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Press release from Business Wire

A.M. Best Affirms Ratings of Argo Group International Holdings, Ltd. and Its Subsidiaries

Monday, June 20, 2011

A.M. Best Affirms Ratings of Argo Group International Holdings, Ltd. and Its Subsidiaries12:06 EDT Monday, June 20, 2011 OLDWICK, N.J. (Business Wire) -- A.M. Best Co. has affirmed the financial strength rating (FSR) of A (Excellent) and issuer credit ratings (ICR) of “a” of Argo Re Ltd. (Argo Re)(Hamilton, Bermuda) and its subsidiaries. A.M. Best also has affirmed the ICR of “bbb” and debt ratings of the parent holding company, Argo Group International Holdings, Ltd. (Argo Group) (Hamilton, Bermuda)[NASDAQ: AGII]. The outlook for all ratings is stable. (See below for a detailed listing of the companies and ratings.) These ratings consider Argo Group's first quarter earnings announcement and take into account the group's experienced management team, product expertise in niche focus areas and the strong historical operating performance at Argo Re's subsidiaries. Despite the $113 million of catastrophe losses included in the first quarter results, Argo Re remains very well capitalized. A.M. Best expects that Argo Re's operating performance and capitalization will continue to support the ratings. The ratings also consider Argo Group's first quarter 2011 conservative debt-to-capital ratio of 19.9%, strong interest coverage and the diversified insurance and reinsurance platform that Argo Re maintains. The U.S. specialty operations are managed holistically with respect to capital, investment strategy and market presence. Argo Re, as the lead insurer, maintains a growing book of unaffiliated, third-party reinsurance business and also assumes risk via quota share reinsurance agreements with its subsidiaries. Argo Group also has recently increased its participation in Syndicate 1200 from 61% to 67%. These positive rating factors are partially offset by the highly competitive environment characterized by significant price competition and the effects from continued difficult economic conditions. These factors, coupled with the planned exit from certain business classes, have exerted pressure on Argo Group's top line and expense ratio. In addition, management continues to work through integration issues at its Syndicate 1200 segment. The FSR of A (Excellent) and ICRs of “a” has been affirmed for Argo Re Ltd. and its following subsidiaries: Argonaut Great Central Insurance CompanyArgonaut Insurance CompanyArgonaut Limited Risk Insurance CompanyArgonaut-Midwest Insurance CompanyArgonaut-Southwest Insurance CompanyColony Insurance CompanyColony National Insurance CompanyColony Specialty Insurance CompanyRockwood Casualty Insurance CompanySelect Markets Insurance CompanySomerset Casualty Insurance Company The following indicative debt ratings available under the shelf registration have been affirmed: Argo Group International Holdings, Ltd.—-- “bbb” on senior unsecured debt-- “bbb-” on subordinated debt-- “bb+” on preferred stock Argo Group Statutory Trust—-- “bb+” on preferred stock The principal methodology used in determining these ratings is Best's Credit Rating Methodology -- Global Life and Non-Life Insurance Edition, which provides a comprehensive explanation of A.M. Best's rating process and highlights the different rating criteria employed. Additional key criteria utilized include: “Risk Management and the Rating Process for Insurance Companies”; “Understanding BCAR for Property/Casualty Insurers”; “Understanding Universal BCAR for P/C Insurers”; “Catastrophe Risk Management within Rating Analysis”; “A.M. Best Ratings and the Treatment of Debt”; and “Rating Members of Insurance Groups.” Methodologies can be found at www.ambest.com/ratings/methodology. Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com. Copyright © 2011 by A.M. Best Company, Inc.ALL RIGHTS RESERVED.A.M. Best Co.Greg WilliamsSenior Financial Analyst908-439-2200, ext. 5815greg.williams@ambest.comorJoseph RoethelAssistant Vice President908-439-2200, ext. 5630joseph.roethel@ambest.comorRachelle MorrowSenior Manager, Public Relations908-439-2200, ext. 5378rachelle.morrow@ambest.comorJim PeavyAssistant Vice President, Public Relations908-439-2200, ext. 5644james.peavy@ambest.com