EMPLOYERS INSURANCE OF WAUSAU A Mutual Company ... · employers insurance of wausau a mutual company ... proposed restructuring employers insurance of wausau and the ... employers

PLEASE READ THIS DOCUMENT FIRST

EMPLOYERS INSURANCE OF WAUSAUA Mutual Company (“EIOW”) proposes to change its corporate structure.

As an EIOW policyholder, you are being asked tomake an important decision about EIOW’s future.

Questions? Call our EIOW MHC InformationLine toll-free at 800-442-4295

Mutual HoldingCompany Restructuring

YOUR VOTE IS IMPORTANT. By voting for the plan, you will help create a morecompetitive company for our members.

Please:

� Read the information contained in this PolicyholderGuide and the Policyholder Information Statement.

� Read the letter from the Wisconsin InsuranceCommissioner.

� Note the time and place of the Public Hearing andSpecial Meeting listed in this Policyholder Guide.

� Sign and return your proxy.

EMPLOYERS INSURANCE OF WAUSAU

A Mutual Company

Policyholder Guide

EMPLOYERS INSURANCE OF WAUSAU AND THE MUTUAL HOLDING COMPANY STRUCTURE

A MESSAGE FROM THE CHAIRMAN

Dear Policyholder:

Three years ago EMPLOYERS INSURANCE OF WAUSAU A Mutual Company enteredinto its affiliation with Liberty Mutual Insurance Company and became part of theLiberty Mutual Group. Since then, EIOW has improved its operating and financialresults, and is far better positioned for growth in its target insurance markets. In theenclosed documents, we describe a restructuring proposal which would build uponthis foundation and further strengthen EIOW’s operationswhile preserving its separate identity, strong brand nameand Wisconsin presence.

For nearly 90 years the Liberty Mutual Group has helpedpeople live safer, more secure lives by providing high quali-ty insurance products and services. Today, we face a prop-erty and casualty insurance industry undergoing rapid andglobal consolidation. Understanding the unique challengesof being a mutual insurer in this environment and recogniz-ing the importance of mutuality, Wisconsin and 26 otherstates have enacted legislation to permit the formation ofmutual holding companies, a corporate structure that pre-serves mutuality but provides significantly greater flexibilityto meet the challenges ahead. We are preparing to changeour structure to that of a mutual holding company.

I am pleased to inform you that your Board of Directors has voted to recommend to ourpolicyholders that they approve the Mutual Holding Company Plan, which is part of aseries of transactions designed to bring the companies in the Liberty Mutual Groupunder the ownership of a single mutual holding company.

We do not propose a change of this nature lightly, but we believe strongly that it is mostbeneficial to the company and our policyholders. As we look to the future we see aninsurance world increasingly dominated by large, financially strong companies. To com-pete and thrive in a changing world, EIOW must grow both organically and throughacquisition, and under our current structure we have very limited means to do so. Themutual holding company structure will provide EIOW with many of the advantages thatour stock competitors enjoy, offering greater strategic flexibility to pursue growththrough consolidations, mergers, acquisitions and alliances.

Our overarching objective

is to continue to

serve you and

all our policyholders

with exceptional

products and services

at competitive costs.

Questions? Call our EIOW MHC Information Line toll-free at 800-442-4295.


A MESSAGE FROM THE CHAIRMAN

As important, the restructuring preserves our mutuality. EIOW was founded on the fun-damental belief that having common goals with our policyholders was the best way toprevent accidents and minimize losses when accidents do occur. We still believe thatworking together with our policyholders is the best way to do business. Additionally,mutuality allows us to focus on the long term needs and objectives of our policyholders,rather than be distracted by quarterly stock earnings and daily market fluctuations.

On a purely administrative level, the mutual holding com-pany structure will align our legal structure with our oper-ating structure, leading to greater efficiency while preservingthe separate licenses, identities and brands of the companiesin the Liberty Mutual Group.

