America Service Group Announces Expected Increase in Loss Contract Reserve Related to Maryland Contract.

BRENTWOOD, Tenn. -- America Service Group Inc. (NASDAQ:ASGR) announced today that it expects to increase its reserve for loss contracts in a range of approximately $1.0 million to $1.5 million in the second quarter of 2005, based upon the financial performance in May and month-to-date in June of the Maryland Department of Public Safety and Correctional Services (Maryland DPS) contract.

The Maryland DPS contract commenced on July 1, 2000 and expires June 30, 2005. The contract is non-cancelable by the Company and the Company is fully at risk for increases in expenses related to hospitalization and outpatient costs under the terms of the contract. During 2004, the Company had previously reserved $12.8 million in the aggregate to cover expected losses and allocated overhead under the Maryland DPS contract over the final thirteen months of its operation. Through April 2005, actual losses incurred under the contract had approximated the estimated amounts. However, hospitalization expenses incurred under the Maryland DPS contract increased significantly in May from previous monthly levels. This increase has continued into June and has resulted in the Company now expecting to incur an additional $1.0 million to $1.5 million in losses under the contract, as compared to previous estimates.

The increase in expected losses under the Maryland DPS contract of $1.0 million to $1.5 million through expiration of the contract on June 30, 2005, will be recorded in the second quarter of 2005 and will be classified in discontinued operations.

America Service Group Inc., based in Brentwood, Tennessee, is the leading provider of correctional healthcare services in the United States. America Service Group Inc., through its subsidiaries, provides a wide range of healthcare and pharmacy programs to government agencies for the medical care of inmates.

This press release may contain "forward-looking" statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including the Company's beliefs and expectations of future performance, the effects of any stock split and may be indicated by words or phrases such as "anticipate," "estimate," "plans," "expects," "projects," "should," "will," "believes" or "intends" and similar words and phrases. As such, they involve risk and uncertainty that actual results may differ materially from those projected in the forward-looking statements including, without limitation, risks related to the following: the Company's ability to retain existing client contracts and obtain new contracts; whether or not government agencies continue to privatize correctional healthcare services; the possible effect of adverse publicity on the Company's business; increased competition for new contracts and renewals of existing contracts; the Company's ability to execute its expansion strategies; the Company's ability to limit its exposure for catastrophic illnesses and injuries in excess of amounts covered under contracts or insurance coverage; the outcome of pending litigation; and the Company's dependence on key personnel. A discussion of these important factors and assumptions regarding the statements and risks involved is contained in the Company's annual report on Form 10-K and other filings with the Securities and Exchange Commission. These forward-looking statements are made as of the date of this release. The Company assumes no obligations to update or revise them or provide reasons why actual results may differ.