Argonaut Group Increases Capital by More Than $87 Million Through a Mandatory Convertible Stock Offering and Other Capital Transactions

Business Wire, April 1, 2003

Business Editors

SAN ANTONIO--(BUSINESS WIRE)--April 1, 2003

Argonaut Group, Inc., (NASDAQ:AGII) a national specialty underwriter, today announced that it has closed various transactions providing the Company with $87.4 million in capital to support current operations and the opportunities presented by favorable market conditions for its four operating business segments.

The funds include the private placement of $35.4 million in mandatory convertible preferred stock led by HCC Insurance Holdings, Inc. (NYSE:HCC). The preferred stock is convertible into shares of Argonaut Group, Inc.'s common stock at any time by the holder and manditorily after 10 years at a conversion price of $12.00 per share.

Additionally Argonaut Group reported it has obtained from HCC an $18 million, three-year loan at 12 percent interest, pre-payable at Argonaut's option at any time. Funding of the preferred stock will repay $6 million of this loan with the balance likely payable from future financing by the Company.

Stephen L. Way, Chairman and Chief Executive Officer of HCC Insurance Holdings, Inc., said, "HCC is very pleased to conclude this transaction and we look forward to expanding our relationship with Mark Watson and his management team."

The Company also completed the sale of certain real state holdings in California totaling $52 million.

"Through these transactions we were able to minimize dilution for shareholders by reducing the size of our preferred stock offering, while achieving our statutory surplus goals," stated Mark E. Watson III, President and Chief Executive Officer of Argonaut Group, Inc. "The capital provided will enable us to continue the transformation of Argonaut Group to a national specialty underwriter and support our strategic business plan."

With the completion of these transactions, the Company expects its risk based capital level to be above the "Company Action Level", as described in its most recent Form 8-K filing with the Securities and Exchange Commission, as of March 31, 2003.

The Company announced that its annual report on Form 10-K with the Security and Exchange Commission will be filed today and will reflect the specifics of these transactions.

ABOUT ARGONAUT GROUP, INC.

Headquartered in San Antonio, Texas, Argonaut Group, Inc. (NASDAQ:AGII) is a national underwriter of specialty insurance products in niche areas of the property & casualty market. Through its operating subsidiaries, Argonaut Group offers high quality customer service in programs tailored to the needs of its customers' business and risk management strategies. Collectively, Colony Insurance, Rockwood Casualty Insurance Company, Argonaut Insurance Company, Argonaut Great Central Insurance Company, and Trident Insurance Services underwrite a full line of products in four primary areas: excess and surplus, specialty commercial, risk management, and public entity. Information on Argonaut Group and its subsidiaries is available at www.argonautgroup.com

FORWARD-LOOKING STATEMENTS DISCLOSURE

This news release contains "forward-looking statements" which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The forward-looking statements are based on the Company's current expectations and beliefs concerning future developments and their potential effects on the Company. There can be no assurance that actual developments will be those anticipated by the Company. Actual results may differ materially from those projected as a result of significant risks and uncertainties, including non-receipt of the expected payments, changes in interest rates, affect of the performance of financial markets on investment income and fair values of investments, development of claims and the effect on loss reserves, accuracy in projecting loss reserves, the impact of competition and pricing environments, changes in the demand for the Company's products, the effect of general economic conditions, adverse state and federal legislation and regulations, developments relating to existing agreements, heightened competition, changes in pricing environments, and changes in asset valuations. For a more detailed discussion of risks and uncertainties, see the Company's public filings made with the Securities and Exchange Commission. The Company undertakes no obligation to publicly update any forward-looking statements.