This legal restructuring will in no way change who we are orwhat we do. Our overarching objective is to continue to serveyou and all our policyholders with exceptional products andservices at competitive costs. We thank you for the confi-dence and trust you’ve placed in us by choosing EIOW asyour insurer….we cherish that trust and look forward toyour continued support.

On behalf of the Board of Directors, I urge you strongly toapprove this proposal and vote for the Mutual HoldingCompany Plan. Your vote is important to our company.

Sincerely,

Edmund F. KellyChairman

The mutual holding company

structure will provide EIOW

with many of the advantages

that our stock competitors

enjoy… As important,

the restructuring preserves

our mutuality.

You may also cast your vote in person by attend-ing the Special Meeting to be held at EIOW’soffice at Westwood Center, 1800 W. Bridge Street,Wausau, Wisconsin at 10:00 a.m. Central Timeon November 20, 2001.

What If I Have Other Questions?If you have any questions, we encourage you tocall our toll-free EIOW MHC Information Line at(800) 442-4295 Monday through Friday, 7:00a.m. to 7:00 p.m., Central Time. For a summaryof contact information, please refer to the backcover of this guide.

2 Questions? Call our EIOW MHC Information Line toll-free at 800-442-4295.

HOW TO INFORM YOURSELF ABOUT EIOW’S PROPOSED RESTRUCTURING


What Should I Read?This mailing contains important informationabout EIOW’s Mutual Holding Company Plan(the “Plan”). Please carefully read the following:

Proxy: Your proxy to vote on the Plan

A letter from the Wisconsin InsuranceCommissioner

A notice of the Public Hearing

Policyholder Guide

This guide includes:

� A brief summary of EIOW’s proposed Plan

� Important questions and answers

� Instructions on how to vote

Policyholder Information Statement

This contains:

� A notice of the Special Meeting

� A detailed explanation of the Plan

� A copy of the Plan, financial statements, and other important information about the Plan and EIOW’s operations

How Do I Vote?You may vote by proxy by using the enclosedproxy card. Please mark and sign your proxy card, and return it in the enclosed postage-paidenvelope. In accordance with the bylaws of EIOW, all proxies must be received by 5:00p.m. Central Time on October 20, 2001 inorder to be counted.

HearingsOctober 16, 2001,Commencing at1:00 p.m. Central Time

Hilton MadisonMonona Terrace9 E. Wilson StreetMadison, Wisconsin(see Notice ofPublic Hearing)

Special Meeting of MembersNovember 20, 2001,10:00 a.m. Central Time

EIOWWestwood Center1800 W. Bridge StreetWausau, Wisconsin

Please note the times and locations forthe Hearings and Special Meeting:

To adopt the Mutual Holding Company Plan, dated as of August 21, 2001.

x Please mark yourvotes as in this example.

8987

FOR AGAINST

PLEASE USE BLUE OR BLACK INK

PROXY

EMPLOYERS INSURANCE OF WAUSAU A Mutual Company SPECIAL MEETING OF MEMBERSTO BE HELD ON NOVEMBER 20, 2001

Signature of Policyholder/Member: ________________________________________________________________________ Date Signed:____________________________

If the policyholder is a corporation or partnership, this ballot should be signed by an authorized officer or partner as the case may be.If the policyholder is an individual, please sign exactly as name appears hereon.

Questions? Call our EIOW MHC Information Line toll-free at 800-442-4295. 3

WHY DOES EIOW NEED TO CHANGE?


Our Industry is UndergoingConsiderable Changes. EIOW’s mission is to help people live safer, moresecure lives. In pursuit of this mission, we are com-mitted to providing high quality products and serv-ices at competitive prices. We operate in one oftoday’s most competitive industry segments: prop-erty and casualty insurance. Global consolidation,low levels of domestic growth in insurance premi-ums, as well as excess industry capital have createdan environment which has increased competitivepressures and reduced profitability. We have notbeen immune to these forces. We believe that thechanges we are proposing are necessary so that wecan continue to compete as a leader and providethe dependable products and high level of servicethat you have come to expect over the years.

