Best Downgrades FSR for Atlantic Mutual Companies

March 3, 2006

A.M. Best Co. has downgraded the debt rating to “ccc” from “b+” of the $100 million 6.05% 30-year surplus notes issued by Atlantic Mutual Insurance Company (New York, N.Y.). A.M. Best has also downgraded the financial strength ratings (FSR) to B- (Fair) from B+ (Very Good) and the issuer credit ratings (ICR) to “bb-” from “bbb-” of the Atlantic Mutual Companies (Atlantic) (New York, N.Y.) and its property/casualty subsidiaries. All the above named companies have been placed under review with negative implications.

The ratings reflect the group’s larger than expected loss of surplus due to adverse reserve development in its discontinued commercial lines reserves that caused approximately a $100 million decline in surplus at year-end 2005. The potential for continued adverse prior year development of the group’s loss reserves remains present and fuels the uncertainty regarding its future financial strength, which remains dependent upon Atlantic’s underwriting and operating profitability (having been weak in recent years) and remains an ongoing concern as the group attempts to improve its situation.

Atlantic will remain under review with negative implications until A.M. Best receives and reviews the group’s most recent revised business plans and projections. Atlantic remains challenged to stabilize the prior year reserve development, continue the improved profitability in its ongoing personal lines operations and protect capital.

The following debt rating has been downgraded:

Atlantic Mutual Insurance Company —
— to “ccc” from “b+” on $100 million 8.15% 30-year surplus note,
due 2028.

The FSRs have been downgraded to B- (Fair) from B+ (Very Good) and the ICRS to “bb-” from “bbb-“and placed under review with negative implications for the Atlantic Mutual Companies and its following subsidiaries: Atlantic Mutual Insurance Company,
Centennial Insurance Company.

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