Development
                Method; however, the implied ultimate claim counts are analyzed
                as ratios to exposure level to achieve implied frequencies.
                Final frequencies are selected judgmentally and multiplied by
                the exposure measure to obtain final ultimate reported claim
                counts. Ultimate average loss and ALAE per claim are derived
                through curve-fitting techniques in which the a-priori
                parameters are the estimated ultimate reported claim counts and
                ultimate loss and ALAE amounts achieved via another method.
                Selected curve fits are extrapolated to more recent Coverage
                Years for which credible severity information may not yet exist.
                This method is used mainly for relatively immature Coverage
                Years.
        o       ALAE-to-Indemnity Ratio Method: This method is only used to
                estimate ultimate ALAE amounts when loss and ALAE are projected
                independently. Both ALAE and indemnity amounts must have been
                projected to ultimate using other methodologies. Then ratios of
                (ultimate ALAE)-to-(ultimate indemnity) are calculated for each
                Coverage Year, and appropriate ratios are judgmentally selected
                for each year. More mature Coverage Years serve as a basis for
                the selections in immature years. Then, the selected ratios are
                multiplied by the ultimate indemnity amounts. This method is
                used mainly for relatively immature Coverage Years.
        o       Audit Method: Claims personnel review individual claims and
                estimate their ultimate loss and ALAE amounts based on their
                specific characteristics. This method is mainly used for
                segments of the business with low frequency and high severity
                exposures.
        o       Paid-to-Paid Ratio Method: Historical ratios of (paid
                ULAE)-to-(paid indemnity and ALAE) are calculated and serve as a
                basis for the judgmental selection of a corresponding ratio to
                be expected in the future. This ratio is applied to the
                estimated indemnity and ALAE reserves.

                                                                               6
<PAGE>

RESERVES BY POLICY TYPE AND YEAR. The Company also reserves by policy type and
by year. In addition to claims-made insurance coverage, the Company offered
traditional occurrence professional liability insurance coverage from 1977
through 1986 and offered a form of occurrence-like coverage, "modified
claims-made," from 1987 to August 31, 2002. The Company's modified claims-made
policy was the Permanent Protection Policy ("PPP"). Under the PPP, coverage was
provided for claims reported to the Company during the policy period arising
from incidents since inception of the policy. The PPP included "tail coverage"
for claims reported after expiration of the policy for occurrences during the
policy period, and thus was reserved on an occurrence basis. As displayed in the
table below, loss and LAE reserves carried for PPP policies and traditional
occurrence professional liability policies constituted approximately 67% of the
gross loss and LAE reserves at December 31, 2003.

The following table provides a summary of gross loss and LAE reserves by policy
type.

<TABLE>
<CAPTION>
                                  Gross Loss and Loss Adjustment Expense Reserves by Policy Type
                                                          (In thousands)

                                              Professional Liability
                              ---------------------------------------------------
                                Occurrence/        % of        Claims       % of                    % of       Total Gross
                              Occurrence-Like      Total        Made        Total       Other       Total        Reserves
                              ---------------      -----      --------      -----      -------      -----      -----------
<S>                              <C>               <C>        <C>           <C>         <C>          <C>       <C>
Gross Reserves Held as of:
December 31, 2001                $832,290          69.5%      $357,495      29.9%       $7,213       0.6%      $1,196,998
December 31, 2002                 750,175          65.1%       395,774      34.4%        5,686       0.5%       1,151,635
December 31, 2003                 812,527          66.7%       401,564      32.9%        4,866       0.4%       1,218,957
</TABLE>

As displayed in the above table, the proportion of the gross loss and LAE
reserves held on claims-made medical professional liability policies has grown
from 29.9% of total gross loss and LAE reserves held at December 31, 2001 to
32.9% at December 31, 2003. This has primarily been the result of the Company's
claims-made policy form writings during 1997 through 2002. New Jersey Physician
business was primarily written under the occurrence-like PPP policy. The
majority of policies sold in other states were claims-made.

Since a significant portion of the Company's reserves are recorded on an
occurrence basis, and given the long time that typically elapses between the
coverage incident and the resolution of the claim, IBNR reserves have
consistently represented a majority of the gross reserves recorded by the
Company. The following table summarizes the components of gross loss and LAE
reserves, including ULAE reserves, and indicates that IBNR reserves constitute a
majority of gross reserves on a consistent basis:

<TABLE>
<CAPTION>

                                   Components of Gross Loss and Loss Adjustment Expense Reserves
                                                            (In thousands)


                                Loss and                   Loss and                                             Total
                                ALAE Case      % of        ALAE IBNR      % of          ULAE        % of        Gross
                                Reserves       Total       Reserves       Total       Reserves      Total      Reserves
                                ---------      ------      ---------      ------      --------      -----     ----------
<S>                              <C>            <C>         <C>            <C>        <C>            <C>      <C>
Gross Reserves Held as of:
December 31, 2001                $429,493       35.9%       $719,268       60.1%      $48,237        4.0%     $1,196,998
December 31, 2002                 436,873       37.9%        696,287       60.5%       18,475        1.6%      1,151,635
December 31, 2003                 463,686       38.0%        737,070       60.5%       18,201        1.5%      1,218,957
</TABLE>

The Company issued occurrence policies since 1977 and occurrence-like PPP
policies since 1987. There is a significant lag in reporting of incidents or
occurrences inherent in the medical malpractice insurance industry. As a result
the Company continues to adjust open claims that are associated with coverage
written in the 1970's.

                                                                               7
<PAGE>

The following table illustrates the amount and percentage of gross loss and LAE
reserves held by the Company at December 31, 2003 categorized by year.


        Gross Loss and Loss Adjustment Expense Reserves By Coverage Year
                             As of December 31, 2003
                                 (In thousands)

Coverage Year                                    Gross Reserves     % of Total
----------------------------------------------   --------------    ------------

1977-93.....................................     $     54,046           4.4%
1994........................................           22,686           1.9%
1995........................................           24,410           2.0%
1996........................................           48,590           4.0%
1997........................................           65,042           5.3%
1998........................................          127,485          10.5%
1999........................................          173,043          14.2%
2000........................................          219,946          18.0%
2001........................................          264,136          21.7%
2002........................................          186,341          15.3%
2003........................................           33,232           2.7%
                                                 ------------         ------
Total Gross Reserves held by the Company....     $  1,218,957         100.0%
                                                 ============         ======

As shown in the above tables, at December 31, 2003, approximately 67% of gross
reserves are occurrence based; over 60% of gross reserves are IBNR reserves, and
approximately 72% of gross reserves relate to the most recent five coverage
years, which are the most immature (and, therefore, most subject to variability)
in terms of loss development.

Activity in the liability for unpaid losses and LAE gross of reinsurance is
summarized as follows:

<TABLE>
<CAPTION>
                                                            Years Ended December 31,
                                                     --------------------------------------
                                                       2003           2002           2001
                                                     --------       --------       --------
                                                                 (In thousands)
<S>                                                <C>            <C>           <C>
Balance at January 1, gross of reinsurance
  recoverable...................................   $1,151,635     $1,196,998    $1,142,530

Incurred related to:
     Current year...............................       33,582        150,612       230,399
     Prior years................................      352,983        161,207       117,881
                                                   ----------     ----------    ----------
Total incurred..................................      386,565        311,819       348,280
                                                   ----------     ----------    ----------
Paid related to:
     Current year...............................          350          2,648         2,570
     Prior years................................      318,893        354,534       291,242
                                                   ----------     ----------    ----------
Total paid......................................      319,243        357,182       293,812
                                                   ----------     ----------    ----------
Balance at December 31, gross of reinsurance
  recoverable...................................    1,218,957      1,151,635     1,196,998
Reinsurance recoverable.........................      425,785        457,005       463,275
                                                   ----------     ----------    ----------
Balance at December 31, net of reinsurance......   $  793,172     $  694,630    $  733,723
                                                   ==========     ==========    ==========
</TABLE>

The Company increased prior year gross reserves by $353.0 million, $161.2
million and $117.9 million during 2003, 2002 and 2001, respectively.
Notwithstanding management's analysis and determination in setting its best
estimate of aggregate reserves reported in the financial statements, which may
or may not require adjustments to aggregate prior year reserves, management
regularly evaluates, and adjusts when appropriate, its estimates of coverage
year ultimate losses and LAE. Accordingly, reserves established for losses and
LAE on individual coverage years may experience greater volatility than
aggregate reserves reported in the Company's financial statements. Individual
coverage year reserves cover a smaller amount of

                                                                               8
<PAGE>

business over a shorter period of time than do the aggregate reserves, which are
an accumulation of reserves pertaining to all coverage years. Estimated ultimate
losses and LAE associated with individual coverage years were adjusted in 2003,
2002 and 2001. The following table presents the estimated ultimate losses and
LAE gross of reinsurance (including changes in such estimates) by coverage year:

<TABLE>
<CAPTION>
                                                      Coverage Year Development
                                                           (In thousands)

                                                                                                    Changes in Estimated
                                                                                                   Ultimate Losses and LAE
                                                       Estimated Ultimate                            for the Years Ended
                                               Losses and LAE as of December 31,                         December 31,
                                    ----------------------------------------------------     --------------------------------------
Coverage Year                           2000          2001           2002          2003          2001          2002         2003
-------------                       ----------    ----------    ----------    ----------     ---------     ---------     ---------
<S>                                 <C>           <C>           <C>           <C>            <C>           <C>             <C>
1993 and Prior                      $1,330,901    $1,332,284    $1,336,850    $1,360,565     $   1,383     $   4,566       $23,715

1994                                   143,651       152,787       159,170       168,681         9,136         6,383         9,511
1995                                   155,128       156,665       163,978       170,515         1,537         7,313         6,537
1996                                   179,902       186,510       217,126       238,018         6,608        30,616        20,893
1997                                   205,156       226,797       235,972       255,709        21,641         9,175        19,737
1998                                   242,349       278,821       303,113       339,270        36,472        24,292        36,156
1999                                   307,246       332,052       358,724       414,796        24,806        26,672        56,071
2000                                   276,261       292,559       321,075       374,179        16,298        28,516        53,104
2001                                                 230,399       254,073       330,614                      23,674        76,541
2002                                                               150,612       201,329                                    50,717
2003                                                                              33,582                                    33,582
                                    ----------    ----------    ----------    ----------     ---------     ---------      --------
Total Estimated Ultimate Losses
and LAE                              2,840,594     3,188,874     3,500,693     3,887,258     $ 117,881     $ 161,207      $386,565
                                                                                             =========     =========      ========
Less:  Total Paid Loss and LAE       1,698,064     1,991,876     2,349,058     2,668,301
                                    ----------    ----------    ----------    ----------
Gross Loss and LAE Reserves at
December 31                         $1,142,530    $1,196,998    $1,151,635    $1,218,957
                                    ==========    ==========    ==========    ==========
</TABLE>

2001, 2002, 2003 ADJUSTMENTS. In 2001 and 2002, prior year gross loss and LAE
reserves were adjusted by $117.9 million and $161.2 million, respectively, to
reflect adverse development on several lines of business including New Jersey
and other states' physicians, Pennsylvania hospitals and hospital excess. The
adjustments were related to increases in severity and frequency.

Specific factors noted in management's actuarial analysis giving rise to the
coverage year reserve development in 2001 included the following: overall
reserves across all coverage years were significantly adjusted to reflect
increased loss severity seen during 2001. Claims were adjudicated or settled at
higher values than the Company had previously experienced. This increase in
severity was seen primarily in the Company's Pennsylvania institutions' book,
and, to a lesser degree, in the Company's core New Jersey physician book, as
well as in the physician business in many other states, including, most
particularly, Pennsylvania, Texas and Ohio. Development in prior coverage years
through 1996 primarily reflects this severity trend in Pennsylvania and New
Jersey. Development on coverage years 1997 through 2000 was primarily composed
of increases to Pennsylvania physician and institutional reserves as well as
increases to reserves on physician business in states outside of New Jersey and
Pennsylvania. The increases to reserves held on business outside of New Jersey
and Pennsylvania reflected increased severity as well as, to a lesser extent,
greater than previously anticipated loss frequency.

Specific factors in management's actuarial analysis giving rise to the coverage
year development in 2002 were increased loss severity, re-underwriting
initiatives undertaken by the Company since 1999 and the acceleration of claim
reporting, settlement and payments experienced by the Company during 2002.

The continued increase in severity of claims was particularly noted in the
physician book in Texas, Ohio and New Jersey, and in the hospital book in
Pennsylvania and all other markets in 2002. The majority of the adverse
development in all markets was observed in coverage years prior to 2000. A
significant acceleration of claim reporting was observed in the first half of
2002 in Pennsylvania attributable to a rush to file suits ahead of pending tort
reform legislation in this state. The Pennsylvania book also showed indications
of acceleration of the claim settlement process, which the Company believes is
attributable to its runoff status, lifting of stays that had delayed many cases
and general efforts by the Pennsylvania court system to clear the backlog of
cases. The New Jersey physician book showed significant acceleration in the
claim settlement process in the latter half of the year with claim settlement
rates in some of the older coverage years (1998 and prior) at 100% or more above
expected levels. The

                                                                               9
<PAGE>

Company believes the acceleration in New Jersey is attributable to its runoff
status, as well as the continued effects of the "Best Practices" initiative
mandated by the New Jersey Supreme Court in September 2000.

These trends continued in 2003 and were complicated by acceleration in the
claims process attributable to tort and judicial reform in Pennsylvania and New
Jersey and the impact on the internal claim process of the Company entering
voluntary solvent runoff in 2002. After extensive analyses, the Company's prior
year gross loss and LAE reserves were adjusted by $353.0 million for 2003. The
increase was primarily attributable to adverse development and increased
severity in New Jersey and Pennsylvania physician lines of business and the
hospital excess lines in all jurisdictions.

The 2003 adjustments were established as a result of an extensive process, which
included an internal actuarial review of data valued at September 30, 2003,
December 31, 2003, March 31, 2004, and June 30, 2004, an external opining
actuarial review of data valued at September 30, 2003, December 31, 2003 and
June 30, 2004 and an external actuarial review performed in conjunction with
filing MIIX's Audited Report.

The reason for the extensive actuarial analyses on multiple quarters of data was
to determine how much of the development in the loss experience of the Company
from quarter to quarter was attributable to acceleration in the claim handling
process and environment as opposed to adverse development in terms of increased
severity.

Management and 2 external actuarial analyses concur that there is acceleration
in the development of the Company's data. Determining, however, what portion is
acceleration versus adversity is extremely difficult. Management sought out
multiple actuarial reviews over four successive quarters of development data to
evaluate the volatile data. The extreme uncertainty in the data and analyses has
been the result of several factors.

The Company's entry into runoff in 2002 resulted in a continuous decline of
policies in force during 2003, with no policies remaining in force as of
December 31, 2003. This caused a significant and continuing decrease in new
claim reports as well as an overall significant decrease in total pending
claims. The decreased pending claims and especially the reduced new claim
reports, which consumed a disproportionately longer time to initially set up,
have allowed greatly increased time for each claim handler to work on existing
claims. This has resulted in an acceleration in the setting up of case reserves,
departing significantly from the historic patterns the Company has relied upon
to estimate future development and IBNR.

Simultaneously, significant changes in the litigation environment in New Jersey,
which represents approximately 50% of the Company's reserves, resulted in the
faster processing of claims and a corresponding acceleration in case reserving.
The court system in New Jersey instituted its "Best Practices" initiative in
September 2000, which was intended to speed cases through the courts. This
initiative has substantially speeded up trials in New Jersey and, thus, has
affected the entire claims management process. In June 2003, the courts issued a
public report stating that the court system in New Jersey had reached its lowest
level of backlogged cases since 1980.



                                                                              10
<PAGE>

On a net of reinsurance basis, the activity in the liability for unpaid losses
and LAE is summarized as follows:

<TABLE>
<CAPTION>
                                                               Years Ended December 31,
                                                      -------------------------------------------
                                                         2003             2002             2001
                                                      ---------        ---------        ---------
                                                               (In thousands)
<S>                                                  <C>              <C>              <C>
Balance at January 1, net of
  reinsurance recoverable..........................  $  694,630       $  733,723       $  710,484

Incurred related to:
     Current year..................................      33,582          146,619          203,975
     Prior years...................................     237,357           49,868           46,793
                                                     ----------       ----------       ----------
Total incurred.....................................     270,939          196,487          250,768
                                                     ----------       ----------       ----------
Paid related to:
     Current year..................................         350            2,648            2,571
     Prior years...................................     172,047          232,932          224,958
                                                     ----------       ----------       ----------
Total paid.........................................     172,397          235,580          227,529
                                                     ----------       ----------       ----------
Balance at December 31, net of
  reinsurance recoverable..........................     793,172          694,630          733,723
Reinsurance recoverable............................     425,785          457,005          463,275
                                                     ----------       ----------       ----------
Balance at December 31, gross of reinsurance.......  $1,218,957       $1,151,635       $1,196,998
                                                     ----------       ----------       ----------
</TABLE>

The following tables reflect the development of reserves for unpaid losses and
LAE, including reserves on assumed reinsurance, for the periods indicated at the
end of that year and each subsequent year. The first line shows the reserves as
originally reported at the end of the stated year. Reserves at each calendar
year-end include the estimated unpaid liabilities for that report or accident
year and for all prior report or accident years. The section under the caption
"Liability reestimated as of" shows the originally reported reserves as adjusted
as of the end of each subsequent year to reflect the cumulative amounts paid and
all other facts and circumstances discovered during each year. The line
"Cumulative redundancy (deficiency)" reflects the difference between the latest
reestimated reserves and the reserves as originally established. The section
under the caption "Cumulative amount of liability paid through" shows the
cumulative amounts paid through each subsequent year on those claims for which
reserves were carried as of each specific year end.

The tables reflect the effect of all changes in amounts of prior periods. For
example, if a loss determined in 1998 to be $100,000 was first reserved in 1993
at $150,000, the $50,000 redundancy (original estimate minus actual loss) would
be included in the cumulative redundancy in each of the years 1993 through 1997
shown below. The tables present development data by calendar year and do not
relate the data to the year in which the claim was reported or the incident
actually occurred. Conditions and trends that have affected the development of
these reserves in the past will not necessarily recur in the future.




                                                                              11
<PAGE>
<TABLE>
<CAPTION>

TABLE I.  LOSS AND LAE RESERVES DEVELOPMENT - GROSS


                              1993     1994      1995      1996      1997      1998       1999       2000        2001       2002
                              ----     ----      ----      ----      ----      ----       ----       ----        ----       ----
                                                                         (In thousands)
<S>                        <C>       <C>       <C>       <C>       <C>      <C>        <C>        <C>         <C>        <C>
LOSS AND LAE RESERVES      $667,200  $688,455  $748,660  $795,449  $876,721 $  951,659 $1,053,597 $1,142,530  $1,196,998 $1,151,635

LIABILITY REESTIMATED AS
OF:
   One year later           623,988   688,455   748,660   795,654   880,543    968,173  1,100,809  1,260,411   1,358,205  1,504,617
   Two years later          623,986   688,450   744,130   793,170   878,233    962,709  1,202,392  1,397,944   1,660,471
   Three years later        623,989   689,122   739,106   772,567   863,657  1,039,486  1,311,410  1,623,669
   Four years later         624,567   674,224   715,136   766,597   903,962  1,121,831  1,484,030
   Five years later         606,219   647,203   707,312   785,261   962,015  1,238,380
   Six years later          588,748   653,275   719,368   834,139 1,042,407
   Seven years later        595,682   663,794   737,630   894,795
   Eight years later        597,065   674,743   777,393
   Nine years later         601,631   707,969
   Ten years later          625,346
CUMULATIVE REDUNDANCY
(DEFICIENCY)                 41,854   (19,514)  (28,733)  (99,346) (165,686)  (286,721)  (430,433)  (481,139)   (463,473)  (352,983)

                              1993     1994      1995      1996      1997      1998       1999       2000        2001       2002
                              ----     ----      ----      ----      ----      ----       ----       ----        ----       ----
                                                                         (In thousands)

CUMULATIVE AMOUNT OF
LIABILITY PAID THROUGH:
   One year later          $ 83,522  $ 98,053  $116,532  $101,217  $141,954 $  164,524 $  230,005 $  291,242  $  354,535  $ 318,893
   Two years later          179,714   212,284   214,484   231,755   298,785    370,911    497,982    620,952     661,087
   Three years later        284,828   293,323   332,920   373,232   470,693    588,348    755,339    888,421
   Four years later         343,563   407,357   452,055   514,813   634,094    771,226    968,729
   Five years later         436,921   492,388   553,205   629,774   757,853    896,538
   Six years later          486,861   552,039   621,022   707,116   828,050
   Seven years later        524,025   594,337   655,511   745,480
   Eight years later        548,388   618,134   676,667
   Nine years later         562,629   631,646
   Ten years later          571,715


TABLE II.  LOSS AND LAE RESERVES DEVELOPMENT - NET

                              1993     1994      1995      1996      1997      1998       1999       2000        2001       2002
                              ----     ----      ----      ----      ----      ----       ----       ----        ----       ----
                                                                       (In thousands)

LOSS AND LAE
RESERVES-GROSS             $667,200  $688,455  $748,660  $795,449  $876,721   $951,659 $1,053,597 $1,142,530 $1,196,998   $1,151,635
REINSURANCE RECOVERABLE
ON UNPAID LOSSES             62,682   112,917   165,729   221,749   270,731    325,795    406,409    432,046    463,275      457,005
                           --------  --------  --------  --------  --------   --------   -------- ---------- ----------   ----------
                            604,518   575,538   582,931   573,700   605,990    625,864    647,188    710,484    733,723      694,630
LIABILITY REESTIMATED AS
OF:
   One year later           559,518   575,538   582,931   573,700   603,906    611,850    698,491    757,277    783,590      931,987
   Two year later           559,518   575,538   582,931   573,321   603,809    649,454    738,008    765,508    988,667
   Three years later        559,518   575,538   580,883   588,477   627,292    678,666    674,266    888,819
   Four years later         559,518   575,124   579,766   595,479   611,087    622,337    756,560
   Five years later         559,133   566,608   587,836   587,991   596,751    699,426
   Six years later          548,242   576,831   586,777   583,738   634,088
   Seven year later         561,953   580,940   587,266   619,876
   Eight years later        564,486   582,625   621,539
   Nine years later         568,076   615,361
   Ten years later          591,551
CUMULATIVE REDUNDANCY
(DEFICIENCY)                 12,967   (39,823)  (38,608)  (46,176)  (28,098)   (73,562)  (109,372)  (178,335)  (254,944)   (237,357)


                              1993     1994      1995      1996      1997      1998       1999       2000        2001       2002
                              ----     ----      ----      ----      ----      ----       ----       ----        ----       ----
                                                                       (In thousands)

CUMULATIVE AMOUNT OF
LIABILITY PAID THROUGH:
   One year later          $ 82,572  $ 97,496  $116,194  $ 84,276  $134,666   $157,359  $ 211,393  $ 224,958   $232,932    $172,048
   Two years later          178,357   211,426   197,370   214,404   284,887    345,305    413,084    433,064    392,640
   Three years later        283,370   278,571   315,743   365,517   439,372    496,456    548,839    553,688
   Four years later         328,836   392,522   437,779   492,617   536,488    557,648    615,383
   Five years later         422,194   478,731   524,447   550,600   542,294    582,701
   Six years later          473,702   523,901   549,919   531,001   560,675
   Seven years later        508,269   544,626   533,102   548,031
   Eight years later        528,303   528,347   548,006
   Nine years later         530,409   541,619
   Ten years later          539,255
</TABLE>

The aggregate excess reinsurance contracts, in place from 1995 through 1999,
provide coverage above aggregate retentions for losses and ALAE other than
certain losses and ALAE retained by MIIX or reinsured under other insignificant
reinsurance contracts. The aggregate reinsurance contracts, therefore, have the
effect of holding underwriting year net incurred losses and ALAE for years 1995
through 1999 at a constant level provided such losses and ALAE ceded under the
aggregate excess reinsurance contracts remain within the coverage limits
available in each underwriting year. Ceded losses and ALAE have remained within
coverage limits in each year since 1995 with the exception of 1998 and 1999.
Loss and LAE reserves have exceeded contract limits in 1998 and 1999 by $6.3
million and $4.5 million, respectively. The aggregate excess reinsurance
contracts for 2000 and 2001 cover New Jersey and Pennsylvania physician business

                                                                              12
<PAGE>

only. The aggregate excess reinsurance contract for 2002 covers New Jersey
physician business only. The aggregate contracts operate on a funds held basis
and provide for premium adjustments based on loss experience. See "Business -
Reinsurance" and "Management's Discussion and Analysis of Financial Condition
and Results of Operation - Risks and Uncertainties."

REINSURANCE

The Company follows customary industry practice by reinsuring some of its
business. The Company typically cedes to reinsurers a portion of its risks and
pays a fee based upon premiums received on all policies subject to such
reinsurance. Insurance is ceded principally to reduce net liability on
individual risks and to provide aggregate loss and LAE protection. Although
reinsurance does not legally discharge the ceding insurer from its primary
liability for the full extent of the policies reinsured, it does make the
reinsurer liable to the insurer to the extent of the reinsurance ceded. The
Company reviews its reinsurance needs annually and makes changes in its
reinsurance arrangements as necessary. The Company did not purchase reinsurance
in 2003 because it was no longer writing insurance policies.

In prior years, the Company reinsured its risks primarily under two reinsurance
contracts, the Specific Contract and the Aggregate Contract. See "Business --
Loss and LAE Reserves -- Table II -- Loss and LAE Reserves Development -- Net."

Each of the aggregate excess reinsurance contracts contains an adjustable
premium provision that may result in changes to ceded premium and related funds
held charges, based on loss experience under the contract. The table below
presents a summary of activity for the aggregate excess reinsurance contracts
for each of the last three years.

                              Aggregate Excess Reinsurance Contracts Activity
                                                (In millions)
                                  2003               2002            2001
                                  ----               ----            ----
 Ceded losses incurred            $98.8              $97.7           $85.9
 Ceded premium                    $50.1              $54.4           $54.7
 Funds held charges               $43.0              $54.2           $42.5

Each of the aggregate excess reinsurance contracts also contains a profit
sharing provision whereby a significant portion of any favorable gross loss and
ALAE reserve development may ultimately be returned to the Company once all
subject losses and ALAE have been paid or the contract has been commuted. Profit
sharing is recorded by the Company after the funds withheld balance related to
an aggregate excess reinsurance contract exceeds the related ceded reserves,
after any adjustments under the adjustable premium provisions. Profit sharing is
recorded as an offset to funds held charges and to the funds withheld liability.

Each of the aggregate excess reinsurance contracts also contains a provision
requiring that the funds withheld be placed in trust should the A.M. Best rating
assigned to MIIX fall below B+. Under the contracts, and as a result of the
downgrade of MIIX's A.M. Best rating to below B+ during the first quarter of
2002, reinsurers requested that assets supporting the funds withheld account be
placed in trust. MIIX established the required trust accounts in accordance with
contract provisions. Each of the aggregate excess reinsurance contracts also
contains a provision allowing reinsurers to offer additional reinsurance
coverage that MIIX is obligated to accept. In September and October 2004, the
reinsurers initiated requests for additional premiums from MIIX in accordance
with provisions of the contracts. Reinsurers are prohibited from canceling
current reinsurance agreements or making additional premium charges to MIIX
under the September 28, 2004 Order of Rehabilitation.

The major elements of all ceded reinsurance activity are summarized in the
following table:

                                             For the Years Ended December 31,
                                           ------------------------------------
                                             2003          2002          2001
                                           --------      --------      --------
                                                      (In thousands)

Ceded premiums earned....................  $ 50,707      $ 59,325      $67,529
Ceded losses and LAE.....................   115,626       115,332       97,509
Funds held charges.......................    42,996        54,209       42,476

                                                                              13
<PAGE>

MIIX seeks to control credit risk from reinsurance by placing the reinsurance
with large, highly rated reinsurers and by collateralizing amounts recoverable
from reinsurers. The following table identifies the Company's most significant
reinsurers, the total amount recoverable from them for unpaid losses, prepaid
reinsurance premiums and other amounts as of December 31, 2003, and collateral
held by the Company in the form of funds withheld and letters of credit as of
December 31, 2003. No other single reinsurer's percentage participation in 2003
exceeded 5% of the total reinsurance recoverable at December 31, 2003.

                                                      At December 31, 2003
                                              ---------------------------------
                                              Total Amounts     Total Amount of
Reinsurer                                      Recoverable      Collateral Held
--------------------------------------------  -------------     ---------------
                                                       (In thousands)

Hannover Reinsurance (Ireland) Ltd..........     $214,226          $207,754
Eisen und Stahl Reinsurance (Ireland) Ltd...       53,556            51,814
London Life and Casualty Reinsurance
   Corporation..............................       37,970            41,559
Underwriters Reinsurance Company (Barbados).       74,565            79,326
Swiss Reinsurance/European Reinsurance......       68,351            59,410

The Company analyzes the credit quality of its reinsurers and relies on its
brokers and intermediaries to assist in such analysis. To date, the Company has
not experienced any material difficulties in collecting reinsurance
recoverables.

REINSURANCE ASSUMED. The Company did not assume reinsurance in 2003 or 2002,
consistent with its decision to discontinue writing insurance. On July 1, 2002,
an excess of loss contract providing medical professional liability coverage on
an institutional account was commuted. The commutation of this treaty had no
impact on the Company's financial condition or results of operations.

REINSURANCE COMMUTED. In June 2004, MIIX commuted its 1995 aggregate excess
reinsurance treaty. The commutation agreement provided for the release of
applicable funds held balances and trust fund assets. The reduction to earnings
as a result of the commutation was $3.3 million in 2004.

INVESTMENT PORTFOLIO

When MIIX was placed by court order into rehabilitation on September 28, 2004,
the New Jersey Department assumed full control of MIIX's investment portfolio.
The Company's investment policy, prior to that time, placed primary emphasis on
holding investment grade, fixed maturity securities, maximizing after-tax yields
while minimizing credit risks and preserving liquidity. In doing so, the Company
used independent fixed income portfolio managers and an investment consultant
operating under the guidance of investment policies established at the direction
of the Company's Board of Directors (the "Board").

Under the Order of Rehabilitation, which was entered on September 28, 2004, the
New Jersey Department has assumed control of the investment portfolio. As a
result, the Company presently exercises no control over its investments, the
liquidation of those investments, or investment policy. The discussion set forth
below and elsewhere in this 10-K is as of December 31, 2003, and does not
describe the management of MIIX's investment portfolio as at present, as the New
Jersey Department's approach to the management of that portfolio is not known to
the Company.

                                                                              14
<PAGE>

The following table sets forth the composition of the investment portfolio of
the Company at the dates indicated. All of the fixed maturity investments were
held as available-for-sale.

<TABLE>
<CAPTION>
                                                     December 31, 2003               December 31, 2002
                                                --------------------------      --------------------------
                                                  Cost or                         Cost or
                                                 Amortized         Fair          Amortized         Fair
                                                    Cost           Value            Cost           Value
                                                ----------      ----------      ----------      ----------

                                                                      (In thousands)
<S>                                             <C>             <C>             <C>             <C>
U.S. Treasury securities and obligations
  of U.S. government corporations and
  agencies..................................    $   99,778      $  100,011      $  108,725      $  112,499
Obligations of states and political
  subdivisions..............................         7,795           7,695               0               0
Foreign securities - U.S. dollar
  denominated...............................             0               0           6,946           7,351
Corporate securities........................       218,666         229,268         280,152         285,183
Mortgage-backed and other asset-backed
  securities................................       354,558         358,761         375,591         383,547
                                                ----------      ----------      ----------      ----------
Total fixed maturity investments............       680,797         695,735         771,414         788,580
Equity investments..........................         2,781           3,226           4,804           5,187
Short-term..................................        56,470          56,468         262,537         262,537
                                                ----------      ----------      ----------      ----------
   Total investments........................    $  740,048      $  755,429      $1,038,755      $1,056,304
                                                ==========      ==========      ==========      ==========
</TABLE>

The investment portfolio of fixed maturity investments consisted primarily of
intermediate-term, investment-grade securities with an allocation to below
investment-grade (i.e. high yield) fixed maturity investments not to exceed 7.5%
of invested assets as per the Company's investment policy prior to 2003. In
2003, as a result of the runoff of MIIX, the Company elected to
opportunistically eliminate its exposure to below investment-grade securities as
market conditions permit.

At December 31, 2003, the average credit quality of the fixed income portfolio
was AA. The table below contains additional information concerning the
investment ratings of the longer term fixed maturity investments at December 31,
2003:

<TABLE>
<CAPTION>
                                                        Amortized        Fair      Percentage of
S&P Rating of Investment (1)                               Cost         Value       Fair Value
---------------------------------------------------    -----------     -------     -------------
                                                                    (In thousands)
<S>                                                       <C>         <C>             <C>
AAA (including U.S. Government and Agencies).......       $441,001    $445,533         64.0%
AA.................................................         82,110      84,355         12.1%
A..................................................        124,476     129,234         18.6%
BBB................................................          3,513       3,665          0.5%
Other Ratings (below investment grade).............         29,697      32,948          4.8%
                                                          --------    --------        ------
   Total...........................................       $680,797    $695,735        100.0%
                                                          ========    ========        ======
</TABLE>

(1)     The ratings set forth above are based on the ratings, if any, assigned
        by Standard & Poor's Rating Services ("S&P"). If S&P's ratings were
        unavailable, the equivalent ratings supplied by another nationally
        recognized ratings agency were used.

The following table sets forth certain information concerning the maturities of
fixed maturity investments, excluding equity and short-term fixed maturity
securities, in the investment portfolio as of December 31, 2003, by contractual
maturity:

<TABLE>
<CAPTION>
                                                         Amortized      Fair     Percentage of
Maturity of Investment                                      Cost        Value      Fair Value
---------------------------------------------------     ----------   ----------  -------------
                                                              (In thousands)
<S>                                                       <C>          <C>           <C>
Due one year or less...............................       $ 15,071     $ 15,400        2.2%
Due after one year through five years..............        183,973      187,039       26.9%
Due after five years through ten years.............        102,697      109,292       15.7%
Due after ten years................................         24,498       25,243        3.6%
Mortgage-backed and other asset-backed securities..        354,558      358,761       51.6%
                                                          --------     --------      ------
   Totals..........................................       $680,797     $695,735      100.0%
                                                          ========     ========      ======
</TABLE>

                                                                              15
<PAGE>

The effective duration of the securities in the longer term fixed maturity
portfolio (excluding short-term investments) as of December 31, 2003, was 3.2
years.