The restructuring to a mutual holding companystructure will benefit EIOW – and ourpolicyholders – in three primary ways:

It Provides Greater Operating Flexibility. We believe that in the future the most successfulcompanies in our increasingly competitive indus-try will be those with the scale, capital, and finan-cial strength to compete in a mature market withfewer and larger competitors. While EIOW isfinancially strong today, mutual insurance compa-nies have limited means to raise capital andacquire or merge with other companies. Thisrestructuring will position us to raise capitalshould the need arise. While the need does notexist today, we will be better prepared for thefuture. Further, the mutual holding companystructure enhances our ability to grow throughmergers with other mutual insurance companies.

It Will Preserve Mutuality. EIOW was founded in 1911 on the fundamentalbelief that having common goals with our policy-holders was the best way to prevent workplace acci-dents and injuries and minimize losses when acci-dents occur. Mutuality entails a better alignment ofowners’ collective interests and customers’ individ-ual interests. Further, under a mutual enterprise,management has the benefit of being able to focuson long-term business objectives. The mutual hold-ing company structure will allow us to preserve themutual culture that the Board of Directors believeshas been a key factor in the past, and will continueto be important in the future in the generation ofsignificant value for policyholders.

It Provides the Foundation for the Global Transaction. Three years ago, EIOW entered into its affiliationwith Liberty Mutual Insurance Company, aMassachusetts mutual property and casualty insur-ance company, and became part of the LibertyMutual Group. The companies within the LibertyMutual Group are legally distinct, but the LibertyMutual Group operates as a single integrated busi-ness enterprise. This restructuring is the first stepin a series of transactions designed to combine,under a single mutual holding company, EIOWwith two of its affiliates within the Liberty MutualGroup. This restructuring will change our legalstructure to bring it into alignment with the realityof our existing operational structure. The resultwill be a more streamlined, efficient governanceand administrative process, which at the same timepreserves the separate identities and brands of thecompanies within the Liberty Mutual Group.



KEY THINGS YOU NEED TO KNOW

EIOW is a mutual insurance company, which isdifferent from a stock insurance company. Amutual insurance company is owned by its mem-bers, who also are its policyholders. In contrast, astock insurance company is owned by its share-holders, who do not necessarily have to be itspolicyholders.

When you purchased an insurance policy fromEIOW, you became both a policyholder andmember of EIOW.

As a policyholder of EIOW, you have certaincontractual rights under your insurance policy.Your contractual rights entitle you to the insur-ance benefits described in your policy.

As a member of EIOW, you also have equityrights, which include the right to vote on certaincorporate matters and to participate in distribu-tions of EIOW’s assets under certain limited cir-cumstances.

You are being asked at this time to vote, as amember, on whether EIOW should restructureto a mutual holding company structure (the“Restructuring”). Under the Restructuring, EIOWwill form Employers Insurance of WausauMutual Holding Company, a Wisconsin mutualholding company (“EIOW MHC”), and EIOWitself will convert to a Wisconsin stock propertyand casualty insurance company (“ConvertedEIOW”). As a stock insurance company,Converted EIOW’s new name will be“Employers Insurance Company of Wausau.”

The proposed Restructuring is subject toapproval by eligible voting members, as well asby the Wisconsin Insurance Commissioner.

The proposed Restructuring will not affect yourpolicyholder contractual rights under your insur-ance policy, your insurance coverage, or yourinsurance premiums.

Under the Restructuring, your equity rights inEIOW will be extinguished and replaced withequity rights in EIOW MHC.

Under the MHC Merger, which is part of theGlobal Transaction, Converted EIOW willbecome a subsidiary of Liberty Mutual HoldingCompany. Your equity rights in EIOW MHC willbe extinguished and replaced with equity rightsin Liberty Mutual Holding Company.

