Argonaut Plans Equity Offering, Completes Other Transactions

Argonaut Group Inc., headquartered in San Antonio, announced plans to offer four million shares of its common stock in an underwritten public offering. Argonaut Group intends to contribute the majority of the net proceeds from the offering to its insurance subsidiaries to support the continued growth of its business and improve its regulatory capital adequacy ratios and maintain strong financial strength ratings. The remaining net proceeds will be used for general corporate purposes.

The registration statement relating to these securities has been filed with the Securities and Exchange Commission and has been declared effective. Argonaut said it would release financial results for its 2003 third quarter on Oct. 27, 2003 and price the offering thereafter.

Raymond James & Associates Inc. is serving as lead manager of the underwriting group, and William Blair & Company, LLC; Ferris, Baker Watts Incorporated and Cochran, Caronia Securities, LLC are serving as co-managers. Argonaut Group will grant the underwriters a 30-day option to purchase up to 600,000 shares of common stock to cover over-allotments, if any. After the offering, Argonaut Group will have approximately 25.6 million shares of common stock outstanding prior to any exercise of the underwriters’ over-allotment option.

Simultaneous with the closing of the offering, HCC Insurance Holdings Inc. will convert approximately $5.0 million of a $12.0 million note into shares of Argonaut Group common stock at a conversion price equal to the public offering price less the underwriting discount. In March 2003, HCC purchased 2,453,310 shares of Argonaut Group Series A Mandatory Convertible Preferred Stock. Subsequent to the offering and the partial conversion of this note, HCC’s ownership in Argonaut Group’s outstanding common stock on a fully diluted basis will remain below 10 percent.

Argonaut Group also announced that during the third quarter ended Sept. 30, 2003, the Company sold more than 90 percent of its investment in Curtiss-Wright Corporation common stock and reduced its investment in other equity securities. Collectively, these transactions resulted in net realized pre-tax gains of approximately $47.3 million.

During its 2003 third quarter, Argonaut Group, as part of its review of run-off segment loss and loss adjustment expense reserves, evaluated the recoverability of reinsurance balances potentially due on such reserves. As a result of the review, the company will take a $10.2 million charge during the third quarter of 2003. The analysis and reserve changes were applicable to policies written primarily in the 1970s. The company generally began excluding these types of exposures from its policy contracts in 1985.