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Letter to the Editor

Insurance Auto Auctions Announces Record Quarterly and Six Month Earnings and Detroit Acquisition

SCHAUMBURG, Ill. -- Insurance Auto Auctions, Inc., a leading provider of automotive salvage and claims processing services in the United States, has announced net earnings for the quarter ended June 30, 2000 of $5.2 million, or $0.44 per diluted share, compared with $4.3 million, or $0.37 per diluted share, for the second quarter of 1999, an increase of 22% in net earnings and a 19% increase in diluted earnings per share.

Net revenues for the three months ended June 30, 2000 increased to $84.3 million versus $82.5 million for the same period a year ago. Gross profit for the quarter increased to $24.2 million, an increase of 7% from $22.7 million for the same quarter a year ago. "Despite a slower than planned start up in the towing business due to high fuel costs and staffing challenges, we were able to meet our goals for the quarter," commented Christopher Knowles, CEO. "The increase in gross profit resulted from a combination of higher volumes and an increase in gross profit per unit as compared to last year."

Revenue from vehicle sales, which reflects the gross proceeds from the sale of purchase agreement vehicles, decreased as a result of the decline in the number of purchase agreement vehicles sold, reflecting the conversion of purchase agreement contracts to the preferred Percentage Plus contract type. Revenues from Purchase Agreement vehicles are recorded at the selling price for the vehicle whereas revenues for Percentage Plus and Fixed Fee Consignment vehicles are recorded as fee income only. This change in mix, while having a negative impact on overall revenues, had a positive impact on fee income and on earnings from operations.

Gross proceeds from the sale of all vehicles, regardless of contract type, increased to $176.7 million in the second quarter of 2000 from $163.7 million in the comparable period in 1999.

In the first six months of 2000, net earnings increased 32 percent to $9.4 million, or 79 cents per diluted share, as compared with $7.1 million, or 62 cents per share, for the same period a year ago. Earnings from operations increased to $15.9 million, up from $12.9 million for the same period a year ago. Gross profit for the first six months was $47.3 million, an increase of 11 percent from $42.6 million for the same quarter a year ago.

The company also announced its third acquisition in 2000. Auto City Auction Recovery, a Detroit, Michigan salvage pool operation has been purchased by IAA and will be integrated into the company's existing operations in the Detroit marketplace. IAA's Detroit facility, with minimal renovations, will be able to accommodate the additional volumes from the acquisition.

Paul Lamoreaux, the owner of ACAR, will join the IAA team and will assist the company in the integration of ACAR into IAA's Detroit operation and the continued growth of IAA in Michigan and the Midwest. "We are extremely pleased that Paul and his organization have joined IAA," Knowles commented. "ACAR is IAA's third acquisition in 2000, clearly indicating we are, once again, back on the expansion track." The previous acquisitions included two facilities in Wisconsin and two facilities in South Carolina.

Launched in January 2000, the roll out of the Company's online Auction Center ( www.iaai-bid.comSM ) has now been substantially completed.

Insurance Auto Auctions, Inc., founded in 1982, a leader in automotive total loss and specialty salvage services in the United States, provides insurance companies with cost-effective, turnkey solutions to process and sell total-loss and recovered-theft vehicles. The Company currently has 54 auction sites across the United States.

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