The purpose of this Guide and the PolicyholderInformation Statement is to explain, among otherthings:

� Why EIOW believes that the proposedRestructuring, if approved, should enhance its ability to succeed in a highly competitive national and international business environment.

� The benefits to you from the proposedRestructuring and the anticipated GlobalTransaction.

� The principal differences between your equi-ty rights as a member of EIOW and yourequity rights as a member of the proposedmutual holding company, EIOW MHC.


How is EIOW Organized Now?EIOW operates in conjunction with two othermajor mutual insurers in the Liberty MutualGroup —Liberty Mutual Insurance Company(“LMIC”) and Liberty Mutual Fire InsuranceCompany (“LMFIC”). Currently, the three com-panies are legally separate entities within theLiberty Mutual Group; however, they are affiliatedthrough common directors and managementwith operating services provided by LMIC.

What is EIOW Proposing?� EIOW is proposing to restructure into a

mutual holding company structure.

� EIOW would form a mutual holdingcompany, EIOW MHC, owned by existingand future policyholder members of EIOW.

� EIOW itself would convert to a stock insur-ance company that is 100% owned by EIOWMHC.

As a result of the Restructuring, you will becomea member of EIOW MHC and, as such, will nolonger be able to vote directly for the board ofdirectors of Converted EIOW. Instead, you willhave the right, among other things, to vote forthe election of directors of EIOW MHC, who, inturn, will elect the board of directors ofConverted EIOW.

If the Restructuring is approved by EIOW’s mem-bers and the Wisconsin Insurance Commissioner,EIOW MHC and Converted EIOW intend toenter into the Global Transaction. The GlobalTransaction is a series of transactions, at the com-pletion of which all of the policyholders ofEIOW, LMIC, and LMFIC will become members

of Liberty Mutual Holding Company, aMassachusetts mutual holding company formedby LMIC as part of its mutual holding companyrestructuring. Following the Global Transaction,Liberty Mutual Holding Company will ultimatelycontrol 100% of EIOW, LMIC and LMFIC.

How Does EIOW Propose to Restructure?EIOW is proposing to restructure through aseries of integrated transactions that involveessentially the following two steps:

The Restructuring — The first step involves:

� The creation of a mutual holding companycalled EIOW MHC,

� The conversion of EIOW into a stock insur-ance company called “Employers InsuranceCompany of Wausau,” and

� The issuance of 100% of the shares of votingstock of Converted EIOW to EIOW MHC.

This is the only matter that you are being askedto vote on. When the first step is completed,EIOW will be structured as shown in the sectiontitled “The Restructuring” in the PolicyholderInformation Statement.

WHAT IS EIOW PROPOSING?



HOW DOES EIOW PROPOSE TO RESTRUCTURE?


Global Transaction — The second step involves, in part, two relatedmergers, resulting in the integration of ConvertedEIOW into the Liberty Mutual Holding Companycorporate structure. As a result, EIOW MHC willbe merged out of existence, and Converted EIOWwill become a subsidiary of Liberty MutualHolding Company. These mergers are described inmore detail in the Policyholder InformationStatement, and are collectively referred to as the“MHC Merger.” As part of the Global Transaction,Reorganized LMIC and Reorganized LMFICwill also become subsidiaries of LibertyMutual Holding Company.

You will not be voting on the MHC Merger.Unless the Wisconsin Insurance Commisionerrequests such a vote, members of EIOW MHCwill not vote to approve the MHC Merger.

The Global Transaction also consists of othertransactions involving the mutual holding company reorganizations of LMIC and LMFIC.Ultimately, EIOW, LMIC and LMFIC will becomewholly-owned, indirect stock subsidiaries ofLiberty Mutual Holding Company.

