Lumbermens Commutes Two Berkshire Hathaway Reinsurance Agreements, Regains Access to $1.6 Billion

June 30, 2003

Lumbermens Mutual Casualty Co., flagship of Long Grove, Ill.-based Kemper Insurance Cos., today announced that it and two Berkshire Hathaway Inc. affiliates, National Indemnity Co. and National Fire & Marine Insurance Co., have commuted two reinsurance agreements entered into the past two years.

In addition, a stock subsidiary established jointly by Lumbermens and Berkshire last spring has repurchased Berkshire’s 15 percent interest in the stock subsidiary. Following these transactions, which were reviewed by the Illinois Department of Insurance, Lumbermens plans to liquidate its now 100 percent equity ownership in the stock subsidiary and its underwriting company, and merge the underwriting company into Lumbermens.

Together, these transactions and the merger will allow Lumbermens to regain direct access to approximately $1.6 billion in cash and liquid assets.

Lumbermens and the Berkshire affiliates have commuted an adverse development cover and an asbestos and environmental (A&E) reinsurance treaty, and amended an A&E claims administration agreement and certain collateral arrangements related to use of National Indemnity Company cut-through agreements on certain Kemper policies.

Other reinsurance arrangements between Lumbermens and Berkshire affiliates are not affected by these events, including the quota share reinsurance agreement on middle-market business. Importantly for those policyholders whose policies include a cut-through agreement with National Indemnity Company, those agreements are unaffected.

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