Mortgage-backed securities represent approximately 24.2% of the total fixed
income portfolio and are allocated equally across "standard" and "more complex"
securities, while the asset-backed portfolio represents approximately 27.4% of
the total fixed income portfolio. Asset-backed securities may involve certain
risks not presented by other securities. These risks may be enhanced during
periods of economic downturn such as what was experienced in the past year.
Risks include default, lack of liquidity, price volatility and sensitivity to
interest rates.

Standard mortgage-backed securities are issued on and collateralized by an
underlying pool of single-family home mortgages. Principal and interest payments
from the underlying pool are distributed pro rata to the security holders. More
complex mortgage-backed security structures prioritize the distribution of
interest and principal payments to different classes of securities that are
backed by the same underlying collateral mortgages.

CUSTOMERS

The Company's only significant customer activity is providing third party
management services to MDAdvantage.

REGULATION

The Company's insurance subsidiaries are subject to supervisory regulation by
their respective states of incorporation, commonly called the state of domicile.
MIIX is domiciled in New Jersey, MIIX Insurance Company of New York ("MIIX New
York") is domiciled in New York and Lawrenceville Re is domiciled in Bermuda.
Therefore, the laws and regulations of these states, and those of Bermuda,
including the tort liability laws and the laws relating to professional
liability exposures and reports, had the most significant impact on the
operations of the combined company.

HOLDING COMPANY REGULATION. As part of a holding company system, MIIX and MIIX
New York are subject to the Insurance Holding Company Systems Acts (the "Holding
Company Act") of their domiciliary states. In general, a state's Holding Company
Act requires the domestic company to file information periodically with the
state insurance department and other state regulatory authorities, including
information relating to its capital structure, ownership, financial condition
and general business operations. The Holding Company Act also provides that the
acquisition or change of "control" of a domestic insurance company or of any
person or entity that controls such an insurance company cannot be consummated
without prior regulatory approval.

EXAMINATION OF INSURANCE COMPANIES. Every insurance company is subject to a
periodic financial examination under the authority of the insurance commissioner
of its state of domicile. The last completed periodic financial examination of
MIIX as of December 31, 2000, was completed on October 30, 2003, and a report
was issued on December 23, 2003. The New York Insurance Department ("New York
Department") conducted an examination of MIIX New York as of December 31, 2001.
The examination report was filed by the New York Department on January 7, 2004.
Currently, the Company has no financial examination in progress. The Company has
not undergone a market conduct examination.

RISK-BASED CAPITAL. In addition to state-imposed insurance laws and regulations,
insurers are subject to the general statutory accounting practices and
procedures and the reporting format of the National Association of Insurance
Commissioners ("NAIC"). The NAIC's methodology for assessing the adequacy of
statutory surplus of property and casualty insurers includes an RBC formula that
attempts to measure statutory capital and surplus needs based on the risks in a
company's mix of products and investment portfolio. The formula is designed to
allow state insurance regulators to identify potentially under-capitalized
companies. Under the formula, a company determines its RBC by taking into
account certain risks related to the insurer's assets (including risks related
to its investment portfolio and ceded reinsurance) and the insurer's liabilities
(including underwriting risks related to the nature and experience of its
insurance business). The RBC rules provide for different levels of regulatory
attention depending on an insurance company's RBC.

                                                                              16
<PAGE>

At December 31, 2003, MIIX's RBC was below the Mandatory Control Level and
continues at this level.

During 2003, MIIX entered into an Order with the New Jersey Department that set
forth the framework for the regulatory monitoring of MIIX and established
certain operating limitations on MIIX. The limitations, among other things,
required the approval of the New Jersey Department prior to payment of dividends
by the Company's insurance subsidiary, and for lending arrangements, investments
and inter-company arrangements outside of the normal course of business, and
required MIIX to periodically provide information relating to its operations and
finances to the New Jersey Department. In April 2004, the New Jersey Department
appointed an Administrative Supervisor as part of its ongoing efforts to monitor
MIIX's runoff operations.

ORDER OF REHABILITATION. On September 28, 2004, the Superior Court of New Jersey
entered an Order placing MIIX and its wholly owned subsidiaries, MIIX New York
and Lawrenceville Holdings, Inc., into rehabilitation and naming the
Commissioner of the New Jersey Department as Rehabilitator with immediate and
exclusive control over the business and property of MIIX. The Order provides
that The MIIX Group and the Underwriter will continue to provide administrative
services to MIIX pursuant to the current Management Services Agreement until
terminated by the New Jersey Department after appropriate notice. The Order does
not stay payment of claims for any litigation currently pending against MIIX or
its insureds and does not bar claimants from filing new actions against MIIX
insureds. The Order, however, prohibits persons from filing any new action or
new claim directly against MIIX without permission of the Court. The Order also
requires notice to and consent of the Rehabilitator for the assignment of any
contract to which MIIX is a party. Reinsurers are prohibited from canceling
current reinsurance agreements or making additional premium charges to MIIX
under the September 28, 2004 Order of Rehabilitation.

EMPLOYEES

When the Company initially entered runoff in 2002, it employed 237 persons. At
December 31, 2003, the Company employed 94 persons. During 2003, as a result of
its reduced insurance operations, the Company reduced the number of employees by
24 persons. None of the Company's employees are covered by a collective
bargaining agreement. The Company believes that its relations with its employees
are good.

AVAILABLE INFORMATION

The Company files annual, quarterly and current reports, proxy statements and
other documents with the Securities and Exchange Commission (the "SEC") under
the Securities Exchange Act of 1934 (the "Exchange Act"). The public may read
and copy any materials that the Company files with the SEC at the SEC's Public
Reference Room at 450 Fifth Street, NW, Washington, DC 20549. The public may
obtain information on the operation of the Public Reference Room by calling the
SEC at 1-800-SEC-0330. Also, the SEC maintains an Internet website that contains
reports, proxy and information statements, and other information regarding
issuers, including those that filed electronically with the SEC. The public can
obtain any documents that the Company files with the SEC at http://www.sec.gov.

The Company also makes available free of charge through its Internet website
(http://www.MIIX.com) its Annual Report on Form 10-K, Quarterly Reports on Form
10-Q, current reports on Form 8-K and amendments to those reports filed or
furnished pursuant to Section 13, or 15(d) or 16(a) of the Exchange Act as soon
as reasonably practicable after the Company electronically files such material
with, or furnishes it to, the SEC.

EXECUTIVE OFFICERS OF THE REGISTRANT

The following table sets forth information concerning the individuals who serve
as executive officers of The MIIX Group. At December 31, 2003, The MIIX Group
had seven executive officers, Ms. Costante, Mr. Davis, Mr. Grab, Ms. Mason, Mr.
Roynan, Mr. Sugerman and Ms. Williams.

                                                                              17
<PAGE>

Name                           Position
----                           --------

Patricia A. Costante           Chairman and Chief Executive Officer

William Davis                  Senior Vice President, Claims

Edward M. Grab                 Senior Vice President, Chief Actuary

Verice M. Mason                Senior Vice President and General Counsel

James Roynan                   Senior Vice President, Information Systems

Allen G. Sugerman              Chief Financial Officer and Treasurer

Catherine E. Williams          Senior Vice President, Business Development and
                               Corporate Secretary

PATRICIA A. COSTANTE (47), Chairman and Chief Executive Officer. Patricia A.
Costante has been Chairman since 2002 and Chief Executive Officer of the Company
since 2001. Before being named Chief Executive Officer, Ms. Costante was the
Company's Chief Operating Officer from September 2001 to November 2001. Prior to
serving as Chief Operating Officer, she was Senior Vice President responsible
for the sale and delivery of all products and services to the New Jersey
physician market from March 2000 to September 2001. Prior to being named Senior
Vice President, Ms. Costante was Executive Vice President and Chief Operating
Officer of MIIX Healthcare Group, Inc., a subsidiary of the Underwriter from
April 1998 to March 2000 and from July 1996 to April 1998 served as Assistant
Vice President. Ms. Costante is Vice Chairman of the Board of Trustees, Catholic
Charities, Diocese of Trenton.

WILLIAM G. DAVIS, JR. (56), Senior Vice President, Claims Operations. Mr. Davis
has been Senior Vice President, Claims since March 2002. He is responsible for
Claims Operations. Prior to serving as Senior Vice President, Mr. Davis served
as Vice President, Claims Operations from September 1995 to February 2000 and
Assistant Vice President, Claims from June 1992 to September 1995. Mr. Davis was
terminated from the Company effective January 26, 2004.

EDWARD M. GRAB (48), Senior Vice President, Chief Actuary. Mr. Grab has served
as Senior Vice President since March 2000. He is responsible for actuarial
services and staff underwriting functions which includes underwriting policy and
risk management services. Prior to serving as Senior Vice President, Mr. Grab
served as Vice President, Chief Actuary from October 1999 to March 2000. Before
joining the Company, he was Vice President and Actuary for Zurich Financial
Services from March 1996 to June 1999 where he directed the actuarial department
in support of four strategic business units with a combined book of $1 billion.

VERICE M. MASON (52), Senior Vice President and General Counsel. Ms. Mason has
served as Senior Vice President and General Counsel since June 2002. She is
responsible for all legal and regulatory matters involving the Company. Prior to
serving as Senior Vice President and General Counsel, Ms. Mason served as Senior
Vice President, Legal and Regulatory Affairs from February 2002 to June 2002.
Prior to being named Senior Vice President, Legal and Regulatory Affairs, Ms.
Mason served as Vice President, Legal and Regulatory Affairs from June 1999 to
February 2002 and Assistant Vice President, Associate General Counsel from June
1995 to June 1999. Ms. Mason resigned from the Company effective October 29,
2004.

JAMES P. ROYNAN (43), Senior Vice President, Information Systems. Mr. Roynan has
served as Senior Vice President since December 2002. He is responsible for
strategy and implementation for all process improvement, information technology,
systems and integration, network administration, software development and
technical support activity. Prior to serving as Senior Vice President Mr. Roynan
served as Vice President, Information Systems from December 2001 to December
2002. Prior to joining the Company Mr. Roynan served as Executive Vice President
and CIO of Xyan, Inc. from September 2000 to May 2001. From February 2000 to
August 2000 Mr. Roynan served as Executive Vice President and COO of WePlayIt,
Inc. From January 1992 to January 2000 Mr. Roynan served as Vice President,
Technology Solutions of Reed Technologies and Information Services. Mr. Roynan
was terminated from the Company effective January 26, 2004.

                                                                              18
<PAGE>

ALLEN G. SUGERMAN (53), Chief Financial Officer and Treasurer. Mr. Sugerman has
served as Chief Financial Officer since July 2002. Mr. Sugerman has been a
principal of Altila Corporation, a health care management consulting firm, since
1990. He has more than 25 years of diversified financial and operational
experience.

CATHERINE E. WILLIAMS (43), Senior Vice President, Business Development and
Corporate Secretary. Ms. Williams has served as Senior Vice President since
December 2001. She is responsible for business development, corporate
governance, shareholder relations, human resources and facilities management.
Prior to serving as Senior Vice President, Ms. Williams served as Vice
President, Corporate Secretary from August 1999 to December 2001 and as
Assistant Corporate Secretary from May 1997 to August 1999.

The following sets forth information regarding Directors of the Company as of
December 31, 2003.

PATRICIA A. COSTANTE (47), Director since 2001. Patricia A. Costante has been
Chairman since 2002 and Chief Executive Officer of the Company since 2001.
Before being named Chief Executive Officer, Ms. Costante was the Company's Chief
Operating Officer from September 2001 to November 2001. Prior to serving as
Chief Operating Officer, she was Senior Vice President responsible for the sale
and delivery of all products and services to the New Jersey physician market
from March 2000 to September 2001. Prior to being named Senior Vice President,
Ms. Costante was Executive Vice President and Chief Operating Officer of MIIX
Healthcare Group, Inc., a subsidiary of the Underwriter, now a subsidiary of the
Company, from April 1998 to March 2000 and from July 1996 to April 1998, served
as Assistant Vice President. Ms. Costante is Vice-Chairman, Board of Trustees,
Catholic Charities, Diocese of Trenton.

ANGELO S. AGRO, M.D. (55), Director since 1997. Dr. Agro has been a member of
the Board of Directors of the Underwriter since 1990. He is a physician
certified by the American Board of Otolaryngology and practices in Andalusia,
Alabama with Andalusia Greater Regional Otolaryngology. He is a member of the
American Academy of Otolaryngology, the American Medical Association and the
American College of Surgeons.

SCOTT L. BARBEE (31), Director since 2003. Mr. Barbee has been Managing Director
of Berno, Gambal & Barbee, Inc. since 1997. He is also lead manager of the Aegis
Value Fund. Prior to his appointment as a Managing Director, Mr. Barbee was a
broker with Berno & Gambal Capital Management from December 1996 until June
1997. Mr. Barbee is a Chartered Financial Analyst. Mr. Barbee resigned from the
Board on October 13, 2004.

HARRY M. CARNES, M.D. (72), Director since 1997. Dr. Carnes has served as a
member of the Board of Directors of the Underwriter since 1989. He is a board
certified physician practicing in Audubon, New Jersey. Dr. Carnes is a member of
the American Academy of Family Practice, the American Medical Association, the
Camden County Medical Society, the Medical Society of New Jersey and the New
Jersey Medical Political Action Committee.

DOMINICK D'AGOSTA (63), Director since 2003. Mr. D'Agosta has served in the
Office of the Chairman of Fleet Bank of New Jersey since 2001. Prior to this
position, he served in the Office of the President of Summit Bank from 1996 to
2001. Mr. D'Agosta has 44 years of experience in the banking industry and has
worked in various senior management positions, which included positions in
marketing, operations and branch administration. He serves as Vice Chair of the
Hudson County Chamber of Commerce, Chairman of the Meadowlands Chamber of
Commerce and the Urban League of Hudson County, Director of Commerce and
Industry Association, National Conference for Community & Justice, Arthritis
Foundation of New Jersey and Bon Secours of Canterbury Partnership for Care. Mr.
D'Agosta is Chair of the New Jersey City University Foundation and Director of
Yes Youth Consultation Service.

PAUL J. HIRSCH, M.D. (67), Vice Chairman of the Board of Directors since 1997.
Dr. Hirsch has served as Vice Chairman of the Board of Directors of the
Underwriter, now a subsidiary of the Company since 1990. He is a board certified
physician practicing in Bridgewater, New Jersey, with BioSport Orthopedics and
Sports Medicine. Dr. Hirsch is President and Medical Director of InterMedix, an
orthopedic specialty care network. He is a member of the American Academy of
Orthopedic Surgeons, the American Orthopedic Association, the American College

                                                                              19
<PAGE>

of Surgeons, the American Medical Association, and the Medical Society of New
Jersey. He currently serves on the Board of Trustees for Raritan Valley
Community College. Dr. Hirsch is a clinical professor of orthopedic surgery at
Seton Hall School of Graduate Medical Education and Editor in Chief of NEW
JERSEY MEDICINE.

A. RICHARD MISKOFF, D.O. (62), Director since 1997. Dr. Miskoff served as a
member of the Board of Governors of Medical Inter-Insurance Exchange of New
Jersey, the predecessor of MIIX Insurance Company, from 1994 to 1999. He is a
board certified physician practicing in Edison, New Jersey. Dr. Miskoff is a
member of the American Osteopathic Association, the American Society of Clinical
Oncologists, the American Society of Hematology, and the New Jersey Association
of Osteopathic Physicians. He is past president of the Middlesex County Medical
Society of Osteopathic Physicians. Dr. Miskoff is Director of the Cancer Program
at JFK Medical Center, Edison, New Jersey.

CARL RESTIVO, JR., M.D. (58), Director since 1997. Dr. Restivo has been a member
of the Board of Directors of the Underwriter since 1997. He is a board certified
physician practicing in Jersey City, New Jersey. Dr. Restivo is a member of the
Arthritis Foundation and the New Jersey Chapter of the American Medical
Association. Dr. Restivo resigned from the Board effective May 1, 2004.

MARTIN L. SORGER, M.D. (70), Director since 1997. Dr. Sorger served as a member
of the Board of Governors of Medical Inter-Insurance Exchange of New Jersey from
1979 to 1999. He is a board certified orthopedic physician practicing in Glen
Ridge, New Jersey, and a member of the Montclair Orthopedic Group. Dr. Sorger is
a member of the American Academy of Orthopedic Surgeons, the American Medical
Association, the American College of Surgeons and a former member of its Board
of Councilors. He is a member of the executive committee and past president of
the New Jersey Orthopedic Society. Dr. Sorger is Vice President of InterMedix,
an orthopedic specialty care network.

BESSIE M. SULLIVAN, M.D. (63), Director since 1997. Dr. Sullivan was a member of
the Board of Governors of Medical Inter-Insurance Exchange of New Jersey from
1992 to 1999. She is a board certified physician practicing in Edison, New
Jersey with Arthritis, Allergy & Immunology Center. Dr. Sullivan is a member of
the American Medical Association and the American Rheumatism Association, a
trustee and Secretary of the Medical Society of New Jersey and a member of the
Executive Committee of the Union County Medical Society.

Because the Company's securities are not traded on a national securities
exchange or quoted on a national quotation system, the Company is not required
to maintain an audit committee under the federal securities laws. Under state
law, the Company must maintain an audit committee, although no audit committee
financial expert is required. The Company has sought to engage an audit
committee expert but has been unsuccessful in its efforts.

ITEM 2.   PROPERTIES

The Underwriter leases approximately 25,000 square feet of space from Gordon
Lawrenceville Realty Associates, LLC ("Gordon") in Lawrenceville, New Jersey,
the location of its home office operations. The Underwriter entered into the
lease agreement with Gordon as of November 25, 2003, with an effective date of
April 27, 2004. The lease agreement was amended on June 22, 2004, and October 1,
2004. The term of the lease is for five years with an option to renew for an
additional five years.

ITEM 3.   LEGAL PROCEEDINGS

GLASSER V. THE MIIX GROUP, INC. ET AL. On February 5, 2003, a shareholder of the
Company instituted a putative class action in the United States District Court
for the District of New Jersey against the Company, present and former directors
and officers of the Company, the Medical Society of New Jersey ("MSNJ") and
Fox-Pitt Kelton, Inc. ("FPK"), which acted as financial advisor to the Company.
The complaint alleges that the Company and its directors and officers engaged in
securities fraud, breaches of fiduciary duty and violations of New Jersey
antitrust laws in connection with the MIIX Advantage contracts and alleged
misrepresentations and omissions of material fact in various SEC filings by the
Company. On May 13, 2003, another shareholder of the Company instituted a
separate putative class action in the United States District Court for the
District of New Jersey

                                                                              20
<PAGE>

(WASSERSTRUM V. THE MIIX GROUP, INC., ET AL.) against the Company and certain of
its officers alleging securities fraud. The law firms representing plaintiffs in
the two actions agreed to consolidate the plaintiffs' claim against the Company.
On August 12, 2003, a Consolidated Amended Complaint (the "Complaint") was filed
by the plaintiffs against the Company, present and former directors and officers
of the Company and MSNJ alleging securities fraud based on alleged
misrepresentations and omissions of material fact in various SEC filings by the
Company concerning the Company's financial condition, its statement of reserves,
the pricing of its policies, the MIIX Advantage contracts and other matters. The
Complaint seeks certification of a plaintiff class of the Company's shareholders
from July 30, 1999 to September 12, 2002 and unspecified damages, pre- and
post-judgment interest, attorneys' fees and costs. On October 21, 2003, the
Company filed a motion to dismiss the Complaint, which is currently pending. On
December 11, 2003, the Court ordered that the case be submitted to mediation and
stayed all proceedings pending mediation. The parties are engaging in mediation
discussions.

FOX-PITT KELTON V. THE MIIX GROUP, INC. On February 10, 2003, FPK, which had
been engaged as financial advisor to the Company, instituted suit against the
Company in the Supreme Court of New York to recover fees allegedly due from the
Company as a result of the investment banking services it rendered in connection
with the Company's efforts to dispose of assets or obtain capital and the
agreements entered into between the Company and MIIX Advantage. FPK filed a
motion for summary judgment in its favor, which was denied by the Court. On
April 28, 2004, the suit was dismissed with prejudice.

WEISFELD V. THE MIIX GROUP, INC., ET AL. On November 20, 2002, a former
executive of MSNJ filed suit in the Superior Court of New Jersey against MSNJ
and certain of its officers, including MSNJ officers who were also MIIX Group
board members, alleging wrongful discharge and defamation. On March 19, 2003,
plaintiff filed pleadings amending the Complaint to include The MIIX Group as a
defendant, alleging that The MIIX Group tortiously interfered with his
employment relationship and that its alleged influence over MSNJ was a causative
factor in his discharge. Motions to dismiss plaintiff's Amended Complaint were
filed by all defendants. By order dated August 19, 2003, the Court granted the
defendants' motions to dismiss and the entire Complaint was dismissed with
prejudice. On October 2, 2003, plaintiffs filed a notice of appeal of the
dismissal of the Complaint with the Superior Court of New Jersey, Appellate
Division. Oral argument in the Appellate Division was held on October 25, 2004.
The parties are awaiting the Court's decision.

Given the Company's current financial condition, any negative outcome of the
litigation requiring the payment of damages could have a material adverse effect
on the Company. The Company may also be a party to litigation from time to time
in the ordinary course of business.

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

Not Applicable.

PART II

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

PRICE RANGE OF COMMON STOCK

The MIIX Group common stock became publicly tradable on the NYSE on July 30,
1999 under the symbol of "MHU." The trading of the MIIX Group's common stock was
suspended from trading on the NYSE at the opening of business on April 28, 2003.
The MIIX Group's common stock now trades on the OTC Bulletin Board and the "pink
sheets" maintained by the National Quotation Bureau, Inc. ("Quotation Bureau")
under the ticker symbol "MIIX."

The following table shows the price ranges per share in each quarter during 2003
and 2002:

                                                                              21
<PAGE>

                                           Common Stock
                                           ------------
                                        High          Low
                                        ----          ---

         2003
         First Quarter                  $1.50        $0.63
         Second Quarter                 $0.95        $0.23
         Third Quarter                  $1.01        $0.01
         Fourth Quarter                 $1.85        $0.85

         2002
         First Quarter                 $13.50        $2.46
         Second Quarter                $ 2.48        $0.73
         Third Quarter                 $ 1.75        $0.60
         Fourth Quarter                $ 2.03        $1.00

On October 28, 2004, the closing price of the The MIIX Group stock was $0.08.

The MIIX Group stock is thinly traded and the stock price has been volatile in
the last fiscal year. For these reasons, there can be no assurance that an
active market will be available in which to trade The MIIX Group stock, which
could affect a stockholders' ability to sell The MIIX Group shares and could
depress the market price of its shares. The MIIX Group's common stock trades on
the OTC Bulletin Board and the "pink sheets" maintained by the Quotation Bureau.
The lack of liquidity could further reduce the trading price and increase the
transaction costs of trading shares of The MIIX Group.

Calculation of Aggregate Market Value of Non-Affiliate Shares

For the purpose of calculating the aggregate market value of the shares of The
MIIX Group common stock held by non-affiliates, as shown on the cover page of
this Report, it has been assumed that all the outstanding shares were held by
non-affiliates except for the shares held by directors. However, this should not
be deemed to constitute an admission that all directors of the Company are, in
fact, affiliates of the Company. The following table sets forth information
concerning shareholdings of officers, directors and principal stockholders of
the Company.

Stock Ownership of Directors, Executive Officers and Certain Beneficial Owners
as of December 31, 2003.

<TABLE>
<CAPTION>
                                                   Shares of   Stock Options Vested
Name                                             Common Stock     & Exercisable(1)       Total         % of Class
----                                             ------------     ----------------       -----         ----------
<S>                                                <C>                <C>              <C>               <C>
Christian Leone(2)                                   948,094                0            948,094          6.44%
Medical Society of New Jersey (3)                    821,365                0            821,365          5.58%
Berno, Gambal& Barbee, Inc.(4)                       797,850                0            797,850          5.42%
Patricia A. Costante                                 248,014          103,750            351,764          2.39%
Angelo S. Agro, M.D.                                   2,228           31,250             33,478              *
Scott L. Barbee (4)                                  242,200                0            242,200          1.70%
Harry M. Carnes, M.D. (5)                             20,111           60,794             80,905              *
Paul J. Hirsch, M.D. (6)                              30,381           34,732             65,113              *
A. Richard Miskoff, D.O.                                 714           37,802             38,516              *
Carl Restivo, MD                                      69,076           33,107            102,183              *
Martin L. Sorger, M.D. (7)                             6,593           33,107             39,700              *
Bessie M. Sullivan, M.D.                               1,667           60,794             62,461              *
William G. Davis                                     164,016            7,450            171,466          1.16%
Edward M. Grab                                       207,795           55,000            262,795          1.79%
Verice M. Mason                                      214,741            7,450            222,191          1.51%
Catherine E. Williams                                154,403           25,000            179,403          1.22%
All directors and officers as a group(16
persons)                                           1,509,805          490,236          2,000,041         13.59%
</TABLE>

                                                                              22
<PAGE>

* Less than 1% of the number of shares of Common Stock outstanding as of
December 31, 2003.

(1)     Represents shares of common stock subject to options held by the named
        individual exercisable on or prior to December 31, 2003.

(2)     Based on the Schedule 13G filed with the SEC on June 23, 2003. The
        address for this stockholder is c/o Luxor Capital Group LLC, 599
        Lexington Avenue, 35th Floor, New York, New York 10022. Christian Leone
        has sole power to dispose of 948,094 shares of common stock. Christian
        Leone has sole voting power to vote 948,094 shares owned.

(3)     MSNJ has sole power to vote all shares. Pursuant to the Stock Purchase
        Agreement dated October 15, 1997 between MSNJ and the Company, MSNJ
        received 814,815 shares of the Company's common stock. MSNJ may not
        transfer any of the 814,815 shares for a period of ten years following
        October 15, 1997, without the approval of the Company. The address of
        MSNJ is Two Princess Road, Lawrenceville, New Jersey 08648.

(4)     Based on Schedule 13G/A filed with the SEC on February 17, 2004. The
        address for this stockholder is 1100 North Glebe Road, Suite 1040,
        Arlington, VA 22201. William S. Berno, Paul Gambal and Scott L. Barbee
        are the owners of Berno, Gambal & Barbee, Inc. The aggregate amount
        beneficially owned by Messrs. Berno, Gambal and Barbee amounted to
        797,850; 800,350; 1,010,050 shares of common stock, respectively. Berno,
        Gambal & Barbee, Inc. has the sole voting power over 720,000 shares of
        common stock and the sole power to dispose of 797,850 shares of common
        stock. Messrs. Berno, Gambal and Barbee have shared power to dispose of
        797,850 shares of common stock and shared voting power over 720,000
        shares of common stock. In addition, Mr. Gambal has sole power to
        dispose of and vote 2,500 shares of common stock and Mr. Barbee has sole
        power to dispose of and vote 242,200 shares of common stock.

(5)     Dr. Carnes' shares include 1,400 shares held by his grandchildren. Dr.
        Carnes disclaims beneficial ownership of the shares owned by his
        grandchildren.

(6)     Dr. Hirsch is a trustee and participant of the BioSport Orthopedic and
        Sports Medicine Profit Sharing Plan. The Plan currently holds 10,000
        shares of common stock, which are included in the shares of common stock
        and the total shares shown. Dr. Hirsch disclaims beneficial ownership of
        shares held pursuant to the Plan except to the extent that he is a
        participant in the Plan.

(7)     Dr. Sorger's shares include 2,000 shares held by his son. Dr. Sorger
        disclaims beneficial ownership of the shares owned by his son.

Based on Schedule 13D filed with the SEC on October 6, 2004, the Company has
determined that Tyndall Capital Partners has acquired approximately 4.9% of the
Company's outstanding capital stock. The address for this stockholder is 153
East 53rd Street, 55th Floor, New York, New York 10022. Tyndall Partners, L.P.,
owns 519,126 shares of common stock as of September 28, 2004. Tyndall
Institutional Partners, L.P., own 222,500 shares of common stock as of September
28, 2004. Tyndall Capital Partners, L.P. possesses investment control over all
securities owned by Tyndall Partners, L.P. and Tyndall Institutional Partners,
L.P. and sole power to dispose of and vote 741,626 shares of common stock.

REGISTERED SHAREHOLDERS

The number of registered stockholders of The MIIX Group common stock as of
October 28, 2004 was 5,913. That number excludes the beneficial owners of shares
held in "street" names or held through participants in depositories.

DIVIDENDS

The MIIX Group is a holding company largely dependent upon dividends from its
subsidiaries to pay dividends to its shareholders. The insurance company
subsidiaries are restricted by state regulation in the amount of dividends they
can pay in relation to surplus and net income without the consent of the
applicable state regulatory authority, principally the New Jersey Department.

                                                                              23
<PAGE>

During 2002, the Board suspended dividend payments to its stockholders. Recent
regulatory limitations imposed on MIIX currently prohibit its ability to declare
and pay dividends. The Company does not expect to pay dividends for the
foreseeable future.

STOCKHOLDER RIGHTS PLAN. On June 27, 2001 the Company's Board adopted a
Stockholder Rights Plan (the "Rights Plan") and declared a dividend of one Right
for every outstanding share of common stock, par value $0.01, per share, to be
distributed on July 10, 2001 to stockholders of record as of the close of
business on that date. The Rights will expire on June 27, 2011 or upon the
earlier redemption of the Rights, and they are not exercisable until a
distribution date on the occurrence of certain specified events as defined
below.

Each Right entitles the holder to purchase from the Company one one-thousandth
of a share of Series A Junior Participating Preferred Stock, $0.01 par value at
a price of $35.00 per one-thousandth of a share, subject to adjustments. The
Rights will, on the distribution date, become exercisable ten (10) days after a
public announcement that a party has acquired at least 15% or commenced a tender
or exchange offer that would result in any party or group owning 15% or more of
the Company's outstanding shares of common stock and the acquiring party is
determined by a majority of the Company's directors to be an "Adverse Person" as
defined in the Rights Plan.

Each holder of a Right, other than the "acquiring person," as defined in the
Rights Plan, or "adverse person," will in such event have the right to receive
shares of the Company's common stock having a market value of two times the
exercise price of the Right. In the event that the Company is acquired in a
merger or other business combination, or if more than 50% of the Company's
assets or earning power is sold or transferred, each holder of a Right would
have the right to receive common stock of the acquiring company with a market
value of two times the purchase price of the Right. Following the occurrence of
any of these triggering events, any Rights that are beneficially owned by an
acquiring person will immediately become null and void. The Company may redeem
the Rights for $0.001 per Right at any time until ten (10) days following the
stock acquisition date.





                                                                              24
<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA

SUMMARY FINANCIAL AND OPERATING DATA

The following table sets forth selected consolidated financial and operating
data for the Company.

<TABLE>
<CAPTION>
                                                          (In thousands, except per share amounts)
                                                              For the Years Ended December 31,
                                     ------------------------------------------------------------------------------------
                                           2003             2002              2001             2000              1999
                                           ----             ----              ----             ----              ----
<S>                                     <C>              <C>               <C>             <C>                <C>
INCOME STATEMENT DATA:
Total premiums written................. $     (633)      $   96,209        $  231,946      $  226,126         $  257,100
                                        ==========       ==========        ==========      ==========         ==========
Net premiums earned.....................$  (26,078)      $  100,220        $  146,852      $  184,062         $  187,845
Net investment income...................    35,930           60,838            80,193          85,158             75,661
Realized investment losses..............    (1,597)          (3,521)           (2,184)         (4,156)            (6,770)
Other revenue...........................     7,126            7,439             8,439           7,452              8,323
                                        ----------       ----------        ----------      ----------         ----------
       Total revenues...................    15,381          164,976           233,300         272,516            265,059
                                        ----------       ----------        ----------      ----------         ----------
Losses and loss adjustment
   expenses.............................   270,939          196,487           250,768         279,224            174,986
Underwriting expenses...................    22,249           33,125            47,121          38,560             42,618
Funds held charges......................    42,996           54,209            42,476           7,502             14,338
Other expenses..........................       691            3,454             3,404           5,828              3,333
Restructuring charge....................         0            2,552                 0               0              2,409
                                        ----------       ----------        ----------      ----------         ----------
       Total expenses...................   336,875          289,827           343,769         331,114            237,684
                                        ----------       ----------        ----------      ----------         ----------
Income (loss) before income
   taxes................................  (321,494)        (124,851)         (110,469)        (58,598)            27,375
Income tax expense (benefit)............    (6,769)         (11,240)           41,892         (22,140)             6,617
Cumulative effect of an
   accounting change, net of
   tax (1)..............................         0           (2,373)           (5,283)              0                  0
                                        ----------       ----------        ----------      -----------        ----------
       Net income (loss)................$ (314,725)      $ (115,984)       $ (157,644)     $  (36,458)        $   20,758
                                        ==========       ==========        ==========      ==========         ==========

BALANCE SHEET DATA (AT END OF
PERIOD):
   Total investments....................$  755,429       $1,056,304        $1,228,058      $1,259,312         $1,182,943
   Total assets......................... 1,278,639        1,616,863         1,895,863       1,897,353          1,837,158
   Total liabilities.................... 1,557,160        1,575,597         1,764,377       1,607,912          1,518,454
   Total stockholders' equity
     (deficiency).......................  (278,521)          41,266           131,486         289,441            318,704
ADDITIONAL DATA:
GAAP ratios:
   Loss ratio...........................        NM            196.1%            170.8%          151.7%              93.1%
   Expense ratio........................        NM             33.1%             32.1%           21.0%              22.7%
                                        ----------       ----------        ----------      -----------        ----------
   Combined ratio.......................        NM            229.2%            202.9%          172.7%             115.8%
                                        ==========       ==========        ==========      ===========        ==========

Statutory surplus (deficit).............$ (252,098)      $   75,812        $  125,485      $  231,498         $  268,445
                                        ==========       ==========        ==========      ==========         ==========

Basic and Diluted earnings
   (loss) per share (2).................$   (23.42)      $    (8.67)       $   (11.66)     $    (2.59)        $     1.54
                                        ==========       ==========        ==========      ==========         ==========
Dividend per share......................$     0.00       $     0.00        $     0.20      $     0.20         $     0.10
                                        ==========       ==========        ==========      ==========         ==========
Book value per share ...................$   (19.21)      $     3.08        $     9.75      $    21.34         $    20.94
                                        ==========       ==========        ==========      ==========         ==========
</TABLE>

NM - Not Meaningful

(1)     On January 1, 2002, the Company adopted SFAS No. 142, "Goodwill and
        Other Intangible Assets." Under SFAS No. 142, goodwill is no longer
        amortized as an expense, but instead is reviewed and tested for
        impairment under a fair value approach. SFAS No. 142 requires that
        goodwill be tested for impairment at least annually, or more frequently
        as a result of an event or change in circumstances that would indicate
        impairment may be necessary. On January 1, 2002, the Company recorded a
        $2.4 million impairment related to goodwill, net of $0 tax ($0.18 per
        diluted share). If SFAS No. 142 were in effect beginning January 1,
        2001, the financial statement impact would have been approximately
        $444,000, net of tax, ($0.03 per diluted share) for the 12 months ended
        December 31, 2001.

