Argonaut Group Announces Renewal Rights Agreement with XL America for Substantial Portion of Risk Management Business.

SAN ANTONIO -- Argonaut Group, Inc. (NASDAQ:AGII), a national underwriter of specialty insurance products in niche areas of the property and casualty market, announced today that it has agreed to sell the renewal rights to a substantial portion of Argonaut Insurance Company's Risk Management book of business to XL America, Inc., the holding company for XL Capital's (NYSE:XL) ("XL") U.S. operations. Under the agreement, XL will begin offering renewal quotes to selected Argonaut Risk Management clients beginning immediately. In addition, customers renewing with XL will continue to have access to Argonaut's specialized claims management and loss control services under an agreement reached by XL with Argonaut Claim Services, Ltd.

Over the past five years, Argonaut Group has transformed itself from what was primarily a monoline workers compensation underwriter into a national specialty underwriter operating in several niche segments: Excess and Surplus, Select Markets, and Public Entity. Through organic growth and key acquisitions during this period, Argonaut has enhanced its profitability substantially and at the same time increased the scale and diversity of its product and service offerings.

Argonaut Group President and Chief Executive Officer, Mark E. Watson III, commented, "As a national specialty underwriter, our goal is to be a market leader in each of the niche markets we serve. Although the restructuring of the Risk Management Segment over the past several years has produced a solid book of diversified and profitable business, we have chosen to focus on the more profitable and growth oriented segments of our business as we continue to expand our national presence as a specialty underwriter."

"Our decision to sell the business does not alter our commitment to provide the quality risk management service that our customers value. We look forward to working with XL to ensure both a smooth transition and the continuation of the professional and customized service that our customers have received throughout the years," added Argonaut's Risk Management President John F. Gribbin.

ABOUT ARGONAUT GROUP, INC.

Headquartered in San Antonio, Argonaut Group, Inc. (NASDAQ:AGII) is a national underwriter of specialty insurance products in niche areas of the property and casualty market with assets of approximately $3.1 billion. Through its operating subsidiaries, Argonaut Group offers high quality customer service in programs tailored to the needs of its customers' business and risk management strategies. Collectively, Colony Group, Argonaut Specialty, Rockwood Casualty Group, Argonaut Insurance Company, Great Central Insurance, Grocers Insurance, and Trident Insurance Services underwrite a full line of products in four primary areas: Excess and Surplus, Select Markets (formerly Specialty Commercial), Risk Management, and Public Entity. Information on Argonaut Group and its subsidiaries is available at www.argonautgroup.com.

ABOUT XL AMERICA, INC.

XL America, Inc. is the holding company for all of the U.S. operations of XL Capital Ltd (NYSE:XL). XL Capital Ltd, through its operating subsidiaries, is a leading provider of insurance and reinsurance coverages and financial products to industrial, commercial and professional service firms, insurance companies and other enterprises on a worldwide basis. As of June 30, 2005, XL Capital Ltd had consolidated assets of approximately $53.3 billion and consolidated shareholders' equity of approximately $8.4 billion. More information about XL Capital Ltd is available at www.xlcapital.com.

FORWARD-LOOKING STATEMENTS DISCLOSURE

This news release may contain "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, regulations and regulatory investigations into industry practices, 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.