Harleysville Mutual to Acquire Penn Mutual

November 26, 2002

Harleysville Mutual Insurance Company, which owns 56 percent of Harleysville, Pa.-based Harleysville Group Inc., announced an agreement to acquire the operations of Penn Mutual Insurance Company.

“The in-market acquisition of Penn Mutual’s operations reinforces our position as a premier insurance provider and marks a step forward in Harleysville’s long-term growth strategy. Similar to our successful assimilation of Boyertown Mutual in 1997, Penn Mutual’s small business and personal lines portfolio, its agency force, and its presence in the Mid- Atlantic region are aligned well with our organization’s strengths,” explained Walter R. Bateman, Harleysville Mutual’s chairman and chief executive officer. “As we integrate the Penn Mutual risk portfolio into our operations, we will ensure its long-term profitability as we apply the same underwriting, pricing and agency management discipline that has driven Harleysville’s progress.”

Under the terms of the agreement, Harleysville Mutual will acquire all of Penn Mutual’s liabilities and assets, including its policies, operations and office facility in West Chester, Pa., but excluding its affiliate The Green Tree Perpetual Assurance Company. As the Penn Mutual policies renew, they will be written with Harleysville rates and forms; the intercompany pooling agreement between Harleysville Group and Harleysville Mutual will not change. Harleysville Group anticipates no material impact on earnings from this transaction.

In 2001, Penn Mutual generated $33 million in written premiums — $16 million of which was in commercial lines — in Delaware, Maryland, New Jersey, Pennsylvania and Virginia through 210 independent agencies, with about half of its business and agents concentrated in Pennsylvania. The transaction is expected to be completed during December 2002.

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