                                                                              25
<PAGE>

        On April 1, 2001, the Company adopted the provisions of EITF No. 99-20,
        "Recognition of Interest Income and Impairment of Purchased and Retained
        Beneficial Interests in Securitized Financial Assets." This standard
        established new guidelines for recognition of income and
        other-than-temporary decline for interests in securitized assets. EITF
        99-20 requires the Company to recognize an other-than-temporary decline
        if the fair value of the security is less than its book value and the
        net present value of expected future cash flows is less than the net
        present value of expected future cash flows at the most recent, prior,
        estimation date. The difference between the book value of the security
        and its fair value must be recognized as an other-than-temporary decline
        and the security's yield is adjusted to market yield. This new guidance
        also adopts the prospective method for adjusting the yield used to
        recognize interest income for changes in estimated future cash flows
        since the last quarterly evaluation date. On April 1, 2001, the Company
        recognized $5.3 million of other-than-temporary declines, net of tax
        ($0.39 per diluted share) as the cumulative effect of a change in
        accounting principle.

(2)     Basic and diluted loss per share of common stock for the year ended
        December 31, 2003 is computed using the weighted average number of
        common shares outstanding during the year of 13,436,586.

        Basic and diluted loss per share of common stock for the year ended
        December 31, 2002 is computed using the weighted average number of
        common shares outstanding during the year of 13,385,124. Basic and
        diluted loss per share of common stock for the year ended December 31,
        2001 is computed using the weighted average number of common shares
        outstanding during the year of 13,524,959. Basic and diluted loss per
        share of common stock for the year ended December 31, 2000 is computed
        using the weighted average number of common shares outstanding during
        the year of 14,100,043. Basic earnings per share of common stock for the
        year ended December 31, 1999 is computed using the weighted average
        number of common shares outstanding during the year of 13,497,110.
        Diluted earnings per share of common stock for the year ended December
        31, 1999 is computed using the weighted average number of common shares
        outstanding during the year of 13,534,052.

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

Overview

The medical malpractice industry is cyclical in nature. Many factors influence
the financial results of the medical malpractice industry, several of which are
beyond the control of the Company. These factors include, among other things,
changes in severity and frequency of claims; changes to applicable law;
regulatory reform; and changes in inflation, interest rates and general economic
conditions.

The Company was subjected to a number of adverse developments during fiscal
2001-2003 as a result of unexpected and unprecedented increases in loss severity
related to prior years' business. As a result of the net losses reported in
2001, the RBC of two of the Company's then operating subsidiaries, MIIX and
LP&C, fell below the standards adopted by the NAIC. Both companies triggered RBC
events requiring the filing of a corrective action plan with each state of
domicile. As a result, both companies entered solvent runoff during 2002.

In 2001 and 2002, loss and LAE reserves were adjusted to reflect adverse
development on several lines of business including New Jersey and other states'
physicians, Pennsylvania hospitals and hospital excess. The adjustments were
related to increases in severity and frequency. These trends continued in 2003
and were complicated by acceleration in the claims process attributable to tort
and judicial reform in Pennsylvania and New Jersey and the impact of the
Company's entering voluntary solvent runoff in 2002. Loss and LAE reserves for
2003 were established as a result of an internal actuarial review, an external
opining actuarial review and an external actuarial review performed in
conjunction with filing of MIIX's Audited Report. As a result of these reviews,
prior year gross loss and LAE reserves were adjusted by $353.0 million. The
increase was attributable primarily to adverse development and increased
severity in the New Jersey and Pennsylvania physician and hospital excess lines
of business.

On September 28, 2004, MIIX was placed in rehabilitation. See "Regulation -
Order of Rehabilitation." As a result, the discussion below, which is as of
December 31, 2003, reflects operations of MIIX that are no longer controlled by
the Company. During the summer of 2004, the Company retained financial advisors
to assist in

                                                                              26
<PAGE>

exploring all of its alternatives. In connection with that exploration, the
financial advisors have contacted more than 50 prospective purchasers of assets
of the Company or investors in the Company. As a consequence of that effort, the
Company has received one indication of interest from MDAdvantage to acquire
certain assets of the Underwriter and one additional possible offer. The Company
is proceeding to negotiate with MDAdvantage the documentation relating to a
possible sale of the Underwriter's assets, subject to the receipt of all
necessary approvals and "higher or better offers" prior to closing. The Company
is also continuing to seek other buyers for its assets.

The future viability and wind-down of the Company will be dependent on cash flow
from managing the MDAdvantage contract and the operations of Lawrenceville Re.

LOSS AND LAE RESERVES

The determination of loss and LAE reserves involves the projection of ultimate
losses through quarterly actuarial analyses of the claims history of the Company
and other professional liability insurers, subject to adjustments deemed
appropriate by the Company due to changing circumstances. Management relies
primarily on such historical experience in determining reserve levels on the
assumption that historical loss experience provides a good indication of future
loss experience despite the uncertainties in loss trends and the delays in
reporting and settling claims. As additional information becomes available, the
estimates reflected in earlier loss reserves have been and may continue to be
revised. The Company increased prior year gross reserves by $353.0 million,
$161.2 million and $117.9 million in 2003, 2002 and 2001, respectively.

The Company offered traditional occurrence coverage from 1977 through 1986 and
offered a form of occurrence-like coverage, "modified claims-made," from 1987 to
August 31, 2002. Occurrence and modified claims-made coverages constituted the
majority of the Company's business throughout its history. In recent years,
however, the Company increased its claims-made business. Development of losses
and LAE is longer and slower for occurrence business than claims-made business.

Reserves for IBNR claims have consistently represented the majority of total
loss and LAE reserves held by the Company. At December 31, 2003 and 2002, gross
IBNR reserves composed 60.5% of total gross loss and LAE reserves. As a
consequence of runoff and the expiration of all in force policies, new claims
being reported are declining rapidly. As the claim inventory matures, the
reserves will shift from IBNR to "case" reserves for known claims, with IBNR
reserves ultimately approaching zero. Gross loss and LAE reserves on claims-made
medical malpractice policies amounted to $401.6 million, or 32.9% of total gross
loss and LAE reserves at December 31, 2003, compared to gross loss and LAE
reserves on claims-made policies of $395.8 million, or 34.4% of total gross loss
and LAE reserves at December 31, 2002.

REINSURANCE

The Company currently reinsures its risks under various Specific Excess and
Aggregate Excess of Loss Reinsurance Contracts, along with five Facultative
Contracts. During January 2002, the Company renewed five institutional policies
with Facultative Reinsurance Contracts, which reduced the amount of risk that
MIIX retained on each policy. The contracts are on a quota share basis;
therefore MIIX shares a portion of the premium and loss on each Facultative
Reinsurance Contract. The quota share amount that MIIX retains ranges between
25% and 50%.

The Aggregate Contract in 2002 provided coverages on an aggregate excess of loss
and quota share basis. The primary coverage afforded under the Aggregate
Contract attaches above a Company retention measured as a 65% loss and ALAE
ratio. Reinsurers provide coverage for an additional 75% loss and ALAE ratio,
with an aggregate annual limit of $100 million. The Company has maintained
aggregate excess of loss coverage generally similar to that described above
since 1993.

MIIX's aggregate reinsurance contracts are maintained on a funds withheld basis,
whereby MIIX holds the ceded premiums in a funds withheld account for the
purpose of paying losses and related LAE. Interest charges are credited on funds
withheld at predetermined contractual rates. Each of the aggregate excess
reinsurance contracts also contains a provision requiring that the funds
withheld be placed in trust should the A.M. Best rating assigned to MIIX fall
below B+. On March 22, 2002, A.M. Best lowered the rating of MIIX to C+, and
MIIX withdrew from the interactive rating process with A.M. Best. As a result of
the downgrade, reinsurers

                                                                              27
<PAGE>

requested that assets supporting the funds withheld account be placed in a
trust. MIIX has established the required trust accounts and moved invested
assets into trusts in accordance with these contract provisions. Each of the
aggregate excess reinsurance contracts also contains a provision allowing
reinsurers to offer additional reinsurance coverage that MIIX is obligated to
accept. In September and October 2004, the reinsurers initiated requests for
additional premiums from MIIX in accordance with provisions of the contracts.
Reinsurers are prohibited from canceling current reinsurance agreements or
making additional premium charges to MIIX under the September 28, 2004 Order of
Rehabilitation.

In June 2004, MIIX commuted its 1995 aggregate excess reinsurance treaty. The
commutation agreement provided for the release of applicable funds held balances
and trust fund assets. The reduction to earnings as a result of the commutation
was $3.3 million in 2004.

UNDERWRITING EXPENSES

The Company's underwriting expenses decreased during 2003 and 2002 mainly due to
the Company having ceased insurance operations resulting in reduced commissions,
premium taxes and a reduction in compensation and benefits resulting from
downsizing actions taken during 2003 and 2002.

The following discussion should be read in conjunction with the consolidated
financial statements and the related notes thereto appearing elsewhere in this
Annual Report. The consolidated financial statements for 2003 include the
accounts and operations of The MIIX Group and its wholly-owned subsidiaries.

CRITICAL ACCOUNTING POLICIES

The Company's discussion and analysis of its financial condition and results of
operations are based upon the Company's consolidated financial statements, which
have been prepared in accordance with accounting principles generally accepted
in the United States. The preparation of these financial statements requires
management to make estimates and judgments that affect the reporting amounts of
assets, liabilities, revenues and expenses, and related disclosures of
contingent assets and liabilities. On an on-going basis, management evaluates
its estimates, including those related to income taxes, loss and LAE reserves,
contingencies and litigation. The Company bases its estimates on historical
experience and on various other assumptions that are believed to be reasonable
under the circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.

The Company believes the following critical accounting policies affect its more
significant judgments and estimates used in the preparation of its consolidated
financial statements:

FINANCIAL REPORTING. The Company has not reported the operations of MIIX as
discontinued operations because the Company continues to have significant
continuing involvement in the operations of MIIX through November 2004.
Employees of the Underwriter continue to service, process and adjudicate claims
and perform administrative services subsequent to the September 28, 2004 Order
of Rehabilitation. Therefore, the Company will not record MIIX as a discontinued
operation until this activity diminishes significantly. As of September 30,
2004, the Company began using the equity method of accounting for its investment
in MIIX and has recorded the investment at $-0-.

REINSURANCE. Reinsurance recoverables include the balances due from reinsurance
companies for paid and unpaid losses and LAE that will be recovered from
reinsurers, based on contracts in force. Amounts recoverable from reinsurers are
estimated in a manner consistent with the claim liability associated with the
reinsured policy. Reinsurance contracts do not relieve the Company from its
primary obligations to policyholders. Failure of reinsurers to honor their
obligations could result in losses to the Company. The Company evaluates the
financial condition of its reinsurers and monitors concentrations of credit risk
with respect to the individual reinsurers, which participate in its ceded
programs to minimize its exposure to significant losses from reinsurer
insolvencies. The Company holds collateral in the form of letters of credit or
trust accounts for amounts recoverable from reinsurers that are not designated
as authorized reinsurers by the domiciliary Departments of Insurance.

                                                                              28
<PAGE>

PREMIUMS. Premiums are recorded as earned over the period the policies to which
they apply are in force. The reserve for unearned premiums is determined on a
monthly pro-rata basis. Gross premiums include both direct and assumed premiums
earned.

LOSS AND LOSS ADJUSTMENT EXPENSES. The Company estimates its liability for
losses and LAE using actuarial projections of ultimate losses and LAE and other
quantitative and qualitative analyses of conditions expected to affect the
future development of claims and related expenses. The estimated liability for
losses is based upon paid and case reserve estimates for losses reported,
adjusted through judgmental formulaic calculations to develop ultimate loss
expectations; related estimates of IBNR losses and expected cash reserve
developments based on past experience and projected future trends; deduction of
amounts for reinsurance placed with reinsurers; and estimates received related
to assumed reinsurance. Amounts attributable to ceded reinsurance derived in
estimating the liability for loss and LAE are reclassified as assets in the
consolidated balance sheets as required by FAS No. 113. The liability for LAE is
provided by estimating future expenses to be incurred in settlement of claims
provided for in the liability for losses and is estimated using similar
techniques.

The Company's determination of loss and LAE reserves involved the projection of
ultimate loss and ALAE through several actuarial techniques. For a brief
description of each of these techniques, refer to "Business - Loss and LAE
Reserves."

The liabilities for losses and LAE and the related estimation methods are
continually reviewed and revised to reflect current conditions and trends. The
resulting adjustments are reflected in the operating results of the current
year. While management believes the liabilities for losses and LAE are adequate
to cover the ultimate liability, the actual ultimate loss costs may vary from
the amounts presently provided and such differences may be material. However, as
indicated elsewhere, on September 28, 2004, the New Jersey Department placed
MIIX in rehabilitation, which resulted in the New Jersey Department having full
control of MIIX operations.

The Company also has direct and assumed liabilities under covered extended
reporting endorsements associated with claims-made policy forms, which generally
provide at no additional charge, continuing coverage for claims-made insureds in
the event of death, disability or retirement. These liabilities are carried
within unearned premium reserves and are estimated through formula calculations
that have been verified by the Company's independent actuarial firm using
techniques, which possess elements of both loss reserves and pension
liabilities, and thus include additional assumptions for mortality, morbidity,
retirement, interest and inflation. Since the Company had no policies in force
as of December 31, 2003, the Company had no liability with respect to extended
reporting endorsements at that date.

INVESTMENTS. Under the Order of Rehabilitation, which was entered on September
28, 2004, the New Jersey Department has assumed control of the investment
portfolio. As a result, the Company presently exercises no control over its
investments, the liquidation of those investments, or investment policy. The
discussion set forth below and elsewhere in this Form 10-K is as of December 31,
2003, and does not describe the management of the investment portfolio as at
present, as the New Jersey Department's approach to the management of that
portfolio is not known to the Company. The Company designated its entire
investment portfolio as available-for-sale. As such, all investments are carried
at their fair values. The fair value of securities is based upon quoted market
prices when available. Where market prices or broker quotations are not
available, the fair value is estimated based upon discounted cash flow, applying
current interest rates for similar financial instruments with comparable terms
and credit quality. The estimated fair value of a financial instrument may be
significantly different from the amount that could be realized if the security
were sold immediately.

The Company has no securities classified as "trading" or "held-to-maturity."
Investments are recorded at the trade date.

Securities available-for-sale, deemed to have declines in fair value that are
other than temporary, are written down to fair value and a realized loss
recorded in operations. The fixed maturity securities to which these write-downs
apply are generally of investment grade quality at the time of purchase but, are
subsequently down graded by rating agencies to "below-investment grade." Factors
considered by

                                                                              29
<PAGE>

the Company in determining whether declines in the fair value of fixed maturity
securities are other than temporary include: (1) the significance of the
decline, (2) the Company's ability and intent to retain the investment for a
sufficient period of time for it to recover, (3) the time period during which
there has been a significant decline in value, and (4) fundamental analysis of
the liquidity, business prospects and overall financial condition of the issuer.
Based upon these factors, securities that have indications of potential
impairment are subject to review. Where such analysis results in a conclusion
that declines in fair values are other than temporary, the security is written
down to fair value. See Note 5 (Investments), to the consolidated financial
statements for a general discussion of the methodologies and assumptions used to
determine estimated fair values.

As the discussion above indicates, there are risks and uncertainties associated
with determining whether declines in the fair value of investments are other
than temporary. These include subsequent significant changes in general overall
economic conditions as well as specific business conditions affecting particular
issuers, future financial market effects such as interest rate spreads,
stability of foreign governments and economies, future ratings agency actions
and significant accounting, fraud or corporate governance issues that may
adversely affect certain investments. In addition, there are often significant
estimates and assumptions required by the Company to estimate the fair values of
securities, including projections of expected future cash flows and pricing of
private securities. The Company is routinely monitoring developments and
updating underlying assumptions and financial models based upon new information.

Premiums and discounts on investments (other than loan-backed and asset-backed
bonds) are amortized/accreted to investment income using the interest method
over the contractual lives of the investments. Realized investment gains and
losses are included as a component of revenues based on a specific
identification of the investment sold.

Short-term investments include investments maturing within one-year and other
cash and cash equivalent balances earning interest.

RISKS AND UNCERTAINTIES

The Company's business is subject to a number of risks and uncertainties.
However, many of these risks and uncertainties were impacted by the September
28, 2004 Order of Rehabilitation. The risks include:

The Company may not be able to retain the key employees necessary to operate the
Company.

The loss of any of its key executives and/or senior managers may materially
adversely impact the Company's ability to continue to manage its business.

The Company may not be able to maintain adequate cash flow and liquidity.

The Company's scope of operations has been significantly diminished. As a result
of the entry of the Order or Rehabilitation, the Company no longer controls the
operations of MIIX, the process of resolving claims, or the management of MIIX's
investment portfolio. As a result, the Company's cash flow has decreased
significantly. The Company does not believe that it has adequate cash to
continue to operate.

The Company is subject to litigation that could have a material adverse effect
on its financial condition.

In 2002, a stockholder of the Company filed a putative class action suit against
the Company, among other plaintiffs, alleging securities fraud, breaches of
fiduciary duty, violations of New Jersey antitrust laws and alleged
misrepresentations and omissions of material facts in various of the Company's
filings with the SEC. See "Legal Proceedings."

Because of the foregoing risks and uncertainties, the Company's financial
statements and the discussion that follows in Management's Discussion and
Analysis of Financial Condition and Results of Operation should not be relied
upon by investors as indicating the Company's ability to operate.

                                                                              30
<PAGE>

RESULTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 2003, COMPARED TO YEAR ENDED DECEMBER 31, 2002

The Company ceased its insurance underwriting operations in 2002 and entered
solvent runoff. The financial results of the Company reflect the cessation of
insurance underwriting operations. During this same period the Company was
impacted by the historic decline in interest rates and the continuing decline in
the size of the investment portfolio as a result of claims settlements.

NET PREMIUMS EARNED. Net premiums earned were $(26.1) million in 2003 compared
to $100.2 million in 2002, a decrease of approximately $126.3 million. This net
decrease is composed of decreased direct and ceded premiums earned. Direct
premiums earned decreased $134.9 million, or 84.6%, to $24.6 million in 2003
from $159.5 million in 2002 primarily due to ceasing insurance operations,
commutations and cancellation activity during the last nine months of 2002.
Direct earned premiums were impacted by the return of approximately $4.9 million
associated with the commutation of a large institutional policy during the
fourth quarter of 2002. Ceded premiums earned decreased by $8.6 million, or
14.5%, to $50.7 million in 2003 from $59.3 million in 2002 primarily due to
lower direct earned premium, offset by additional ceded premiums of $56.3
million associated with the reserve adjustment during 2003 as compared to $44.8
million associated with the reserve adjustment during 2002.

Total negative premiums written in 2003 were $0.6 million, a decrease of $96.8
million from total premiums written of $96.2 million in 2002. The net decrease
in total premiums written is primarily due to the Company's cessation of writing
or renewing premiums in all states, in accordance with each state's specific
non-renewal requirements.

NET INVESTMENT INCOME. Net investment income decreased $24.9 million, or 41.0%,
to $35.9 million in 2003 from $60.8 million in 2002. The decrease was primarily
attributable to the combined effects of lower market yields, a decrease in
average invested assets resulting mainly from claims payments and a
corresponding increase in average short-duration investments held during 2003.
Because the Company's insurance subsidiary was in solvent runoff, the Company
modified its investment portfolio to: (1) manage an expected increase in
accelerated claims and a lower invested asset base and (2) improve the overall
average credit quality of the portfolio. This modification involved selling the
portfolio's longer duration securities, opportunistically selling below
investment grade holdings and using the proceeds, over time, to acquire shorter
duration, high quality securities. Accordingly, the Company experienced losses
over time mainly concentrated in the sale of its below investment-grade
securities.

Average invested assets at amortized cost decreased to approximately $889.4
million in 2003 from $1.15 billion in 2002. The average annual pre-tax yield on
the investment portfolio decreased to 4.03% in 2003 from 5.31% in 2002 primarily
as a result of lower market yields and an increase in short-duration investments
held during 2003 for the reasons set forth above.

REALIZED INVESTMENT GAINS AND LOSSES. Net realized investment losses were $1.6
million in 2003 compared to net realized investment losses of $3.5 million in
2002. In 2003, realized gains of approximately $20.7 million were recognized
primarily due to sales of fixed maturity investments as a result of investment
portfolio modifications, offset by $22.3 million of realized losses, including
approximately $19.4 million of losses related to other-than-temporary declines
in investment values, of which $8.7 million was attributable to
Conseco/Greentree Financial corporate bonds and $8.5 million to collateralized
bond obligations. In 2002, net realized gains of approximately $13.4 million
were recognized primarily due to sales of fixed maturity investments as a result
of investment portfolio modifications and recognized approximately $16.9 million
of losses related to other-than-temporary declines in investment values, of
which $8.9 million was attributable to collateralized bond obligations and $4.8
million was associated with United Airlines corporate bonds. EITF 99-20
established new guidelines for recognition of income and other-than-temporary
declines for interests in securitized assets.

OTHER REVENUE. Other revenue decreased $0.3 million, or 4.1%, to $7.1 million in
2003 compared to $7.4 million in 2002. This net decrease is primarily composed
of decreases of $2.7 million in finance charge revenue, $1.3 million due to the
sale of Hamilton National Leasing Corporation ("HNL") and $0.3 million
attributable to

                                                                              31
<PAGE>

other non-insurance business activity, offset by increases of $1.5 million
associated with management services and $2.5 million in renewal rights revenue
from MIIX Advantage.

LOSS AND LOSS ADJUSTMENT EXPENSES. Losses and LAE increased $74.4 million, or
37.9%, to $270.9 million in 2003 from $196.5 million in 2002. Losses and LAE
were net of ceded losses and LAE of $115.6 million in 2003 and $115.3 million in
2002.

The Company recorded a $237.4 million net adjustment to loss and LAE reserves in
2003 to maintain the loss and LAE reserve at management's best estimate levels.
Loss and LAE reserve for 2003 included an increase to direct and assumed prior
year loss and ALAE reserves of $353.0 million reduced by ceded loss and LAE
reserves of $119.9 million. Adjustments to direct and assumed loss and ALAE
reserves included a net increase in Pennsylvania hospitals of $67.6 million, a
net increase to New Jersey physicians business of $190.4 million, an increase to
Pennsylvania physicians of $20.9 million and a net increase to all other states
hospitals and physicians business of $60.3 million and $30.5 million,
respectively. The net adjustment primarily reflects adverse development and
increased severity trends, and to a certain extent acceleration of claims,
particularly with respect to Pennsylvania hospital claims and to New Jersey
physicians for coverage years prior to 1999.

UNDERWRITING EXPENSES. Underwriting expenses decreased $10.9 million, or 32.9%,
to $22.2 million in 2003 from $33.1 million in 2002. This decrease is primarily
due to the effects of discontinued insurance operations, with reduced
commissions, premium taxes and a reduction in compensation and benefits
resulting from downsizing actions taken during 2003.

FUNDS HELD CHARGES. Funds held charges decreased $11.2 million, or 20.7%, to
$43.0 million in 2003 from $54.2 million in 2002. Funds held charges relate to
the Company's ceded aggregate reinsurance contracts, and represent balances due
to reinsurers, which are withheld as collateral for losses and LAE ceded under
the contracts.

Funds held charges are calculated based upon the beginning of quarter funds held
balances and are adjusted based upon changes to ceded premiums associated with
changes in ceded losses.

OTHER EXPENSES. Other expenses decreased $2.8 million, or 80.0%, to $0.7 million
in 2003 from $3.5 million in 2002. This net decrease is primarily due to the
sale of substantially all the assets of the Company's leasing subsidiary, HNL,
effective April 30, 2002 and a decrease in the expenses of MIIX Healthcare
Group.

RESTRUCTURING CHARGE. The Company announced in March, 2002 that LP&C's
operations would be placed into runoff and recorded a restructuring charge of
$2.6 million during the first quarter of 2002 relating to the reduction of
regional and home office staff and the closing of regional offices in Dallas and
Indianapolis. No such event occurred during 2003.

CUMULATIVE EFFECT OF AN ACCOUNTING CHANGE, NET OF TAX. On January 1, 2002, the
Company adopted SFAS No. 142, "Goodwill and Other Intangible Assets," which
requires that goodwill no longer be amortized as an expense, but instead
reviewed and tested for impairment under a fair value approach. The cumulative
effect of adopting SFAS No. 142 was a charge of $2.4 million on January 1, 2002.
On April 1, 2001, the Company adopted EITF 99-20, "Recognition of Interest
Income and Impairment on Purchased and Retained Beneficial Interests in
Securitized Financial Assets," which established new guidelines for recognition
of income and other-than-temporary declines for interests in securitized assets.
The cumulative effect of adopting EITF 99-20 was $5.3 million, net of $2.8
million tax, on April 1, 2001.

INCOME TAXES. An income tax benefit of $6.8 million was recorded in 2003,
compared to an income tax benefit of $11.2 million in 2002. The tax benefit in
2003 primarily reflects the reduction in the deferred tax valuation allowance
specifically resulting from changes in deferred taxes on unrealized portfolio
gains. The deferred tax benefit recorded in operations is offset by a charge in
other comprehensive income.

                                                                              32
<PAGE>

YEAR ENDED DECEMBER 31, 2002, COMPARED TO YEAR ENDED DECEMBER 31, 2001

NET PREMIUMS EARNED. Net premiums earned were $100.2 million in 2002 compared to
$146.9 million in 2001, a decrease of approximately $46.7 million or 31.8%. This
net decrease is composed of decreased direct, assumed and ceded premiums earned.
Direct premiums earned decreased $54.4 million or 25.4% to $159.5 million in
2002 from $213.9 million in 2001 primarily due to ceasing insurance operations,
commutations and cancellation activity during the last nine months of 2002.
Direct earned premiums were impacted by the return of approximately $4.9 million
associated with the commutation of a large institutional policy during the
fourth quarter of 2002. Assumed premiums earned decreased by $0.4 million or
100.0% to $0 from $0.4 million in 2001 primarily due to nonrenewal of a large
poorly performing excess of loss reinsurance contract effective January 1, 2001.
Ceded premiums earned decreased by $8.1 million or 12.1% to $59.3 million in
2002 from $67.5 million in 2001 primarily due to lower direct earned premium,
offset by additional ceded premiums of $44.8 million associated with the reserve
adjustment during 2002 as compared to $40.1 million associated with the reserve
adjustment during 2001.

Total premiums written in 2002 were $96.2 million, a decrease of $135.7 million,
or 58.5% from total premiums written of $231.9 million in 2001. The net decrease
in total premiums written is primarily due to the Company's cessation of writing
or renewing premiums in all states, in accordance with each state's specific
non-renewal requirements.

NET INVESTMENT INCOME. Net investment income decreased $19.4 million, or 24.2%,
to $60.8 million in 2002 from $80.2 million in 2001. The decrease was primarily
attributable to the combined effects of lower market yields and a decrease in
average invested assets resulting mainly from claims payments and a
corresponding increase in average short-term investments held during 2002.
Because two of the Company's insurance subsidiaries, MIIX and LP&C, were in
solvent runoff, the Company has modified its investment portfolio to (1) manage
an expected increase in accelerated claims and a lower invested asset base and
(2) improve the overall average credit quality of the portfolio.

Average invested assets at amortized cost decreased to approximately $1.15
billion in 2002 from $1.26 billion in 2001. The average annual pre-tax yield on
the investment portfolio decreased to 5.31% in 2002 from 6.38% in 2001 primarily
as the result of lower market yields and an increase in short-duration
investments held during 2002 for the reasons set forth above.

REALIZED INVESTMENT GAINS AND LOSSES. Net realized investment losses increased
$1.3 million, or 61.2%, to net realized investment losses of $3.5 million in
2002 compared to net realized investment losses of $2.2 million in 2001. In
2002, net realized gains of approximately $13.4 million were recognized
primarily due to sales of fixed maturity investments as a result of investment
portfolio modifications and recognized approximately $16.9 million of losses
related to other-than-temporary declines in investment values, of which $8.9
million was attributable to collateralized bond obligations and $4.8 million was
associated with United Airlines corporate bonds. In 2001, $19.7 million of net
realized gains were taken primarily from continued repositioning of the
portfolio, offset by $21.8 million of losses related to other-than-temporary
declines in investment values, including $8.1 million ($5.3 million net of tax)
resulting from activity following adoption of EITF 99-20, "Recognition of
Interest Income and Impairment on Purchased and Retained Beneficial Interests in
Securitized Financial Assets" effective April 1, 2001. EITF 99-20 established
new guidelines for recognition of income and other-than-temporary declines for
interests in securitized assets.

OTHER REVENUE. Other revenue decreased $1.0 million, or 11.8%, to $7.4 million
in 2002 compared to $8.4 million in 2001. This net decrease is composed of (1) a
decrease of approximately $2.4 million due to the sale of substantially all of
the assets of the Company's leasing subsidiary, HNL, effective April 30, 2002,
(2) an increase of $1.7 million associated with management services and related
contracts with MIIX Advantage, which commenced insurance operations on September
1, 2002 and (3) a net decrease of approximately $0.3 million attributable to
other non-insurance business activity.

LOSS AND LOSS ADJUSTMENT EXPENSES. Losses and LAE decreased $54.3 million, or
21.6%, to $196.5 million in 2002 from $250.8 million in 2001. Losses and LAE
were net of ceded losses and LAE of $115.3 million in 2002 and $97.5 million in
2001. The ratio of net losses and LAE to net premiums earned increased to 196.1%
in 2002 from 170.8% in 2001.

                                                                              33
<PAGE>

As a result of a reserve study conducted by the Company and the annual external
actuarial review, the Company recorded a $20.5 million net adjustment to loss
and LAE reserves for the fourth quarter ended December 31, 2002, to maintain the
loss and LAE reserve at management's best estimate levels. Loss and LAE reserve
for the quarter ended December 31, 2002, included an increase to direct and
assumed loss and LAE reserves of $85.1 million reduced by ceded loss and ALAE
reserves of $64.6 million. Adjustments to direct and assumed loss and LAE
reserves included a net increase in Pennsylvania hospitals of $42.0 million, a
net increase to New Jersey physicians business of $34.7 million, a decrease to
Pennsylvania physicians of $6.1 million and a net increase to all other states
hospitals and physicians business of $10.1 million and $4.4 million,
respectively. The net adjustment primarily reflects adverse severity trends and,
to a certain extent, an acceleration of claims particularly with respect to
Pennsylvania hospital claims and to New Jersey physicians for coverage years
prior to 1999.

Through the nine months ended September 30, 2002, reserve adjustments had been
made to maintain the loss and LAE reserve at management's best estimate levels.
The reserve adjustments recorded for the three months ending September 30, 2002,
followed from an internal study conducted by the Company. Loss and LAE reserves
for the quarter ended September 30, 2002, included a net increase to direct and
assumed loss and ALAE reserves of $30.7 million and a net decrease to ULAE
reserves of $24.1 million. Ceded loss and ALAE reserves were increased by $11.2
million. Adjustments to direct and assumed loss and ALAE reserves included a net
increase in Pennsylvania hospital reserves of $23.5 million, a net decrease in
Pennsylvania physician reserves of $9.5 million, a net decrease in New Jersey
physician reserves of $0.8 million, and a net increase in reserves held on all
other business, written primarily in Texas and Ohio, of $17.5 million. The net
adjustment primarily reflected adverse severity trends, particularly with
respect to Pennsylvania hospital claims, somewhat offset by better than expected
activity in the 2002 coverage year. The net adjustment to ULAE reserves
primarily reflected the greater level of claims activity associated with
claims-made business written in recent years. Claims-made business generally has
a shorter development tail than occurrence policies, so the duration of
anticipated future claim handling activity, and claim activity costs per dollar
of indemnity payment, diminished.

For the three months ending March 31, 2002, the Company strengthened loss
reserves based on updated actuarial information, which became available as of
March 31, 2002. The Company recorded a $29.5 million net adjustment to loss and
LAE reserves as of March 31, 2002. Prior year gross and ceded loss and LAE
reserves were increased by $54.5 million and $25.0 million, respectively. The
strengthening in prior year gross loss and LAE reserves consists of $31.3
million attributable to physician business written by LP&C for the coverage
years of 1998-2001, $31.3 million related to New Jersey physicians primarily for
business earned during 1994-1996, and other increases of $8.0 million relating
primarily to Pennsylvania institutional business for the 1999-2001 coverage
years. These increases were partly offset by reductions in prior year gross loss
and LAE reserves of $9.5 million related to Pennsylvania physician business
earned primarily during 1998 and 1999 and $6.6 million related to New Jersey
physician business earned during 2001, reflecting the Company's recent
improvements in underwriting, risk selection and pricing disciplines.

As a result of reserve studies conducted by the Company, the Company's outside
actuary and a second actuarial firm specializing in medical malpractice
reserving, the Company recorded a $64.5 million net adjustment to loss and LAE
reserves as of December 31, 2001. During 2001, the Company increased direct and
assumed prior year loss and LAE reserves of $113.1 million and $4.8 million,
respectively. During 2001, ceded reserves associated with the Company's
aggregate reinsurance contracts increased by $61.7 million. The increase in
prior year loss and LAE reserves resulted from three primary factors: increased
loss severity, particularly in the Pennsylvania institutions and New Jersey
physicians book; adverse development in the form of additional frequency and
severity relating to physicians business in certain states, primarily in
Pennsylvania, Texas and Ohio; and adverse development associated with reserves
held on an assumed excess of loss reinsurance contract which was non-renewed
January 1, 2001. The increase in current year loss and LAE reserves resulted
primarily from increased severity levels and reduced profitability indications
from prior accident years.

UNDERWRITING EXPENSES. Underwriting expenses decreased $14.0 million, or 29.7%,
to $33.1 million in 2002 from $47.1 million in 2001. This decrease is primarily
due to the effects of discontinued insurance operations, with reduced
commissions, premium

                                                                              34
<PAGE>

taxes and a reduction in compensation and benefits resulting from downsizing
actions taken during 2002. The ratio of underwriting expenses to net premiums
earned increased to 33.1% in 2002 from 32.1% in 2001. The increase resulted
primarily from lower net earned premiums which was impacted by additional ceded
premiums associated with additional losses ceded under the Company's aggregate
reinsurance contracts.

