A.M. Best Affirms Ratings of Argonaut Group Incorporated and Revises Some Outlooks to Stable.

OLDWICK, N.J. -- A.M. Best Co. has affirmed the financial strength rating (FSR) of A (Excellent) and the issuer credit ratings (ICR) of "a" for the Argonaut Insurance Group (Argonaut Insurance) (San Antonio, TX). A.M. Best has also affirmed the ICR of "bbb" of Argonaut Group Incorporated (Argonaut Group) (NASDAQ: AGII) (San Antonio, TX). The outlook for the above ratings has been revised to stable from negative.

In addition, A.M. Best has affirmed the FSRs of A (Excellent) and the ICRs of "a" for Colony Insurance Group (Colony) (Richmond, VA) and Rockwood Casualty Group (Rockwood Casualty) (Rockwood, PA). A.M. Best has also affirmed the FSR of A- (Excellent) and the ICR of "a-" for Argonaut Great Central Insurance Company (AGC) (Peoria, IL). All the above groups are subsidiaries of Argonaut Group. The outlook for these ratings is stable.

At the same time, A.M. Best has affirmed the debt rating of "bb+" on Argonaut Group's outstanding shares of 7.0% Series A mandatory convertible preferred stock, and the ratings of "bbb" on senior debt, "bbb-"on subordinated debt and "bb+" on preferred stock of Argonaut Group's universal shelf registration. This shelf registration has an undesignated amount of securities, which can be issued in accordance with recently adopted Securities and Exchange Commission rules for seasoned issuers and replaces Argonaut Group's previous existing $150 million universal shelf registration. Under the terms of the shelf, Argonaut Group may issue an indeterminate number of senior debt securities, subordinated debt securities, preferred stock, common stock, warrants and units. The outlook for these ratings has been revised to stable from negative. (See link below for a detailed list of ratings.)

The affirmation of the ratings for Argonaut Insurance recognize the improved operating performance of its continuing business segments, favorable market position as a national specialty underwriter with strong relationships with its primary distribution force, as well as the expectation that 2006 earnings will further strengthen overall capitalization. Management's efforts to improve earnings and risk-adjusted capital include the sale of a majority of the group's risk management business in 2005, reduced investment leverage and improved claims management. However, legacy issues in prior years have diluted the results generated by the core business segments. The revised outlook is reflective of Argonaut Insurance's improved core operating results, which in 2005 excludes the impact of various commutations. The revised outlook also reflects the improved quality of capital and A.M. Best's expectation that management will maintain appropriate capital levels in Argonaut Insurance's subsidiaries.

The affirmation of Colony's ratings reflects its consistently favorable operating profitability and improved business profile. With its focus on underwriting profit, Colony maintains a significant loss ratio advantage over the excess and surplus lines composite. This rating also takes into consideration the continued support provided by Argonaut Group in each of the last four years.

The affirmation of Rockwood Casualty's ratings recognizes its consistently profitable operating performance, historically strong operating returns and excellent business profile as the leading workers' compensation writer in the Pennsylvania coal mining industry.

AGC's rating affirmations acknowledge its improved profitability and consider the rating of AGC's immediate parent, Argonaut Insurance Company (California). Partially offsetting these positive rating factors are the company's elevated underwriting leverage measures due to rapid growth.

For a complete list of Argonaut Group Incorporated's FSRs, ICRs and debt ratings please visit www.ambest.com/press/052204argonaut.pdf.

A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com.