Calif. Commissioner to Liquidate PAULA Ins. Co.

June 24, 2002

California Insurance Commissioner Harry Low obtained an Order of Liquidation for PAULA Insurance Company based on the worsening financial condition of the company. PAULA, which is domiciled in California, is headquartered in Pasadena and is a wholly-owned subsidiary of Paula Financial. The company wrote primarily workers’ compensation insurance.

Low confirmed that PAULA’s financial condition was as stated in its December 31, 2001 Annual Statement which showed that the policyholder surplus as of December 31, 2001 was negative $22,028,334. Furthermore, Low has not discovered any additional assets that could reasonably lead to rehabilitation. Therefore, pursuant to the Order of Liquidation, Low will proceed to liquidate the business of PAULA. PAULA conducted the majority of its business in California but did business in other states as well.

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