A.M. Best Upgrades Ratings of Affirmative Insurance Company and Insura Property and Casualty Insurance Company, Inc

Business Wire, July 12, 2004

OLDWICK, N.J. -- A.M. Best Co. has upgraded the financial strength ratings to B (Very Good) from B (Fair) of Affirmative Insurance Company and Insura Property and Casualty Insurance Company, Inc., both members of the Affirmative Insurance Group (all of Bedford Park, IL). The ratings have been removed from under review and assigned a stable outlook.

The ratings reflect the Group's strengthened capitalization following the initial public offering (IPO) of the parent company, Affirmative Insurance Holdings, Inc., (NASDAQ: AFFM) and recently improved operating results. Partially offsetting these positive rating factors are the significant premium and policy count growth experienced over the last few years, dependence upon reinsurance and corresponding gross leverage position. The stable outlook reflects the Group's favorable capitalization and expectation of sustained favorable earnings.

These positive rating attributes are derived from the improved capitalization relating to the IPO. Of the $56.7 million of capital raised, $55.7 million was contributed to the insurance subsidiaries to support future premium growth, to become less dependent upon reinsurance for surplus relief and to strengthen the overall capital position of the insurance operations. If the underwriters over allotment option is exercised in full the parent is expected to contribute an additional $8.6 million to insurance subsidiaries. While some of the recent premium expansion was fueled by rate increases, the Group has begun rolling business into Affirmative Insurance Company and Insura Property and Casualty Insurance Company from its affiliated underwriting and retail agencies. Although this will result in a significant increase in net premiums written, the inherent risks associated with new business are somewhat mitigated due to this business being produced previously by its affiliates and the short-tail nature of the non-standard auto line.

A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com.