American Re United National Terminates Acquisition by American Re.

Business Editors

KING OF PRUSSIA, Penn.--(BUSINESS WIRE)--August 11, 2000

The owners of American Insurance Service, Inc. ("AIS"), parent company of the United National Group ("UNG") of insurance companies, announced that they have terminated the definitive stock purchase agreement between them and American Re Corporation of Princeton, New Jersey, pursuant to which American Re was to purchase all of the stock of AIS. The owners terminated the agreement due to the continued refusal of the Pennsylvania Insurance Department to rule for more than ten months on American Re's application for approval to acquire control of UNG, the uncertainty as to when litigation over the Department's refusal would be resolved and whether the Department would then approve the transaction, and the resulting impediments this delay and uncertainty presented to strategic planning for UNG and its current ownership. This transaction was structured nearly a year ago and changing business and market conditions since then, and during any further delay, present risks and challenges to UNG that can no longer be left on hold.

UNG, as an issuing carrier, and American Re, as a reinsurer, plan to continue their long-term strategic alliance. American Re expressed to UNG both its disappointment in the failure to complete the transaction and its intention to expand and strengthen its relationship with UNG as a ceding company.

The purchase agreement was entered into in August 1999, and American Re filed its application for the required regulatory approval with the Pennsylvania Insurance Department on September 30, 1999. American Re is owned by Munich Re of Germany, the world's largest reinsurer. The Pennsylvania Insurance Department withheld a decision on the application citing concerns that Munich Re has not joined the International Commission on Holocaust Era Claims, an international private and voluntary organization, on which Pennsylvania Insurance Commissioner M. Diane Koken serves as an alternate member. (While Munich Re is not a member of the International Commission, it has joined and made a substantial commitment of financial resources to the German Foundation Initiative, which is officially backed by the German, and U.S. governments as the exclusive remedy and forum for all claims against German companies arising out of the Nazi era.) The insurance departments of Indiana and Wisconsin, the domiciliary states of two other UNG companies, Diamond State Insurance Company and Hallmark Insurance Company Inc. respectively, timely reviewed and approved in December 1999 American Re's applications to acquire control of those companies.

On February 8, 2000, American Re instituted legal action, claiming that the Pennsylvania Insurance Department and Commissioner Koken were improperly using Holocaust issues to delay its purchase of UNG. President Judge Joseph Doyle of the Pennsylvania Commonwealth Court issued orders in May and June, 2000 directing the Insurance Department and Commissioner Koken to either approve or disapprove American Re's application. Rather than issuing a decision on the application in response to the court's orders, the Insurance Department and Commissioner Koken chose instead to appeal those orders to the Supreme Court of Pennsylvania, resulting in a stay of the lower court's orders.