FUNDS HELD CHARGES. Funds held charges increased $11.7 million, or 27.6%, to
$54.2 million in 2002 from $42.5 million in 2001. Funds held charges relate to
the Company's ceded aggregate reinsurance contracts, and represent balances due
to reinsurers which are withheld as collateral for losses and LAE ceded under
the contracts. Funds held charges increased $30.0 million resulting from
adjustments made to ceded loss and LAE reserves and ceded premiums recorded
during the first, third and fourth quarters of 2002. In 2001, funds held charges
increased $19.8 million resulting from changes to less reserves, ceded losses
and ceded premiums during 2001.

Funds held charges are calculated based upon the beginning of quarter funds held
balances and are adjusted based upon changes to ceded premiums associated with
changes in ceded losses.

OTHER EXPENSES. Other expenses increased $0.1 million, or 1.5%, to $3.5 million
in 2002 from $3.4 million in 2001. This net increase is primarily due to
increased costs resulting from management services provided to MIIX Advantage,
which commenced operations on September 1, 2002, offset by the sale of
substantially all the assets of the Company's leasing subsidiary, HNL, effective
April 30, 2002.

RESTRUCTURING CHARGE. The Company announced in March, 2002, that LP&C's
operations would be placed into runoff and recorded a restructuring charge of
$2.6 million during the first quarter of 2002 relating to the reduction of
regional and home office staff and the closing of regional offices in Dallas and
Indianapolis. No such event occurred during 2001.

CUMULATIVE EFFECT OF AN ACCOUNTING CHANGE, NET OF TAX. On January 1, 2002, the
Company adopted SFAS No. 142, "Goodwill and Other Intangible Assets," which
requires that goodwill no longer be amortized as an expense, but instead
reviewed and tested for impairment under a fair value approach. The cumulative
effect of adopting SFAS No. 142 was a charge of $2.4 million on January 1, 2002.
On April 1, 2001, the Company adopted EITF 99-20, "Recognition of Interest
Income and Impairment on Purchased and Retained Beneficial Interests in
Securitized Financial Assets," which established new guidelines for recognition
of income and other-than-temporary declines for interests in securitized assets.
The cumulative effect of adopting EITF 99-20 was $5.3 million, net of $2.8
million tax, on April 1, 2001.

INCOME TAXES. An income tax benefit of $11.2 million was recorded in 2002, as
compared to an income tax expense of $41.9 million in 2001. The tax benefit
resulted from the recognition of a net operating loss carryback due to a tax law
change enacted during 2002. This benefit was net of an increase in the valuation
allowance of $29.7 million during 2002. At December 31, 2001, the Company
recorded a $95.1 million valuation allowance against the net deferred tax asset
in accordance with Statement of Financial Accounting Standards 109, "Accounting
for Income Taxes," offset by an increase in pre-tax loss of $52.0 million
resulting in an increased tax benefit of $18.2 million at a 35% tax rate, a tax
contingency reserve release of $10.2 million, and a net increase in taxes of
$2.9 million in other items including $1.0 million due to lower tax exempt
interest. The release of the tax contingency reserve resulted from the
establishment of the valuation allowance, at full value.

LIQUIDITY AND CAPITAL RESOURCES

The MIIX Group is a holding company whose assets primarily consist of all of the
capital stock of its subsidiaries. Cash flow needs at the holding company level
include corporate operating expenses. Prior to the Order of Rehabilitation, the
Company's principal sources of funds were dividends and other permissible
payments from its subsidiaries and revenues from its non-insurance operations.
Subsequent to the Order of Rehabilitation, the Company's principal source of
funds is derived from the management contract with MDAdvantage. The Company does
not believe that its cash flow will be sufficient to allow it to continue to
operate. Accordingly, the Company continues the wind-down of its business
activities. See "Recent Developments," "Management's Discussion and Analysis of
Financial Condition and

                                                                              35
<PAGE>

Results of Operation - Risks and Uncertainties," "Business - Business Strategy"
and "Business - Regulation - Risk-Based Capital."

MIIX, while in runoff through September 28, 2004, needed to have cash and liquid
assets available to meet its obligations to policyholders in accordance with
contractual obligations, in addition to having funds available to meet ordinary
operating costs. The primary sources of the Company's liquidity are net
investment income, proceeds from the maturity or sale of invested assets,
recoveries from reinsurance, revenues from non-insurance operations and unearned
premium. Funds are used to pay losses and LAE, operating expenses, reinsurance
premiums and taxes. The Company's net cash flow used in operating activities
were approximately $(280.4) million, $(181.7) million and $(24.3) million for
the years ended December 31, 2003, 2002 and 2001, respectively. The decrease in
cash flow during 2003 was primarily the result of increased loss payments
reflecting the maturation of the Company's expansion book of business and the
settlement of several higher severity cases, lower investment income and a
decrease in premium collection reflecting the decrease in written premium
offset. Because of the inherent unpredictability related to the timing of the
payment of claims, it is not unusual for cash flow from operations for a medical
malpractice insurance company to vary, perhaps substantially, from year to year.
However, as a result of the Order of Rehabilitation on September 28, 2004, the
Company no longer has control over the operations of MIIX and, accordingly, the
financial position and results of operations of MIIX will no longer be reflected
in the Company's financial statements after September 28, 2004. See "Business -
Recent Developments" and "Management's Discussion and Analysis of Financial
Condition and Results of Operation - Risks and Uncertainties."

The Company, through the normal course of operations, entered into contractual
obligations relating to leases for premises and equipment. The following table
details the Company obligations for the years presented (In thousands).

                                         Less Than 1      1-3       More Than 3
                                         ------------    -----      -----------
                             Total           Year        Years         Years
                            -------         -----        -----       --------
  Operating leases:
     Equipment              $   390         $  181       $ 209       $      0
     Premises                 1,748            282         733            733
                            -------         ------       -----       --------
  Total                     $ 2,138         $  463       $ 942       $    733
                            =======         ======       =====       ========

The Company investments consisted primarily of fixed-maturity securities. The
Company's investment strategy sought to maximize after-tax income through
holding an investment grade, intermediate term, diversified, taxable bond
portfolio, while maintaining an adequate level of liquidity. Approximately $56.5
million was set aside in short-term investments to provide for acceleration of
claims. If claim payments continue at current levels these funds will be
inadequate and the investment portfolio will be diminished faster than
anticipated. Any diminution of the investment portfolio will reduce net
investment income. At December 31, 2003, the portfolio had an average credit
quality of "AA," an average duration of 3.2 years and an annualized yield of
4.0%.

At December 31, 2003, and 2002, the Company held collateral of $292.1 million
and $332.7 million, respectively, in the form of funds held, and $161.2 million
in the form of letters of credit, for recoverable amounts on ceded unpaid losses
and LAE under certain reinsurance contracts. Under the contracts, reinsurers may
require that a trust fund be established to hold the collateral should one or
more triggering events occur, such as a downgrade in the Company's A.M. Best
rating below B+, a reduction in statutory capital and surplus to less than $60
million, or a change in control. Under the contracts, and as a result of the
downgrade of the Company's A.M. Best rating to below B+ during the first quarter
of 2002, reinsurers requested that assets supporting the funds withheld account
be placed in trust. The Company established the required trust accounts in
accordance with contract provisions. The Company does not anticipate a material
impact on the Company's financial condition or results of operations from
placing the funds withheld in trust. In accordance with the provisions of the
reinsurance contracts, the funds held are credited with interest at contractual
rates ranging from 6.0% to 8.6%, which is recorded as an expense in the year
incurred.

                                                                              36
<PAGE>

The tables below provide, as of December 31, 2003 and 2002, information about
the Company's fixed maturity investments, which are sensitive to changes in
interest rates, showing principal amounts and the average yield applicable
thereto by expected maturity date and type of investment. The expected
maturities displayed have been compiled based upon the earlier of the investment
call date or the maturity date or, for mortgage-backed securities, expected
payment patterns based on statistical analysis and management's judgment. Actual
cash flows could differ, perhaps significantly, from the expected amounts.

The information on the tables below and the paragraphs that follow represent
historical information and do not discuss the change resulting from the Order of
Rehabilitation on September 28, 2004.

<TABLE>
<CAPTION>

At December 31, 2003:

                                                    Expected Maturity Date
                       ----------------------------------------------------------------------------------     Total
                                                        (In thousands)                                      Principal
                           2004          2005           2006          2007          2008       Thereafter    Amounts    Fair Value
                       -----------   -----------    -----------   -----------   -----------    ----------  ----------   ----------
<S>                    <C>           <C>            <C>            <C>          <C>            <C>         <C>          <C>
Government & Agency    $    20,364   $    13,441    $     41,045   $    3,020    $   17,455     $   14,365  $  109,690   $   100,011
- Average Yield ...           1.24%         1.57%           2.46%        3.38%         4.12%          4.49%       2.68%
Corporate .........    $    14,972   $     8,450    $     23,775   $   36,930    $   31,300     $  131,338  $  246,766   $   229,268
- Average Yield ...           5.86%         4.58%           3.35%        3.75%         3.83%          5.43%       4.77%
Mortgage-Backed ...    $         0   $        18    $      2,643   $      922    $      552     $  232,407  $  236,543   $   242,196
- Average Yield ...           0.00%         6.64%           5.53%        4.00%         6.16%          5.09%       5.09%
Asset-Backed ......    $        74   $     1,125    $     10,531   $   13,890    $    6,815     $   90,992  $  123,427   $   116,565
- Average Yield ....          5.80%         1.22%           2.15%        2.37%         2.08%          4.83%       4.14%
Municipal .........    $         0   $         0    $          0   $        0    $        0     $    8,200  $    8,200   $     7,695
- Average Yield ...           0.00%         0.00%           0.00%        0.00%         0.00%          4.91%       4.91%
                       -----------   -----------    ------------    ---------    -----------    ----------  ----------   ----------
TOTALS ............    $    35,410   $    23,035    $    77,995    $   54,762   $    56,122     $  477,302  $  724,626   $   695,735


At December 31, 2002:

                                                    Expected Maturity Date
                       ----------------------------------------------------------------------------------     Total
                                                        (In thousands)                                      Principal
                           2003          2004           2005          2006          2007       Thereafter    Amounts    Fair Value
                       -----------   -----------    -----------   -----------   -----------    ----------  ----------   ----------

Government & Agency    $     8,066   $    15,780    $     3,195   $    14,645   $    14,515    $   53,930  $  110,131   $  119,850
- Average Yield ...           4.30%         3.60%          2.97%         3.81%         3.43%         5.36%       4.38%
Corporate .........    $     8,475   $    18,600    $    11,750   $    19,625   $    23,900    $  217,279  $  299,629   $  285,183
- Average Yield ...           7.62%         6.79%          5.16%         5.24%         4.45%         5.95%       5.82%
Mortgage-Backed ...    $         0   $         0    $        54   $     2,688   $         0    $  171,970  $  174,712   $  181,347
- Average Yield ...           0.00%         0.00%          6.73%         5.60%         0.00%         6.10%       6.10%
Asset-Backed ......    $         0   $       212    $         0   $     6,411   $     1,637    $  191,605  $  199,865   $  202,200
- Average Yield ...           0.00%         5.84%          0.00%         5.01%         6.89%         6.21%       6.19%
                       -----------   -----------    -----------   -----------   -----------    ----------  ----------   ----------
TOTALS ............    $    16,541   $    34,592    $    14,999   $    43,369   $    40,052    $  634,784  $  784,337   $  788,580
</TABLE>

At December 31, 2003, the Company had net unrealized gains on its fixed maturity
investment portfolio of $14.9 million. The net unrealized gains were the result
of the decline in market interest rates during 2003, 2002 and 2001.

Management does not expect that significant unrealized losses will be realized
on the fixed maturity portfolio given the credit quality of the portfolio at
December 31, 2003 and the Company's policy of matching asset and liability
maturities. Asset and liability matching is an important part of the Company's
portfolio management process. The Company utilizes financial modeling and
scenario analysis to closely monitor the effective modified duration of assets
and liabilities in order to minimize mismatching. The goal of effective
asset/liability management is to allow payment of claims and operating expenses
from operating funds without disrupting the Company's long-term investment
strategy.

In addition to interest rate risk, fixed maturity securities like those
comprising the Company's investment portfolio involve other risks such as
default (or credit deteriorating quality). The Company manages these issues by
limiting the amount of higher risk corporate obligations (determined, among
other variables, by credit rating assigned by private rating agencies) in which
it invests.

At December 31, 2003, approximately 52% of the investment portfolio was
concentrated in mortgage-backed and asset-backed securities. Mortgage-backed and
asset-backed securities involve similar risks associated with fixed maturity
investments: interest rate risk, reinvestment rate risk and default or credit
risk. In addition, mortgage-backed and asset-backed securities also possess
prepayment risk, which is the risk that a security's originally scheduled
interest and principal payments will differ considerably due to changes in the
level of interest rates. The Company purchased mortgage-backed and asset-backed
securities structured to enhance credit quality and/or provide prepayment
stability.

Short-term investments are composed of highly rated money market instruments.

                                                                              37
<PAGE>

The Company also held a number of equity investments. At December 31, 2003, the
cost and fair value of equity investments was $2.8 million and $3.2 million,
respectively. At December 31, 2002, the cost and fair value of equity
investments was $4.8 million and $5.2 million, respectively. The value of the
common stock investments is dependent upon general conditions in the securities
markets and the business and financial performance of the individual companies
in the equity portfolio.

EFFECTS OF INFLATION

The Company considers the effects of inflation in reserving for losses and LAE.
There may be long periods between the sale of insurance coverage and the
reporting of losses, particularly with respect to coverage provided by the
Company on occurrence-basis policies. Further, there are typically significant
periods of time between reporting and settlement of losses. The actual effects
of inflation on the Company's operating results cannot be accurately known until
losses are reported and ultimately settled. Management believes that the
Company's pricing and loss and LAE reserving processes adequately incorporate
the effects of inflation.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Quantitative and qualitative disclosures about market risk are included in Item
7 under "Management's Discussion and Analysis of Financial Condition and Results
of Operation."

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements and schedules listed in the accompanying Index to
Financial Statements and Schedules on page F-1 are filed as part of this report.

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

A disagreement existed between the Company and Ernst & Young LLP related to the
Company's preliminary loss and LAE reserve balances, primarily due to
differences of opinion as to the effect of claim acceleration and severity
related to the estimation of loss and LAE reserve balances as of December 31,
2003. As a result of additional analysis performed by the Company resulting in a
reserve adjustment recorded as of December 31, 2003, the Company and Ernst &
Young LLP no longer have a disagreement.

ITEM 9A.  CONTROLS AND PROCEDURES

Within 90 days prior to the date of this report, and with the participation of
management, The MIIX Group's Chief Executive Officer and Chief Financial Officer
carried out an evaluation of the effectiveness of the design and operation of
The MIIX Group's disclosure controls and procedures (as defined in the Exchange
Act Rule 15d-14). Based upon that evaluation, the Chief Executive Officer and
Chief Financial Officer have concluded that The MIIX Group's disclosure controls
and procedures are effective in providing them with timely material information
that is required to be disclosed in reports The MIIX Group files under Section
15(d) of the Exchange Act.

There were no significant changes in The MIIX Group's internal controls or in
other factors that could significantly affect these controls subsequent to the
date of the evaluation.

ITEM 9B.  OTHER INFORMATION

None.

PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

(a)     Directors of the Company.

        See Part I of this Form 10-K.

                                                                              38
<PAGE>

(b)     Executive Officers of the Company.

        See Part I of this Form 10-K.

(c)     Section 16(a) Beneficial Ownership Reporting Compliance.

        Section 16(a) of the Exchange Act generally requires the Company's
        Executive Officers and Directors, and persons who own more than ten
        percent of the common stock, to file reports of beneficial ownership and
        changes in beneficial ownership with the SEC. Regulations promulgated by
        the SEC require the Company to disclose in this Annual Report any
        reporting violations with respect to the fiscal year 2003, which came to
        the Company's attention based on a review of the applicable filings made
        by the Company's officers and directors with the SEC. Based solely on
        review of such forms received by it, no reporting person made a late
        filing under Section 16(a). The foregoing statements are based solely on
        a review of the copies of such reports furnished to the Company by its
        officers, directors and security holders and their written
        representations that such reports accurately reflect all reportable
        transactions and holdings.

(d)     Code of Ethics

        The Company adopted a Code of Ethics on December 10, 2003. The Company
        will provide to any person without charge a copy of such Code of Ethics
        upon request to: Corporate Secretary, The MIIX Group, Two Princess Road,
        Lawrenceville, New Jersey 08648.

ITEM 11.  EXECUTIVE COMPENSATION

The following Summary Compensation Table sets forth information concerning the
compensation of (1) the Company's current Chairman and Chief Executive Officer,
and (2) the five other most highly compensated Executive Officers of the Company
for the year ended December 31 (collectively, the "Named Executive Officers").

<TABLE>
<CAPTION>

SUMMARY COMPENSATION TABLE
                                      Annual Compensation                      Long-term Compensation
                                      -------------------                      ----------------------
                                                                   Other                      Securities
                                                                   Annual      Restricted     Underlying      All Other
Name and Principal                                                 Compensa    Stock          Options/SARs    Compensa-
Position                         Year    Salary($)    Bonus($)     Tion($)     Award (#)      (#)             Tion($)(6)
--------                         ----    ---------    -----        ----        -----          ---             ----------
<S>                              <C>     <C>          <C>          <C>         <C>            <C>              <C>
Patricia A. Costante             2003    413,772      323,750(1)        0      250,000(2)          0           60,106
Chairman and                     2002    370,000      323,750           0            0             0           55,884
Chief Executive Officer          2001    259,038            0           0       10,000(3)     95,000            5,345

Allen G. Sugerman(4)             2003    350,000       50,000      78,886            0             0                0
Chief Financial Officer &        2002    158,869            0      54,082            0             0                0
Treasurer                        2001          0            0           0            0             0                0

Edward M. Grab                   2003    246,786      201,250(1)   97,257(5)   223,735(2)          0           22,276
Senior Vice President and        2002    229,423      201,250           0            0             0           25,232
Chief Actuary                    2001    199,237            0           0            0        35,000            5,358

Verice M. Mason                  2003    214,735       72,688(1)        0      225,510(2)          0            7,276
Senior Vice President and        2002    200,758       24,229           0            0             0           13,958
General Counsel                  2001    182,746       10,000           0            0         2,450           12,661

Catherine E. Williams            2003    181,056      123,750(1)        0      163,716(2)          0           17,579
Senior Vice President,           2002    164,039       41,250           0            0             0            9,828
Business Development and         2001    121,442            0           0            0        20,000           10,375
Corporate Secretary

William G. Davis                 2003    165,595       59,319(1)        0      173,262(2)          0            6,597
Senior Vice President, Claims    2002    157,718       19,772           0            0             0            5,938
                                 2001    142,446        5,000           0            0         2,450            5,007
</TABLE>

(1)     Includes retention payments under the Employee Retention Incentive Plan
        for Ms. Costante, Mr. Grab, Ms. Mason, Ms. Williams and Mr. Davis of
        $323,750, $201,250, $72,688, $123,750 and $59,319, respectively.

                                                                              39
<PAGE>

        In 2002, the Company developed an Employee Retention Incentive Plan (the
        "Retention Plan") to encourage key executives and employees to continue
        their employment with the Company. The Compensation Committee approved
        the Retention Plan in 2002 for eligible employees of the Company and the
        Underwriter. The Committee recognizes the importance of retaining key
        employees during this critical time as the Company actively engages in
        strategies to realize value for stockholders. The Retention Plan was
        offered to key supervisors and senior managers and certain key
        executives, including Ms. Costante, Ms. Mason, Ms. Williams, Mr. Grab
        and Mr. Davis. Cash payments under the Retention Plan were based on a
        percentage of salary and only vested if the employee was employed on the
        vesting dates set forth in the Plan or was terminated without cause. The
        Retention Plan was administered over the 18-month period which began
        March 5, 2002 and ended on September 5, 2003. In the event of a change
        of control, equity infusion into the Company in excess of $20 million,
        or the entry of an order of rehabilitation or liquidation of any of the
        Company's New Jersey insurance subsidiaries, the commencement of an
        involuntary proceeding of bankruptcy or a resolution of the Company to
        make a voluntary bankruptcy filing and the termination of the covered
        employee without cause, all Retention Plan payments would have
        accelerated and become immediately payable.

        Under the Retention Plan, key supervisors and senior managers were
        eligible to receive 15-50% of salary, key vice presidents from 25-50% of
        salary, senior vice presidents from 50-175% and the Chief Executive
        Officer was eligible to receive 175% of salary. Ms. Costante and Mr.
        Grab earned the balance of their retention payments on September 5,
        2003, and the Company paid them $323,750 and $201,250, respectively, on
        that date. With respect to Ms. Costante and Mr. Grab, all payments
        received under the Retention Plan were used, after deduction for taxes,
        first to extinguish the outstanding balances and interest thereon under
        their respective stock loans. Ms. Mason, Ms. Williams and Mr. Davis were
        entitled to receive a total of $96,917, $165,000 and $79,092,
        respectively, under the Retention Plan. Ms. Mason, Ms. Williams and Mr.
        Davis earned twenty-five percent of their retention payments on March 5,
        2003 and fifty percent on September 5, 2003, and the Company paid them a
        total of $72,688, $123,750 and $59,319, respectively.

        The Retention Plan is not provided in lieu of any annual performance
        incentive plan or arrangements maintained by the Company as part of its
        general compensation programs or as part of any Employment Agreement or
        similar instrument entered into between the Company and the Executives.
        The Retention Plan was filed as an exhibit to the Company's Annual
        Report on Form 10-K, for the year ended December 31, 2001.

(2)     Amounts consist of shares of restricted common stock granted on February
        26, 2003. The value of the restricted common stock on February 26, 2003,
        was $1,331,547. The table below represents the individual grants and
        vesting schedules.

<TABLE>
<CAPTION>
                                                 Restricted
                                                    Stock       Restricted Stock        Total            Value of
                                Restricted        Retention         Promotion        Restricted      Restricted Common
   Named Executive Officer     Stock Bonus*         Bonus**          Bonus***        Stock Granted      Stock Granted
   -----------------------     ------------         -------          --------        -------------      -------------
<S>                                 <C>             <C>                <C>            <C>                 <C>
  Patricia A. Costante               93,580         156,420                -            250,000             $321,250
  William G. Davis                   21,708         129,001            22,553           173,262             $222,642
  Edward M. Grab                     31,323         192,412                -            223,735             $287,499
  Verice M.  Mason                   28,545         167,315            29,650           225,510             $289,780
  Catherine E. Williams              22,471         141,245                -            163,716             $210,375
  Totals                            197,627         786,393            52,203         1,036,223           $1,331,547

  * Vests 100% on anniversary of the grant date, February 26, 2003.
  ** Vests 25% on each six month anniversary of the grant date, February 26, 2003.
  *** Vests 50% on each of the first and second anniversaries of the grant date, February 26, 2003.
</TABLE>

                                                                              40
<PAGE>

(3)     Amount consists of shares of restricted common stock granted on December
        19, 2001. The value of the restricted common stock on December 19, 2001,
        was $117,900. The restricted common stock vests one-third on the third
        anniversary of the date of grant and one-third on each of the next two
        anniversaries of the grant date.

(4)     Of the $350,000 listed under "Salary," $302,000 was paid to Altila
        Corporation. Of the $78,886 listed under Other Compensation, $56,853 was
        reimbursement for travel related expenses paid to Altila Corporation,
        $9,000 was for a car allowance and $13,033 was for flexible benefits
        paid to Mr. Sugerman as provided for in his Employment Agreement.

(5)     On November 12, 2003, the Compensation Committee approved a retention
        program for Mr. Grab. Under the retention program, Mr. Grab's
        outstanding stock loan balance of $97,257 was forgiven subject to his
        continued employment with the Company through December 31, 2004.

(6)     Amounts in this column include the following:

<TABLE>
<CAPTION>

                                                Matching
                                                Contributions under                           Group Term Life
Name and Principal                              Retirement Savings      Unused Vacation       Insurance Premiums
Position                               Year     Plan (401(K) Plan) ($)  Payments ($)          ($)
--------                               ----     ---------------------   ------------          ------------------

<S>                                    <C>              <C>             <C>                   <C>
Patricia A. Costante                   2003             6,000           53,449                657
Chairman and                           2002             5,500           49,807                577
Chief Executive Officer                2001             5,100                0                245

William G. Davis                       2003             6,000                0                597
Senior Vice President, Claims          2002             5,387                0                551
                                       2001             4,521                0                486

Edward M. Grab                         2003             6,000           15,921                355
Senior Vice President and              2002             5,500           19,420                312
Chief Actuary                          2001             5,100                0                258

Verice M. Mason                        2003             6,000              821                455
Senior Vice President and              2002             5,500            8,059                399
General Counsel                        2001             5,100            7,327                234

Catherine E. Williams                  2003             6,000           11,421                158
Senior Vice President, Business        2002             5,500            4,190                138
Development and Corporate Secretary    2001             3,856            6,442                 77
</TABLE>

                                                                              41
<PAGE>

Option Grant Table

There were no options granted to Executive Officers during the fiscal year ended
December 31, 2003.

The following table sets forth information with respect to the exercisable and
unexercisable options held by the Named Executive Officers as of December 31,
2003.

AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR(1) AND FISCAL YEAR-END
OPTION/SAR VALUES

<TABLE>
<CAPTION>
                                                                Number of Securities     Value of Unexercised
                                                                Underlying Unexercised   In-the-Money
                                Shares                          Options/SARs             Options/SARs at
                                Acquired on                     At Fiscal Year-End (#)   Fiscal Year-End ($)
                                Exercise      Value Realized    Unexercisable (U)/       Unexercisable (U)/
                                (#)(1)        ($)               Exercisable (E)          Exercisable (E)
                                ------        ---               ---------------          ---------------
<S>                             <C>           <C>               <C>                      <C>
                                                                 11,250  U               0        U
Patricia A. Costante            0             0                 103,750  E               0        E

                                                                      0  U               0        U
Allen G. Sugerman               0             0                       0  E               0        E

                                                                    613  U               0        U
William G. Davis                0             0                   6,837  E               0        E
                                                                      0  U               0        U
Edward M. Grab                  0             0                  55,000  E               0        E
                                                                    613  U               0        U
Verice M. Mason                 0             0                   6,837  E               0        E
                                                                      0  U               0        U
Catherine E. Williams           0             0                  25,000  E               0        E
</TABLE>

(1)     None of the Named Executive Officers exercised options during the fiscal
        year ended December 31, 2003.

Employment and Severance Agreements

Each of Mmes. Costante, Mason and Williams and Messrs. Sugerman, Grab and Davis
(collectively, the "Executives") is party to an employment agreement with the
Company dated December 19, 2001, March 19, 2002, October 31, 2001, July 17, 2003
and March 1, 2000, and March 19, 2002, respectively (each an "Employment
Agreement"). Each Employment Agreement, except for Mr. Sugerman's Employment
Agreement, is for an indefinite term, subject to the right of the Company and
the Executive to terminate the Agreement in accordance with its terms. The
Employment Agreements of Mmes. Costante, Mason and Williams and Messrs. Grab and
Davis provide for an annual base salary of $370,000, $190,500, $115,000,
$165,000 and $159,390, respectively. Under each of the Employment Agreements,
other than Mr. Sugerman's and Ms. Costante's Employment Agreements, base salary
may be adjusted as deemed appropriate by the Board taking into account the
recommendation of the Chief Executive Officer. As of January 1, 2004, the annual
base salary for Mmes. Costante, Mason and Williams and Messrs. Grab and Davis
was $415,000, $215,000, $181,500, $247,250 and $165,765, respectively.

Mr. Sugerman's Employment Agreement is for a period of one year ending on July
17, 2004 and provides for a base salary of $48,000. In addition, the Company
entered into agreement with Altila Corporation ("Altila") under which the
Company leases from Altila the services provided by Mr. Sugerman as Chief
Financial Officer of the Company. Under the agreement, the Company pays Altila
$302,000 per year for Mr. Sugerman's services, plus reimbursement of Mr.
Sugerman's reasonable out of pocket expenses. During 2003, the Company paid
Altila $302,000 under this agreement for Mr. Sugerman's services. Mr. Sugerman
is a principal of Altila. Mr. Sugerman's Employment Agreement has been extended
for a period of one year through July 17, 2005 under the same terms and
conditions.

                                                                              42
<PAGE>

Under each of the Employment Agreements, bonuses are payable at the discretion
of the Board of the Company, based on the Company's and the individual
Executive's achievement of certain goals and objectives established by the Board
on an annual basis.

With respect to Mr. Sugerman, his Employment Agreement provides that he is
eligible to receive an annual cash bonus of up to $225,000, at the discretion of
the Company's Board, based on the achievement of specific goals and objectives.
In addition, Mr. Sugerman's Employment Agreement provides that he is eligible to
receive a transaction bonus upon the consummation of a major capital infusion
into the Company in excess of $10 million or a sale or merger of the Company in
exchange for consideration in excess of a certain amount, provided that either
such transaction is initiated during the term of Mr. Sugerman's employment and
closed no later than six months thereafter. The transaction bonus that Mr.
Sugerman will be entitled to receive upon the consummation of such a transaction
is: (a) in the case of a capital infusion into the Company, $17,500 for each $1
million in capital raised in excess of $10 million, up to a maximum of $350,000;
and (b) $350,000 in the event of a sale or merger of the Company, for
consideration of an amount in excess of $46.5 million, the Company's net book
value at June 30, 2003. In the event of the consummation of a transaction or
transactions involving both a capital infusion into and the sale or merger of
the Company, Mr. Sugerman is entitled to receive only one transaction bonus,
which shall be the greater of the two applicable bonuses.

In the event of the termination of the employment of any of the Executives,
except Mr. Sugerman, by the Company without cause, their Employment Agreements
provide for a continuation of their health benefits and severance pay of up to
two years' base salary in the case of Ms. Costante and up to one year's base
salary in the case of the other Executives or, in each case, if sooner, until
the date upon which the Executive obtains new full-time employment. If
termination occurs within six months of a change in control of the Company, in
addition to a continuation of his or her health benefits, the terminated
Executive will receive a severance payment in the amount of three years' base
salary in the case of Ms. Costante and two years' base salary in the case of the
other Executives other than Mr. Sugerman. In the event of the termination of
employment of Mr. Sugerman without cause, his Employment Agreement provides for
a continuation of his health benefits and base salary through the end of the
term of his Employment Agreement and the prorated portion of any cash bonus
earned through the date of any such termination of employment.

Under the terms of their Employment Agreements and the Company's Amended and
Restated 1998 Long-Term Incentive Equity Plan, the Executives may be granted
options to purchase common stock. The exercise price of each option is equal to
the fair market value of the common stock on the grant date.

Deferred Compensation Plans

The Company is party to Deferred Compensation Agreements with each of Mmes.
Costante, Mason and Williams and Messrs. Grab and Davis. Pursuant to their
respective Agreements, the Executives may elect to defer payment of portions of
their compensation and dividend equivalents awarded pursuant to the Company's
Amended and Restated 1998 Long-Term Incentive Equity Plan. Interest is credited
quarterly on the deferred amounts at a rate equal to the aggregate yield on the
Company's investment portfolio, or at the request of the Executive, at a rate
equal to the return associated with another investment. Distributions of
benefits shall commence no earlier than March 1, 2005, in the case of Ms.
Costante and Mr. Grab, March 19, 2007 in the case of Ms. Mason and Mr. Davis and
October 31, 2006 in the case of Ms. Williams, but shall be accelerated upon the
date that the applicable Executive ceases to be employed by the Company, or upon
such Executive's death, whichever is the earliest to occur. As of December 31,
2003, Ms. Costante, Mr. Davis, Mr. Grab, Ms. Mason and Ms. Williams had deferred
the receipt of $31,817, $0, $15,260, $0, and $1,106 respectively, pursuant to
their Deferred Compensation Agreements. The Deferred Compensation Plan was
terminated effective March 25, 2004. Deferred compensation that had accrued was
paid to Ms. Costante, Mr. Grab and Ms. Williams in the amounts of $31,487,
$15,404 and $1,117, respectively. In the case of Ms. Costante, payment received
under the Deferred Compensation Plan was used, after deduction for taxes, first
to extinguish the outstanding balance and interest thereon under her stock loan.

                                                                              43
<PAGE>

Pension Benefits

The Company has a retirement plan (the "Retirement Plan") that provides
retirement benefits for substantially all employees of the Company. The
Retirement Plan is an employee non-contributory, tax-qualified defined benefit
pension plan. The Retirement Plan was amended effective April 1, 2000, and
provides each covered employee with a notional account balance, which is
credited with 3% of each year's basic annual compensation (if at least 1,000
hours of service are earned) up to Internal Revenue Code limits. Additionally,
interest will be credited to the accounts each year based on the rate for
five-year U.S. Treasury Bonds in the preceding November. The normal form of
benefit payment from the Retirement Plan as amended April 1, 2000 is a single
life annuity. Covered employees attaining age 21 and having completed 90 days of
service are eligible to participate in the Retirement Plan. Covered employees
who terminate employment prior to normal retirement may elect to defer receipt
of their benefits until their normal retirement date, in which case they will
continue to earn interest credits as described above.

The following table sets forth the compensation, service, and estimated annual
benefits payable under the Retirement Plan to the following officers or
employees assuming retirement at age 65:

ESTIMATED ANNUAL BENEFIT YEARS OF CREDITED SERVICE AT AGE 65

                                                   Current Years of
                                       Plan            Service       Annual
    Officer                        Compensation*       12/31/03     Benefit**
    -------                        -------------       --------     ---------

    Patricia A. Costante           $200,000               7          $ 20,076
    Allen G. Sugerman              $200,000               1          $  8,433
    William G. Davis               $165,766              23          $103,017
    Edward M. Grab                 $200,000               4          $ 14,733
    Verice M. Mason                $200,000               9          $ 18,292
    Catherine E. Williams          $181,000               7          $ 19,471

*For purposes of benefit projections, plan compensation is limited to $200,000.
**Estimated annual benefit at age 65.

ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS

See Part II of this Form 10-K.

The following table provides certain information with respect to the Company's
equity compensation plans in effect as of December 31, 2003:


                                                                              44
<PAGE>
<TABLE>
<CAPTION>

                                        Equity Compensation Plan Information


                                                                                              (c)
                                                                                      Number of securities
                                                                                    remaining available for
                                        (a)                         (b)              future issuance under
                              Number of securities to    Weighed-average exercise     equity compensation
                              be issued upon exercise      price of outstanding         plans (excluding
                              of outstanding options,     options, warrants AND     securities reflected in
Plan Category                   Warrants and Rights               Rights                  Column (A))
-------------                   -------------------               ------                  -----------
<S>                                    <C>                        <C>                        <C>
Equity compensation plans
approved by security
holders                                661,250*                   $8.33                      263,774

Equity compensation plans
not approved by security
holders                                      0                     0.00                            0
                                      ---------                   -----                     --------


Total                                 661,250*                    $8.33                      263,774
</TABLE>

* Does not include outstanding restricted stock awards

COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

The Company's director and executive compensation programs are administered by
the Compensation Committee of the Board (the "Committee"). The Committee
consists of three non-employee directors, who are appointed by the Board.