The proposed structure following the GlobalTransaction is illustrated as follows:

Subsidiaries Subsidiaries

LMHC MASSACHUSETTSHOLDINGS INC.(a Massachusetts stock

holding company)

LIBERTY MUTUAL HOLDING COMPANY

(a Massachusetts mutualholding company)

LIBERTY MUTUALINSURANCE COMPANY

(a Massachusetts reorganized stockinsurance company)

EMPLOYERS INSURANCECOMPANY OF WAUSAU(a Wisconsin reorganized stock

insurance company)

LIBERTY MUTUAL FIREINSURANCE COMPANY(a Massachusetts reorganized

stock insurance company)

LIBERTY MUTUAL GROUP INC.

(a Massachusetts stockholding company)

100% of Voting Stock

100% of Voting Stock

100% of Voting Stock100% of Voting Stock 100% of Voting Stock



IMPORTANT QUESTIONS AND ANSWERSAQ&

The Restructuring

Q. Why is EIOW proposing torestructure?

A. For the following reasons, EIOW’s Board ofDirectors believes that the proposedRestructuring affords needed financial flexibilityto grow and compete more effectively in anincreasingly challenging national and global busi-ness and economic environment:

EIOW, LMIC and LMFIC currently are mutualinsurance companies. Because they are mutualcompanies, they cannot issue stock and theirability to issue debt is limited. By contrast,most major competitors of EIOW, LMIC andLMFIC are stock insurance companies andthey are able to issue stock either to raise capi-tal or to grow by using stock as a currency foracquisitions.

Although we have no plans to do so today, thecombination of the Restructuring and theGlobal Transaction will allow Liberty MutualHolding Company to raise additional capitalthrough the issuance of no more than 49% (alimit required by Wisconsin and Massachusettslaw) of the total equity of the intermediateholding companies as well as the insurancecompanies themselves.

The Liberty Mutual Group has had a successfulhistory of growth through affiliation with othermutual insurers. The mutual holding companystructure will enhance the ability of EIOW, LMICand LMFIC to continue to grow throughaffiliations and mergers with other mutualinsurers and mutual holding companies.

We believe that the concept of mutuality isimportant to our members and our business.That is why we structured the Restructuring topreserve mutuality. Converted EIOW will beowned and controlled by EIOW MHC, whichretains mutuality for Converted EIOW’s policy-holders as members of EIOW MHC. Similarly,after the Global Transaction, EIOW, LMIC andLMFIC ultimately will be owned and controlledby Liberty Mutual Holding Company, whichretains mutuality for Converted EIOW’s policy-holders as members of Liberty Mutual HoldingCompany and for the policyholders of LMIC andLMFIC as well.

EIOW, LMIC and LMFIC have considered anumber of strategic alternatives, including demu-tualization. We selected the mutual holding com-pany structure because, in our judgment, it rep-resents the best strategic alternative, after takingaccount of policyholder interests, capital flexibili-ty, tax efficiencies and other factors, includingpreservation of mutuality.

Q. How does the proposedRestructuring compare to a demutualization?

A. The proposed Restructuring is different froma demutualization.

A demutualization would require conversion ofthe mutual insurance company to a stockinsurance company. EIOW’s members wouldexchange their equity rights for compensationin the form of common stock based on thevalue of EIOW.


IMPORTANT QUESTIONS AND ANSWERS AQ&


EIOW is not proposing that it demutualize,although demutualization is an available optionin the future for EIOW MHC after theRestructuring is approved.

Q. Will I receive any compensation in connection with the proposedRestructuring?

A. No. You will not receive any stock, cash orother compensation. You will, however,receive equity rights in the new mutual hold-ing company in exchange for your equityrights in EIOW.

Q. Are there any plans to issue stock in connection with either the proposed Restructuring or the Global Transaction?

A. No. There are no plans as of today to issuestock if the proposed Restructuring or theGlobal Transaction are completed. But, oneresult of the proposed Restructuring and theGlobal Transaction is that the subsidiaries ofEIOW MHC or Liberty Mutual HoldingCompany (as applicable) could issue stock inthe future, should their respective boards ofdirectors determine that issuance of stock isnecessary or appropriate.

