Important Information for Abd Clients Insured by the Atlantic Mutual Insurance Companies

IMPORTANT INFORMATION FOR ABD CLIENTS INSURED BY THE ATLANTIC MUTUAL INSURANCE COMPANIES

In October we began communicating with you regarding a downgrade in the A.M. Best rating of Atlantic Mutual Insurance Company (from A- to B++). Our market security and policy placement guidelines provide that we will only place insurance coverage with insurers rated by Best as A- (excellent) Class VII or better. Because, of this, your account management team has been working with you to identify and evaluate appropriate alternative coverage, where available.

There have been recent developments with respect to Atlantic Mutual that you should be aware of.

Earlier this month it was announced that One Beacon Insurance Company, an A rated carrier owned by White Mountain Insurance Group, had signed an agreement in principle to acquire renewal rights to the vast majority of Atlantic Mutual’s commercial insurance business as well as the Atlantic Specialty Insurance Company. One Beacon has advised that Atlantic Specialty will be used to both renew existing Atlantic business and to write new business. The projected timeline for finalizing the agreement and obtaining the necessary regulatory approval is February 1, 2004.

In a December 5th, 2003 press release (copy attached) A.M. Best commented that the proposed purchase would not immediately effect the financial strength or debt ratings of either company (Atlantic Mutual remains below our placement guidelines at B++).

Best further advised: “At the time a definitive agreement is signed, which is anticipated within the next 30 days, A.M. Best expects to place the financial strength rating of B++ (Very Good) of Atlantic Specialty under review with positive implications, reflecting the pending acquisition by a stronger parent. The rating would remain under review until the completion of the acquisitions, which is anticipated in early 2004.”

While all of this certainly holds some promise for the future, there is no guarantee of anything at this stage and a conservative response remains prudent. Your account management team will continue working with you regarding market options and what this news could mean to those companies electing to remain insured by Atlantic Mutual despite their Best rating downgrade.

ABD will communicate any additional general news as it develops and we expect to have more information for you by the first of the year. In the meantime, we encourage you to contact your account management team with any specific questions, comments or concerns.