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 issuer credit rating (ICR) of "aa-" of American National Insurance Company (American National) (Texas) (NASDAQ: ANAT), the lead life insurer within the American National Group (ANG). The outlook for these ratings remains negative. In addition, A.M. Best has affirmed the FSRs of A (Excellent) and the ICRs of "a" for 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.

A.M. Best notes that American National's risk-adjusted capitalization continues to remain strong with a well-managed asset/liability program and overall growth in its consolidated capital and surplus position. In addition, A.M. Best acknowledges that ANG continues to enjoy a multi-level distribution platform, diversified product portfolio across its life/health and property/casualty operations, good risk management capabilities and additional avenues for income accretion from its non-insurance business segments, which include real-estate, joint ventures and other alternative investments.

However, the continuation of the negative outlook reflects American National's declining trends in its consolidated and stand-alone statutory operating results, mixed operating trends on a GAAP basis and high level of interest sensitive liabilities, which have recorded an increasing level of surrender activity. GAAP results for American National have shown a significant reliance on earnings from its excess capital and surplus funds while the core life business segments continue to face operational challenges. Furthermore, contributions from its property/casualty operations have been mixed and subject to near-term volatility.

The ratings of the life subsidiaries of American National reflect their more than adequate level of risk-adjusted capitalization, financial and management support of American National and their own niche presence in the markets they serve. Partially offsetting these positive rating factors are the operating life subsidiaries' mixed earnings and premium trends and limited growth potential.

A.M. Best has also affirmed the FSR of A+ (Superior) and the ICRs 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) 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 metrics, as well as the financial commitment of its Superior-rated life/health parent, American National.

Somewhat offsetting these positive rating factors are ANPAC's elevated but improving underwriting leverage, below industry, operating performance and the inherent catastrophe risk associated with its property business that continues to expose its earnings to weather-related losses. This was evident in 2006 when geographically disparate catastrophe losses, the third largest in the group's history, significantly eroded ANPAC's profitability for the year. The 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.

Additionally, A.M. Best has affirmed the FSR of A (Excellent) and the ICRs of "a+" of 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 these ratings is stable.

The ratings of Farm Family are based on the consolidated results of its two pooled members. These ratings reflect these companies' consistently favorable operating earnings, adequate capitalization and their well-established market position in the Northeast. The ratings also consider the group's ownership by 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 Farm Family's elevated but improving underwriting leverage and susceptibility to severe winter storm losses.

Farm Family's catastrophe risk management capability was re-evaluated and improved in 2006 from lessons learned from the significant impact of Hurricane Katrina on ANPAC's profitability in 2005. The rating outlook is supported by its sound operating results, solid capital position and the synergies derived from the business combination with ANPAC.

Concurrently, A.M. Best has affirmed the FSR of A (Excellent) and the ICR of "a" of Pacific Property & Casualty Company (California) with a stable outlook, as well as the FSR of A- (Excellent) and ICR of "a-" of ANPAC Louisiana Insurance Company (Louisiana) with a negative outlook. Both companies are affiliates of the American National Property and Casualty Company.

A.M. Best has also downgraded the FSR to A (Excellent) from A+ (Superior) and the ICR to "a" from "aa-" of American National Lloyds Insurance Company (ANPAC Lloyds). The outlook for both ratings is revised to stable from negative.

These rating actions were taken in response to the change in the explicit support ANPAC Lloyds receives from ANPAC. The cancellation of the pre-existing quota share represents a material change in the explicit support afforded to ANPAC Lloyds by ANPAC. Therefore, this action has triggered the removal of ANPAC Lloyds from ANPAC. The group membership had afforded ANPAC Lloyds its prior group modifier and the associated ratings. Going forward, ANPAC Lloyds will be rated on a stand-alone basis.

Founded in 1899, A.M. Best Company is a full-service credit rating organization dedicated to serving the financial services industries, including the banking and insurance sectors. For more information, visit www.ambest.com.