A.M. Best Takes Various Rating Actions on American National Insurance Company and Its Subsidiaries.

OLDWICK, N.J. -- A.M. Best Co. has affirmed the financial strength rating (FSR) of A+ (Superior) and assigned an issuer credit rating (ICR) of "aa-" to American National Insurance Company (American National) (Texas) (NASDAQ: ANAT), the lead company within the American National Group (ANG). The outlook for the FSR has been revised to negative from stable, and the ICR has been assigned a negative outlook. Additionally, A.M. Best has affirmed the FSR of A (Excellent) and assigned an ICR of "a" to each of the following life insurance subsidiaries of American National: American National Life Insurance Company of Texas (Texas), Farm Family Life Insurance Company (Farm Family Life) (New York), Garden State Life Insurance Company (Texas) and Standard Life and Accident Insurance Company (Oklahoma). The outlook for these ratings is stable.

The ratings of American National reflect its strong level of risk-adjusted capitalization, positive aggregate statutory net operating gains, diversified product and distribution profile and well-managed asset/liability program. The ratings of the life subsidiaries reflect the favorable financial strength and support from their parent. American National's established market position in the home service business, combined with other core life lines of business, has contributed positive statutory operating earnings in the majority of the last five years. The company's business profile has been enhanced by the establishment of a significant presence in the independent marketing organization distribution channel, the development of new life and annuity product offerings and the acquisition and successful assimilation of Farm Family Life.

Partially offsetting these strengths are the lack of sustained growth in statutory capital and surplus funds over the past five years; an increased level of interest-sensitive liability reserves due to fixed annuities; and low operating returns relative to American National's overall capital and surplus base. The rating and outlook on the lead company, American National, acknowledge the group's ongoing reliance on the property/casualty earnings, which are more volatile. Despite a mixed operating earnings trend, the high level of stockholder dividends has constrained the growth of statutory capital and surplus funds. While A.M. Best acknowledges that ANG currently has a sufficient capital base to support new business growth, in the long term, it will be important to rebuild and maintain its statutory earnings capacity as the annuity line and other business profile initiatives develop and mature.

A.M. Best has also affirmed the FSR of A+ (Superior) and assigned an ICR of "aa-" to American National Property and Casualty Group (ANPAC) (Missouri) and its following members: American National Property and Casualty Company (Missouri), American National General Insurance Company (Missouri), American National Lloyds Insurance Company (Texas) and American National County Mutual Insurance Company (Texas) (due to its 100% reinsurance agreement with the American National Property and Casualty Company). The outlook for these ratings is negative.

The ratings of ANPAC reflect its adequate capitalization, well-established regional market presence and improved operational performance, as well as the financial commitment of its Superior-rated life/health parent, American National.

Somewhat offsetting these positive rating factors are the group's elevated but improving underwriting leverage and its catastrophe management practices, which expose its earnings to weather-related losses. This was evident in 2005 when Hurricane Katrina losses significantly eroded ANPAC's profitability for the year. The group's rating outlook is based on the execution risk associated with ANPAC returning to its historical levels of sustained profitability while it simultaneously manages its significant exposures to catastrophe risk in the Gulf Coast states.

A.M. Best has also affirmed the FSR of A (Excellent) and assigned an ICR of "a+" to the Farm Family Insurance Companies (Farm Family) (New York) and its two pooled property/casualty member companies, Farm Family Casualty Insurance Company (New York) (98%) and United Farm Family Insurance Company (New York) (2%). The outlook for the FSR has been revised to stable from positive, and the ICR has been assigned a stable outlook.

The ratings of Farm Family Insurance Companies are based on the consolidated results of Farm Family Casualty Insurance Company and United Farm Family Insurance Company. These ratings reflect the group's consistently favorable operating earnings, adequate capitalization and well-established market position in the Northeast. The ratings also consider the group's ownership with its Superior-rated life/health parent, American National, and the synergies that are being enhanced with its sister group, ANPAC. Somewhat offsetting these positive factors are the group's elevated but improving underwriting leverage and susceptibility to severe winter storm losses. The group's catastrophe risk management capabilities will be re-evaluated due to the significant impact of Hurricane Katrina on ANPAC's profitability. The group's rating outlook is supported by its sound operating results, solid capital position and the anticipated synergies derived from the business combination with ANPAC.

Concurrently, A.M. Best has affirmed the FSR of A (Excellent) and assigned an ICR of "a" to Pacific Property & Casualty Company (California), an affiliate of American National Property and Casualty Company. The outlook for both ratings is stable.

Finally, A.M. Best has downgraded the FSR to A- (Excellent) from A+ (Superior) and assigned an ICR of "a-" to ANPAC Louisiana Insurance Company (Louisiana). The outlook for both ratings is negative. These actions were taken despite ANPAC's capital infusion of $50 million at the end of 2005 and rate increases totaling over 33% in early 2006, as well as the purchase of additional reinsurance coverage in 2006 that lowers the company's retention levels in future events. While the risk management strategy has been improved to better manage new exposures, ANPAC Louisiana Insurance Company remains severely challenged in implementing measures that also mitigate its current exposures effectively. A.M. Best will continue to monitor this situation as it develops.

For a complete list of American National Insurance Company and its affiliates' FSRs and ICRs, visit www.ambest.com/press/020804americannational.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.