Old Guard Results Hit By Other Insurers' Failure

Old Guard Group, Inc. announced today that it will take a cash charge of $1.2 million, or $.30 cents per share, for its third quarter ended September 30, 1998. The charge is a result of estimated assessments from the Pennsylvania Insurance Guaranty Association (PIGA) due to the recent insolvencies of PIC Insurance Group, Inc. and The P-I-E Mutual Insurance Company, medical malpractice writers in Pennsylvania. The failed malpractice insurers had no affiliation to Old Guard, which is based in Lancaster, PA. Old Guard says it expects to announce third quarter earnings in the second week of November.

Pennsylvania law does not permit guaranty fund assessments for property and casualty insurance to be offset against premium taxes, as is the case for life insurers. Rather, property and casualty assessments may be put into the rate making process for homeowners and farmowners, which Old Guard would expect to do in order to recoup these unusually large assessments.

David E. Hosler, chairman and chief executive officer, says, "Although Old Guard's insurance company subsidiaries are fully reserved for past insolvencies reported by PIGA, these two new malpractice insurance company insolvencies are unprecedented in terms of the size of the assessment by PIGA. It is very disappointing when one considers the fact that although Old Guard Group, Inc. and its insurance company subsidiaries do not write malpractice insurance, the Guaranty Association membership as mandated by the Commonwealth of Pennsylvania has the ability to assess home, farm and business insurance to make good on the malpractice liability claims against failed companies."

Old Guard says the charge for PIGA assessments is based on premiums written in 1997 and year-to-date 1998, which are the basis for the 1998 and 1999 anticipated PIGA assessments. Among public companies, Old Guard believes it is the hardest hit in proportion to its total business because it is predominately a Pennsylvania company; ranks as the state's leading insurer of farmowners business with 33 percent market share; and is the 15th leading insurer of homeowners business. PIGA has indicated that the maximum assessment permitted by law (2 percent of subject premiums) is likely to continue for several years.

Old Guard Insurance Group is comprised of Old Guard Insurance Company, Old Guard Fire Insurance Company, First Patriot Insurance Company, Neffsville Mutual Fire Insurance Company, New Castle Insurance Company of Delaware, and First Delaware Insurance Company. Founded in 1896, Old Guard currently serves approximately 155,000 policyholders throughout Pennsylvania, Maryland and Delaware with total annual premium volume in excess of $95 million.