Executive Compensation

Executive Compensation Philosophy

The executive compensation philosophy has been adjusted to reflect the
significant challenges and uncertainties inherent in managing the downsizing and
run-off of the Company's insurance business, and the efforts to develop current
and future business possibilities under its circumstances. It is critical that
the Company retain the best talent possible in order to maximize the resources
of the Company. The executive compensation philosophy is to: (i) provide
competitive compensation and benefit levels to help the Company retain highly
qualified executive employees, (ii) align compensation strategies with overall
business objectives, and (iii) reward executive employees based on their
performance. Under the current circumstances, the principal challenge that the
Company's Compensation Committee faces is created by the Company's uncertain
future, which the Committee believes makes it extremely difficult to attract new
talent.

Executive Compensation Principles

The Company's executive compensation program is generally designed to best
prevent executive attrition, to be competitive with compensation levels of a
defined peer group of distressed companies, to reward performance against
predetermined goals, and to recognize the changing nature of the Company's
business and the challenges that it confronts. Competitive compensation levels
are evaluated periodically based on an analysis by an independent third party of
executive compensation of a public company peer group of distressed companies
and relevant survey information. The Company has used cash and equity-based
instruments to align executive rewards with the achievement of individual and
corporate objectives. In light of the Company's current circumstances, the
Committee also evaluated the likely compensation that would be required to be
paid to run-off or re-organization specialists. Any change in executive
compensation must be approved by the New Jersey Department of Banking and
Insurance ("NJDOBI").

                                                                              45
<PAGE>

Employee Equity Ownership

The Company strives to ensure that stockholders and executive members of
management share long-term common interests. The Committee believes that
employee stock ownership and equity incentives strengthen the link between
executive rewards and long-term corporate performance. In that regard, executive
and other employees are eligible to receive grants of equity under the Company's
1998 Long-Term Incentive Equity Plan (the "Plan") which was approved by
stockholders on July 15, 1998, and as amended and approved by the Board of
Directors on September 15, 1999.

Elements of Executive Compensation

Compensation elements offered by the Company include the following:

Base Salaries

Base salaries for key executives are targeted to be at or below the median level
of the peer group, and are subject to review and adjustment annually, based on
individual performance.

Annual Cash Bonuses

Key executives are eligible for an annual incentive bonus based on achieving
certain predetermined individual, and/or corporate operating and strategic
objectives. Certain other members of the management team are eligible to receive
bonuses based on individual and corporate performance. Although all senior
executives achieved their individual performance goals for 2003, no cash bonuses
were awarded because of the current financial condition of the Company. At the
current time, the payment of any bonuses awarded would require the approval of
the New Jersey Department of Banking and Insurance.

Long-Term Incentives

Equity grants are an important component of total compensation and provide a
long-term incentive to participants to align performance with stockholders'
interests. The Company offers executives and eligible management employees the
opportunity to receive grants of stock (stock options, restricted Common Stock
or performance stock) under the Plan.

Employee Retention Incentive

The Committee approved an Employee Retention Incentive Plan (the "Retention
Incentive Plan") in 2002 for eligible employees of the Company and the New
Jersey State Medical Underwriters, Inc. ("Underwriter"). The Committee
recognizes the importance of retaining key employees during this critical time
as the Company actively engages in strategies to realize value for stockholders.
The Retention Incentive Plan was offered to key supervisors and senior managers
and certain key executives, including Ms. Costante, Ms. Mason, Ms. Williams, Mr.
Grab and Mr. Davis. Cash payments under the Retention Incentive Plan were based
on a percentage of salary and only vested if the employee was employed on the
vesting dates set forth in the Plan or was terminated without cause. The
Retention Incentive Plan was administered over the 18-month period which began
March 5, 2002 and ended on September 5, 2003. In the event of a change of
control, equity infusion into the Company in excess of $20 million, or the entry
of an order of rehabilitation or liquidation of any of the Company's New Jersey
insurance subsidiaries, the commencement of an involuntary proceeding of
bankruptcy or a resolution of the Company to make a voluntary bankruptcy filing
and the termination of the covered employee without cause, all Retention
Incentive Plan payments would have accelerated and become immediately payable.

Under the Retention Incentive Plan, key supervisors and senior managers were
eligible to receive 15-50% of salary, key vice presidents from 25-50% of salary,
senior vice presidents from 50-175% and the Chief Executive Officer was eligible
to receive 175% of salary. Ms. Costante and Mr. Grab earned the balance of their
retention payments on September 5, 2003, and the Company paid them $323,750 and
$201,250, respectively, on that date. With respect to Ms. Costante and Mr. Grab,
all payments received under the Retention Incentive Plan were used, after
deduction for taxes, first to extinguish the outstanding balances and interest
thereon under their respective stock loans. Ms. Mason, Ms. Williams and Mr.
Davis were entitled

                                                                              46
<PAGE>

to receive a total of $96,917, $165,000 and $79,092, respectively, under the
Retention Incentive Plan. Ms. Mason, Ms. Williams and Mr. Davis earned
twenty-five percent of their retention payments on March 5, 2003 and fifty
percent on September 5, 2003, and the Company paid them a total of $72,688,
$123,750 and $59,319, respectively.

Directors Compensation

Directors Compensation Philosophy

The compensation philosophy for non-employee Directors of the Company is to
provide competitive compensation to best enable the Company to attract and
retain highly qualified individuals.

Directors Compensation Elements

The Company provides Directors, who are not officers or employees of the Company
or any of its subsidiaries, the following compensation: (i) an annual stipend of
$40,000 per year for the Chairman of the Board, $25,000 for the Vice-Chairman of
the Board, $15,000 for the Chairman of the Audit Committee, the Chairman of the
Compensation Committee and Executive Committee members, and $10,000 for all
other directors; (2) a per meeting fee of $1,200 and $600 for attendance at each
Board or Committee meeting, respectively (directors who attend any Board or
Committee meeting via telephone receive 25% of the meeting fee); and (3) an
annual grant of 15,000 options on the Company's Common Stock, which vest 25% on
the date of grant and 25% at each of the next three grant anniversary dates. The
Directors have elected to suspend this grant for 2004. Director fees may be
taken either in cash or in stock options; however, the Directors have elected to
suspend this option for 2004. The number of stock option shares granted in lieu
of the cash stipend is determined by the fair market value of the Company's
stock on the date of grant. These options vest immediately. All stock options
are granted at fair market value on the date of grant.

The total annual compensation for non-employee directors, including stipend and
meeting fees is capped as follows: Chairman of the Board - $50,000;
Vice-Chairman of the Board - $35,000; Chairman of the Audit Committee, Chairman
of the Compensation Committee and Executive Committee members - $25,000; all
other directors - $20,000. Directors serving in more than one of the positions
listed above are subject to the highest applicable cap.

The Compensation Committee's Review of Chief Executive Officer Compensation is
as follows.

Base Salary

Based on a review of the Chief Executive Officer's performance, it was
determined that Ms. Costante achieved all of her individual performance goals in
an exemplary manner. Under normal conditions, based on Ms. Costante's position,
responsibility and accomplishments, the Committee would have considered a
significant increase in base salary. Given the Company's financial condition,
however, her base salary remains unchanged at $415,000. Ms. Costante was
commended as an outstanding leader, especially in light of the many challenges
facing the Company. The Chief Executive Officer's ability to skillfully manage
relationships with regulatory authorities and stockholders and to retain and
motivate key executives necessary to maximize the resources of the Company are
examples of her extraordinary leadership abilities. Ms. Costante continues to
demonstrate integrity, excellent communication skills and strategic focus.

Annual Incentive Compensation

The annual incentive plan goals for 2003 were based on a combination of
corporate strategic initiatives, operating and financial, plus certain
identified, individual performance measures. The operating and financial targets
included goals for revenue, expense and net income before taxes. The corporate
goals were not accomplished due primarily to the significant increase in loss
reserves relating to prior years' business. Ms. Costante was eligible to receive
incentive compensation related to attainment of individual goals under the Plan
for 2003; however, in light of the Company's current financial situation, no
cash bonus was awarded.

                                                                              47
<PAGE>

Long-Term Equity Awards

Stock options are another key element of the Chief Executive Officer's total
compensation. Equity-based compensation produces a long-term link between
stockholders and the rewards provided to key Executive Officers. Ms. Costante
was eligible to receive a long-term incentive equity award related to attainment
of individual goals under the Plan for 2003; however, in light of the Company's
current financial situation, no equity award was granted. The Committee does not
anticipate that any additional stock grants will be made.

March 10, 2004
A. Richard Miskoff, D.O., Chairman
Harry M. Carnes, M.D.
Bessie M. Sullivan, M.D.

Stock Performance Graph

The graph set forth below shows the cumulative total return to holders of the
Company's Common Stock from July 30, 1999 to December 31, 2003, computed by
dividing (X) the difference between the price per share at the beginning and end
of such period by (Y) the share price at the beginning of the period assuming
the reinvestment of all dividends paid on the Company's Common Stock during the
period, and compares the return to the performance at the beginning and end of
such period of the Standard & Poor's 500 Index and the Standard & Poor's
Insurance (Property and Casualty) - 500 index. The graph assumes $100 invested
on July 30, 1999 in the Company's Common Stock (at $17.80 per share), the
Standard & Poor's Index and the Standard & Poor's Insurance (Property and
Casualty) - 500 Index. The return for both Standard & Poor's indices assumes
reinvestment of all dividends for the period.

                            CUMULATIVE TOTAL RETURN





                              [PERFORMANCE GRAPH]




<TABLE>
<CAPTION>
                                    Base Period
COMPANY/INDEX                           7/30/99     12/31/99       12/29/00       12/31/01     12/31/02     12/31/03
-------------                       -----------     --------       --------       --------     --------     --------
<S>                                         <C>        <C>           <C>            <C>           <C>         <C>
The MIIX Group, Incorporated*               100        81.80          41.86          68.55         9.44         5.11
S&P 500 Index                               100       111.21          99.58          86.51        67.51        86.87
Insurance (P&C) - 500 Index                 100        80.32         122.53         110.82        98.79       124.86

        *The measurement period begins on the date of the Company's initial public offering.
</TABLE>

                                                                              48
<PAGE>

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

MIIX HOLDINGS AND MIIX ADVANTAGE

On August 28, 2002, the Company and certain of its affiliates entered into a
series of contracts with MIIX Advantage Holdings, Inc. ("MIIX Holdings") and
MIIX Advantage, relating to, among other things, the transfer of insurance
policy renewal rights to MIIX Advantage and the use of the "MIIX" name and
associated marks by MIIX Holdings and MIIX Advantage. In connection with the
transaction, the Company also agreed to provide certain management services to
MIIX Advantage. The material contracts involved in the transaction include a:
(a) Management Services Agreement, (b) Non-Competition and Renewal Rights
Agreement, and (c) Intellectual Property License Agreement (together, the
"Agreements"). All of these Agreements were filed as exhibits to the Company's
Form 8-K filed with the SEC on September 12, 2002.

The Company is currently negotiating the sale of certain assets of the
Underwriter to MDAdvantage, although the transaction is not complete or binding
at the present time.

Management Services Agreement

Under the Management Services Agreement, the Underwriter, a wholly-owned
subsidiary of the Company, provides management and operational services to
MDAdvantage for an initial term of eight years, and thereafter is automatically
renewed for successive five-year terms unless the Company or MIIX Holdings
provides notice to the other party of an intention not to renew within 24 months
of the original or then current term of the agreement. The agreement also
provides for termination in the event of a dissolution, liquidation or
bankruptcy of the Company, the Underwriter, MDAdvantage or MIIX Holdings or upon
a change of control of the Company or the Underwriter under certain
circumstances. In exchange, MDAdvantage agrees to pay the Underwriter an amount
equal to the direct costs incurred by the Underwriter in providing the services,
an allocated amount of overhead costs (including without limitation employee
compensation and benefits), and an incentive payment based on the ratio of
MDAdvantage's operating expenses to premium revenues. In 2003, MDAdvantage paid
the Underwriter approximately $3,879,000 under the Management Services
Agreement.

Non-Competition and Renewal Rights Agreement

Under the Non-Competition and Renewal Rights Agreement, (i) the Company and its
affiliates agreed not to compete with MIIX Advantage in connection with its New
Jersey physician insurance business, (ii) MIIX Advantage is permitted to issue
insurance policies to the Company's former policyholders after their current
policies expire, and (iii) MIIX Holdings and MIIX Advantage agree not to engage
in activities other than providing medical professional liability and associated
general liability insurance to eligible New Jersey physicians. In exchange, MIIX
Advantage agreed to pay a specified amount to the Company for each MIIX
Advantage policy that MIIX Advantage issues to a former policyholder of the
Company. The amount paid to the Company for each policy will be (i) ten percent
(10%) of the gross written premiums received by MIIX Advantage, if no other
commissions are payable by MIIX Advantage to an unaffiliated broker with respect
to the policy, or (ii) three percent (3%) of the gross written premiums received
by MIIX Advantage, if any other commissions are payable by MIIX Advantage to an
unaffiliated broker. MIIX Advantage agrees to use its best efforts to issue
insurance policies to the Company's former policyholders after their current
policies expire. MIIX Advantage made payments to MIIX under the Non-Competition
and Renewal Rights Agreement in 2003 in the amount of approximately $2,716,700.

Intellectual Property License Agreement

Under the Intellectual Property License Agreement, MIIX Holdings and MIIX
Advantage may use the "MIIX" name, associated service marks and certain other
intangible assets of the Underwriter (which holds the intellectual property
assets of the Company and its affiliates), in connection with providing medical
professional liability and associated general liability insurance to eligible
New Jersey physicians. In exchange, MIIX Advantage paid the Underwriter
$2,000,000 in 2002 under the Intellectual Property License Agreement.

                                                                              49
<PAGE>

Method for Determining Consideration

In the case of each of the agreements described above, the amounts payable by
MIIX Holdings and/or MIIX Advantage to the Company were negotiated in a process
designed to ensure that the terms were based on terms found in comparable
transactions. Also, as part of the transactions, MIIX Holdings and MIIX
Advantage agreed to reimburse the Company for the fees and expenses incurred by
the Company in connection with the formation and capitalization of MIIX Holdings
and MIIX Advantage. The agreements were submitted to the New Jersey Department
and some of the terms in the agreements reflect changed terms requested by the
New Jersey Department. Finally, the Company received an opinion from an
independent investment bank engaged by the Company stating that, subject to
other provisions contained in the opinion, the consideration to be received by
the Company in connection with the Agreements was fair, from a financial point
of view, to the Company. This opinion was filed with the Company's Form 8-K
filed with the SEC on September 12, 2002.

Relationships between MIIX Holdings and MIIX Advantage and the Company

As of December 31, 2003, eight of the Company's ten Directors were directors of
MIIX Holdings and MIIX Advantage, although the number of the Company's Directors
serving on the MIIX Holdings and MIIX Advantage boards of directors will be
reduced to no more than seven (7) in 2004, no more than six (6) in 2005 and no
more than five (5) in 2006.

MIIX Advantage currently provides medical malpractice insurance coverage to Drs.
Carnes, Miskoff, Hirsch, Sorger and Sullivan. The following Executive Officers
serve, without additional compensation, as Executive Officers of MIIX Holdings
and MIIX Advantage as of December 31, 2003: Ms. Costante, Mr. Sugerman, Ms.
Williams, Mr. Grab, Mr. Davis, Mr. Roynan and Ms. Mason.

ALTILA CORPORATION

On July 17, 2003, the Company entered into an agreement with Altila under which
Altila provides a leased employee, Allen Sugerman, to serve as Chief Financial
Officer of the Company. Under the agreement, the Company pays Altila $302,000
per year for Mr. Sugerman's services as the Chief Financial Officer, plus
reimbursement of Mr. Sugerman's reasonable out of pocket expenses. During 2003,
the Company paid Altila $302,000 for Mr. Sugerman's services and $56,853 for
travel and related expenses under this agreement. Mr. Sugerman is a principal of
Altila.

STOCK PURCHASE AND LOAN AGREEMENTS

The Company is party to Stock Purchase and Loan Agreements with each of Ms.
Costante and Mr. Grab (the "Stock Purchase and Loan Agreements"). The proceeds
of such loans were used to purchase unregistered shares of common stock from the
Company at the price of the common stock as of the date the loans were made. The
interest rate charged on the amounts outstanding under each loan is 6.21% for
Ms. Costante and Mr. Grab, compounded annually. Each loan is for a term of five
years and provides for full recourse against the borrower.

On March 5, 2002, the Stock Purchase and Loan Agreements were amended and Ms.
Costante and Mr. Grab tendered the stock each had purchased to the Company, to
apply the proceeds to their respective outstanding loan balances. In addition,
Ms. Costante and Mr. Grab each received a payment under the Retention Plan on
September 5, 2003, which each applied to further reduce their respective
outstanding loan balances. As of March 5, 2004, Ms. Costante's obligation was
$45,706 and Mr. Grab's obligation was $0. The maturity date of Ms. Costante's
loan is March 1, 2005.

The largest amount outstanding under the Stock Purchase and Loan Agreements
during 2003 for Ms. Costante and Mr. Grab was $229,443 and $195,946,
respectively.

During 2003, Mr. Grab's outstanding loan balance of $97,257 was forgiven as a
retention incentive subject to his continued employment with the Company through
December 31, 2004. Should Mr. Grab voluntarily resign from the Company prior to
December 31, 2004, he will be obligated to repay the then outstanding loan
balance, including accrued interest, according to the terms of the Stock Loan
Repayment Agreement and Note, as amended.

                                                                              50
<PAGE>

At December 31, 2003, the Company determined the outstanding loan balance due
from a former executive officer of the Company was uncollectible. The Company
wrote off the $2.0 million balance at December 31, 2003.

The Stock Loan Repayment Agreements are filed with the SEC as an exhibit to the
Company's Form 10-K filing for the year ended December 31, 2001.

The Company believes that the terms of the transactions described above are fair
to the Company.

ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

Audit Fees

The Audit Committee appointed Ernst & Young LLP as independent auditors to audit
the financial statements of the Company for fiscal years 2003 and 2002. Annual
audit fees for the 2003 and 2002 fiscal years were $818,600 and $492,000,
respectively.

All Other Fees

All other fees for audit related services for the 2003 and 2002 fiscal years
were $0 and $259,000, respectively, and for all other non-audit services were $0
and $26,348, respectively.

Other Matters

The Audit Committee has considered whether the provision of the non-audit
services described above and other non-audit services is compatible with
maintaining the independence of its independent auditors, Ernst & Young LLP, and
has determined that such services does not impair the independence of Ernst &
Young LLP. The Audit Committee pre-approves all auditing services and permitted
non-audited services (including the fees and terms thereof) to be performed for
the Company by its independent auditor, subject to the de minimus exceptions for
non-audit services described in Section 10A(i)(1)(B) of the Exchange Act, which
are approved by the Committee prior to the completion of the audit.

PART IV

ITEM 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

(a)(1) and (2) and (d)

        The financial statements filed as part of this Report are listed on the
        Index to Financial Statements and Schedules on page F-1. The required
        schedules filed as part of this Report are identified on the Index to
        Financial Statements and Schedules on page F-1 of this Report. All other
        schedules for which provision is made in the applicable accounting
        regulation of the SEC are not required under the related instructions,
        are inapplicable or the required information is included in the
        consolidated financial statements, and therefore omitted.

(a)(3) and (c)

        The following exhibits are filed herewith unless otherwise indicated:

 Exhibit
 Number                               Description

   2.1          Plan of Reorganization of Medical Inter-Insurance Exchange
                (incorporated by reference to the exhibit filed with the
                registrant's registration statement on Form S-1 (Reg. No.
                333-59371)).

   2.2          Stock Purchase Agreement between The Medical Society of New
                Jersey and The MIIX Group, Incorporated (incorporated by
                reference to the exhibit filed with the registrant's
                registration statement on Form S-1 (Reg. No. 333-59371)).

   2.3          Amendment No. 1 to Stock Purchase Agreement between The Medical
                Society of New Jersey and The MIIX Group, Incorporated, dated as
                of September 20, 1998 (incorporated by reference to the exhibit
                filed with the registrant's registration statement on Form S-1
                (Reg. No. 333-59371)).

                                                                              51
<PAGE>

   2.4          Amendment No. 2 to Stock Purchase Agreement between The Medical
                Society of New Jersey and The MIIX Group, Incorporated, dated as
                of December 21, 1998 (incorporated by reference to the exhibit
                filed with the registrant's registration statement on Form S-1
                (Reg. No. 333-59371)).

   2.5          Resolution of the Medical Inter-Insurance Exchange of New Jersey
                Board of Governors amending the Plan of Reorganization
                (incorporated by reference to the exhibit filed with the
                registrant's registration statement on Form S-1 (Reg. No.
                333-59371)).

   3.1          Restated Certificate of Incorporation of The MIIX Group,
                Incorporated (incorporated by reference to the exhibit filed
                with the registrant's registration statement on Form S-1 (Reg.
                No. 333-59371)).

   3.2          Amended and Restated By-Laws of The MIIX Group, Incorporated,
                amended June 12, 2002. (incorporated by reference to the exhibit
                filed with the registrant's Annual Report on Form 10-K for the
                year ended December 31, 2002 as filed with the Securities and
                Exchange Commission on March 31, 2003 (file no. 001-14593)).

   4.1          Rights Agreement dated as of June 27, 2001 (incorporated by
                reference to the exhibit filed with the registrant's Form 8-K/A
                dated June 28, 2001 and filed with the Securities and Exchange
                Commission on July 11, 2001 (file no. 001-14593)).

   4.2          Certificate of Designation, Preferences and Rights (incorporated
                by reference to the exhibit filed with the registrant's Form 8-K
                dated June 27, 2001 and filed with the Securities and Exchange
                Commission on June 28, 2001 (file no. 001-14593)).

   10.4         Specific Excess Reinsurance Contract, effective January 1, 1997,
                among Medical Inter-Insurance Exchange of New Jersey and Swiss
                Reinsurance Company; Hannover Ruckversicherungs; Underwriters
                Reinsurance Company; Kemper Reinsurance Company; and London Life
                and Casualty Reinsurance Corporation (incorporated by reference
                to the exhibit filed with the registrant's registration
                statement on Form S-1 (Reg. No. 333-59371)).

   10.5         Specific Excess Reinsurance Contract, effective January 1, 1997,
                between Medical Inter-Insurance Exchange of New Jersey and
                American Re-Insurance Company (incorporated by reference to the
                exhibit filed with the registrant's registration statement on
                Form S-1 (Reg. No. 333-59371)).

   10.6         Combined Quota Share, Aggregate and Specific Excess of Loss
                Reinsurance Treaty, effective November 1, 1996, among Medical
                Inter-Insurance Exchange of New Jersey and Hannover Reinsurance
                (Ireland) Ltd.,; E&S Reinsurance (Ireland) Ltd.; Underwriters
                Reinsurance Company (Barbados) Inc.; London Life and Reinsurance
                Corporation; and Lawrenceville Re, Ltd. (incorporated by
                reference to the exhibit filed with the registrant's
                registration statement on Form S-1 (Reg. No. 333-59371)).

   10.7         Specific Excess Reinsurance Contract, effective January 1, 1996
                and terminated December 31, 1996, among Medical Inter-Insurance
                Exchange of New Jersey and Swiss Reinsurance Company; Hannover
                Ruckversicherungs; Underwriters Reinsurance Company; American
                Re-Insurance Company; Kemper Reinsurance Company; and London
                Life and Casualty Reinsurance Corporation (incorporated by
                reference to the exhibit filed with the registrant's
                registration statement on Form S-1 (Reg. No. 333-59371)).

   10.8         Combined Aggregate and Casualty Catastrophe Excess of Loss
                Reinsurance Treaty, effective January 1, 1996 among Medical
                Inter-Insurance Exchange of New Jersey and Hannover Reinsurance
                (Ireland) Ltd.; Eisen und Stahl Reinsurance (Ireland) Ltd.;
                London Life and Casualty Reinsurance Corporation; and
                Scandinavian Reinsurance Company, Ltd.; and Lawrenceville Re,
                Ltd. (incorporated by reference to the exhibit filed with the
                registrant's registration statement on Form S-1 (Reg. No.
                333-59371)).

                                                                              52
<PAGE>

   10.9         Specific Excess Reinsurance Contract, effective January 1, 1995
                and terminated December 31, 1995 among Medical Inter-Insurance
                Exchange of New Jersey and Swiss Reinsurance Company; Hannover
                Ruckversicherungs; Underwriters Reinsurance Company; and PMA
                Reinsurance Corporation (incorporated by reference to the
                exhibit filed with the registrant's registration statement on
                Form S-1 (Reg. No. 333-59371)).

   10.10        Combined Aggregate and Casualty Catastrophe Excess of Loss
                Reinsurance Treaty, effective January 1, 1995 among Medical
                Inter-Insurance Exchange of New Jersey and Hanover Reinsurance
                (Ireland) Ltd.; Eisen und Stahl Reinsurance (Ireland) Ltd.;
                London Life and Casualty Reinsurance Corporation; and
                Scandinavian Reinsurance Company Ltd. (incorporated by reference
                to the exhibit filed with the registrant's registration
                statement on Form S-1 (Reg. No. 333-59371)).

   10.11        Combined Aggregate and Casualty Catastrophe Excess of Loss
                Reinsurance Treaty, effective January 1, 1994 among Medical
                Inter-Insurance Exchange of New Jersey and Scandinavian
                Reinsurance Company Ltd.; Hannover Reinsurance (Ireland) Ltd.;
                and Eisen und Stahl Reinsurance (Ireland) Ltd. (incorporated by
                reference to the exhibit filed with the registrant's
                registration statement on Form S-1 (Reg. No. 333-59371)).

   10.12        Combined Aggregate and Casualty Catastrophe Excess of Loss
                Reinsurance Treaty, effective January 1, 1993 among Medical
                Inter-Insurance Exchange of New Jersey and Scandinavian
                Reinsurance Company Ltd.; Hannover Reinsurance (Ireland) Ltd.;
                and Eisen und Stahl Reinsurance (Ireland) Ltd. (incorporated by
                reference to the exhibit filed with the registrant's
                registration statement on Form S-1 (Reg. No. 333-59371)).

   10.13        Combined Aggregate and Casualty Catastrophe Excess of Loss
                Reinsurance Treaty, effective December 15, 1992 among Medical
                Inter-Insurance Exchange of New Jersey and Hannover Reinsurance
                (Ireland) Ltd.; and Eisen und Stahl Reinsurance (Ireland) Ltd.
                (incorporated by reference to the exhibit filed with the
                registrant's registration statement on Form S-1 (Reg. No.
                333-59371)).

   10.14*       Amended and Restated 1998 Long Term Incentive Equity Plan of The
                MIIX Group, Incorporated (incorporated by reference to the
                exhibit filed with the registrant's Annual Report on Form 10-K
                for the year ended December 31, 1999 as filed with the
                Securities and Exchange Commission on March 30, 2000 (file no.
                001-14593)).

   10.17*       Employment Agreement among The MIIX Group, Incorporated, New
                Jersey State Medical Underwriters, Inc. and Edward M. Grab
                (incorporated by reference to the exhibit filed with the
                registrant's Annual Report on Form 10-K for the year ended
                December 31, 1999 as filed with the Securities and Exchange
                Commission on March 30, 2000 (file no. 001-14593)).

   10.22*       Stock Purchase and Loan Agreement by and between The MIIX Group,
                Incorporated and Daniel Goldberg (incorporated by reference to
                the exhibit filed with the registrant's registration statement
                on Form S-1 (Reg. No. 333-59371)).

   10.23*       Stock Purchase and Loan Agreement by and between The MIIX Group,
                Incorporated and Kenneth Koreyva (incorporated by reference to
                the exhibit filed with the registrant's Annual Report on Form
                10-K for the year ended December 31, 1999 as filed with the
                Securities and Exchange Commission on March 30, 2000 (file no.
                001-14593)).

   10.26*       Stock Purchase and Loan Agreement by and between The MIIX Group,
                Incorporated and Joseph Hudson (incorporated by reference to the
                exhibit filed with the registrant's registration statement on
                Form S-1 (Reg. No. 333-59371)).

   10.29*       Stock Purchase and Loan Agreement by and between The MIIX Group,
                Incorporated and Daniel G. Smereck (incorporated by reference to
                the exhibit filed with the registrant's registration statement
                on Form S-1 (Reg. No. 333-59371)).

                                                                              53
<PAGE>

   10.41        Addendum No. 2 to the Combined Quota Share, Aggregate and
                Specific Excess of Loss Reinsurance Treaty, effective November
                1, 1998, among Medical Inter-Insurance Exchange of New Jersey
                and Hannover Reinsurance (Ireland) Ltd.; E&S Reinsurance
                (Ireland) Ltd.; Underwriters Reinsurance Company (Barbados)
                Inc.; London Life and Casualty Reinsurance Corporation;
                Lawrenceville Re, Ltd.; and European Reinsurance Company of
                Zurich (incorporated by reference to the exhibit filed with the
                registrant's Quarterly Report on Form 10-Q for the quarter ended
                September 30, 1999 as filed with the Securities and Exchange
                Commission on November 15, 1999 (file no. 001-14593)).

   10.42        Addendum No. 3 to the Combined Quota Share, Aggregate and
                Specific Excess of Loss Reinsurance Treaty, effective January 1,
                1999, among Medical Inter-Insurance Exchange of New Jersey and
                Hannover Reinsurance (Ireland) Ltd; E&S Reinsurance (Ireland)
                Ltd.; Underwriters Reinsurance Company (Barbados) Inc.; and
                European Reinsurance Company of Zurich (incorporated by
                reference to the exhibit filed with the registrant's Quarterly
                Report on Form 10-Q for the quarter ended September 30, 1999 as
                filed with the Securities and Exchange Commission on November
                15, 1999 (file no. 001-14593)).

   10.43        Addendum No. 4 to the Combined Quota Share, Aggregate and
                Specific Excess of Loss Reinsurance Treaty, effective January 1,
                1999, among Medical Inter-Insurance Exchange of New Jersey and
                Hannover Reinsurance (Ireland) Ltd; E&S Reinsurance (Ireland)
                Ltd.; Underwriters Reinsurance Company (Barbados) Inc.; and
                European Reinsurance Company of Zurich (incorporated by
                reference to the exhibit filed with the registrant's Quarterly
                Report on Form 10-Q for the quarter ended September 30, 1999 as
                filed with the Securities and Exchange Commission on November
                15, 1999 (file no. 001-14593)).

   10.44        Excess Cession and Event Reinsurance Contract, effective January
                1, 1999, among Medical Inter-Insurance Exchange and Hannover
                Ruckversicherungs-Aktiengesellschaft; and Swiss Reinsurance
                Company (incorporated by reference to the exhibit filed with the
                registrant's Quarterly Report on Form 10-Q for the quarter ended
                September 30, 1999 as filed with the Securities and Exchange
                Commission on November 15, 1999 (file no. 001-14593)).

   10.45        Excess Cession and Event Reinsurance Contract, effective January
                1, 1999, between Medical Inter-Insurance Exchange and American
                Re-Insurance Company (incorporated by reference to the exhibit
                filed with the registrant's Quarterly Report on Form 10-Q for
                the quarter ended September 30, 1999 as filed with the
                Securities and Exchange Commission on November 15, 1999 (file
                no. 001-14593)).

   10.46        Endorsement No. 1, effective January 1, 2000, to the Excess
                Cession and Event Reinsurance Contract between Medical
                Inter-Insurance Exchange and Hannover
                Ruckversicherungs-Aktiengesellschaft (incorporated by reference
                to the exhibit filed with the registrant's Annual Report on Form
                10-K for the year ended December 31, 2000 as filed with the
                Securities and Exchange Commission on April 2, 2001 (file no.
                001-14593)).

   10.47        Endorsement No. 1, effective January 1, 2000, to the Excess
                Cession and Event Reinsurance Contract between Medical
                Inter-Insurance Exchange and Swiss Reinsurance Company
                (incorporated by reference to the exhibit filed with the
                registrant's Annual Report on Form 10-K for the year ended
                December 31, 2000 as filed with the Securities and Exchange
                Commission on April 2, 2001 (file no. 001-14593)).

   10.48        Endorsement No. 1, effective January 1, 2000, to the Excess
                Cession and Event Reinsurance Contract between Medical
                Inter-Insurance Exchange and American Re-insurance Company
                (incorporated by reference to the exhibit filed with the
                registrant's Annual Report on Form 10-K for the year ended
                December 31, 2000 as filed with the Securities and Exchange
                Commission on April 2, 2001 (file no. 001-14593)).

   10.49        Combined Quota Share and Aggregate Reinsurance Treaty, effective
                November 1, 1999 between MIIX Insurance Company and Hannover
                Reinsurance (Ireland) Ltd. (incorporated by reference to the
                exhibit filed with the registrant's Annual Report on Form 10-K
                for the year ended December 31, 2000 as filed with the
                Securities and Exchange Commission on April 2, 2001 (file no.
                001-14593)).

                                                                              54
<PAGE>

   10.50        Combined Quota Share and Aggregate Reinsurance Treaty, effective
                November 1, 1999 between MIIX Insurance Company and E+S
                Reinsurance (Ireland) Ltd. (incorporated by reference to the
                exhibit filed with the registrant's Annual Report on Form 10-K
                for the year ended December 31, 2000 as filed with the
                Securities and Exchange Commission on April 2, 2001 (file no.
                001-14593)).

   10.51        Combined Quota Share and Aggregate Reinsurance Treaty, effective
                November 1, 1999 between MIIX Insurance Company and Swiss
                Reinsurance Company. (incorporated by reference to the exhibit
                filed with the registrant's Annual Report on Form 10-K for the
                year ended December 31, 2000 as filed with the Securities and
                Exchange Commission on April 2, 2001 (file no. 001-14593)).

   10.53        Combined Quota Share And Aggregate Excess Of Loss Reinsurance
                Agreement, effective November 1, 2000, and dated as of July 30,
                2001, between MIIX Insurance Company and Hannover Reinsurance
                (Ireland) Limited/E + S Reinsurance (Ireland) Limited
                (incorporated by reference to Exhibit 10.53 filed with the
                registrant's Form 10-Q for the period ended June 30, 2001 and
                filed with the Securities and Exchange Commission on August 13,
                2001(file no. 001-14593)).

