Argonaut Group Announces Closing of Underwriters' Option.

Business Editors

SAN ANTONIO--(BUSINESS WIRE)--Dec. 4, 2003

Argonaut Group, Inc. (Nasdaq:AGII) announced today that it closed the sale of an additional 568,000 shares of its common stock at a public offering price of $15.80 per share in connection with the exercise of the over-allotment option granted to the underwriters of Argonaut Group's recent offering of 4,800,000 shares of common stock that closed on Nov. 3, 2003. The net proceeds to Argonaut Group were $14.93 per share. Argonaut Group intends to contribute substantially all of the net proceeds from the offering to support the continued growth of its business, improve its regulatory capital adequacy ratios and maintain strong financial strength ratings. Argonaut will use the remaining net proceeds for general corporate purposes.

Concurrent with the closing of the underwriters' over-allotment option, HCC Insurance Holdings Inc. (NYSE:HCC) converted $0.9 million of a note payable into additional shares of Argonaut Group common stock at a conversion price equal to $14.93 per share (the price to the public less the underwriting discount). Concurrent with the closing of the recent 4,800,000 share offering, HCC converted $7.9 million of this $12.0 million note payable into shares of Argonaut Group common stock at $14.93 per share. HCC's ownership in Argonaut Group's outstanding common stock on a fully diluted basis remains below 10 percent.

With the recent common stock offering and exercise of the over-allotment option, Argonaut Group has approximately 27.6 million shares of common stock outstanding. Argonaut Group's common stock trades on Nasdaq National Market System under the symbol AGII and closed at a price of $15.84 per share on Dec. 3, 2003.

Raymond James acted as the sole book-running manager for the public offering including the over-allotment option. Copies of the prospectus relating to this offering may be obtained from the offices of Raymond James & Associates, Inc., 880 Carillon Parkway, St. Petersburg, Florida 33716.

The registration statement relating to these securities has been filed with the Securities and Exchange Commission and has been declared effective. This communication shall not constitute an offer to sell or the solicitation of an offer to buy the common stock, which is being made only pursuant to the prospectus relating to the offering, nor shall there be any sale of these securities in any state in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state.

Forward-Looking Statements Disclosure

This news release contains "forward-looking statements" which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The forward-looking statements are based on the Company's current expectations and beliefs concerning future developments and their potential effects on the Company. There can be no assurance that actual developments will be those anticipated by the Company. Actual results may differ materially from those projected as a result of significant risks and uncertainties, including non-receipt of the expected payments, changes in interest rates, effect of the performance of financial markets on investment income and fair values of investments, development of claims and the effect on loss reserves, accuracy in projecting loss reserves, the impact of competition and pricing environments, changes in the demand for the Company's products, the effect of general economic conditions, adverse state and federal legislation and regulations, developments relating to existing agreements, heightened competition, changes in pricing environments, and changes in asset valuations. For a more detailed discussion of risks and uncertainties, see the Company's public filings made with the Securities and Exchange Commission. The Company undertakes no obligation to publicly update any forward-looking statements.

About Argonaut Group, Inc.

Headquartered in San Antonio, Texas, Argonaut Group, Inc. (Nasdaq:AGII) is a national underwriter of specialty insurance products in niche areas of the property & casualty market with assets of approximately $2.6 billion. Through its operating subsidiaries, Argonaut Group offers high quality customer service in programs tailored to the needs of its customers' businesses and risk management strategies. Collectively, Colony Insurance, Rockwood Casualty Insurance Company, Argonaut Insurance Company, Argonaut Great Central, and Trident Insurance Services underwrite a full line of products in four primary areas: Excess and Surplus, Specialty Commercial, Risk Management, and Public Entity. Information on Argonaut Group and its subsidiaries is available at www.argonautgroup.com.