Lebanon Mutual Insurance Company
Cleona, Pennsylvania

Conversion Valuation Appraisal Report
Valued as of April 11, 2008

Prepared By

Feldman Financial Advisors, Inc.
Washington, D.C.

Feldman Financial Advisors, Inc.

April 11, 2008

Board of Directors
Lebanon Mutual Insurance Company
137 West Penn Avenue
Cleona, Pennsylvania 17042

Members of the Board:

     At your request, we have completed and hereby provide an independent appraisal (the ?Appraisal?) of the estimated pro forma market value of Lebanon Mutual Insurance Company (?Lebanon Mutual? or the ?Company?), as of April 11, 2008. Pursuant to a Plan of Conversion (the ?Plan?) adopted by the Board of Directors of the Company, Lebanon Mutual will convert from a Pennsylvania-chartered mutual property and casualty insurance company to a Pennsylvania-chartered stock property and casualty insurance company (the ?Conversion?), issue all of its capital stock to a newly formed holding company, LMI Holdings, Inc. (?LMI Holdings?), and become a wholly-owned subsidiary of LMI Holdings. In accordance with the Plan, LMI Holdings will then offer shares of its common stock for sale in a subscription offering and, if necessary, in a community offering and a syndicated community offering.

     To facilitate completion of the Conversion, Lebanon Mutual and LMI Holdings entered into an Investment Agreement with Griffin MTS Partners, LLC (?Griffin MTS?), a newly formed Pennsylvania limited liability company created for the sole purpose of entering into the Investment Agreement with Lebanon Mutual and LMI Holdings and performing its obligations under that agreement. Under the Investment Agreement, Griffin MTS will pay the costs of the Conversion in exchange for a payment at closing and will absorb the costs fully in the event the transaction is not completed (unless the reason it is not completed is abandonment by Lebanon Mutual). In addition, Griffin MTS has agreed to purchase a significant interest in LMI Holdings to help ensure completion of the Conversion.

     As part of the Conversion, LMI Holdings is offering shares of its common stock for sale in a subscription offering to the following potential subscribers: policyholders insured under a policies of insurance issued by Lebanon Mutual; the Company?s employee stock ownership plan (?ESOP?); directors, officers, and employees of Lebanon Mutual; and Griffin MTS. Any shares not subscribed for in the subscription offering may be offered to members of the general public in a community offering with preference given to Griffin MTS, residents of Berks, Dauphin, Lancaster, or Lebanon Counties in Pennsylvania, and licensed insurance agencies that market and distribute insurance policies issued by the Company. If there are any shares of common stock not purchased in the subscription and community offerings, they may be offered for sale to the public in a syndicated community offering.

FELDMAN FINANCIAL ADVISORS, INC.

Board of Directors
Lebanon Mutual Insurance Company
April 11, 2008
Page Two

     Griffin MTS has agreed to purchase up to the lesser of 35% of LMI Holdings common stock sold in the Conversion or $6.5 million of LMI Holdings common stock. Griffin MTS will have the right to purchase $500,000 of LMI Holdings common stock in the subscription offering and has agreed to submit an order in the community offering for the balance of the shares that it has agreed to purchase. LMI Holdings will have the option to accept or reject, in whole or in part, the order submitted by Griffin MTS in the community offering.

     This Appraisal is furnished in conjunction with the filing by Lebanon Mutual of the Application for Approval to Convert from Mutual to Stock Form (the ?Application?) with the Pennsylvania Insurance Department under the Insurance Company Mutual to Stock Conversion Act, 40 P.S. Sections 911-A et seq. (the ?Conversion Act?). In accordance with the Plan and Section 914-A(d) of the Conversion Act, the estimated pro forma market value of the Company shall be determined by an independent valuation expert and shall represent the aggregate price of common stock sold in the Conversion. Furthermore, as permitted by Section 914-A(d) of the Conversion Act, the pro forma market value may be expressed as a range of value and may be that value that is estimated to be necessary to attract a full subscription for the shares of common stock offered for sale in the Conversion.

     Feldman Financial Advisors, Inc. (?Feldman Financial?) is a financial consulting and economic research firm that specializes in financial valuations and analyses of business enterprises and securities in the financial services industries. The background of Feldman Financial is presented in Exhibit I. In preparing the Appraisal, we conducted an analysis of Lebanon that included discussions with the Company?s management and an onsite visit to the Company?s headquarters. We reviewed the audited financial statements of the Company as of and for the years ended December 31, 2006 and 2007. In addition, where appropriate, we considered information based on other available published sources that we believe are reliable; however, we cannot guarantee the accuracy and completeness of such information.

     In preparing the Appraisal, we also reviewed and analyzed: (i) financial and operating information with respect to the business, operations, and prospects of the Company furnished to us by the Company; (ii) publicly available information concerning the Company that we believe to be relevant to our analysis; (iii) a comparison of the historical financial results and present financial condition of the Company with those of selected publicly traded insurance companies that we deemed relevant; and (iv) financial performance and market valuation data of certain publicly traded insurance industry aggregates as provided by industry sources.

     The Appraisal is based on the Company?s representation that the information contained in the Application and additional evidence furnished to us by the Company and its independent auditor are truthful, accurate, and complete. We did not independently verify the financial statements and other information provided by the Company and its independent auditor, nor did we independently value the assets or liabilities of the Company. The Appraisal considers the Company only as a going concern on a stand-alone basis and should not be considered as an indication of the liquidation value of the Company.

FELDMAN FINANCIAL ADVISORS, INC.

Board of Directors
Lebanon Mutual Insurance Company
April 11, 2008
Page Three

     It is our opinion that, as of April 11, 2008, the estimated pro forma market value of the Company was within a range (the ?Valuation Range?) of $10,200,000 to $13,800,000 with a midpoint of $12,000,000. The Valuation Range was based upon a 15 percent decrease from the midpoint to determine the minimum and a 15 percent increase from the midpoint to establish the maximum.

     Our Appraisal is not intended, and must not be construed, to be a recommendation of any kind as to the advisability of purchasing shares of common stock in the Conversion. Moreover, because the Appraisal is necessarily based upon estimates and projections of a number of matters, all of which are subject to change from time to time, no assurance can be given that persons who purchase shares of stock in the Conversion will thereafter be able to sell such shares at prices related to the foregoing estimate of the Company?s pro forma market value. Feldman Financial is not a seller of securities within the meaning of any federal or state securities laws and any report prepared by Feldman Financial shall not be used as an offer or solicitation with respect to the purchase or sale of any securities.

     The Valuation Range reported herein will be updated as appropriate. These updates will consider, among other factors, any developments or changes in the Company?s operating performance, financial condition, or management policies, and current conditions in the securities markets for insurance company common stocks. Should any such new developments or changes be material, in our opinion, to the estimated pro forma market value of the Company, appropriate adjustments to the Valuation Range will be made. The reasons for any such adjustments will be explained in detail at that time.