Q. Will the proposed Restructuringor the Global Transaction adverselyaffect the financial condition ofEIOW, LMIC or LMFIC?

A. No. The audited combined surplus (networth) of EIOW, LMIC and LMFIC and theirother affiliated companies was approximately$7.9 billion, as of December 31, 2000. Theirindividual and combined financial conditionwill not be affected by either the proposedRestructuring or the Global Transaction. Infact, we expect they will continue to enjoy thesame strong financial ratings after theRestructuring and the Global Transaction areconsummated.

Q. Will there be any changes in management or the board of directors as a result of either the proposed Restructuring or the Global Transaction?

A. The directors of EIOW MHC andConverted EIOW will initially be the same asthe directors that currently serve as directorsof EIOW. The officers of EIOW MHC andConverted EIOW will be the same as the offi-cers that currently serve as officers of EIOW.Following the Global Transaction, however,the directors of Liberty Mutual HoldingCompany will be the same as the directors thatcurrently serve as directors of LMIC. Thedirectors of the two intermediate stock holding




companies, including the one which willdirectly own 100% of the shares of votingstock of Converted EIOW, will consist princi-pally of members of the current managementof LMIC. The officers of Converted EIOW willremain unchanged. We do not expect thesechanges to have a dramatic impact. Seven ofthe ten EIOW board members have been mem-bers of LMIC’s senior management sinceEIOW’s affiliation with LMIC three years ago.

Q. Are the proposed Restructuringand Global Transaction subject to theapproval of the Wisconsin InsuranceCommissioner?

A. Yes with respect to the proposedRestructuring and the portion of the GlobalTransaction involving the MHC Merger. EIOW’sproposed Restructuring is currently beingreviewed by the Wisconsin InsuranceCommissioner.

The Wisconsin Insurance Commissioner hasscheduled hearings on the proposedRestructuring. The hearings are scheduled tocommence at 1:00 p.m. Central Time,October 16, 2001, to be held at The HiltonMadison Monona Terrace, 9 E. Wilson Street,Madison, Wisconsin. (see Notice of PublicHearing for more details)

Under Wisconsin law, the Wisconsin InsuranceCommissioner will approve the Restructuring ifshe finds that EIOW has complied with therequirements of the Wisconsin mutual holdingcompany law and the members of EIOW havevoted to approve the transactions contemplatedby the Plan.

Upon consummation of the Restructuring,EIOW MHC and Converted EIOW will submitan application to the Wisconsin InsuranceCommissioner for approval of the MHCMerger, which is one of the transactions consti-tuting the Global Transaction. The MHCMerger involves two related mergers, resultingin the integration of Converted EIOW into theLiberty Mutual Holding Company corporatestructure. The Wisconsin InsuranceCommissioner will review the application,including the MHC Merger Agreement, a formof which is attached as Annex B to thePolicyholder Information Statement, and hold apublic hearing before approving the MHCMerger in accordance with Wisconsin law.

Q. May I attend the public hearing?

A. Yes. All policyholders, directors and offi-cers of EIOW have the right to appear and beheard at the public hearing. You also may sub-mit a written statement or comments to beconsidered at the hearing. For more informa-tion please read the Notice of Public Hearing.

Q. What are the implications if theRestructuring is not approved?

A. We believe that without the ability to mergeeasily with other mutual companies, and thefinancial flexibility and enhanced access to capi-tal afforded by the Restructuring, EIOW will be




increasingly challenged to maintain its positionas an industry leader. However, if theRestructuring is not approved, your policy rightsand benefits will not be affected and your insur-ance premiums will not, as a result, increase.

