S&P Announces: Associated Industries Insurance Co. 'Bpi' Ratings Affirmed.

Business Editors

NEW YORK--(BUSINESS WIRE)--Nov. 25, 2003

On Nov. 25, 2003, Standard & Poor's Ratings Services affirmed its 'Bpi' counterparty credit and financial strength ratings on Associated Industries Insurance Co. (AIIC).

The ratings reflect the company's marginal capitalization, weak operating performance, and extremely high geographical and product line concentrations.

Major Rating Factors

-- AIIC's capital adequacy is marginal, as demonstrated by a

Standard & Poor's capital adequacy ratio of 56.2% as of

year-end 2002. The company's leverage (net premium plus

liabilities/surplus) is 7.76x, which is higher than its peers.

-- Operating performance has been weak, with a Standard & Poor's

earnings adequacy ratio of 22.8% at year-end 2002. In

addition, the company has volatile returns, with the ROA

ranging from negative 0.9% in 1999 to positive 0.8% in 2002.

-- AIIC's geographic and product line concentrations are

extremely high, exposing it to economic, legal, and regulatory

risks. In 2002, more than 99% of its business was written in

Florida. Moreover, the company writes only workers'

compensation insurance.

Based in Boca Raton, Fla., AIIC writes only worker's compensation insurance and distributes its products primarily through independent general agents. The company, which began business in 1954, is licensed in Alabama, Florida, Georgia, and Mississippi. The parent company of AIIC is Associated Industries Insurance Services Inc.

The company is rated on a stand-alone basis.

Ratings with a 'pi' subscript are insurer financial strength ratings based on an analysis of an insurer's published financial information and additional information in the public domain. They do not reflect in-depth meetings with an insurer's management and are therefore based on less comprehensive information than ratings without a 'pi' subscript. Ratings with a 'pi' subscript are reviewed annually based on a new year's financial statements, but may be reviewed on an interim basis if a major event that may affect the insurer's financial security occurs. Ratings with a 'pi' subscript are not subject to potential CreditWatch listings.

Ratings List
Associated Industries Insurance Co.
  Counterparty credit rating                Bpi
  Financial strength rating                 Bpi

Complete ratings information is available to subscribers of RatingsDirect, Standard & Poor's Web-based credit analysis system, at www.ratingsdirect.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com; under Credit Ratings in the left navigation bar, select Credit Ratings Lists. Standard & Poor's ratings appear alphabetically.