   10.55*       Employment Agreement among The MIIX Group, Incorporated, New
                Jersey State Medical Underwriters, Inc. and Catherine E.
                Williams, dated October 31, 2001 (incorporated by reference to
                the exhibit filed with the registrant's Annual Report on Form
                10-K for the year ended December 31, 2001 as filed with the
                Securities and Exchange Commission on March 31, 2002 (file no.
                001-14593)).

   10.56*       Employment Agreement among The MIIX Group, Incorporated, New
                Jersey State Medical Underwriters, Inc. and Patricia A.
                Costante, dated December 19, 2001 (incorporated by reference to
                the exhibit filed with the registrant's Annual Report on Form
                10-K for the year ended December 31, 2001 as filed with the
                Securities and Exchange Commission on March 31, 2002 (file no.
                001-14593)).

   10.58*       Non-Qualified Deferred Compensation Agreement by and between The
                MIIX Group, Incorporated, New Jersey State Medical Underwriters,
                Inc. and Catherine E. Williams, entered into and effective
                October 31, 2001 (incorporated by reference to the exhibit filed
                with the registrant's Annual Report on Form 10-K for the year
                ended December 31, 2001 as filed with the Securities and
                Exchange Commission on March 31, 2002 (file no. 001-14593)).

   10.62*       The MIIX Group, Incorporated and New Jersey State Medical
                Underwriters, Inc. Employee Retention Incentive Plan.
                (incorporated by reference to the exhibit filed with the
                registrant's Annual Report on Form 10-K for the year ended
                December 31, 2002 as filed with the Securities and Exchange
                Commission on March 31, 2003 (file no. 001-14593)).

   10.63*       First Amendment and Allonge to Note between The MIIX Group,
                Incorporated and Patricia A. Costante, entered into March 5,
                2002 (incorporated by reference to the exhibit filed with the
                registrant's Annual Report on Form 10-K for the year ended
                December 31, 2001 as filed with the Securities and Exchange
                Commission on March 31, 2002 (file no. 001-14593)).

   10.64*       First Amendment and Allonge to Note between The MIIX Group,
                Incorporated and Edward M. Grab, entered into March 5, 2002
                (incorporated by reference to the exhibit filed with the
                registrant's Annual Report on Form 10-K for the year ended
                December 31, 2001 as filed with the Securities and Exchange
                Commission on March 31, 2002 (file no. 001-14593)).

   10.65*       Stock Loan Repayment Agreement by and between Patricia A.
                Costante and The MIIX Group, Incorporated, entered into March 5,
                2002 (incorporated by reference to the exhibit filed with the
                registrant's Annual Report on

                                       55
<PAGE>

                Form 10-K for the year ended December 31, 2001 as filed with the
                Securities and Exchange Commission on March 31, 2002 (file no.
                001-14593)).

   10.66*       Stock Loan Repayment Agreement by and between Edward M. Grab and
                The MIIX Group, Incorporated, entered into May 5, 2002
                (incorporated by reference to the exhibit filed with the
                registrant's Annual Report on Form 10-K for the year ended
                December 31, 2001 as filed with the Securities and Exchange
                Commission on March 31, 2002 (file no. 001-14593)).

   10.67*       Employment Agreement among The MIIX Group, Incorporated, New
                Jersey State Medical Underwriters, Inc. and William G. Davis,
                Jr., dated March 19, 2002 (incorporated by reference to the
                exhibit filed with the registrant's Quarterly Report on Form
                10-Q for the quarter ended March 31, 2002 as filed with the
                Securities and Exchange Commission on May 15, 2002 (file no.
                001-14593)).

   10.68*       Employment Agreement among The MIIX Group, Incorporated, New
                Jersey State Medical Underwriters, Inc. and Verice M. Mason,
                dated March 19, 2002 (incorporated by reference to the exhibit
                filed with the registrant's Quarterly Report on Form 10-Q for
                the quarter ended March 31, 2002 as filed with the Securities
                and Exchange Commission on May 15, 2002 (file no. 001-14593)).

   10.69*       Non-Qualified Deferred Compensation Agreement by and between The
                MIIX Group, Incorporated, New Jersey State Medical Underwriters,
                Inc. and William G. Davis, Jr., entered into and effective March
                19, 2002 (incorporated by reference to the exhibit filed with
                the registrant's Quarterly Report on Form 10-Q for the quarter
                ended March 31, 2002 as filed with the Securities and Exchange
                Commission on May 15, 2002 (file no. 001-14593)).

   10.70*       Non-Qualified Deferred Compensation Agreement by and between The
                MIIX Group, Incorporated, New Jersey State Medical Underwriters,
                Inc. and Verice M. Mason, entered into and effective March 19,
                2002 (incorporated by reference to the exhibit filed with the
                registrant's Quarterly Report on Form 10-Q for the quarter ended
                March 31, 2002 as filed with the Securities and Exchange
                Commission on May 15, 2002 (file no. 001-14593)).

   10.72        Combined Quota Share and Aggregate Excess of Loss Reinsurance
                Agreement made and entered into by and between MIIX Insurance
                Company and Hannover Reinsurance (Ireland) Limited/ E + S
                Reinsurance (Ireland) Limited (incorporated by reference to the
                exhibit filed with the registrant's Quarterly Report on Form
                10-Q for the quarter ended September 30, 2002 as filed with the
                Securities and Exchange Commission on November 14, 2002 (file
                no. 001-14593)).

   10.73        Commutation and Release Agreement by and between Health Care
                Indemnity, Inc. and Lawrenceville Property & Casualty Company
                and MIIX Insurance Company (incorporated by reference to the
                exhibit filed with the registrant's Quarterly Report on Form
                10-Q for the quarter ended September 30, 2002 as filed with the
                Securities and Exchange Commission on November 14, 2002 (file
                no. 001-14593)).

   10.74        Employment Agreement between and among The MIIX Group,
                Incorporated, New Jersey State Medical Underwriters, Inc. and
                Allen G. Sugerman dated July 17, 2003 (incorporated by reference
                to the exhibit filed with the registrant's Form 8-K as filed
                with the Securities and Exchange Commission on July 22, 2003
                (file no. 001-14593)).

   10.75*       Employment Agreement among The MIIX Group, Incorporated, New
                Jersey State Medical Underwriters, Inc., and James P. Roynan,
                dated December 18, 2002. (incorporated by reference to the
                exhibit filed with the registrant's Annual Report on Form 10-K
                for the year ended December 31, 2002 as filed with the
                Securities and Exchange Commission on March 31, 2003 (file no.
                001-14593)).

   10.76*       Non-Qualified Deferred Compensation Agreement by and between The
                MIIX Group, Incorporated, New Jersey State Medical Underwriters,
                Inc. and

                                                                              56
<PAGE>

                James P. Roynan (incorporated by reference to the Exhibit filed
                with the registrant's Annual Report on Form 10-K for the year
                ended December 31, 2002 as filed with the Securities and
                Exchange Commission on March 31, 2003 (file no. 00L-14593)).

   10.77        Trust Agreement among MIIX Insurance Company, Eisen Und Stahl
                Reinsurance and Mellon Bank, N.A., entered into May 13, 2002.
                (incorporated by reference to the exhibit filed with the
                registrant's Annual Report on Form 10-K for the year ended
                December 31, 2002 as filed with the Securities and Exchange
                Commission on March 31, 2003 (file no. 001-14593)).

   10.78        Trust Agreement among MIIX Insurance Company, Underwriters
                Reinsurance Company (Barbados) Inc., and Mellon Bank, N.A.,
                entered into May 7, 2002. (incorporated by reference to the
                exhibit filed with the registrant's Annual Report on Form 10-K
                for the year ended December 31, 2002 as filed with the
                Securities and Exchange Commission on March 31, 2003 (file no.
                001-14593)).

   10.79        Trust Agreement among MIIX Insurance Company, London Life and
                Casualty Reinsurance Corporation, and Mellon Bank, N.A., entered
                into May 7, 2002. (incorporated by reference to the exhibit
                filed with the registrant's Annual Report on Form 10-K for the
                year ended December 31, 2002 as filed with the Securities and
                Exchange Commission on March 31, 2003 (file no. 001-14593)).

   10.80        Trust Agreement among MIIX Insurance Company, Hannover
                Reinsurance (Ireland) Ltd., and Mellon Bank, N.A., entered into
                May 7, 2002. (incorporated by reference to the exhibit filed
                with the registrant's Annual Report on Form 10-K for the year
                ended December 31, 2002 as filed with the Securities and
                Exchange Commission on March 31, 2003 (file no. 001-14593)).

   10.81        Trust Agreement among MIIX Insurance Company, Swiss Reinsurance
                America Corporation, and Mellon Bank, N.A., entered into May 7,
                2002. (incorporated by reference to the exhibit filed with the
                registrant's Annual Report on Form 10-K for the year ended
                December 31, 2002 as filed with the Securities and Exchange
                Commission on March 31, 2003 (file no. 001-14593)).

   10.82        Management Services Agreement, dated as of August 28, 2002 by
                and among The MIIX Group, Inc., New Jersey State Medical
                Underwriters, Inc., MIIX Advantage Holdings, Inc. and MIIX
                Advantage Insurance Company of New Jersey (incorporated by
                reference to Exhibit 99.1 to the registrant's Current Report on
                Form 8-K as filed with the Securities and Exchange Commission on
                September 12, 2002 (file no. 001-14593)).

   10.83        Non-Competition and Renewal Rights Agreement, dated as of August
                28, 2002 by and among The MIIX Group, Inc., MIIX Insurance
                Company, New Jersey State Medical Underwriters, Inc., MIIX
                Advantage Holdings, Inc. and MIIX Advantage Insurance Company of
                New Jersey (incorporated by reference to Exhibit 99.2 to the
                registrant's Current Report on Form 8-K as filed with the
                Securities and Exchange Commission on September 12, 2002 (file
                no. 001-14593)).

   10.84        Intellectual Property License Agreement, dated as of August 28,
                2002 by and among New Jersey State Medical Underwriters, Inc.,
                MIIX Advantage Holdings, Inc. and MIIX Advantage Insurance
                Company of New Jersey (incorporated by reference to Exhibit 99.3
                to the registrant's Current Report on Form 8-K as filed with the
                Securities and Exchange Commission on September 12, 2002 (file
                no. 001-14593)).

   10.85        Reimbursement Agreement dated as of August 28, 2002 by and among
                MIIX Advantage Insurance Company of New Jersey, MIIX Advantage
                Holdings, Inc. and MIIX Insurance Company (incorporated by
                reference to the Exhibit filed with the registrant's Annual
                Report on Form 10-K for the year ended December 31, 2002 as
                filed with the Securities and Exchange Commission on March 31,
                2003 (file no. 001-14593)).

                                                                              57
<PAGE>

   10.86 +      Lease Agreement, dated as of November 25, 2003 by and between
                New Jersey State Medical Underwriters, Inc. and Gordon
                Lawrenceville Realty Associates, L.L.C.

   10.87 +      Amendment to Lease, dated as of June 22, 2004 by and between
                New Jersey State Medical Underwriters, Inc. and Gordon
                Lawrenceville Realty Associates, L.L.C.

   10.88 +      Second Amendment to Lease, dated as of October 1, 2004 by and
                between New Jersey State Medical Underwriters, Inc. and Gordon
                Lawrenceville Realty Associates, L.L.C.

   11           No statement regarding the computation of per share earnings is
                required to be filed because the computations can be clearly
                determined from the materials contained herein.

   21.1         Subsidiaries of The MIIX Group, Incorporated (incorporated by
                reference to the exhibit filed with the registrant's
                registration statement on Form S-1 (Reg. No. 333-59371)).

   23.1 +       Consent of Independent Auditors.

   31.1 +      Certification of Chief Executive Officer under Section 302
               of the Sarbanes-Oxley Act of 2002.

   31.2 +      Certification of Chief Financial Officer under Section 302
               of the Sarbanes-Oxley Act of 2002.

   32.1 +      Certification of Chief Executive Officer under Section 906
               of the Sarbanes-Oxley Act of 2002.

   32.2 +      Certification of Chief Financial Officer under Section 906
               of the Sarbanes-Oxley Act of 2002.

*       Represents a management contract or compensatory plan or arrangement.
+       Filed herewith.

(b)     Reports on Form 8-K

A current report on Form 8-K, dated October 30, 2003, was filed by the Company
to furnish the text of a press release issued on October 29, 2003, announcing
third quarter 2003 financial results of operations.

A current report on Form 8-K, dated November 17, 2003, was filed by the Company
to provide a current Financial Supplement.

A current report on Form 8-K, dated January 27, 2004, was filed by the Company
to announce the departure of William G. Davis, Senior Vice President, Claims and
James P. Roynan, Senior Vice President, Information Systems, effective January
26, 2004.

A current report on Form 8-K, dated February 5, 2004, was filed by the Company
to furnish the text of a press release issued on February 5, 2004, announcing it
has advised the New Jersey Department of Banking and Insurance of the need to
increase its loss and allocated loss adjustment expense reserves based on the
progress of the annual audit to date.

A current report on Form 8-K, dated March 18, 2004, was filed by the Company to
furnish the text of a press release issued March 17, 2004, announcing that the
loss and allocated loss adjustment expense reserve adjustment required continues
to be under review.

A current report on Form 8-K, dated March 31, 2004, was filed by the Company to
furnish the text of a press release issued March 31, 2004, announcing that the
Company filed notice with the Securities and Exchange Commission on Form 12b-25
to extend the period in which it intends to file its Annual Report on Form 10-K.




                                                                              58
<PAGE>

A current report on form 8-K, dated April 14, 2004, was filed by the company to
furnish the text of a press release issued April 14, 2004, announcing the
continuing review of financials and delay of filing annual report on Form 10-K.

A current report on Form 8-K, dated May 14, 2004, was filed by the Company to
furnish the text of a press release issued May 14, 2004, announcing an
acquisition offer, extension on filing of statutory statements and appointment
of administrative supervisor.

A current report on Form 8-K, dated July 8, 2004, was filed by the Company to
furnish the text of a press release issued July 8, 2004, announcing that it has
received a preliminary memorandum of terms for the acquisition of MIIX Insurance
Company, New Jersey State Medical Underwriters, Inc. and certain other
subsidiaries.

A current report on Form 8-K, dated August 4, 2004, was filed by the Company to
furnish the text of a press release issued August 4, 2004, announcing that MIIX
Insurance Company has obtained a further extension of the filing date for its
2003 annual audited financial report with the New Jersey Department of Banking
and Insurance and substantial reserve adjustment.

A current report on Form 8-K, dated August 24, 2004, was filed by the Company to
furnish the text of a press release issued August 24, 2004, announcing that the
New Jersey Department of Banking and Insurance has filed an application for an
Order to Show Cause seeking to place one of its insurance subsidiaries, MIIX
Insurance Company, in rehabilitation.

A current report on Form 8-K, dated September 30, 2004, was filed by the Company
to furnish the text of a press release issued September 30, 2004, announcing
that that the Superior Court of New Jersey entered an Order on September 28,
2004, placing MIIX Insurance Company, a subsidiary of The MIIX Group, Inc., into
rehabilitation and naming the Commissioner of the New Jersey Department of
Banking and Insurance as Rehabilitator with immediate and exclusive control over
the business and property of MIIX Insurance.

A current report on Form 8-K, dated November 15, 2004, was filed by the Company
to furnish the text of a press release issued November 15, 2004, announcing that
Scott L. Barbee resigned from the Board of Directors effective October 13, 2004.






                                                                              59
<PAGE>

                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

                                            THE MIIX GROUP, INCORPORATED

                                       By:  /s/ PATRICIA A. COSTANTE
                                            ------------------------------------
                                                    Patricia A. Costante
                                            Chairman and Chief Executive Officer

                                                     November 15, 2004

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 dates indicated.

<TABLE>
<CAPTION>
<S>                                                                           <C>

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

/s/ PATRICIA A. COSTANTE               Chairman and Chief Executive
---------------------------            Officer
Patricia A. Costante                   (principal executive officer)       November 15, 2004


/s/ ALLEN G. SUGERMAN
----------------------------           Chief Financial Officer
Allen G. Sugerman                      (principal financial and
                                       accounting officer)                 November 15, 2004


/s/ ANGELO S. AGRO                     Director
----------------------------
Angelo S. Agro, M.D.                                                       November 15, 2004


/s/ HARRY M. CARNES                    Director
----------------------------
Harry M. Carnes, M.D.                                                      November 15, 2004


/s/ DOMINICK D'AGOSTA                  Director
----------------------------
Dominick D'Agosta                                                          November 15, 2004


/s/ PAUL J. HIRSCH                     Director
----------------------------
Paul J. Hirsch, M.D.                                                       November 15, 2004


/s/ MARTIN L. SORGER                   Director
----------------------------
Martin L. Sorger, M.D.                                                     November 15, 2004


/s/ BESSIE M. SULLIVAN                 Director
----------------------------
Bessie M. Sullivan, M.D.                                                   November 15, 2004
</TABLE>

                                                                              60

<PAGE>

                   INDEX TO FINANCIAL STATEMENTS AND SCHEDULES


                                                                            PAGE
                                                                            ----

Report of Independent Registered Public Accounting Firm.....................F- 2
Consolidated Balance Sheets as of December 31, 2003 and 2002................F- 3
Consolidated Statements of Operations for the years ended
  December 31, 2003, 2002 and 2001..........................................F- 4
Consolidated Statements of Stockholders' Equity (Deficiency)for
  the three years ended December 31, 2003, 2002 and 2001....................F- 5
Consolidated Statements of Cash Flows for the years ended
  December 31, 2003, 2002 and 2001..........................................F- 6
Notes to Consolidated Financial Statements..................................F- 7
Schedule I -- Summary of Investments -- Other than
  Investments in Related Parties............................................F-29
Schedule II -- Condensed Financial Information of Registrant................F-30



(ALL OTHER SCHEDULES FOR WHICH PROVISION IS MADE IN THE APPLICABLE ACCOUNTING
REGULATION OF THE SECURITIES AND EXCHANGE COMMISSION ARE OMITTED FOR THE REASON
THAT THEY ARE NOT APPLICABLE OR THE INFORMATION IS OTHERWISE CONTAINED IN THE
FINANCIAL STATEMENTS).


                                                                             F-1
<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


Board of Directors
The MIIX Group, Incorporated

We have audited the accompanying consolidated balance sheets of The MIIX Group,
Incorporated and subsidiaries as of December 31, 2003 and 2002, and the related
consolidated statements of operations, stockholders' equity (deficiency), and
cash flows for each of the three years in the period ended December 31, 2003.
Our audits also included the financial statement schedules referred to at Item
15 (a). These financial statements and schedules are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and schedules based on our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). 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, and 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 The
MIIX Group, Incorporated and subsidiaries at December 31, 2003 and 2002, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 2003, in conformity with U.S.
generally accepted accounting principles. Also, in our opinion, the related
financial statement schedules, when considered in relation to the basic
financial statements taken as a whole, present fairly, in all material respects,
the information set forth therein.

The Company has prepared the accompanying financial statements assuming the
Company will continue as a going concern. As more fully described in Notes 3, 9
and 17, as a result of significant increases reported by MIIX Insurance Company,
a wholly-owned subsidiary of the Company, in the liability for unpaid losses and
loss adjustment expenses, the Company reported a deficiency in stockholders'
equity as of December 31, 2003. This increase in the liability for unpaid losses
and loss adjustment expenses reported by MIIX Insurance Company resulted in the
State of New Jersey entering, on September 28, 2004, an Order of Rehabilitation
of MIIX Insurance Company. Pursuant to the Order of Rehabilitation the immediate
and exclusive control over the business and property of MIIX Insurance Company
was placed with the New Jersey Department of Banking and Insurance. As a result
of these actions, the Company is attempting the wind-down of its business
activities. The potential consequences of these conditions and those described
in Note 1 raise substantial doubt about the Company's ability to continue as a
going concern. Management's plans in regard to these matters are described in
Note 1. The financial statements do not reflect any adjustments that might
result from the outcome of this uncertainty.

As discussed in Note 2 to the financial statements, during 2002 the Company
changed its method of accounting for goodwill, and during 2001 the Company
changed its method of accounting for certain investments.


/s/ Ernst & Young LLP

Philadelphia, Pennsylvania
November 15, 2004


                                                                             F-2
<PAGE>
<TABLE>
<CAPTION>

                                          THE MIIX GROUP, INCORPORATED

                                           CONSOLIDATED BALANCE SHEETS
                                      (In thousands, except share amounts)


                                                                                          DECEMBER 31,
                                                                                -------------------------------
                                                                                   2003                 2002
                                                                                -----------         -----------
<S>                                                                             <C>                 <C>
                                                     ASSETS
Securities available-for-sale:
  Fixed maturity investments, at fair value (amortized cost:
     2003 - $680,797; 2002 - $771,414) .................................        $   695,735         $   788,580
  Equity investments, at fair value (cost: 2003 - $2,781;
     2002 - $4,804) ....................................................              3,226               5,187
  Short-term investments, at cost, which approximates fair
     value .............................................................             56,468             262,537
                                                                                -----------         -----------
      Total investments ................................................            755,429           1,056,304
Cash ...................................................................             18,081               4,667
Accrued investment income ..............................................              6,520               8,339
Premium receivable, net ................................................                708               7,602
Prepaid reinsurance premiums ...........................................                  0               3,053
Reinsurance recoverable on unpaid losses ...............................            425,785             457,005
Reinsurance recoverable on paid losses, net ............................             31,874              31,822
Deferred policy acquisition costs ......................................                  0               1,016
Other assets ...........................................................             40,242              47,055
                                                                                -----------         -----------
      Total assets .....................................................        $ 1,278,639         $ 1,616,863
                                                                                ===========         ===========

                      LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
LIABILITIES
Unpaid losses and loss adjustment expenses .............................        $ 1,218,957         $ 1,151,635
Unearned premiums ......................................................                  0              25,262
Premium deposits .......................................................                  0                 209
Funds held under reinsurance treaties ..................................            292,126             332,741
Other liabilities ......................................................             46,077              65,750
                                                                                -----------         -----------
      Total liabilities ................................................          1,557,160           1,575,597
                                                                                -----------         -----------

Commitments and Contingent Liabilities

STOCKHOLDERS' EQUITY (DEFICIENCY)
Preferred stock, $0.01 par value, 50,000,000 shares
   authorized, no shares issued and outstanding ........................                  0                   0
Common stock, $0.01 par value, 100,000,000 shares
   authorized, 16,538,005 shares issued,(2003 - 14,497,536
   shares outstanding; 2002 - 13,382,173 shares outstanding) ...........                166                 166
Additional paid-in capital .............................................             40,270              53,909
Retained earnings (deficit) ............................................           (301,402)             13,323
Treasury stock, at cost (2003 - 2,040,469 shares;
    2002 - 3,155,832 shares) ...........................................            (25,115)            (40,199)
Stock purchase loans and unearned stock compensation ...................             (2,617)             (3,662)
Accumulated other comprehensive income .................................             10,177              17,729
                                                                                -----------         -----------
      Total stockholders' equity (deficiency) ..........................           (278,521)             41,266
                                                                                -----------         -----------
      Total liabilities and stockholders' equity (deficiency)                   $ 1,278,639         $ 1,616,863
                                                                                ===========         ===========


                                             See accompanying notes


                                                                                                             F-3
</TABLE>

<PAGE>
<TABLE>
<CAPTION>

                                       THE MIIX GROUP, INCORPORATED

                                   CONSOLIDATED STATEMENTS OF OPERATIONS
                                 (In thousands, except per share amounts)


                                                                      YEARS ENDED DECEMBER 31,
                                                            ---------------------------------------------
                                                              2003              2002              2001
                                                            ---------         ---------         ---------
<S>                                                         <C>               <C>               <C>
REVENUES
Net premiums earned ................................        $ (26,078)        $ 100,220         $ 146,852
Net investment income ..............................           35,930            60,838            80,193
Realized investment losses .........................           (1,597)           (3,521)           (2,184)
Other revenue ......................................            7,126             7,439             8,439
                                                            ---------         ---------         ---------
          Total revenues ...........................           15,381           164,976           233,300
                                                            ---------         ---------         ---------

EXPENSES
Losses and loss adjustment expenses ................          270,939           196,487           250,768
Underwriting expenses ..............................           22,249            33,125            47,121
Funds held charges .................................           42,996            54,209            42,476
Other expenses .....................................              691             3,454             3,404
Restructuring charge ...............................                0             2,552                 0
                                                            ---------         ---------         ---------
          Total expenses ...........................          336,875           289,827           343,769
                                                            ---------         ---------         ---------
Loss before income taxes and cumulative effect of an
     accounting change .............................         (321,494)         (124,851)         (110,469)
Income tax provision (benefit) .....................           (6,769)          (11,240)           41,892
                                                            ---------         ---------         ---------
  Net loss before cumulative effect of an
       accounting change ...........................         (314,725)         (113,611)         (152,361)
     Cumulative effect of an accounting change,
       net of tax ..................................                0            (2,373)           (5,283)
                                                            ---------         ---------         ---------
          Net loss .................................        $(314,725)        $(115,984)        $(157,644)
                                                            =========         =========         =========
Basic and diluted loss per share before cumulative
     effect of an accounting change ................        $  (23.42)        $   (8.49)        $  (11.27)
Cumulative effect of an accounting change ..........             0.00             (0.18)            (0.39)
                                                            ---------         ---------         ---------
Basic and diluted loss per share of common stock ...        $  (23.42)        $   (8.67)        $  (11.66)
                                                            =========         =========         =========

Dividend per share of common stock .................        $    0.00         $    0.00         $    0.20
                                                            =========         =========         =========


                                          See accompanying notes


                                                                                                       F-4
</TABLE>

<PAGE>
<TABLE>
<CAPTION>

                                                    THE MIIX GROUP, INCORPORATED

                                    CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
                                             For the Three Years Ended December 31, 2003
                                                (In thousands, except share amounts)

                                                                                                 Stock      Accum-
                                                                                               Purchase     ulated
                                   Number                                                        Loans      Other
                                     of                                                           and       Compre-      Total
                                   Shares                Additional    Retained                Unearned     hensive   Stock-holders'
                                    Out-       Common      Paid-In     Earnings     Treasury     Stock       Income      Equity
                                  standing      Stock      Capital     (Deficit)     Stock    Compensation   (Loss)    (Deficiency)
                                ------------  ---------  -----------  -----------  ---------- ------------ ---------- --------------
<S>                              <C>              <C>       <C>         <C>         <C>           <C>        <C>           <C>
Balance at January 1, 2001....   13,563,938       $166      $53,716     $289,655    $(38,897)     $(5,929)   $(9,270)      $289,441
  Net loss....................                                          (157,644)                                          (157,644)
  Other comprehensive income
     (loss), net of tax.......
     Net unrealized
       appreciation on
       securities available-
       for-sale, net of
       deferred taxes.........                                                                                 2,431          2,431
  Stock purchase and loan
     agreement activities.....      (86,049)                    (66)                    (840)         454                      (452)
  Stock compensation..........        1,440                     222                      101           31                       354
  Treasury stock activity,
     net......................          431                      55                        5                                     60
  Cash dividends to
     stockholders.............                                            (2,704)                                            (2,704)
                                ------------  ---------  -----------  -----------  ---------- ------------ ---------- --------------

Balance at December 31, 2001..   13,479,760        166       53,927      129,307     (39,631)      (5,444)    (6,839)       131,486
  Net loss....................                                          (115,984)                                          (115,984)
  Other comprehensive income
     (loss), net of tax.......
     Net unrealized
       appreciation on
       securities available-
       for-sale, net of
       deferred taxes.........                                                                                24,568         24,568
  Stock purchase and loan
     agreement activities.....     (110,061)                                            (729)       1,782                     1,053
  Stock compensation and
     treasury stock activity..       12,474                     (18)                     161                                    143
                                ------------  ---------  -----------  -----------  ---------- ------------ ---------- --------------

Balance at December 31, 2002..   13,382,173        166       53,909       13,323     (40,199)      (3,662)    17,729         41,266
  Net loss....................                                          (314,725)                                          (314,725)
  Other comprehensive income
     (loss), net of tax.......
     Net unrealized
       depreciation on
       securities available-
       for-sale, net of
       deferred taxes.........                                                                                (7,552)        (7,552)
  Stock purchase and loan
       agreement activities...      (75,529)                                             (85)       2,285                     2,200
  Stock compensation and
       treasury stock
       activity...............    1,190,892                 (13,639)                  15,169       (1,240)                      290
                                ------------  ---------  -----------  -----------  ---------- ------------ ---------- --------------

 Balance at December 31, 2003.   14,497,536       $166      $40,270    $(301,402)   $(25,115)    $(2,617)    $10,177      $(278,521)
                                ============  =========  ===========  ===========  ========== ============ ========== ==============


                                                       See accompanying notes


                                                                                                                                 F-5
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
                                      THE MIIX GROUP, INCORPORATED

                                  CONSOLIDATED STATEMENTS OF CASH FLOWS
                                             (In thousands)


                                                                    YEARS ENDED DECEMBER 31,
                                                          ---------------------------------------------
                                                            2003              2002              2001
                                                          ---------         ---------         ---------
<S>                                                       <C>               <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss .........................................        $(314,725)        $(115,984)        $(157,644)
Adjustments to reconcile net loss to net cash
  provided by operating activities:
    Cumulative effect of an accounting change, net
       of tax ....................................                0             2,373             5,283
    Stock based compensation .....................            2,161                50               (50)
    Unpaid losses and loss adjustment expenses ...           67,322           (45,363)           54,468
    Unearned premiums ............................          (25,262)          (63,336)           17,565
    Premium deposits .............................             (209)          (18,719)            3,310
    Premium receivable, net ......................            6,894            12,944           (10,781)
    Reinsurance balances, net ....................           (6,394)           (2,321)           (3,085)
    Deferred policy acquisition costs ............            1,016             3,400            (1,390)
    Realized investment losses ...................            1,597             3,521             2,184
    Depreciation, accretion and amortization .....            3,628            (1,134)           (2,482)
    Accrued investment income ....................            1,819             4,922             2,813
    Net investment in direct financing leases ....                0            32,101            (5,104)
    Other assets .................................            1,429            15,044            53,467
    Other liabilities ............................          (19,673)           (9,247)           17,110
                                                          ---------         ---------         ---------
Net cash used in operating activities ............         (280,397)         (181,749)          (24,336)
                                                          ---------         ---------         ---------


CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from fixed maturity investment sales ....          660,831           859,469           503,153
Proceeds from fixed maturity investments matured,
  called or prepaid ..............................          209,005           157,157           115,121
Proceeds from equity investment sales ............            2,028             2,484             2,132
Cost of investments acquired .....................         (784,450)         (729,135)         (505,880)
Change in short-term investments, net ............          206,068           (96,036)          (84,210)
                                                          ---------         ---------         ---------
Net cash provided by investing activities ........          293,482           193,939            30,316
                                                          ---------         ---------         ---------


CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable and other borrowings .                0                 0             3,199
Repayment of notes payable and other borrowings ..                0           (10,699)           (7,232)
Employee stock purchase loan repayment ...........              414             1,877               747
Purchase of treasury stock .......................              (85)             (730)                0
Cash dividends to stockholders ...................                0                 0            (2,704)
Subordinated loan certificates redeemed ..........                0                 0              (152)
                                                          ---------         ---------         ---------
Net cash used in financing activities ............              329            (9,552)           (6,142)
                                                          ---------         ---------         ---------

Net change in cash ...............................           13,414             2,638              (162)
Cash, January 1 ..................................            4,667             2,029             2,191
                                                          ---------         ---------         ---------
Cash, December 31 ................................        $  18,081         $   4,667         $   2,029
                                                          =========         =========         =========


                                         See accompanying notes


                                                                                                     F-6
</TABLE>

<PAGE>

                          THE MIIX GROUP, INCORPORATED

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.   ORGANIZATION AND RELATED MATTERS

The accompanying consolidated financial statements include the accounts and
operations of The MIIX Group, Incorporated ("The MIIX Group") and its
wholly-owned subsidiaries, MIIX Insurance Company ("MIIX"), and its subsidiaries
Lawrenceville Holdings, Inc. ("LHI") and MIIX Insurance Company of New York
("MIIX New York"), and New Jersey State Medical Underwriters, Inc. and its
wholly-owned subsidiaries (the "Underwriter"), collectively (the "Company").

Until September 1, 2002, the Company provided a wide range of insurance products
to the medical profession and health care institutions. The primary business of
the Company prior to September 1, 2002, was medical professional liability
insurance and it issued claims-made, modified claims-made with prepaid extended
reporting endorsements and occurrence basis policies.

As a result of unexpected and unprecedented increases in loss and Loss
Adjustment Expense ("LAE") reserves during the past three years, the Company has
been subjected to a number of adverse developments. As a result of significant
adjustments to loss and LAE reserves, the Company's capitalization has
significantly weakened and the Company has, among other things:

o    Ceased writing insurance in 2002 in all states and placed the insurance
     operations of MIIX into solvent runoff;
o    Sold renewal rights in 2002 to certain of its business and licensed the
     "MIIX" name and certain trademarks to a New Jersey insurance company, MIIX
     Advantage Insurance Company of New Jersey ("MIIX Advantage");
o    MIIX, the primary insurance subsidiary of the Company, entered into an
     Order with the New Jersey Department of Banking and Insurance ("New Jersey
     Department") in 2003 that set forth the framework for the regulatory
     monitoring of MIIX and established certain operating limitations on MIIX.

The significant increases in loss and LAE reserves ultimately led, on September
28, 2004, to the Superior Court of New Jersey entering an Order placing MIIX
into rehabilitation and naming the Commissioner of the New Jersey Department as
Rehabilitator with immediate and exclusive control over the business and
property of MIIX. See Note 17.

Prior to the Order of Rehabilitation, the Company's principal sources of funds
were dividends and other permissible payments from its subsidiaries and revenues
from its non-insurance operations. Subsequent to the Order of Rehabilitation,
the Company's principal source of funds is derived from the management contract
with MIIX Advantage. The Company does not believe that its cash flow will be
sufficient to allow it to continue to operate. Accordingly, the Company
continues the wind-down of its business activities.

2.   SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying consolidated financial statements have been prepared in
conformity with accounting principles generally accepted in the United States
("GAAP"). The significant accounting policies followed by the Company that
materially affect financial reporting are summarized below:

Principles of Consolidation

The accompanying consolidated financial statements include the accounts and
operations of The MIIX Group and its wholly-owned subsidiaries, MIIX and the
Underwriter. MIIX owns 100% of LHI, a property and casualty insurance holding
company, which owns 100% of MIIX New York. The Underwriter's principal
wholly-owned subsidiaries include Medical Brokers, Inc., an insurance agency,
Reinsurance Services, Inc. (formerly Pegasus Advisors, Inc.), an inactive
reinsurance intermediary, MIIX Healthcare Group, an inactive healthcare
consulting firm, and Lawrenceville Re, Ltd. ("Lawrenceville Re"), a
Bermuda-domiciled reinsurance company. Effective April 30, 2002, the Company
sold substantially all the assets of


                                                                             F-7
<PAGE>

Administrative and Information Management Services, Inc. (formerly Hamilton
National Leasing Corporation). On December 31, 2003, MIIX completed the merger
of Lawrenceville Property and Casualty Company ("LP&C") into MIIX. All
significant intercompany transactions and balances have been eliminated in the
consolidation.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes. Such estimates and assumptions
could change in the future as more information becomes known which could impact
the amounts reported and disclosed herein.