What the Restructuring Means to You

Q. Will this Restructuring cost me anything?

A. No, this Restructuring will not cost you any-thing, nor are there any expected tax conse-quences to you.

Q. How will this Restructuring affect my contract rights under my insurance policy?

A. The Restructuring will not affect your con-tract rights under your insurance policy in anyway. The Restructuring will not reduce thecoverage, benefits, or other rights underyour insurance policy, nor will it increaseyour premiums regardless of whether ornot it is approved.

Q. What are my current equity rights as a member of EIOW?

A. Your equity rights as a member of EIOWinclude the right to vote for directors of EIOW,

to share in its surplus in the highly remote andunlikely event that EIOW is liquidated or dis-solved and, if and when the Board of Directorsdetermines it is in the best interests of EIOW, todemutualize. As a member of EIOW, your equityrights relate exclusively to EIOW and you haveno voting or other equity rights with respect toeither LMIC or LMFIC.

Q. What will my new equity rights be as a member of EIOW MHC?

A. Your equity rights as a member of EIOWMHC include the right to vote for its directorsand to share in its surplus in the unlikely eventthat it is liquidated or dissolved. Your equityrights will also entitle you to compensation ifEIOW MHC ever demutualizes, but there are noplans to demutualize EIOW MHC.

Q. How will my voting rights beaffected by the Restructuring and the Global Transaction?

A. Your voting rights will be affected as follows:

Currently, you are able to vote for the directorsof EIOW, the insurance company from whichyou purchased an insurance policy. If theRestructuring is approved, you will become amember of EIOW MHC, and will be able to votedirectly for its directors, but you will no longerbe able to vote for the directors of ConvertedEIOW. Directors of Converted EIOW will beappointed by EIOW MHC, the sole shareholderof Converted EIOW.




If the Global Transaction occurs, all of thepolicyholders of EIOW, LMIC and LMFIC willbecome members of Liberty Mutual HoldingCompany. Those members then will be able tovote directly for the directors of Liberty MutualHolding Company, but no longer will be able tovote for the directors of the insurance companythat issued their insurance policy.

Although the Global Transaction will result inyour voting rights being with a larger and poten-tially stronger company, it will have the effect ofdiluting your voting rights because policyholdersof LMIC and LMFIC will also be members of,and have voting rights in, Liberty MutualHolding Company.

Q. If the Global Transaction isapproved, how will my rights to adistribution in the event of a futuredemutualization be affected?

A. As explained above, there are no presentplans for a demutualization. However, if a demu-tualization should occur in the future and youare an eligible member of Liberty MutualHolding Company at that time, you will be enti-tled to receive compensation in the form ofstock, cash or other consideration for the valueof Liberty Mutual Holding Company under a for-mula approved by the Massachusetts InsuranceCommissioner as being fair and reasonable.

What Benefits Do I Receive?

Q. What benefits are anticipated if the proposed Restructuring is approved?

A. The main benefit you can expect if the pro-posed Restructuring is approved is continuationof EIOW as a leading insurance company withina mutual holding company structure withenhanced corporate and financial flexibility.

Q. What benefits can I expect if theGlobal Transaction is approved?

A. Building upon the benefits of theRestructuring, the Global Transaction will com-bine three large and separate mutual insurancecompanies—EIOW, LMIC and LMFIC—under asingle mutual holding company owned by itsmembers. The mutual holding company struc-ture will provide enhanced financial flexibilityand a simpler, more efficient organizationalstructure.

The Voting Process

Q. Why should I vote FOR the Plan?

A. EIOW’s Board of Directors unanimously rec-ommends that you vote FOR the Plan as itbelieves that the financial and structural flexibili-ty afforded by the Restructuring, combined withthe preservation of mutuality, is fair and equi-table to EIOW’s policyholders and expected to




benefit EIOW’s policyholders. This Restructuringand the Global Transaction constitute one of themost important events in EIOW’s and the LibertyMutual Group’s history. We strongly urge yoursupport of the Plan. Prior to voting, however,you should carefully review the “SpecialConsiderations and Risks” sections of thePolicyholder Information Statement.

