Letter to Shareholders It has been an honor to serve as the new Chief Executive Officer of Eastern Insurance Holdings, Inc. (“EIHI” or the “Company”) during this past year. I wanted to start the 2011 shareholder letter with a special “thankyou” to the EIHI Board of Directors, Senior Management team and our valued employees and agents for your confidence and support during my first year as CEO. I also want to express my heartfelt appreciation and thanks to EIHI Vice-Chair, Bruce Eckert, for the opportunity to join forces with him above the tattoo parlor in Lancaster over 14 years ago. As Bruce described in the 2010 EIHI shareholder letter, “it has been quite a ride” – I’m grateful for the wisdom shared and the guidance that Bruce provided to the Senior Management team over his years at Eastern. We are extremely proud of the Company’s 2011 operating performance despite continued soft insurance market conditions, low investment yields and a challenging economic environment. All of us at EIHI are pleased to report that your Company delivered consolidated and workers’ compensation insurance segment combined ratios of 94.3 percent and 89.7 percent, respectively, for the year ended December 31, 2011. We believe these best-in-class combined ratio results will outperform industry results. The Company’s outperformance resulted in an increase in diluted book value per share from $14.88 to $15.89 during 2011. We are encouraged that workers’ compensation renewal rates stabilized and actually increased 2.5 percent during 2011 – the first sign of rate firming since 2005. The Company also benefited from the private sector job growth trends during 2011 as it recorded additional audit premium of $2.6 million during 2011 compared to return premiums of $1.4 million in 2010 – an increase of $4 million, a welcomed improvement. We are hopeful that both of these trends will continue within our carefully selected book of workers’ compensation business in 2012. We finished 2011 with a strong balance sheet. During 2011, A.M. Best Company confirmed the “A” (Excellent) financial strength rating of the Eastern Alliance Insurance Group and upgraded the financial rating of Eastern Re Ltd., SPC from “A-” to “A”. The Company managed its capital prudently in 2011 by focusing on (4) four areas: stock buybacks, shareholder dividends, acquisitions, and organic growth. EIHI repurchased slightly over 1 million common shares of stock for $13.3 million ($12.88 per share – weighed average price). We paid a quarterly dividend of 7 cents per share during 2011 providing shareholders with a 1.9 percent dividend yield on diluted book value resulting in aggregate dividend payout to shareholders of $2.2 million. Acquisition activity was focused on workers’ compensation operations with the ability to provide geographic diversification and/or scale. Quality opportunities were limited, resulting in a deeper commitment to organic growth strategies. Organic growth has been, and continues to be, the cornerstone capital management strategy for EIHI, as outlined below in the Workers’ Compensation Insurance Segment highlights. Workers’ Compensation Insurance Segment (Eastern Alliance Insurance Group) Following the divestitures of Eastern Life and Health Insurance Company and Eastern Atlantic RE in 2010, the Company was well positioned to execute its organic growth strategy in our core business – Workers’ Compensation. We focused all of the Company’s talent, capital and resources on the workers’ compensation insurance segment with the clear vision to be the premier workers’ compensation insurance group in the United States. We were pleased with the execution of the workers’ compensation strategic, operational and financial plans in 2011, that resulted in 23 percent year-over-year premium growth, an 89.7 percent combined ratio and net income of $10.2 million in this segment. The revenue trends were driven by solid growth in each of our regional offices (Mid-Atlantic, Southeast and Midwest) and in all of our product lines. The Company’s policyholder base increased approximately 6 percent to 7,475 policyholders in 2011. Profit results were consistently solid across all of the Company’s operating territories. The regional offices delivered combined ratios ranging from 85.5 percent to 91.1 percent in 2011 as a result of high quality risk selection, renewal rate increases (+2.5 percent), reduced open lost time claim frequency (-8 percent) and record results in closing claims (closed 63.4 percent of 2010 and prior open lost time claims during 2011).