A.M. Best Places Ratings of Affirmative Insurance Group Under Review with Negative Implications.

OLDWICK, N.J. -- A.M. Best Co. has placed the financial strength rating (FSR) of B+ (Very Good) and the issuer credit ratings (ICR) of "bbb-" of Affirmative Insurance Group (Affirmative), as well as the ICR of "bb-" of Affirmative's parent company, Affirmative Insurance Holdings, Inc. (Affirmative Holdings) (NASDAQ: AFFM) under review with negative implications. All companies are located in Addison, TX. (See below for a detailed list of the ratings.)

The ratings were placed under review following the announcement that Affirmative Holdings has signed a definitive agreement to acquire 100% of the membership units of USAgencies, L.L.C. (USAgencies). USAgencies is a privately held non-standard automobile insurance provider headquartered in Baton Rouge, LA, which includes two insurance company subsidiaries, USAgencies Casualty Insurance Company, Inc. and USAgencies Direct Insurance Company, both currently assigned an NR-1 (Insufficient Data) status by A.M. Best.

While it is anticipated that subsequent to the completion of the acquisition, the combined entities are expected to maintain favorable risk-adjusted capitalization and operating performance relative to Affirmative's current rating level, A.M. Best is concerned with the projected high tangible financial leverage position of Affirmative Holdings.

The acquisition, valued at approximately $200 million, is anticipated to be funded solely from the proceeds of senior debt to be issued by Affirmative Holdings. In addition, certain execution risk exists relative to the overall infrastructure resulting from the combination of the two entities. Accordingly, the ratings will remain under review pending the close of the transaction, at which time A.M. Best expects to downgrade the FSR and the ICRs to a vulnerable level, due to concern with the combined financial leverage.

The FSR of B+ (Very Good) and the ICRs of "bbb-" have been placed under review with negative implications for Affirmative Insurance Group and its following property/casualty affiliates:

* Affirmative Insurance Company

* Insura Property and Casualty Insurance Company, Inc.

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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.