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FOR IMMEDIATE RELEASE
OLDWICK, N.J. - JUNE 29, 2004 12:00 AM (EDT)
A.M. Best Co. has affirmed the financial strength ratings of A (Excellent) of Colony Insurance Group (Colony) (Richmond, VA), Argonaut Insurance Group (San Antonio, TX) and Rockwood Casualty Group (Rockwood, PA). Argonaut Insurance Group is comprised of Argonaut Insurance Company (California) and four pooled affiliates. Additionally, A.M. Best has affirmed the financial strength rating of A- (Excellent) of Argonaut Great Central Insurance Company (AGC) (Peoria, IL) .The outlook for all ratings is stable, except for Argonaut Insurance Group, which has a negative outlook. All of the above companies are subsidiaries of Argonaut Group, Inc. [NASDAQ: AGII] (San Antonio, TX).
The affirmation of Colony's rating reflects its consistently favorable operating profitability and improved market profile. With its focus on underwriting profit and consistency, Colony maintains a significant loss ratio advantage over its peer surplus lines writers. While A.M. Best is concerned with Colony's overall capitalization in light of moderate adverse loss reserve development and significant growth in recent years, Argonaut Group, Inc. raised a significant amount of capital in 2003 and intends to infuse sufficient capital into Colony to support expected future growth.
The affirmation of Argonaut Insurance Group's rating reflects the improved operating performance of its continuing business segments. Management has refocused its ongoing risk management segment in more profitable markets, reduced investment leverage, improved claim management operations and produced good accident year operating results over the last few years. However, A.M. Best remains concerned about the continued impact of the Group's discontinued legacy business on overall financial results. Adverse loss reserve development related to asbestos and environmental (A&E) and older workers' compensation reserves continued to be a drag on earnings in 2003, offsetting the Group's more profitable business again as it has over the previous several years. While the current management team, which started in 2000, eliminated many of these legacy issues, they continue to be a drag on the financial results of Argonaut Insurance Group. Should this continue in 2004, its rating may be downgraded.
The affirmation of Rockwood Casualty Group's rating reflects its strong capitalization, consistently profitable operating performance and good market profile as the leading workers' compensation writer of the Pennsylvania coal mining industry.
The affirmation of AGC's rating reflects its improved profitability and its investment portfolio, which is no longer exposed to the volatile equity market. The affirmation also considers the rating of Argonaut Insurance Company, AGC's immediate parent. On the negative side, the company has been rapidly growing due to the expansion of Trident Insurance Services, Argonaut Group, Inc.'s public entity subsidiary whose business is currently written on AGC's paper and whose capital adequacy has deteriorated considerably. However, A.M. Best expects Argonaut Group, Inc. to resolve this capitalization issue via additional internal reinsurance or a reallocation of capital.
The financial strength rating of A (Excellent) has been affirmed with a negative outlook for Argonaut Insurance Group and its following affiliates:
- Argonaut Insurance Company
- Argonaut-Midwest Insurance Company
- Argonaut-Northwest Insurance Company
- Argonaut-Southwest Insurance Company
- Georgia Insurance Company
The financial strength rating of A (Excellent) has been affirmed with a stable outlook for Rockwood Casualty Group and its following affiliates:
- Rockwood Casualty Insurance Company
- Somerset Casualty Insurance Company
The financial strength rating of A (Excellent) has been affirmed with a stable outlook for Colony Insurance Group and its following affiliates:
- Colony Insurance Company
- Colony National Insurance Company
- Colony Specialty Insurance Company
The financial strength rating of A- (Excellent) has been affirmed with a stable outlook for Argonaut Great Central Insurance Company.
A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source.