Investments

The Company has designated its entire investment portfolio as
available-for-sale. As such, all investments are carried at their fair values.
The Company has no securities classified as "trading" or "held-to-maturity."
Investments are recorded on the trade date.

Temporary changes in fair values of available-for-sale securities, after
adjustment of deferred income taxes, are reported as unrealized appreciation or
depreciation directly in equity as a component of other comprehensive income.

On April 1, 2001, the Company adopted the provisions of EITF No. 99-20,
"Recognition of Interest Income and Impairment of Purchased and Retained
Beneficial Interests in Securitized Financial Assets." This standard established
new guidelines for recognition of income and other-than-temporary decline for
interests in securitized assets (loan-backed and asset-backed securities),
unless they met certain exception criteria. EITF 99-20 requires the Company to
recognize an other-than-temporary decline if the fair value of the security is
less than its book value and the net present value of expected future cash flows
is less than the net present value of expected future cash flows at the most
recent, prior, estimation date. The difference between the book value of the
security and its fair value must be recognized as an other-than-temporary
decline and the security's yield is adjusted to market yield. This guidance also
adopts the prospective method for adjusting the yield used to recognize interest
income for changes in estimated future cash flows since the last quarterly
evaluation date. On April 1, 2001, the Company recognized $5.3 million of
other-than-temporary declines, net of tax ($0.39 per diluted share) as the
cumulative effect of a change in accounting principle. Expected cash flow
assumptions are obtained from both proprietary and broker/dealer estimates and
are consistent with the current interest rate and economic environment.

Premiums and discounts on investments (other than loan-backed and asset-backed
bonds) are amortized/accreted to investment income using the interest method
over the contractual lives of the investments. Realized investment gains and
losses are included as a component of revenues based on a specific
identification of the investment sold.

Short-term investments include investments maturing within one-year and other
cash and cash equivalent balances earning interest.

The Company regularly evaluates the carrying value of its investments based on
current economic conditions, past credit loss experience, the length of time and
the extent to which the fair value has been less than book value and other
circumstances. A decline in fair value that is other-than-temporary is
recognized by an adjustment to carrying value treated as a realized investment
loss and a reduction in the cost basis of the investment in the period when such
a determination is made.

Deferred Policy Acquisition Costs

Policy acquisition costs (primarily commissions and premium tax expenses), that
vary with and are directly related to the production of business, are
capitalized and amortized over the effective period of the related policies.

Intangible Assets

Intangible assets consist primarily of $1.0 million of goodwill, resulting from
the acquisition of subsidiaries. On January 1, 2002, the Company adopted SFAS
No. 142, "Goodwill and Other Intangible Assets." Under SFAS No. 142, goodwill is
no longer


                                                                             F-8
<PAGE>

amortized as an expense, but instead is reviewed and tested for impairment under
a fair value approach at least annually, or more frequently as a result of an
event or change in circumstances that would indicate impairment may be
necessary. On January 1, 2002, the Company recorded a $2.4 million impairment
related to goodwill, net of $0 tax ($0.18 per diluted share).

The Company completed its annual assessment of goodwill during the fourth
quarter of 2003, which resulted in an impairment of $1.8 million. Due to the
Company's current financial condition, management considered recent third-party
purchase offers made for the assets associated with the goodwill and deemed the
write-down to be appropriate based on these offers.

Software Development Costs

Costs incurred in the development of software used for Company operations are
capitalized and amortized over a useful life ranging from three to five years.

Losses and Loss Adjustment Expenses

Estimates for unpaid losses and LAE are based on the Company's evaluation of
reported claims and actuarial analyses of the Company's operations since its
inception, including assumptions regarding expected ultimate losses and
reporting patterns, and estimates of future trends in claim severity and
frequency. The Company's philosophy is to have a disciplined process
consistently applied in setting and adjusting loss and LAE reserves. Although
variability is inherent in such estimates, recorded loss and LAE reserves
represent management's best estimate of the remaining costs of settling all
incurred claims. Changes in the Company's estimate of ultimate claim costs are
recognized in the period in which the Company's estimate of those ultimate costs
is changed. These estimates are reviewed regularly and any adjustments to prior
year reserves are reflected in current year operating results. See Note 3 for
the discussion of loss and LAE reserves.

The Company offered pure occurrence coverage from 1977 through 1986 and a form
of occurrence coverage, "modified claims-made," from 1987 to August 31, 2002
through its Permanent Protection Plan ("PPP") policy. The PPP policy provides
coverage for claims reported during the policy period as well as, under the
extended reporting endorsement, claims reported after the termination of the
policy (for any reason), and thus is reserved on an occurrence basis. The
Company also offered traditional claims-made and occurrence coverages, which are
reserved on a claims-made or occurrence basis, as appropriate.

Premiums

Premiums are recorded as earned over the period the policies to which they apply
are in force. Premium deposits represent amounts received prior to the effective
date of the new or renewal policy period. The reserve for unearned premiums is
determined on a monthly pro-rata basis. Gross premiums include both direct and
assumed premiums earned.

Reinsurance

Reinsurance premiums, losses and LAE are accounted for on a basis consistent
with the accounting for the original policies issued and the terms of the
reinsurance contracts. Premium deposits, unearned premiums and unpaid losses and
LAE are reported gross of reinsurance amounts. All reinsurance contracts are
accounted for in accordance with the provisions of SFAS No. 113, "Accounting and
Reporting for Reinsurance of Short-Duration and Long-Duration Contracts," which
provides the criteria for determining whether the contracts should be accounted
for utilizing reinsurance accounting or deposit accounting.

Income Taxes

The Company utilizes the liability method of accounting for income taxes. Under
the liability method, deferred income taxes arise as a result of applying
enacted statutory tax rates to the temporary differences between the financial
statement carrying value and the tax basis of assets and liabilities. A
valuation allowance is established if, based on the weight of available
evidence, it is more likely than not that some or all of the deferred tax asset
will not be realized.


                                                                             F-9
<PAGE>

Reclassification

Certain prior year amounts in the Company's financial statements have been
reclassified to conform to the 2003 financial statement presentation.

Cash Flow Reporting

For purposes of reporting cash flows, cash consists of amounts held at banks,
cash in money market accounts and time deposits with original maturities of
three months or less.

Stock-Based Compensation

The Company grants stock options for a fixed number of shares to employees and
board members with an exercise price equal to the fair value of the shares at
the date of grant. The Company accounts for stock option grants in accordance
with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" ("APB 25") and related interpretations. Under APB 25, because the
exercise price of the Company's employee stock options equals the market price
of the underlying stock on the dates of grant, no compensation expense is
recognized.

Earnings (Loss) Per Share

Basic and diluted earnings (loss) per share are calculated on the
weighted-average number of common shares and common share equivalents
outstanding.

Segment Information

The Company's operations are classified into one reportable segment: providing
professional liability and related insurance coverages to the healthcare
industry. In connection therewith, the Company generally offered, through August
31, 2002, three products: occurrence policies, claims-made policies with prepaid
tail coverage and claims-made policies, varying by market. The Company
distributed its products both directly to the insureds and through
intermediaries.

Recent Accounting Pronouncements

In December 2002, FASB issued SFAS No. 148, "Accounting for Stock-Based
compensation -- Transition and Disclosure." This Statement, which amends
Statement No. 123, "Accounting for Stock-Based Compensation," provides
alternative methods of transition for a voluntary change to the fair value based
method of accounting for stock-based employee compensation. In addition, it
requires more prominent and more frequent disclosures in financial statements
about the effects of stock-based compensation. These additional disclosures are
in Note 14 of Notes to Consolidated Financial Statements.


                                                                            F-10
<PAGE>

3.   LIABILITY FOR UNPAID LOSSES AND LOSS ADJUSTMENT EXPENSES

Activity in the liability for unpaid losses and LAEs is summarized as follows:

<TABLE>
<CAPTION>
                                                                  Years Ended December 31,
                                                       ----------------------------------------------
                                                          2003              2002              2001
                                                       ----------        ----------        ----------
                                                                       (In thousands)
<S>                                                    <C>               <C>               <C>
Balance as of January 1, net of reinsurance
  recoverable of $457.0 million, $463.3
  million and $432.0 million, respectively ....        $  694,630        $  733,723        $  710,484

Incurred related to:
  Current year ................................            33,582           146,619           203,975
  Prior years .................................           237,357            49,868            46,793
                                                       ----------        ----------        ----------
Total incurred ................................           270,939           196,487           250,768
                                                       ----------        ----------        ----------
Paid related to:
  Current year ................................               350             2,648             2,571
  Prior years .................................           172,047           232,932           224,958
                                                       ----------        ----------        ----------
Total paid ....................................           172,397           235,580           227,529
                                                       ----------        ----------        ----------
Balance as of December 31, net of reinsurance
  recoverable .................................           793,172           694,630           733,723
Reinsurance recoverable .......................           425,785           457,005           463,275
                                                       ----------        ----------        ----------
Balance as of December 31, gross of reinsurance        $1,218,957        $1,151,635        $1,196,998
                                                       ==========        ==========        ==========
</TABLE>

2001, 2002, 2003 ADJUSTMENTS. In 2001 and 2002, prior year gross loss and LAE
reserves were adjusted by $117.9 million ($46.8 million net of reinsurance) and
$161.2 million ($49.9 million net of reinsurance), respectively, to reflect
adverse development on several lines of business including New Jersey and other
states' physicians, Pennsylvania hospitals and hospital excess. The adjustments
were related to increases in severity and frequency.

Specific factors noted in management's actuarial analysis that gave rise to the
coverage year reserve development in 2001 included the following: overall
reserves across all coverage years were adjusted significantly to reflect
increased loss severity seen during 2001. Claims were adjudicated or settled at
higher values than the Company had previously experienced. This increase in
severity was seen primarily in the Company's Pennsylvania institutions' book,
and, to a lesser degree, in the Company's core New Jersey physician book, as
well as in the physician business in many other states, including, most
particularly, Pennsylvania, Texas and Ohio. Development in prior coverage years
through 1996 primarily reflects this severity trend in Pennsylvania and New
Jersey. Development on coverage years 1997 through 2000 was primarily composed
of increases to Pennsylvania physician and institutional reserves as well as
increases to reserves on physician business in states outside of New Jersey and
Pennsylvania. The increases to reserves held on business outside of New Jersey
and Pennsylvania reflected increased severity as well as, to a lesser extent,
greater than previously anticipated loss frequency.

Specific factors in management's actuarial analysis that give rise to the
coverage year development in 2002 were increased loss severity, re-underwriting
initiatives undertaken by the Company since 1999 and the acceleration of claim
reporting, settlement and payments experienced by the Company during 2002.

The continued increase in severity of claims was particularly noted in the
physician book in Texas, Ohio and New Jersey, and in the hospital book in
Pennsylvania and all other markets in 2002. The majority of the adverse
development in all markets was observed in coverage years prior to 2000. A
significant acceleration of claim reporting was observed in the first half of
2002 in Pennsylvania attributable to a rush to file suits ahead of pending tort
reform legislation in this state. The Pennsylvania book also showed indications
of acceleration of the claim settlement process, which the Company believes is
attributable to its runoff status, lifting of stays that had delayed many cases
and general efforts by the Pennsylvania court system to clear the backlog of
cases. The New Jersey physician book showed significant acceleration in the
claim settlement process in the latter half of 2002 with claim settlement rates
in some of the older coverage years (1998 and prior)


                                                                            F-11
<PAGE>

100% or more above expected levels. The Company believes the acceleration in New
Jersey is attributable to its runoff status, as well as the continued effects of
the "Best Practices" initiative mandated by the New Jersey Supreme Court in
September 2000.

These trends continued in 2003 and were complicated by acceleration in the
claims process attributable to tort and judicial reform in Pennsylvania and New
Jersey and the impact on the internal claim process of the Company entering
voluntary solvent runoff in 2002. After extensive analyses, the Company's prior
year gross loss and LAE reserves were adjusted by $353.0 million ($237.4 million
net of reinsurance) at December 31, 2003. The increase was primarily
attributable to adverse development and increased severity in New Jersey and
Pennsylvania physician lines of business and the hospital excess lines in all
jurisdictions.

The 2003 adjustments were established as a result of an extensive process, which
included an internal actuarial review of data valued at September 30, 2003,
December 31, 2003, March 31, 2004 and June 30, 2004, an external opining
actuarial review of data valued at September 30, 2003, December 31, 2003 and
June 30, 2004 and an external actuarial review performed in conjunction with
filing MIIX's Annual Audited Statutory Financial Statements.

The reason for the extensive actuarial analyses on multiple quarters of data was
to determine how much of the development in the loss experience of the Company
from quarter to quarter was attributable to acceleration in the claim handling
process and environment as opposed to adverse development in terms of increased
severity.

Management and 2 external actuarial analyses concur that there is acceleration
in the development of the Company's data; however, determining what portion is
acceleration and what portion is adversity is extremely difficult. Management
sought out multiple actuarial reviews over four successive quarters of
development data to evaluate the volatile data. The extreme uncertainty in the
data and analyses has been the result of several factors.

The Company's entry into runoff in 2002 resulted in a continuous decline of
policies in force during 2003, with no policies remaining in force as of
December 31, 2003. This caused a significant and continuing decrease in new
claim reports as well as an overall significant decrease in total pending
claims. The decreased pending claims and especially the decreased new claim
reports, which consumed disproportionately longer time to initially set up, have
allowed greatly increased time for each claim handler to work on existing
claims. This has resulted in an acceleration in the setting up of case reserves,
departing significantly from the historic patterns the Company has relied upon
to estimate future development and claims incurred but not reported.

Simultaneously, significant changes in the litigation environment in New Jersey,
which represents approximately 50% of the Company's reserves, resulted in faster
processing of claims and a corresponding acceleration in case reserving. The
court system in New Jersey instituted its "Best Practices" initiative in
September 2000 which was intended to speed cases through the courts. This
initiative has substantially speeded up trials in New Jersey and thus has
affected the entire claims management process. In June 2003, the courts issued a
public report stating that the court system in New Jersey had reached its lowest
level of backlogged cases since 1980.

4.   RELATED PARTY TRANSACTIONS

The Underwriter leased 47,000 square feet for its home office from the Medical
Society of New Jersey ("MSNJ") pursuant to a lease agreement dated June 29, 1981
and extended on July 7, 1999. The lease agreement expired on September 30, 2003,
and was extended at current terms until the sale of the building was completed
in April 2004. Annual lease payments were $782,846 in 2003, $777,735 in 2002 and
$760,512 in 2001.

A majority of the members of the Company's Board of Directors (the "Board") were
also policyholders of MIIX and acquired shares in connection with the Company's
initial public offering. Such directors may experience claims requiring coverage
under their respective policies with MIIX.

As of December 31, 2003, eight of the Company's ten Directors were directors of
MIIX Advantage Holdings, Inc. ("MIIX Holdings") and MIIX Advantage. MIIX
Advantage


                                                                            F-12
<PAGE>

currently provides medical malpractice insurance coverage to its Board's
directors. As of December 31, 2003, seven Executive Officers of the Company also
served, without additional compensation, as Executive Officers of MIIX Holdings
and MIIX Advantage.

On August 28, 2002, the Company and certain of its affiliates entered into a
series of contracts with MIIX Holdings and MIIX Advantage, relating to, among
other things, the transfer of insurance policy renewal rights to MIIX Advantage
and the use of the "MIIX" name and associated marks by MIIX Holdings and MIIX
Advantage. In connection with the transaction, the Company also agreed to
provide certain management services to MIIX Advantage. The material contracts
involved in the transaction include a: (a) Management Services Agreement, (b)
Non-Competition and Renewal Rights Agreement and (c) Intellectual Property
License Agreement (together, the "Agreements").

On July 17, 2002, the Company entered into an agreement with Altila Corporation
("Altila") under which Altila provides a leased employee to serve as Chief
Financial Officer and Treasurer of the Company. Under the agreement, the Company
pays Altila $302,000 per year for his service, plus reimbursement of reasonable
out of pocket expenses. During 2003 and 2002, the Company paid Altila $423,879
and $180,619, respectively, under this agreement and an additional $220,689
under a separate agreement, for services prior to July 17, 2002. The Company's
Chief Financial Officer and Treasurer is a principal owner of Altila.

The Company believes that the terms of the transactions described above were
negotiated at arms length and are fair to the Company.

5.   INVESTMENTS

The Company's investment strategy focuses primarily on the purchase of
intermediate-term, investment-grade securities. At December 31, 2003, and 2002,
the average credit quality of the fixed income portfolio was AA.

The actual or amortized cost and estimated market value of the Company's
available-for-sale securities as of December 31, 2003 and 2002 were as follows:

<TABLE>
<CAPTION>

                                                                GROSS UNREALIZED     ESTIMATED
                                                  AMORTIZED     -----------------      MARKET
                                                     COST        GAINS     LOSSES      VALUE
                                                  ----------    -------   -------    ----------
                                                                  (In thousands)
<S>                                               <C>           <C>       <C>        <C>
2003
U.S. Treasury securities and obligations of
  U.S. government corporations and agencies.....  $   99,778    $   620   $   387    $  100,011
Obligations of states and political
  subdivisions..................................       7,795         10       110         7,695
Corporate securities............................     218,666     10,800       198       229,268
Mortgage-backed and other asset-backed
  securities....................................     354,558      5,381     1,178       358,761
                                                  ----------    -------   -------    ----------
Total fixed maturity investments................     680,797     16,811     1,873       695,735
Equity investments..............................       2,781        447         2         3,226
                                                  ----------    -------   -------    ----------
          Total investments (excluding
             short-term)........................  $  683,578    $17,258   $ 1,875    $  698,961
                                                  ==========    =======   =======    ==========
2002
U.S. Treasury securities and obligations of
  U.S. government corporations and agencies.....  $  108,725    $ 3,774   $     0    $  112,499
Foreign securities - U.S. dollar denominated....       6,946        405         0         7,351
Corporate securities............................     280,152     13,150     8,119       285,183
Mortgage-backed and other asset-backed
  securities....................................     375,591     12,654     4,698       383,547
                                                  ----------    -------   -------    ----------
Total fixed maturity investments................     771,414     29,983    12,817       788,580
Equity investments..............................       4,804        383         0         5,187
                                                  ----------    -------   -------    ----------
          Total investments (excluding
             short-term)........................  $  776,218    $30,366   $12,817    $  793,767
                                                  ==========    =======   =======    ==========
</TABLE>

The fair values for fixed maturity investments are based on quoted market
prices, where available. For fixed maturity investments not actively traded,
fair values are estimated using values obtained from independent pricing
services. The fair values for equity securities are based on quoted market
prices.


                                                                            F-13
<PAGE>

The amortized cost and estimated fair value of fixed maturity investments at
December 31, 2003 by contractual maturity are shown below. Actual maturities
will differ from contractual maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment penalties.

                                                                      ESTIMATED
                                                        AMORTIZED        FAIR
                                                           COST         VALUE
                                                        ----------    ---------
                                                             (In thousands)

Due in one year or less...............................  $   15,071   $   15,400
Due after one year through five years.................     183,973      187,039
Due after five years through ten years................     102,697      109,292
Due after ten years...................................      24,498       25,243
Mortgage-backed and other asset-backed securities.....     354,558      358,761
                                                        ----------   ----------
          Total fixed maturity investments............  $  680,797   $  695,735
                                                        ==========   ==========

Major categories of the Company's net investment income are summarized as
follows:

                                                      YEARS ENDED DECEMBER 31,
                                                   -----------------------------
                                                    2003        2002       2001
                                                   -------    -------    -------
                                                          (In thousands)

Fixed maturity investments.......................  $35,181    $59,120    $75,675
Equity investments...............................       28         84        195
Short-term investments...........................    2,012      3,534      5,455
Other............................................      261        314        669
                                                   -------    -------    -------
          Subtotal...............................   37,482     63,052     81,994
Investment expenses..............................    1,552      2,214      1,801
                                                   -------    -------    -------
Net investment income............................  $35,930    $60,838    $80,193
                                                   =======    =======    =======

The Company held fixed maturity investments of $4.3 million and $7.7 million at
December 31, 2003 and 2002, respectively, that were non-income producing.
Realized gains and losses from sales and other-than-temporary declines in fair
values of investments, excluding the cumulative effect of an accounting change,
are summarized as follows:

                                                     YEARS ENDED DECEMBER 31,
                                                  -----------------------------
                                                   2003        2002       2001
                                                  -------    -------    -------
                                                         (In thousands)

Fixed maturity investments
  Gross realized gains........................... $20,703    $23,362    $22,489
  Gross realized losses.......................... (22,305)   (26,493)   (23,819)
Net realized gains (losses) on fixed maturity     -------    -------    -------
  investments....................................  (1,602)    (3,131)    (1,330)
                                                  -------    -------    -------
Equity investments
  Gross realized gains...........................       5        143          0
  Gross realized losses..........................       0       (533)      (854)
                                                  -------    -------    -------
Net realized gains (losses) on equity
  investments....................................       5       (390)      (854)
                                                  -------    -------    -------
Net realized gains (losses) on investments....... $(1,597)   $(3,521)   $(2,184)
                                                  =======    =======    =======

Realized investment losses include $19.4 million, $16.9 million and $21.8
million related to securities that have experienced an other-than-temporary
decline in value in 2003, 2002 and 2001, respectively. The change in the
Company's unrealized appreciation (depreciation) on fixed maturity investments
was $(2.2) million, $23.7 million and $6.3 million for the years ended December
31, 2003, 2002 and 2001, respectively. The corresponding amounts for equity
investments were $62,000, $841,000 and $585,000, respectively.


                                                                            F-14
<PAGE>

At December 31, 2003 and 2002, investments in fixed maturity investments with a
carrying amount of approximately $6.3 million and $5.3 million, respectively,
were on deposit with state insurance departments to satisfy regulatory
requirements.

For total traded and private securities held by the Company at December 31, 2003
that are in unrealized loss status, the fair value, amortized cost, unrealized
loss and total time period that the security has been in an unrealized loss
position are presented in the table below (In thousands):

<TABLE>
<CAPTION>
                                         % Fair   Amortized  % Amortized  Unrealized % Unrealized
                             Fair Value   Value      Cost        Cost        Loss        Loss
                             ----------  -------  ---------- -----------  ---------- ------------
<S>                          <C>          <C>     <C>            <C>      <C>             <C>
less than 90 days            $  108,184   79.5%   $  109,014     79.0%    $    (830)      44.3%

91 days - 180 days               27,854   20.5%       28,897     21.0%       (1,043)      55.7%
                             ----------  ------   ----------    ------    ----------     ------
  Totals                     $  136,038  100.0%   $  137,911    100.0%    $  (1,873)     100.0%
                             ----------  ------   ----------    ------    ----------     ------
</TABLE>

Securities available-for-sale, deemed to have declines in fair value that are
other than temporary, are written down to fair value and a realized loss
recorded in operations. The fixed maturity securities to which these write-downs
apply are generally of investment grade quality at the time of purchase but, are
subsequently down graded by rating agencies to "below-investment grade." Factors
considered by the Company in determining whether declines in the fair value of
fixed maturity securities are other than temporary include: (1) the significance
of the decline, (2) the Company's ability and intent to retain the investment
for a sufficient period of time for it to recover, (3) the time period during
which there has been a significant decline in value, and (4) fundamental
analysis of the liquidity, business prospects and overall financial condition of
the issuer. Based upon these factors, securities that have indications of
potential impairment are subject to review. Where such analysis results in a
conclusion that declines in fair values are other than temporary, the security
is written down to fair value.

As the discussion above indicates, there are risks and uncertainties associated
with determining whether declines in the fair value of investments are other
than temporary. These include subsequent significant changes in general overall
economic conditions as well as specific business conditions affecting particular
issuers, future financial market effects such as interest rate spreads,
stability of foreign governments and economies, future ratings agency actions
and significant accounting, fraud or corporate governance issues that may
adversely affect certain investments. In addition, there are often significant
estimates and assumptions required by the Company to estimate the fair values of
securities, including projections of expected future cash flows and pricing of
private securities. The Company is routinely monitoring developments and
updating underlying assumptions and financial models based upon new information.

6.   REINSURANCE

Certain premiums, losses and allocated loss adjustment expenses are ceded to
other insurance companies under various reinsurance agreements. These
reinsurance agreements allow the Company to write or retain insurance risks in
amounts in excess of what would otherwise be desirous. The Company has both
excess of loss and quota share reinsurance treaties. The effect of assumed and
ceded reinsurance on premiums is summarized in the following table (In
thousands):

<TABLE>
<CAPTION>
                               2003                    2002                   2001
                       --------------------    ----------------------   ---------------------
                       WRITTEN      EARNED       WRITTEN      EARNED     WRITTEN      EARNED
                       --------    --------    ---------    ---------   ---------    --------
<S>                    <C>          <C>         <C>          <C>         <C>         <C>
Direct...............  $   (633)    $ 24,629    $  96,209    $159,545    $231,550    $213,944
Assumed..............         0            0            0           0         396         437
Ceded................   (47,654)     (50,707)     (59,868)    (59,325)    (67,131)    (67,529)
                       --------     --------    ---------    --------    --------    --------
Net premiums.........  $(48,287)    $(26,078)   $  36,341    $100,220    $164,815    $146,852
                       ========     ========    =========    ========    ========    ========
</TABLE>


                                                                            F-15
<PAGE>

During 2003, 2002 and 2001, approximately $115.6 million, $115.3 million and
$97.5 million, respectively, of losses and LAE were ceded to reinsurers.

The Company remains liable in the event that amounts recoverable from reinsurers
are uncollectible. To minimize its exposure to losses from reinsurer
insolvencies, the Company enters into reinsurance arrangements with carriers
rated "A" or better by A.M. Best. At December 31, 2003 and 2002, the Company
held collateral under related reinsurance agreements for all unpaid losses and
LAE ceded in the form of funds withheld of $292.1 million and $332.7 million,
respectively, and letters of credit of $161.2 million.

The Company was a reinsurer on a large excess of loss reinsurance contract
providing medical professional liability coverage on an institutional account
from January 1, 1999 to December 31, 2000. The commutation of this treaty in
2002 had no impact on the Company's financial condition or results of
operations.

During 2002, the Company partially commuted several ceded reinsurance treaties
with certain reinsurers. The Company recognized the amounts received from
reinsurers as a reduction to losses and LAE paid of $35.1 million, increased its
loss and LAE reserves by $36.9 million and recognized a reduction of funds held
charges of $0.9 million. The net effect of the commutations resulted in a net
loss of $0.9 million. There were no commutations during 2003 or 2001.

In June 2004, MIIX commuted its 1995 aggregate excess reinsurance treaty. The
commutation agreement provided for the release of applicable funds held balances
and trust fund assets. The reduction to earnings as a result of the commutation
was $3.3 million in 2004.

In accordance with the provisions of various aggregate excess reinsurance
contracts, the funds withheld are credited with interest at contractual rates
ranging from 6.0% to 8.6%, which is recorded as a period expense in the year
incurred. Each aggregate excess reinsurance contract contains an adjustable
provision that may result in changes to ceded premium and related funds held
charges based on loss experience under the contract. Each of the aggregate
excess reinsurance contracts also contains a provision allowing reinsurers to
offer additional reinsurance coverage that MIIX is obligated to accept. For
contract years beginning November 1, 2000 and forward, the contracts require
that the funds withheld balance on a particular contract year be below $500,000
before reinsurers may offer the additional coverage. For contract years prior to
November 1, 2000, the contracts provide no funds withheld threshold amount,
although the reinsurance intermediary has confirmed in writing that the
intention of the parties was that the additional coverage would be offered only
if and when the funds withheld balance was in a loss position. As of December
31, 2003, 2002 and 2001, no funds withheld balances are below $500,000 or in a
loss position. However, in September and October 2004, the reinsurers initiated
requests for additional premiums from MIIX in accordance with provisions of the
contracts. Reinsurers are prohibited from canceling current reinsurance
agreements or making additional premium charges to MIIX under the September 28,
2004 Order of Rehabilitation. Each of the aggregate excess reinsurance contracts
also contains a provision requiring that the funds withheld be placed in trust
should the A.M. Best rating assigned to MIIX fall below B+. On March 22, 2002,
A.M. Best lowered the rating of MIIX to C+ and MIIX withdrew from the
interactive rating process with A.M. Best. As a result of the downgrade,
reinsurers requested that assets supporting the funds withheld account be placed
in trust. MIIX established the required trust accounts in accordance with
contract provisions.

7.   RETIREMENT PLANS

The Company has a contributory 401(k) Retirement Savings Plan which covers
substantially all employees. The Company currently contributes 50% of the first
6% of compensation contributed by participants. Employer contributions for the
years ended December 31, 2003, 2002 and 2001 totaled $166,742, $294,060 and
$327,448, respectively.

The Company also provides a noncontributory defined benefit Pension Plan
covering substantially all its employees. The plan was amended effective April
1, 2000, subject to approval by the Internal Revenue Service and provides each
covered employee with a notional account balance. On September 29, 2004, the
Board of Directors of the Underwriter (a) authorized, effective November 15,
2004, the freezing of benefit accruals and participation under the Underwriters
Pension Plan; and (b) approved, effective November 15, 2004, an amendment to the
Pension Plan to provide for the same. The net periodic pension expense consists
of the following components:


                                                                            F-16
<PAGE>

                                                     YEARS ENDED DECEMBER 31,
                                                   ----------------------------
                                                    2003       2002       2001
                                                   ------     ------     ------
                                                          (In thousands)

Service cost....................................  $   308    $   412     $  341
Interest cost...................................      764        743        607
Expected return on plan assets..................     (900)      (961)    (1,006)
Amortization of:
   Transition asset.............................      (22)       (22)       (22)
   Prior service cost(1)........................       75         93        (45)
   Actuarial gain...............................        0        (97)      (336)
Settlement/curtailment expense..................        0        139          0
                                                  -------     ------     ------
Net periodic pension expense (benefit). ........  $   225     $  307     $ (461)
                                                  =======     ======     ======

(1)  Prior service cost is amortized under an alternate method where the period
     is equal to the average future working lifetime of an active population.

The following table sets forth the funding status of the plan:

                                                       YEARS ENDED DECEMBER 31,
                                                       -----------------------
                                                          2003         2002
                                                        -------      -------
                                                            (In thousands)

CHANGE IN BENEFIT OBLIGATION
Net benefit obligation at January 1...................  $11,529      $ 9,605
Service cost..........................................      308          412
Interest cost.........................................      764          743
Amendments(2).........................................        0        1,053
Actuarial loss........................................    1,259           24
Gross benefits paid...................................     (254)        (215)
Settlement/Curtailment................................        0          (93)
                                                        -------      -------
Net benefit obligation at December 31.................  $13,606      $11,529
                                                        =======      =======
CHANGE IN PLAN ASSETS
Fair value of plan assets at January 1................  $10,327      $11,464
Actual return on plan assets..........................    1,940         (922)
Gross benefits paid...................................     (254)        (215)
                                                        -------      -------
Fair value of plan assets at December 31..............  $12,013      $10,327
                                                        =======      =======


Funded status.........................................  $(1,592)     $(1,202)
Unrecognized actuarial gain...........................      464          245
Unamortized prior service cost........................      425          500
Unrecognized net transition asset.....................       (4)         (25)
                                                        -------      -------
Accrued pension expense...............................  $  (707)     $  (482)
                                                        =======      =======

(2)  Effective January 1, 2002, the plan was amended to grandfather 11
     additional employees under the pre-April 1, 2000 Pension Plan provisions.

A minimum pension liability is required when the actuarial present value of
accumulated benefits exceeds plan assets and accrued pension liabilities. The
minimum liability adjustment, less allowance for intangible assets, net of tax
benefit, is reported as an expense in the statement of operations.

Amounts recognized in the statement of
  operations consists of
    Accrued benefit liability.........................    $  (976)     $  (626)
    Intangible asset..................................        269          144
                                                          -------      -------
Accrued pension expense...............................    $  (707)     $  (482)
                                                          =======      =======


                                                                            F-17
<PAGE>

                                                      YEARS ENDED DECEMBER 31,
                                                     ---------------------------
                                                      2003      2002       2001
                                                     ------    ------     ------

Weighted-average assumptions
   Discount rate...................................   6.00%     6.75%      7.25%
   Expected return on plan assets..................   9.00%     9.00%      9.00%
   Rate of compensation increase...................   4.00%     4.00%      4.00%


8.   COMMITMENTS, CONTINGENCIES AND OFF BALANCE SHEET RISK

The Company has employment contracts with certain officers which commit the
Company to various salary and fringe benefit obligations as specified in the
individual agreements.

The Company leases office space and office equipment. Rent expense for 2003,
2002 and 2001 were $1.3 million, $3.1 million and $2.6 million, respectively,
including rent paid to MSNJ of $782,846, $777,735 and $760,512 in 2003, 2002 and
2001, respectively. Minimum future rental obligations for leases currently in
effect are as follows (In thousands):

                           2004                               $463
                           2005                                477
                           2006                                465
                           Thereafter                          733
                                                               ---

                           Total                            $2,138
                                                            ======

The Company currently purchases annuities without recourse on a competitive
basis to fund settlements of indemnity losses. The nature and terms of the
annuities vary according to settlements. The current value of annuities
purchased in prior years from other insurance companies, but with recourse to
the Company, are reflected as an other asset and an other liability in the
consolidated balance sheets, totaled $22.1 million and $22.9 million as of
December 31, 2003 and 2002, respectively. The Company becomes liable only in the
event that an insurance company cannot meet its obligations under existing
agreements and state guaranty funds are not available. To minimize its exposure
to such losses, the Company primarily utilizes insurance companies with an A.M.
Best rating of "A+" or better.

