Atlantic Mutual Cites Improvements in Financial Strength after Downgrade by A.M. Best

NEW YORK, NY, June 29, 2004 -- Atlantic Mutual today asserted its financial strength and noted improvements that contrast with A.M. Best’s decision to lower the company’s financial strength rating to B+ (Very Good) from B++ (Very Good).

Within the past 12 months, the company has restructured itself to become a well-capitalized writer of personal lines insurance for affluent individuals. The restructuring involved the sale of commercial lines businesses to raise capital; the exit from unprofitable large account workers compensation business; the repositioning of the investment portfolio to realize significant capital gains and eliminate exposure to equities; the termination of $92 million of finite reinsurance, also known as "soft" capital; the significant lowering of expenses through staffing initiatives; and the substantial reduction of exposures in catastrophe prone states.

To address reserve adequacy, the company commissioned independent actuarial reviews by two prominent international firms. These reviews support the company's $919 million in reserves as meeting the "best" estimate level. Atlantic Mutual noted that rating agencies do not estimate reserves; they take the company's reserve estimates and assume a level of deficiency based on how much and how often the company has increased reserves in the past. This process can penalize a company after reserve problems have been fixed and, therefore, can be a lagging indicator.

To address future profitability for its personal lines business, the company gave a positive outlook based on improvements that are not yet reflected in the historical five-year averages often used by rating agencies. The improvements include increased pricing, higher quality customers due to a focus on the affluent market, declining accident-year loss ratios, and improved operating efficiency through the use of technology. Year-to-date results through May show Personal lines posting profitable results consistent with company plans to achieve a 95% operating ratio.

"The bright spot for us has been the tremendous support we have received from our independent agents and personal lines policyholders in spite of rating agency actions," said Dan Olmsted, president of Atlantic Mutual. "Our Atlantic Master Plan® package insurance policy and top-ranked claims service make us unique in serving people with substantial assets to protect. Our agents and policyholders have a lot of faith in us." The company reported that premium levels in 2004 have held steady and even grown in most of the states in which it operates.

Atlantic Mutual noted that 2004 will continue to be a year of transition as it exits lease agreements, absorbs severance costs, and eliminates additional soft capital. By 2005, the company expects a significant improvement in results and should emerge as a well-capitalized writer of affluent personal lines with a premium-to-surplus ratio stronger than the industry average.

About The Atlantic Companies

The Atlantic Companies, also known as Atlantic Mutual, is a group of diversified financial services companies with a Wall Street heritage dating back to 1842. The group is widely known for the Atlantic Master Plan insurance program, which is designed specifically for affluent individuals and sold through a select group of independent agents. The Atlantic Companies acts as a property-casualty insurer, manages claims for commercial insurance, and helps other business partners target profitable niches in the insurance marketplace. Additional information about The Atlantic Companies and the Atlantic Master Plan can be found at www.atlanticmasterplan.com.


Contact: Peter G. Scott
Corporate Marketing & Communications
973-408-6044