Argonaut Lowered

Argonaut Group Inc.’s property/casualty insurance companies counterparty credit and financial strength ratings have been lowered to “BBB+” from “A” by Standard & Poor’s Ratings Services based on the likely capital strain related to the announced asbestos and environmental study and the company’s declining capitalization. The ratings remain on CreditWatch with negative implications.

S&P’s believes Argonaut will continue to face challenges associated with the execution risk from its recent acquisitions, loss reserve profile of its prior year workers’ compensation book, and a return to its historical underwriting profitability levels. The net outcome of its 2002 asbestos and environmental liabilities study is expected to place additional strain on its current capital position. S&P’s expects that Argonaut will continue to pursue capital-raising initiatives in the first quarter of 2003, but the recent delay in earnings reports and the resulting drop in the share price could affect the company’s ability to successfully raise additional capital within that time frame.