Atlantic Mutual Announces Statutory Financial Results

August 21, 2002

Atlantic Mutual Companies, a New York-based mutual insurance company providing commercial and personal coverages through independent agents and brokers, announced unaudited statutory financial results for the second quarter and first six months of 2002.

Statutory operating results, before realized gains on investments, interest expense on the surplus note and federal income taxes, were $1.5 million for the second quarter of 2002, an improvement of $3.4 million over the same period in 2001. A statutory net income of $2.0 million was recorded for the second quarter of 2002, an improvement of $2.3 million over the same period in 2001.

Atlantic’s statutory combined ratio was 101.7 for the second quarter of 2002, a significant improvement over the 107.7 recorded during the same period in 2001, and the 120.3 recorded for the 12 months ended Dec. 31, 2001, which included more than 6 points related to the events of Sept. 11th. Statutory operating results for the six months, before realized gains on investments, interest expense on the surplus note and federal income taxes, were $8.7 million, an improvement of $11.9 million over the same period in 2001.

A Federal income tax benefit of $13.8 million was recognized during the six months ended June 30, 2002 compared to $1.3 million during the same period in 2001. A statutory net income of $20.0 million was recorded for the six months ended June 30, 2002, an improvement of $21.2 million over the same period in 2001. Atlantic’s statutory combined ratio for the six months ended June 30, 2002 was 100.1, a continued improvement over the 107.2 recorded during the same period in 2001.

Atlantic entered into a quota share agreement in the fourth quarter of 2001 to bring the net premiums written to surplus leverage in line with the Atlantic’s long-term objective of 1.50 to 1. This quota share agreement continues into 2002. Accordingly, there is a decrease in net premiums written and earned, losses and LAE incurred, and underwriting expenses for 2002 compared to 2001.

The Atlantic’s 2002 six month results have continued to benefit from the significant price increases achieved in commercial lines and marine, effective partnerships with key independent agents, as well as new business development initiatives in surety, and select commercial and marine segments. Renewal premium rates continue to be strong. Statutory policyholders’ surplus at June 30, 2002, as prepared under New York’s Regulation 172, was $418.6 million. New York’s Regulation 172 is an adoption of a modified version of the NAIC’s codification of statutory accounting rules.

The most significant difference between New York’s regulation and the NAIC’s codification of accounting rules is that, under New York rules, Atlantic can not record deferred tax assets.

Under the NAIC’s codified accounting rules, Atlantic’s statutory policyholders’ surplus at June 30, 2002 would be $450.8 million, $32.2 million higher than that reported under New York rules. Subsequent to June 30, 2002, The State of New York approved full codification with recognition starting with accounting periods beginning Dec. 31, 2002.

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