S&P Assigns Frontier Insurance Co. ‘R’ Rating

August 29, 2001

Standard & Poor’s assigned its “R” financial strength rating to Frontier Insurance Co. after the New York State Insurance Department and Frontier reached an agreement for Frontier to enter into voluntary rehabilitation.

By a vote of the Board of Directors, Frontier consented to entry by an order of rehabilitation pursuant to Article 74 of the New York State Insurance Law. On approval of the rehabilitation by the New York State Supreme Court in New York County, the Department will take control of the property/casualty insurance company.

Frontier, formerly rated “BB+” prior to their rating withdrawal on March 24, 2000, were cited by S&P as having weakened capitalization, coupled with weak earning levels. S&P placed the ratings on CreditWatch with negative implications on March 17, 2000, because of concerns regarding future profitability, capitalization, and financial leverage.

An insurer rated “R” is under regulatory supervision owing to its financial condition. During the pendency of the regulatory supervision, the regulators may have the power to favor one class of obligations over others or pay some obligations and not others. The rating does not apply to insurers subject only to non-financial actions such as market conduct violations.

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