Royal Bank of Canada -RBC- Liberty Life Unit Loses First Round of $35 Million Arbitration with Former Business Partner American Homeowners Association -AHA-

Business Wire, June 30, 2004

STAMFORD, Conn. -- A 3-member arbitration panel has ordered Liberty Life Insurance, a wholly owned subsidiary of Royal Bank of Canada (RBC) (RY on TSX & NYSE), to pay damages based on breach of contract to AHA Group, Inc. (f/k/a RealHome.com, Inc.), a former business partner. AHA Group, a U.S. based holding company, owns the leading homeowner membership group in the U.S., the American Homeowners Association (AHA)(R). The panel found that Liberty Life, "by its actions, materially breached and, in effect, unilaterally terminated" an exclusive Marketing and Services Agreement "without justification and to the detriment of" AHA Group. The amount of the award, which was in the low seven-figures, was not disclosed.

"This finding confirms from a legal perspective that what Liberty and Royal Bank of Canada had done throughout the process of Royal Bank's acquisition of Liberty Life caused the breach of significant contractual promises to our company, resulting in significant damage," said Richard J. Roll, Founder and CEO of American Homeowners Association. "It is satisfying to have this first round successfully behind us but now Liberty and RBC must account for the damages to our company, shareholders, and other individuals. We'll have to continue to press for relief until the full damages resulting from RBC's actions are recovered," Roll stated. Additional claims for recovery of damages have already been filed by AHA under the rules of the American Arbitration Association.

The $35 million breach of contract claim by RealHome.com, Inc. was originally announced in November, 2001. In addition to its acquisition of Liberty Life Insurance of Greenville, SC, RBC bought regional brokers Dain Rauscher Wessels of Minneapolis and Tucker Anthony Sutro of Boston, which was folded into Dain Rauscher to form the ninth largest securities brokerage in the U.S. RBC also acquired Centura Banks of Rocky Mount, NC and Prism Mortgage in Chicago, IL. As a result of these acquisitions, RBC Financial Group now has over 10,000 employees in the United States.

"This finding clearly raises the question of whether U.S. regulators should permit further acquisitions of U.S. insurance, banking, or securities companies by RBC until these breaches and any other comparable matters have been fully scrutinized by them," said Mr. Roll, who has previously testified before both the U.S. Senate and House Banking Committees in regard to the need for banking reforms which have since been passed into law.

RBC has continued its foray into the insurance business in the U.S., with recent announcements that it is continuing to focus on introducing new products and services, expanding into new markets, making acquisitions, and expanding its travel insurance business into the U.S. through travel agents in 46 states and the District of Columbia. RBC's Liberty Life Insurance continues to remain one of several institutional shareholders of AHA Group, Inc., which is based in Stamford, CT.

RBC disclosed in September 2003 that PricewaterhouseCoopers LLP resigned as one of their auditors because of issues relating to its independence under U.S. rules. RBC recently received a subpoena from the U.S. Securities and Exchange Commission related to PricewaterhouseCoopers' resignation, the provision of non-audit services by RBC's auditors and RBC's policies and compliance procedures regarding auditor independence. RBC stated it is in the process of responding to the SEC.