A M Best Removes Majestic Insurance's A-rating, ''Under Review with Negative Outlook'' and Assigns a Secure B++ Financial Strength Rating with a Stable Outlook.

SAN FRANCISCO -- On May 3, 2005, A M Best announced that it has assigned a secure Financial Strength Rating of B++ (Very Good) with a stable outlook from a rating of "A-u" (Excellent, under review with negative outlook). The outlook reflects Majestic's supportive capitalization at the current rating and favorable overall operating results, said Best.

This rating action "reflects Majestic Insurance Company's profitable operating results over the last five-year period, improved near term underwriting fundamentals and the company's expertise within its specialty workers' compensation insurance product offering." Majestic had earned and sustained an A M Best rating of "A-" since the initial rating was issued in 1995. A M Best noted that "offsetting these strengths is the company's reduced risk-adjusted capitalization...driven by the occurrence of adverse loss reserve development..." A M Best also noted that despite reporting solid operating gains in 2004, "accounting corrections of prior year errors and the recording of excess statutory loss reserves," a California requirement to maintain a minimum of 65% loss ratio, "resulted in surplus reduction for the calendar year."

"We are disappointed with the rating, but pleased to be removed from the 'Under Review with Negative Implications' List," said John Sullivan, Majestic's President and CEO. "Our success and continued growth in the dynamic California workers' compensation marketplace over the last five years reflects strong demand for Majestic's specialty products and services -- this demand strained our Premium to Surplus leverage ratios and A M Best required immediate infusion of capital to retain our rating. Unfortunately, we were unable to meet their demands. We will continue our search for additional capital in 2005 and will actively pursue A M Best's reconsideration. We are pleased that A M Best recognizes that we continue to be a profitable and financially strong company."

"2004 was the best earning year in our history and our first quarter 2005 results indicate that our adverse development appears to have turned around. Furthermore, cash flow in 2004 and 1st Qtr. 2005 was very positive, another indication of the company's financial strength. Majestic's financial position was negatively impacted by a one-time accounting correction of prior year errors relating to the calculation of Earned but Unbilled (EBUB) premium receivables and corrected claims handling reserve overstatement ceded to a quota share treaty; Majestic identified the oversight and believes these factors are non-recurring in nature." Sullivan also added, "We are confident that with the quality and consistency of our performance and the business value we offer, we have established a strong reputation as a disciplined underwriter and service provider. We are committed to bringing our rating back to A-."

For more information about Majestic Insurance Company, visit the company's website at www.majesticinsurance.com.

Majestic Insurance Company is a wholly-owned subsidiary of Embarcadero Insurance Holdings, Inc. Majestic writes workers' compensation insurance under the US Longshore and Harbor Workers' Compensation Act and various state acts. Majestic is licensed in 15 states and operates primarily in California, Oregon, Washington, Nevada, Hawaii and Alaska.