Press Release - JUNE 10, 2002

A.M. Best Raises Rating of American Contractors Insurance Group

Henry Witmer
(908) 439-2200, ext. 5097
Public Relations
Jim Peavy
(908) 439-2200, ext. 5644

Rachelle Striegel
(908) 439-2200, ext. 5378


OLDWICK, N.J. - JUNE 10, 2002
A.M. Best Co. has raised the financial strength rating to A (Excellent) from A- (Excellent) of American Contractors Insurance Group (ACIG), Dallas.

The rating is based on the consolidated financial condition and operating performance of all the insurance entities that comprise ACIG including, American Contractors Insurance Group Ltd., Bermuda, and its core operating subsidiaries, American Risk Funding Insurance Company (ARFIC), Illinois, and American Contractors Insurance Company Risk Retention Group (ACICRRG), Texas.

The rating reflects ACIG's excellent capitalization, conservative operating strategy and strong underwriting results. Also, the rating acknowledges ACIG's consistent profitability evidenced by the five year average pre-tax return on revenues of 17.5%. These positive rating factors are primarily derived from management's niche market expertise including an emphasis on risk management, loss control and claims handling. ACIG writes workers' compensation, commercial general liability, commercial auto and other coverages for 35 construction contractor owners and is very discretionary in admitting new shareholder insureds. Potential insureds must be financially strong and have effective safety programs and good loss records. The bulk of the working layer loss exposures are written on a retrospective rating policy form, thereby reducing

the potential for unfavorable financial results at ACIG. This policy provision also encourages ACIG members to remain focused on appropriate loss control and risk management programs. The rating recognizes the conservative nature of ACIG's investment program, which is characterized by a portfolio dominated by high quality fixed income securities.

Partially offsetting these positive factors are the premium concentration among certain member insureds and the competitive market where ACIG is being challenged to maintain a market presence. However, ACIG is positioning itself to respond to these challenges by restructuring entities within the Group to reduce operating expenses and acquiring additional state licenses. Additionally, it recently added several new construction contractors to its membership. ACIG will remain conservative with member admissions, as its focus is to ensure a low cost, carefully controlled insurance program, which does not outpace the risk management oversight capacity of the organization. A.M. Best expects future operating earnings to remain favorable based on ACIG's focus on geographic and contractor-type diversification, prudent operating strategies and active loss control initiatives as well as its recognized market presence, which results in strong business persistency. Accordingly, the rating outlook is stable.

A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source.

Related Companies

For information about each company, including the Best's Credit Reports, group members (where applicable) and news stories, click on the company name. An additional purchase may be required.