Frequently Asked Questions Regarding Guaranty Capital

1. What is Guaranty Capital?
   Guaranty Capital is a financial instrument authorized by North Carolina law and used by mutual insurance companies, such as Medical Mutual Insurance Company of North Carolina, as a means of raising capital. Guaranty Capital was used by physicians to capitalize Medical Mutual in 1975 and has been used periodically since then to raise capital for the Company.
2. How has Medical Mutual most recently utilized Guaranty Capital?
   Medical Mutual’s most recent issuance of Guaranty Capital was in 2002, when the Company’s Board of Directors authorized and its policyholders approved issuance of up to $25,000,000 of Guaranty Capital to support the Company’s operations. That issuance required all North Carolina physicians—full- and part-time (and any slot positions)—insured under a claims-made policy issued by Medical Mutual to own a minimum of $2,000 of Guaranty Capital to satisfy the membership requirements of the Company.
   
   As a result of that issuance, Medical Mutual raised approximately $12,000,000 to support its operations.
3. What are Medical Mutual’s current plans regarding Guaranty Capital?
   The capital raised from the 2002 issuance of Guaranty Capital gave the Company a “cushion” against the rising costs of malpractice claims, supported its retention of an “A” (Excellent) rating from A.M. Best Company, and gave it the capacity to meet the insurance needs of physicians that had been abandoned by the commercial market.
   
   Since 2002, Medical Mutual has been able to generate sufficient capital from operations and investments, such that it no longer requires the capital raised by issuing Guaranty Capital. For that reason, the Company’s Board of Directors has authorized and its policyholders have approved a Guaranty Capital Cessation and Redemption Program effective April 19, 2008.
   
   Pursuant to that Program, Medical Mutual has terminated the requirement to invest in Guaranty Capital as a condition of coverage in North Carolina and has ceased the issuance of new Guaranty Capital. In addition, Medical Mutual intends to redeem current Guaranty Capital investments on a pro-rata basis over the next four (4) years.
4. When can I expect to receive the first pro-rata distribution of my current Guaranty Capital investment?
   The first pro-rata redemptions will be to Guaranty Capital investors of record as of June 30, 2008. This redemption will be for twenty-five percent (25%) of the outstanding investment, and will be paid on or about July 31, 2008.
   
   Additional annual, pro-rata distributions are planned for this same time period in 2009, 2010 and 2011.
5. How much of my Guaranty Capital investment can I expect to receive when it is redeemed?
   Guaranty Capital has a fixed face value of $100.00 per unit. Medical Mutual will be redeeming the Guaranty Capital at the full $100.00 face value.
6. What if I am a Guaranty Capital investor, and I cease to be a policyholder of Medical Mutual, do I have to wait until 2011 to get the full redemption of my Guaranty Capital investment?
   Medical Mutual will continue to fully redeem Guaranty Capital investments when a physician ceases to be a policyholder of the Company. Typically, this occurs through retirement, disability, or the death of the physician.
7. Has the Guaranty Capital Cessation and Redemption Program been approved by any regulatory agency?
   The North Carolina Commissioner of Insurance has the primary responsibility for regulating the Company’s use of Guaranty Capital. The North Carolina Commissioner of Insurance approved the Guaranty Capital Cessation and Redemption Program prior to its consideration and approval by the Company’s policyholders.
8. Does Medical Mutual envision future Guaranty Capital campaigns?
   Given current conditions and circumstances, Medical Mutual does not foresee the need to issue additional Guaranty Capital. The Company’s Board of Directors will reserve the option of utilizing Guaranty Capital again in the future if the conditions and circumstances warrant.
9. Will I continue to receive an interest payment on my outstanding Guaranty Capital investment?
   Historically, Medical Mutual has paid an investment return on Guaranty Capital and expects to continue this practice in the future. The exact amount will be determined annually by the Company’s Board of Directors based on the financial performance of the Company and the current interest rate environment.
10. Can I apply my Guaranty Capital redemption against my medical malpractice premium?
    No. Guaranty Capital redemptions will be paid by check to the investor of record.
11. What documentation will I receive to evidence the redemption of my Guaranty Capital investment?
    In addition to the check for the amount of your Guaranty Capital redemption, you will receive a statement evidencing the activity in your Guaranty Capital investment account.
12. Is the redemption of Guaranty Capital a taxable event?
    Guaranty Capital is being redeemed at its face value, and therefore the redemption is not a taxable event. We suggest you consult with your tax advisor on any questions regarding taxation.

If you have questions regarding Guaranty Capital, please contact Colleen Larsen, Investor Relations Coordinator, at (919) 878-7563 or (800) 662-7917 x7563 or colleen.larsen@mmicnc.com.