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Fitch Rating Review

Some of you may have seen that today Fitch has placed the "A- (Strong)" insurer financial strength rating of AEGIS on "Rating Watch Negative." This is the culmination of our fairly extensive dialogue with Fitch over the last several weeks. Obviously, they are concerned about the $300 million loss in surplus that we have previously discussed with you as well as the magnitude of underwriting losses in recent years. I think all of us understand and share their concerns in that regard.

We spent a good deal of time explaining to Fitch the various steps we have taken since November 2008 to reduce capital stress going forward, to improve our underwriting profitability and to restore surplus (all as I have previously outlined to you in my earlier emails). In their press release, Fitch mentions these ongoing efforts and notes very positively that our total surplus increased 4% to $790 million (unaudited) and that the company's operating performance has improved during the first four months of 2009. They very much agreed with the appropriateness of the various measures we are taking to improve overall operating performance as well as to curb future surplus volatility. They were also encouraged to hear of the excellent member and broker support that we have enjoyed over the first four months of the year. They have agreed that it makes sense for them to continue to follow our progress with our 2009 business plan as the year unfolds before instituting any rating action beyond the "Negative Watch" issued today. I am confident that with your continued support our 2009 strategy will be successful in helping restore lost surplus and steering AEGIS toward improved operating ratios. We believe this will not only aid in our ongoing efforts to meet Members' needs, but also will help satisfy rating agency concerns.

I look forward to discussing all of these issues with you in detail when we get together next month at the Policyholders' Conference.