Q. What do I need to do to vote?

A. Simply mark one of the FOR or AGAINSTboxes on the enclosed proxy, then sign andreturn it in the enclosed envelope. Proxies mustbe received by 5:00 p.m., October 20, 2001, inorder to be counted. You may appoint individu-als other than designated officers of EIOW tocast your vote by proxy. However, only proxiesthat meet the standards established by theWisconsin Insurance Commissioner will be valid.If you prefer, you may attend and vote at theSpecial Meeting to be held at 10:00 a.m. CentralTime on November 20, 2001, at EIOW’s officesat Westwood Center, 1800 W. Bridge Street,Wausau, Wisconsin.

Q. What must happen for the Plan to be approved?

A. The Plan must be approved by a majorityvote of the eligible policyholders who vote(either in person or by proxy), and by theWisconsin Insurance Commissioner.

Q. What will happen if the Plan is not approved?

A. If the Plan is not approved, EIOW willremain a mutual insurance company. Whether ornot the Plan is approved, the benefits and otherrights under your insurance policy will not bereduced, nor will your insurance premiums beincreased as a result.

Q. What happens if EIOW’s proposedRestructuring into a mutual holdingcompany structure is approved, but the Global Transaction is not approved?

A. If the Global Transaction is not approved,but EIOW’s proposed Restructuring isapproved, EIOW will become a stock insur-ance company owned by EIOW MHC, andyour equity rights in EIOW will be replacedwith equity rights in EIOW MHC. In that case,the potential benefits of the Global Transactionwill not be achieved.

Questions? Call our EIOW MHC Information Line toll-free at 800-442-4295.


OUR CORPORATE MISSION

ABOUT WAUSAU

OVER THE YEARS THE WAUSAU STORY HAS COME

TO BE TOLD THROUGH THIS HUMBLE DEPOT. IT HAS

BECOME SYNONYMOUS WITH OUR COMPANY

AND OUR HOMETOWN. WE DIDN'T INVENT

THE DEPOT; IT ACTUALLY EXISTS. THE DEPOT

EMBODIED IN OUR CURRENT LOGO SYMBOLIZES

EVERYTHING WAUSAU STANDS FOR: HONESTY,

HARD WORK, SMALL-TOWN FRIENDLINESS,

EXCEPTIONAL SERVICE.

IT'S NOT ADVERTISING HYPE; IT'S HOW

WAUSAU CONDUCTS ITS BUSINESS. THE DEPOT

REMINDS US THAT NO MATTER HOW MUCH

THINGS CHANGE, SOME BASIC PRINCIPLES ENDURE.

EMPLOYERS INSURANCE OF WAUSAUA Mutual Company

EIOW QA

U.S. Policyholders should mail their completed proxies to:

EMPLOYERS INSURANCE OF WAUSAU A Mutual CompanyP.O. Box 8245Edison, NJ 08818-9085

Canadian Policyholders should mail their completed proxies to:

EMPLOYERS INSURANCE OF WAUSAU A Mutual CompanyP.O. Box 1 STN LCD MaltonMalton, ON L4T 9Z9

Policyholders who reside outside the U.S. and Canada should mail their completed proxies to:

EMPLOYERS INSURANCE OF WAUSAU A Mutual CompanyDept. AA247P.O. Box 85995LondonGreat BritainEC50 6AA

You may call EIOW at the following numbers:

U.S. and Canadian Policyholders: 800-442-4295

Policyholders using a TDD (telephone device for the deaf): 888-789-7703

Member of the Liberty Mutual Group

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EMPLOYERS INSURANCE OF WAUSAU A Mutual Company ... · employers insurance of wausau a mutual company ... proposed restructuring employers insurance of wausau and the ... employers