GLASSER V. THE MIIX GROUP, INC. ET AL. On February 5, 2003, a shareholder of the
Company instituted a putative class action in the United States District Court
for the District of New Jersey against the Company, present and former directors
and officers of the Company, the Medical Society of New Jersey ("MSNJ") and
Fox-Pitt Kelton, Inc. ("FPK"), which acted as financial advisor to the Company.
The complaint alleges that the Company and its directors and officers engaged in
securities fraud, breaches of fiduciary duty and violations of New Jersey
antitrust laws in connection with the MIIX Advantage contracts and alleged
misrepresentations and omissions of material fact in various SEC filings by the
Company. On May 13, 2003, another shareholder of the Company instituted a
separate putative class action in the United States District Court for the
District of New Jersey (WASSERSTRUM V. THE MIIX GROUP, INC., ET AL.) against the
Company and certain of its officers alleging securities fraud. The law firms
representing plaintiffs in the two actions agreed to consolidate the plaintiffs'
claim against the Company. On August 12, 2003, a Consolidated Amended Complaint
(the "Complaint") was filed by the plaintiffs against the Company, present and
former directors and officers of the Company and MSNJ alleging securities fraud
based on alleged misrepresentations and omissions of material fact in various
SEC filings by the Company concerning the Company's financial condition, its
statement of reserves, the pricing of its policies, the MIIX Advantage contracts
and other matters. The Complaint seeks certification of a plaintiff class of the
Company's shareholders from July 30, 1999 to September 12, 2002 and unspecified
damages, pre- and post-judgment interest, attorneys' fees and costs. On October
21, 2003, the Company filed a motion to dismiss the Complaint, which is
currently pending. On December 11, 2003, the Court ordered that the case be
submitted to mediation and stayed all proceedings pending mediation. The parties
are engaging in mediation discussions.


                                                                            F-18
<PAGE>

FOX-PITT KELTON V. THE MIIX GROUP, INC. On February 10, 2003, FPK, which had
been engaged as financial advisor to the Company, instituted suit against the
Company in the Supreme Court of New York to recover fees allegedly due from the
Company as a result of the investment banking services it rendered in connection
with the Company's efforts to dispose of assets or obtain capital and the
agreements entered into between the Company and MIIX Advantage. FPK filed a
motion for summary judgment in its favor, which was denied by the Court. On
April 28, 2004, the suit was dismissed with prejudice.

WEISFELD V. THE MIIX GROUP, INC., ET AL. On November 20, 2002, a former
executive of MSNJ filed suit in the Superior Court of New Jersey against MSNJ
and certain of its officers, including MSNJ officers who were also MIIX Group
board members, alleging wrongful discharge and defamation. On March 19, 2003,
plaintiff filed pleadings amending the Complaint to include The MIIX Group as a
defendant, alleging that The MIIX Group tortiously interfered with his
employment relationship and that its alleged influence over MSNJ was a causative
factor in his discharge. Motions to dismiss plaintiff's Amended Complaint were
filed by all defendants. By order dated August 19, 2003, the Court granted the
defendants' motions to dismiss and the entire Complaint was dismissed with
prejudice. On October 2, 2003, plaintiffs filed a notice of appeal of the
dismissal of the Complaint with the Superior Court of New Jersey, Appellate
Division. Oral argument in the Appellate Division was held on October 25, 2004.
The parties are awaiting the Court's decision.

Given the Company's current financial condition, any negative outcome of the
litigation requiring the payment of damages could have a material adverse effect
on the Company. The Company may also be a party to litigation from time to time
in the ordinary course of business.

9.   STATUTORY ACCOUNTING PRACTICES

MIIX, domiciled in New Jersey, MIIX New York, domiciled in New York, and
Lawrenceville Re, domiciled in Bermuda, prepare statutory-basis financial
statements in accordance with accounting practices prescribed or permitted by
the New Jersey Department, the New York State Insurance Department and the
Bermuda Registrar of Companies, respectively. "Prescribed" statutory accounting
practices include state laws, regulations, and general administrative rules, as
well as a variety of publications of the National Association of Insurance
Commissioners ("NAIC"). "Permitted" statutory accounting practices encompass all
accounting practices that are not prescribed; such practices may differ from
state to state, may differ from company to company within a state, and may
change in the future. The NAIC adopted codified statutory accounting principles
("Codification"), which was effective for the reporting periods beginning after
January 1, 2001. Adoption of Codification did not have a material impact to the
statutory basis financial statements of MIIX or MIIX New York. Combined
policyholders' surplus and net income prepared in accordance with the
domiciliary insurance departments or permitted statutory accounting practices
for these companies, which differs as described below from the statutory surplus
and net income that would have been reported had NAIC statutory accounting
practices been followed, are summarized as follows:

                                                  YEARS ENDED DECEMBER 31,
                                              --------------------------------
                                                2003        2002        2001
                                              --------    --------    --------
                                                       (In thousands)

Statutory net loss for the year............  $(325,682)  $ (55,565)   $(87,172)
Statutory surplus (deficiency) at
  December 31..............................  $(252,098)  $  75,812    $125,485


MIIX received permission in 2003 to begin discounting loss and LAE reserves as
of December 31, 2002, at a rate of 3%. As of December 31, 2003 and 2002, the
discount amounted to $49.8 million and $53.6 million, respectively.
Additionally, MIIX completed the merger of LP&C into MIIX on December 31, 2003.
The merger resulted in the combination of the statutory surplus of MIIX and LP&C
for purposes of determining MIIX's Risk Based Capital ("RBC").

MIIX's RBC level is not impacted by the ability to discount loss and LAE
reserves as the NAIC standards do not permit discounting of loss and LAE
reserves to be taken into account in the determination of RBC. At December 31,
2003, MIIX's RBC was below the Mandatory Control Level and continues at this
level.


                                                                            F-19
<PAGE>

During 2003, MIIX entered into an Order with the New Jersey Department that set
forth the framework for the regulatory monitoring of MIIX and established
operating limitations.

On September 28, 2004, the Superior Court of New Jersey entered an Order placing
MIIX into rehabilitation and naming the Commissioner of the New Jersey
Department as Rehabilitator with immediate and exclusive control over the
business and property of MIIX. See Note 17.

10.  RESTRUCTURING CHARGE

The Company undertook a restructuring during the first quarter of 2002 which
includes a charge of approximately $2.6 million composed primarily of severance
and the write-off of remaining lease commitments associated with the closure of
the Company's offices in Dallas and Indianapolis, and the decision to put LP&C
into runoff. The Company communicated these initiatives during the first quarter
of 2002. During 2003 and 2002, the Company paid approximately $0.5 million and
$2.1 million, respectively, related to this restructuring.

11.  INCOME TAXES

For federal income tax purposes, the Company files a consolidated return with
its subsidiaries.

The components of the income tax (benefit) provision in the accompanying
statements of income, before the cumulative effect of an accounting change, are
summarized as follows:

                                                  YEARS ENDED DECEMBER 31,
                                                -----------------------------
                                                  2003       2002       2001
                                                -------    -------    -------
                                                       (In thousands)

Current income tax (benefit).................  $ (1,902)  $(11,157)  $(14,977)
Deferred income tax (benefit)................    (4,867)       (83)    56,869
                                               --------   --------   --------
Total income tax expense (benefit)...........  $ (6,769)  $(11,240)  $ 41,892
                                               ========   ========   ========

A reconciliation of income tax (benefit) computed at the federal statutory tax
rate to total income tax expense (benefit) before the cumulative effect of an
accounting change is as follows:

                                                  YEARS ENDED DECEMBER 31,
                                                -----------------------------
                                                  2003       2002       2001
                                                -------    -------    -------
                                                       (In thousands)

Expected annual effective federal income tax
  benefit at 35%............................. $(112,523)  $(43,698)  $(38,664)
Increase (decrease) in taxes resulting from:
  Establishment of valuation allowance, net
     of reduction of tax contingency
     reserves................................   110,095     32,389     82,297
  Tax-exempt interest........................         0       (444)    (1,695)
  Other......................................    (4,341)       513        (46)
                                              ---------   --------   --------
          Total income tax expense (benefit). $  (6,769)  $(11,240)  $ 41,892
                                              =========   ========   ========

The tax benefit in 2003 primarily reflects the change in the deferred tax
valuation allowance resulting from the reduction in deferred taxes on unrealized
portfolio gains. The deferred tax benefit recorded in operations is offset by an
equal amount charged to other comprehensive income.


                                                                            F-20
<PAGE>

Significant components of the Company's deferred tax assets and liabilities are
summarized as follows:

                                                                 DECEMBER 31,
                                                             -------------------
                                                               2003       2002
                                                             --------   --------
                                                               (In thousands)
Deferred tax assets:
  Net operating loss carryforwards.......................... $174,863   $ 63,681
  Discounting of loss reserves..............................   44,714     47,597
  Unearned premium reserve..................................        0      1,965
  Unrealized losses and other-than-temporary declines
      on investments........................................   15,104     10,060
  Other.....................................................    2,475      3,549
                                                             --------   --------
          Total deferred tax assets.........................  237,156    126,852

   Less valuation allowance.................................  233,710    124,828
                                                             --------   --------
           Deferred tax asset after valuation allowance.....    3,446      2,024

Deferred tax liabilities-Other..............................    3,446      1,536
                                                             --------   --------
Net deferred tax assets..................................... $      0   $    488
                                                             ========   ========

At December 31, 2003 and 2002 the Company established a valuation allowance of
$233.7 million and $124.8 million, respectively, to reduce its net deferred tax
asset to $0 and $488,000 at December 31, 2003 and 2002, respectively. The
deferred tax assets primarily relate to net operating loss carryforwards which
expire in 20 years, and the different tax and book treatment of discounting of
loss reserves, unrealized losses and other-than-temporary declines on the
available-for-sale securities and unearned premium reserve. The Company
evaluates a variety of factors in determining the amount of the deferred income
tax assets to be recognized pursuant to SFAS No. 109, "Accounting for Income
Taxes," including the Company's earnings history, the number of years the
Company's operating loss and tax credit can be carried forward and expected
future taxable income. Due to the Company's cumulative loss position in recent
years, a valuation allowance has been provided for the full value of the
deferred tax assets at December 31, 2003, and substantially the full value of
the deferred tax assets at December 31, 2002.

At December 31, 2003 and 2002, the Company had $0 and $1.8 million,
respectively, of income taxes payable included in other liabilities.

The Company did not pay federal income taxes in 2003 or 2002 and the $1.8
million income tax payable at December 31, 2002 was reversed in 2003.

12.  DEFERRED POLICY ACQUISITION COSTS

The following represents the components of deferred policy acquisition costs and
the amounts that were charged to expense for the years ended December 31, 2003,
2002 and 2001.


                                                 2003        2002       2001
                                               --------    --------   --------
                                                        (In thousands)

Balance at January 1........................   $  1,016    $  4,416   $  3,026
Cost deferred during the year...............        563       4,920     15,086
Amortization expense........................      1,579      (8,320)   (13,696)
                                               --------    --------   --------
Balance at December 31......................   $      0    $  1,016   $  4,416
                                               ========    ========   ========


                                                                            F-21
<PAGE>

13.  COMPREHENSIVE INCOME (LOSS)

The components of comprehensive income (loss), net of related tax, for the years
ended December 31, 2003, 2002 and 2001 were as follows:

                                                   2003       2002       2001
                                                ---------  ---------  ---------
                                                         (In thousands)

Net loss....................................... $(314,725) $(115,984) $(157,644)

Other comprehensive income (loss):

Unrealized holding appreciation
    (depreciation) arising during period
    (net of tax) ..............................    (9,149)    21,047     (4,272)

  Reclassification adjustment for losses
    realized in net income (loss) (net of
    tax) ......................................     1,597      3,521      6,703
                                                ---------  ---------  ---------
  Net unrealized appreciation (depreciation)
    arising during the period at
    December 31, (net of tax)..................    (7,552)    24,568      2,431
                                                ---------  ---------  ---------
Comprehensive loss............................. $(322,277) $ (91,416) $(155,213)
                                                =========  =========  =========

14.  STOCK BASED COMPENSATION

Pursuant to stock purchase and loan agreements, the Company, upon Board
approval, made loans to certain officers of the Company, which the officers used
to purchase unregistered shares of The MIIX Group common stock at the Offering
Price. The Company had loans outstanding to certain officers of the Company of
$1.3 million and $3.6 million as of December 31, 2003 and 2002, respectively.
The loans, three of which are with former officers of the Company, bear interest
rates ranging from 5.37% to 6.21% and provide for full recourse against the
borrowers. Pursuant to a former CEO's separation agreement during 2001, the
outstanding stock purchase and loan balance was reduced by approximately $0.7
million. As part of the separation agreement, the Company also issued 221,591
phantom stock options, which are stock appreciation rights, with prices ranging
from $7.40 to $13.50, all of which were immediately exercisable and expire April
13, 2006. During 2002, certain current and former officers tendered 110,061
shares of The MIIX Group common stock and exercised 101,591 stock appreciation
rights, which are designated as phantom stock options in the respective
agreement. These tenders and additional loan repayments reduced the stock
purchase and loan balances by approximately $1.8 million. All transactions were
recorded at the fair market value of the Company common stock on the effective
date of the respective transactions.

The Company, upon Board approval, grants restricted shares of the Company's
common stock to certain officers of the Company. The Company had 708,612 and
10,000 non-vested restricted shares outstanding as of December 31, 2003 and
2002, respectively. During 2001, the Company granted an additional 40,000 shares
of restricted shares of The MIIX Group common stock, of which 10,000 shares were
immediately vested, and 28,560 shares were forfeited. During 2002, 10,000
restricted shares of The MIIX Group common stock were granted, having a per
share market value of $2.88 and 166,746 options to purchase shares of The MIIX
Group common stock at exercise prices ranging from $1.26 to $1.80 were granted,
of which 65,496 shares were immediately exercisable. During the 12 months ended
December 31, 2002, 171,379 options and 10,000 shares of non-vested restricted
stock were cancelled and 12,474 options were exercised with exercise prices
ranging from $7.45 to $11.91. During the 12 months ended December 31, 2003,
50,005 options were cancelled and no options were exercised.

The aggregate number of options for common shares issued and issuable under the
Plan is currently limited to 2,250,000. All options granted have ten year terms
and vest over various future periods. Options outstanding at December 31, 2003
have exercise prices ranging from $1.26 to $16.06.


                                                                            F-22
<PAGE>

A summary of the Company's stock option activity and related information
follows:

<TABLE>
<CAPTION>

                                                        2003                               2002
                                            ----------------------------     ----------------------------
                                                             Weighted-                        Weighted-
                                             Number of        Average         Number of        Average
                                              Options     Exercise Price       Options     Exercise Price
                                            -----------   --------------     -----------   --------------
<S>                                           <C>              <C>             <C>              <C>
Options outstanding at beginning
   of year.............................       811,462          $8.47           828,569          $10.13
Granted during year....................             0           0.00           166,746            1.69
Exercised during year..................             0           0.00            12,474           11.47
Forfeited during the year..............         3,388           7.88            80,086            9.41
Expired during the year................        46,617          10.78            91,293           12.46
                                              -------                          -------
Options outstanding at end of year.....       761,457          $8.33           811,462           $8.47
                                              =======          =====           =======           =====

Options exercisable....................       661,250          $8.84           550,825           $9.38
                                              =======          =====           =======           =====
</TABLE>

The following table illustrates the effect on net income and earnings per share
if the Company had applied the fair value recognition provisions of SFAS No.
123, "Accounting for Stock-Based Compensation to Stock-Based Employee
Compensation for the years Ended December 31."

<TABLE>
<CAPTION>
                                                              2003               2002                2001
                                                            ---------         ----------          ---------
<S>                                                         <C>               <C>                 <C>
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
   Net loss, as reported                                    $(314,725)        $(115,984)          $(157,644)
   Total stock-based employee compensation expense
     determined under fair value based method for all
     awards, net of related tax effects
                                                                    3              (301)               (194)
                                                            ---------         ----------          ---------
   Pro forma net loss                                       $(314,722)        $(116,285)          $(157,838)
                                                            =========         ==========          =========
   Basic/diluted loss per share:
     As reported                                              $(23.42)           $(8.67)            $(11.66)
     Pro forma                                                 (23.42)            (8.69)             (11.67)
   Estimated weighted average of the fair value of
     options granted                                           $ 0.00            $ 0.49             $  2.36
</TABLE>

The per share weighted-average fair value of stock options was estimated at each
date of grant using a Black-Scholes option pricing model using the following
assumptions: risk-free interest rates ranging from 1.7% to 6.8%; dividend yields
ranging from 0% to 2.7%; volatility factors of the expected market price of the
Company's common stock ranging from 33.6% to 36.4%; and a three-year weighted
average expected life of the options.

15.  EARNINGS (LOSS) PER SHARE

Basic and diluted earnings (loss) per share are calculated in accordance with
SFAS Statement No. 128, "Earnings per Share." Basic and diluted loss per share
for the years ended December 31, 2003, 2002 and 2001 is computed using the
weighted-average number of common shares outstanding during these periods of
13,436,586, 13,385,124 and 13,524,959, respectively. The following table sets
forth the computation of basic and diluted loss per share:


                                                                            F-23
<PAGE>
<TABLE>
<CAPTION>

                                                                   YEARS ENDED DECEMBER 31,
                                                              --------------------------------
                                                                 2003        2002       2001
                                                              ---------   ---------  ---------
                                                                      (In thousands)
<S>                                                           <C>         <C>        <C>
Numerator for basic and diluted loss per share
   of common stock:
   Net loss before cumulative effect of an
     accounting change......................................  $(314,725)  $(113,611) $(152,361)
   Cumulative effect of an accounting change,
     net of tax.............................................          0      (2,373)    (5,283)
                                                              ---------   ---------  ---------

   Net loss.................................................  $(314,725)  $(115,984) $(157,644)
                                                              =========   =========  =========

Denominator:
  Denominator for basic loss per share of
  common stock - weighted-average shares outstanding........     13,437      13,385     13,525

  Effect of dilutive securities:
    Stock options and non-vested restricted stock...........          0          25         81
                                                              ---------   ---------  ---------
    Denominator for diluted loss per share of
    common stock adjusted - weighted-average shares
    outstanding.............................................     13,437      13,410     13,606
                                                              =========   =========  =========

Basic and diluted loss per share of common stock
   before cumulative effect of an accounting change.........    $(23.42)     $(8.49)   $(11.27)
Cumulative effect of an accounting change...................       0.00       (0.18)     (0.39)
                                                              ---------   ---------  ---------

Basic and diluted loss per share of common stock............    $(23.42)     $(8.67)   $(11.66)
                                                              =========   =========  =========
</TABLE>

16.  PREFERRED STOCK PURCHASE RIGHTS

On June 27, 2001 the Company's Board adopted a Stockholder Rights Plan (the
"Rights Plan") and declared a dividend of one Right for every outstanding share
of common stock, par value $0.01, per share, to be distributed on July 10, 2001
to stockholders of record as of the close of business on that date. The Rights
will expire on June 27, 2011 or upon the earlier redemption of the Rights, and
they are not exercisable until a distribution date on the occurrence of certain
specified events as defined below.

Each Right entitles the holder to purchase from the Company one one-thousandth
of a share of Series A Junior Participating Preferred Stock, $0.01 par value at
a price of $35.00 per one-thousandth of a share, subject to adjustments. The
Rights will, on the distribution date, become exercisable ten (10) days after a
public announcement that a party has acquired at least 15% or commenced a tender
or exchange offer that would result in any party or group owning 15% or more of
the Company's outstanding shares of common stock and the acquiring party is
determined by a majority of the Company's directors to be an "Adverse Person" as
defined in the Rights Plan.

Each holder of a Right, other than the "Acquiring Person," as defined in the
Rights Plan, or "Adverse person," will in such event have the right to receive
shares of the Company common stock having a market value of two times the
exercise price of the Right. In the event that the Company is acquired in a
merger or other business combination, or if more than 50% of the Company's
assets or earning power is sold or transferred, each holder of a Right would
have the right to receive common stock of the acquiring company with a market
value of two times the Purchase Price of the Right. Following the occurrence of
any of these "Triggering Events," any rights that are beneficially owned by an
acquiring person will immediately become null and void. The Company may redeem
the Rights for $0.001 per Right at any time until ten (10) days following the
stock acquisition date.


                                                                            F-24
<PAGE>

17.  SUBSEQUENT EVENTS

On September 28, 2004, the Superior Court of New Jersey entered an Order placing
MIIX into rehabilitation and naming the Commissioner of the New Jersey
Department as Rehabilitator with immediate and exclusive control over the
business and property of MIIX. The Order provides that The MIIX Group and the
Underwriter will continue to provide administrative services to MIIX pursuant to
the current Management Services Agreement until terminated by the New Jersey
Department after appropriate notice. The Order does not stay payment of claims
for any litigation currently pending against MIIX or its insureds and does not
bar claimants from filing new actions against MIIX insureds. The Order, however,
prohibits persons from filing any new action or new claim directly against MIIX
without permission of the Court. The Order also requires notice to and consent
of the Rehabilitator for the assignment of any contract to which MIIX is a
party. Reinsurers are prohibited from canceling current reinsurance agreements
or making additional premium charges to MIIX under the September 28, 2004 Order
of Rehabilitation.

As a result of the Company no longer having control of MIIX at September 30,
2004, MIIX will be no longer be consolidated with the Company in the financial
statements. The consolidated financial statements subsequent to September 28,
2004 will include The MIIX Group and its wholly owned subsidiary the Underwriter
and its subsidiaries Medical Brokers, Inc., an insurance agency, Reinsurance
Services, Inc. (formerly Pegasus Advisors, Inc.), an inactive reinsurance
intermediary, MIIX Healthcare Group, an inactive healthcare consulting firm, and
Lawrenceville Re, Ltd. ("Lawrenceville Re"), a Bermuda-domiciled reinsurance
company.

New Jersey insurance regulation provides that when an insurance company is
deemed in a hazardous financial condition, the State may step in and assume
control of all operations of the insurance company, including a provision for
any shortfall in funds to pay claims. The New Jersey Department has assumed
control of the operations of MIIX in rehabilitation. Because MIIX has no
continuing legal obligation, the Company has made no provision for the excess of
liabilities over assets of MIIX as of September 30, 2004. Accordingly, as of
September 30, 2004, the Company began using the equity method of accounting for
its investment in MIIX and has recorded the investment at $-0-, and the
deficiency in equity of ($280.1) million that existed as of December 31, 2003,
will be reversed and recognized as a gain on deconsolidation as of and for the
period ended September 30, 2004.

The Company has not reported the operations of MIIX as discontinued operations
because the Company continues to have significant continuing involvement in the
operations of MIIX through November 2004. MIIX employees continue to service,
process and adjudicate claims and perform administrative services subsequent to
the September 28, 2004 Order of Rehabilitation. Therefore, the Company will not
record MIIX as a discontinued operation until this activity diminishes
significantly. The table below provides an unaudited pro forma as if the Company
deconsolidated MIIX and its wholly owned subsidiaries as of and for the year
ended December 31, 2003.


                                                                            F-25
<PAGE>
<TABLE>
<CAPTION>

                          THE MIIX GROUP, INCORPORATED
                           CONSOLIDATED BALANCE SHEET
                                DECEMBER 31, 2003
                                 (In thousands)


                                                             As Reported    Pro Forma
                                                             -----------    ---------
                                                                           (unaudited)
<S>                                                           <C>          <C>
                                     ASSETS
Total investments...........................................  $  755,429   $    5,532
Cash........................................................      18,081           28
Reinsurance recoverable on unpaid losses....................     425,785            0
Reinsurance recoverable on paid losses, net.................      31,874            0
Other assets................................................      47,470        4,149
                                                              ----------   ----------
      Total assets..........................................  $1,278,639   $    9,709
                                                              ==========   ==========

                LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
LIABILITIES
Unpaid losses and loss adjustment expenses..................  $1,218,957   $    1,625
Funds held under reinsurance treaties.......................     292,126            0
Other liabilities...........................................      46,077        6,468
                                                              ----------   ----------
      Total liabilities.....................................   1,557,160        8,093
                                                              ----------   ----------
STOCKHOLDERS' EQUITY (DEFICIENCY)

Common stock................................................         166          166
Additional paid-in capital..................................      40,270       40,270
Retained earnings (deficit).................................    (301,402)     (11,283)
Treasury stock..............................................     (25,115)     (25,115)
Stock purchase loans and unearned stock compensation........      (2,617)      (2,617)
Accumulated other comprehensive income......................      10,177          195
                                                              ----------   ----------
      Total stockholders' equity (deficiency)...............    (278,521)       1,616
                                                              ----------   ----------
      Total liabilities and stockholders' equity (deficiency) $1,278,639   $    9,709
                                                              ==========   ==========


                                                                                 F-26
</TABLE>

<PAGE>

                          THE MIIX GROUP, INCORPORATED
                      CONSOLIDATED STATEMENT OF OPERATIONS
                      FOR THE YEAR ENDED DECEMBER 31, 2003
                                 (In thousands)


                                                     As Reported    Pro Forma
                                                     -----------    ---------
                                                                   (unaudited)
REVENUES
Net premiums earned...................................$ (26,078)    $     119
Net investment income.................................   35,930           247
Realized investment losses............................   (1,597)            0
Other revenue.........................................    7,126        11,555
                                                      ---------     ---------
          Total revenues..............................   15,381        11,921
                                                      ---------     ---------

EXPENSES
Losses and loss adjustment expenses...................  270,939          (305)
Underwriting and other expenses.......................   22,940        12,069
Funds held charges....................................   42,996             2
                                                      ---------     ---------
          Total expenses..............................  336,875        11,766
                                                      ---------     ---------
Loss before income taxes.............................. (321,494)          155
Income tax benefit....................................   (6,769)         (731)
                                                      ---------     ---------

     Net loss.........................................$(314,725)    $     886
                                                      =========     =========


                                                                            F-27
<PAGE>

18.  UNAUDITED QUARTERLY FINANCIAL DATA

The following is a summary of unaudited quarterly results of operations for 2003
and 2002:

<TABLE>
<CAPTION>
                                                                   2003
                                                 -----------------------------------------
                                                   1ST         2ND        3RD        4TH
                                                 --------    -------    -------    -------
                                                              (In thousands)
<S>                                              <C>        <C>        <C>       <C>
Total written premiums.........................  $ (1,136)  $    218   $    256  $      29
Net premiums earned............................    19,860      7,277      1,989    (55,204)
Net investment income..........................    10,945      8,915      7,839      8,231
Realized investment gains (losses).............    (2,004)     4,359      2,595     (6,547)
Losses and loss adjustment expenses............    16,963      4,600     (3,844)   253,220
Net income (loss)..............................     5,240      9,419      7,034   (336,418) (1)

Basic and diluted earnings (loss) per share..... $   0.39   $   0.70   $   0.52  $  (25.03)
                                                 ========   ========   ========  =========
Dividend per share of common stock.............. $   0.00   $   0.00   $   0.00  $    0.00
                                                 ========   ========   ========  =========

                                                                   2002
                                                 -----------------------------------------
                                                   1ST         2ND        3RD        4TH
                                                 --------    -------    -------    -------
                                                              (In thousands)

Total written premiums.......................... $ 95,526   $  6,510   $ (2,311) $  (3,516)
Net premiums earned.............................   37,153     49,083     23,727     (9,743)
Net investment income...........................   18,249     16,158     13,710     12,721
Realized investment gains (losses)..............   (1,503)       222       (591)    (1,649)
Losses and loss adjustment expenses.............   81,804     54,497     21,219     38,967
Net income (loss)...............................  (45,366)    (6,120)       885    (65,383)

Basic and diluted earnings (loss) per share..... $  (3.38)  $  (0.45)  $   0.07  $   (4.89)
                                                 ========   ========   ========  =========
Dividend per share of common stock.............. $   0.00   $   0.00   $   0.00  $    0.00
                                                 ========   ========   ========  =========
</TABLE>

(1)  The net loss in the fourth quarter of 2003 is due to the reserve
     adjustments discussed in Part I, Item 1 of this Form 10-K.


                                                                            F-28
<PAGE>

                                   SCHEDULE I

       SUMMARY OF INVESTMENTS -- OTHER THAN INVESTMENTS IN RELATED PARTIES
                                DECEMBER 31, 2003
                          The MIIX Group, Incorporated
                                 (In thousands)


                                           AMORTIZED                 AMOUNT ON
                                              COST     FAIR VALUE  BALANCE SHEET
                                           ---------   ----------  -------------

Fixed maturities:
  Bonds:
  United States government and
     government agencies and authorities.. $ 292,899   $  295,788  $     295,788

  Obligations of state and political
     subdivisions.........................     7,795        7,695          7,695
  All other corporate bonds...............   380,103      392,252        392,252
                                           ---------   ----------  -------------
     Total fixed maturities...............   680,797      695,735        695,735
                                           ---------   ----------  -------------
Equity securities:
  Common stock:
     Banks, trusts and insurance
       companies..........................       170          258            258
     All other corporate stock............     2,611        2,968          2,968
                                           ---------   ----------  -------------
     Total equity securities..............     2,781        3,226          3,226
                                           ---------   ----------  -------------
Short-term investments....................    56,470       56,468         56,468
                                           ---------   ----------  -------------

Total investments......................... $ 740,048   $  755,429  $     755,429
                                           ==========  ==========  =============


                                                                            F-29
<PAGE>

                                   SCHEDULE II

                  CONDENSED FINANCIAL INFORMATION OF REGISTRANT

                          The MIIX Group, Incorporated
                            Condensed Balance Sheets
                      (In thousands, except share amounts)


                                                               DECEMBER 31,
                                                          ----------------------
                                                             2003        2002
                                                          ----------  ----------
                                     ASSETS
Investments
Short-term investments, at cost which approximates
  fair value..........................................    $     304   $   1,327
Investment (loss in excess of investment) in
  subsidiaries........................................     (271,833)     50,447
                                                          ----------  ----------
  Total investments...................................     (271,529)     51,774

Cash (overdraft)......................................          (73)          8

Other assets..........................................        1,341         837
                                                          ----------  ----------
   Total assets.......................................    $(270,261)  $  52,619
                                                          ==========  =========

                LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)

LIABILITIES
Due to subsidiaries...................................    $   7,626   $  10,276
Other liabilities.....................................          634       1,077
                                                          ----------  ----------
   Total liabilities..................................        8,260      11,353
                                                          ----------  ----------
STOCKHOLDERS' EQUITY (DEFICIENCY)
Preferred stock, $0.01 par value, 50,000,000 shares
  authorized, no shares issued and outstanding........            0           0
Common stock, $0.01 par per share, 100,000,000 shares
  authorized, 16,538,005 shares issued (2003 -
  14,497,536 shares outstanding; 2002 - 13,382,173
  shares outstanding) ................................          166         166
Additional paid-in capital............................       40,270      53,909
Retained earnings (deficiency)........................     (301,402)     13,323
Treasury stock, at cost (2003 - 2,040,469 shares;
  2002 - 3,155,832 shares)............................      (25,115)    (40,199)
Stock purchase loans and unearned stock compensation..       (2,617)     (3,662)
Accumulated other comprehensive income................       10,177      17,729
                                                          ----------  ----------
   Total stockholders' equity (deficiency)............     (278,521)     41,266
                                                          ----------  ----------

   Total liabilities and stockholders' equity
     (deficiency).....................................    $(270,261)  $  52,619
                                                          ==========  =========



                                                                            F-30
<PAGE>

                                   SCHEDULE II

           CONDENSED FINANCIAL INFORMATION OF REGISTRANT - (CONTINUED)

                          The MIIX Group, Incorporated
                       Condensed Statements of Operations


                                                 YEARS ENDED DECEMBER 31,
                                             --------------------------------
                                                2003        2002       2001
                                             ---------   ---------  ---------
                                                      (In thousands)

Net investment income....................... $     171   $   2,205  $     285
Other income................................     2,951         267         10
Realized investment losses..................         0        (518)         0
Other expenses..............................    (3,930)     (2,506)    (2,371)
                                             ---------   ---------  ---------
Loss before federal income taxes and
  equity in income of subsidiaries..........      (808)       (552)    (2,076)

Tax provision (benefit).....................      (811)     (3,394)     1,556
                                             ---------   ---------  ---------

Earnings (loss) before equity in income
  of subsidiaries...........................         3       2,842     (3,632)
Equity in loss of subsidiaries..............  (314,728)   (118,826)  (154,012)
                                             ---------   ---------  ---------
        Net loss............................ $(314,725)  $(115,984) $(157,644)
                                             =========   =========  =========



                                                                            F-31
<PAGE>
<TABLE>
<CAPTION>

                                   SCHEDULE II

           CONDENSED FINANCIAL INFORMATION OF REGISTRANT - (CONTINUED)

                          The MIIX Group, Incorporated
                       Condensed Statements of Cash Flows


                                                       YEARS ENDED DECEMBER 31,
                                                   --------------------------------
                                                     2003        2002         2001
                                                   ---------   ---------   --------
                                                            (In thousands)
<S>                                                <C>         <C>        <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss.......................................... $(314,725)  $(115,984) $(157,644)

Adjustments to reconcile net loss to net cash
   provided by (used in) operating activities:
  Other stock based compensation..................     2,161          50        (50)
  Realized investment losses......................         0         518          0
  Change in payable to subsidiaries...............    (2,650)      5,863      2,035
  Net change in other assets and liabilities......      (947)     (2,238)     2,713
  Equity in loss of subsidiaries..................   314,728     118,826    153,315
                                                   ---------   ---------   --------
Net cash (used in) provided by
   operating activities...........................    (1,433)      7,035        369
                                                   ---------   ---------   --------

CASH FLOWS FROM INVESTING ACTIVITIES
Cash dividends received from subsidiary...........         0       2,100          0
Change in short-term investments, net.............     1,023      (1,219)        23
                                                   ---------   ---------   --------
Net cash provided by
  investing activities............................     1,023         881         23
                                                   ---------   ---------    -------

CASH FLOWS FROM FINANCING ACTIVITIES
Employee stock purchase loan repayments...........       414       1,877        747
Purchase of treasury stock........................       (85)       (730)         0
Cash dividends paid to stockholders...............         0           0     (2,704)
Notes payable and other borrowings................         0      (9,050)     1,550
                                                   ---------   ---------   --------

Net cash provided by (used in)
   financing activities...........................       329      (7,903)      (407)
                                                   ---------   ---------   --------

Net change in cash................................       (81)         13        (15)
Cash (overdraft), January 1.......................         8          (5)        10
                                                   ---------   ---------   --------

Cash (overdraft), December 31..................... $     (73)   $      8   $     (5)
                                                   =========   =========   ========


                                                                               F-32
</TABLE>

<PAGE>

                                   SCHEDULE II

           CONDENSED FINANCIAL INFORMATION OF REGISTRANT - (CONTINUED)

                          The MIIX Group, Incorporated

                     Notes to Condensed Financial Statements
                                December 31, 2003


1.   BASIS OF PRESENTATION

In The MIIX Group's condensed financial statements, investment in subsidiaries
is stated at cost plus equity or loss in undistributed earnings of subsidiaries
since the date of acquisition. The MIIX Group's condensed financial statements
should be read in conjunction with the consolidated financial statements, in
particular see Notes 4, 9 and 17.



                                                                            F-33