Q. What was filed by the Commissioner of Insurance on November 1, 2000?

A. The Commissioner filed a petition with the Supreme Judicial Court for Suffolk County ("the Court") seeking an order of receivership with the objective of rehabilitation against Lumber Mutual Insurance Company, SEACO Insurance Company, and North American Lumber Insurance Company ("Lumber"). Lumber assented to the petition and the Commissioner was appointed Receiver of Lumber.

The goal of the Receiver will be to "run-off" all obligations of Lumber to its policyholders and other creditors. Management is currently working with the Receiver and her representatives to develop "run-off" business and staffing plans.

Q. Why did the Commissioner take this step?

A. After consultation with Lumber's management, the Commissioner has concluded that Lumber's financial condition required a receivership proceeding to protect the interests of the Company's policyholders and other creditors.

Q. What will this mean to our current book of business?

A. In light of Lumber's financial condition, the Receiver has obtained the Court's authority to cancel all policies in force effective 12:01a.m. on 1-1-01.

The Receiver will seek potential acquirers who may have an interest in Lumber's charter and licenses, its book of business, its infrastructure, or some combination thereof.

Q. How does a "run-off" work?

A. All claims will continue to be paid in the normal course. Return premiums on cancelled policies will be paid. Policyholders and claimants should continue to deal with Lumber/SEACO staff, as in the past.

Q. How will policyholders, agents, defense counsel, and other vendors hear information about the Receivership?

A. Policyholders will receive a letter from the Receiver advising of her appointment. We expect that there will also be media coverage, which will result in policyholder and agent inquiries. The Receiver's letter will include the telephone number for the Division of Insurance Consumer Help Line (617) 521-7777, which will include a recorded message concerning Lumber.

Q. Will commission payments continue to be made to SEACO's agents during the rehabilitation?

A. SEACO agents' commissions will continue to be credited during the term of the rehabilitation. However, since the cancellation of SEACO's book of business will generate large unearned commission balances owed to SEACO, the ways in which commissions are credited and paid may need to be revised.

Q. What about obligations under profit sharing programs?

A. Obligations under profit sharing programs will be treated in the same manner as all other commission payments.

Q. Will Lumber be renewing policies which have expiration dates between now and January 1?

A. If sufficient time remains to issue a legal notice of non-renewal, the policy will be non-renewed. If not, it will be renewed, but the renewal policy will be cancelled effective 12:01 am on January 1, 2001.

Q. How will refunds of unearned premium be handled?

A. Unearned premium refunds will continue to be processed in the normal course during the rehabilitation.

Q. Will short rate cancellation penalties apply if a policy is cancelled prior to January 1, 2001 by the policyholder?

A. No.

Q. What is being done by the Receiver to rehabilitate Lumber?

A. Attempts are being made to identify potential acquirers of Lumber's charter and licenses, book of business or some combination thereof. The Receiver recognizes that SEACO's independent agents own the expirations and that the sale of the book of business (or any part) is dependent upon an agent's consent.

Q. Why must a letter be sent by the Receiver to all policyholders?

A. The Receiver has a statutory obligation to notify all policyholders of her appointment, within 20 days of the entry of the receivership order in a form approved by the Court.

Q. How will the receivership affect dividend payments?

A. All dividend payments have been suspended, effective immediately.