A.M. Best Downgrades Rating of Southern Farm Bureau Casualty Group and Removes Separately Rated Subsidiaries From Under Review

Business Wire, June 16, 2006

OLDWICK, N.J. -- A.M. Best Co. has downgraded the financial strength rating (FSR) to A (Superior) from A (Superior) of Southern Farm Bureau Casualty Group (Southern Casualty) (Ridgeland, MS). Southern Casualty consists of Southern Farm Bureau Casualty Insurance Company, Farm Bureau County Mutual Insurance Company of Texas and Louisiana Farm Bureau Casualty Insurance Company. The rating outlook is stable.

Concurrently, A.M. Best has removed from under review and downgraded the FSR to B (Very Good) from A- (Excellent) and the issuer credit rating (ICR) to "bbb" from "a-" of Southern Farm Bureau Property Insurance Company (Property) (Ridgeland, MS). A.M. Best has also removed from under review and affirmed the FSR of B (Very Good) of Mississippi Farm Bureau Casualty Insurance Company (Mississippi Casualty) (Jackson, MS). These companies are separately rated subsidiaries of Southern Casualty. These ratings have been assigned a stable outlook.

The downgrading of Southern Casualty's rating reflects its variable operating performance, which is not consistent with A.M. Best's highest rating level. This performance has been across a number of lines including assumed reinsurance, homeowners and commercial multi-peril. In addition, while the core personal automobile business has trended favorably over the last several years, partially reflective of favorable industry-wide frequency and severity trends, it compares somewhat unfavorably to the personal automobile composite norms. Southern Casualty's variable operating performance is reflected in underwriting losses in three of the previous five years.

Despite the downgrade, A.M. Best believes Southern Casualty continues to maintain superior risk-adjusted capitalization. The rating further reflects Southern Casualty's favorable personal lines market position in its selected operating territories. These positive rating attributes are derived from management's adherence to sound operating fundamentals, as demonstrated by modest underwriting leverage, consistently favorable loss reserve development and a conservative investment philosophy. Southern Casualty also benefits from its sponsorship by the Farm Bureau Federations in each of the six states that comprise its operating territory, which enhances customer loyalty and affinity.

The downgrading of Property's ratings reflects A.M. Best's view of the company's financial position following significant losses associated with hurricanes Katrina and Rita, as well as an evaluation of its underwriting strategy and business profile. Property's ratings were previously downgraded on October 24, 2005 to reflect the deterioration in risk-adjusted capitalization. At that time, the ratings were placed under review with negative implications pending discussions with Property's management regarding the company's proposed revised risk profile and potential capital enhancement plans.

The rating of Mississippi Casualty was previously downgraded and placed under review on December 13, 2005 as a result of the significant risk profile change brought about by its writing of property business formerly written by Mississippi Farm Bureau Mutual Insurance Company (Mississippi Mutual). The rating affirmation is based on its adequate capitalization, preliminary risk mitigation initiatives and the explicit support of Southern Casualty, as reflected in a capital contribution of $67 million to surplus in November 2005, as well as funding of a surplus note in second quarter 2006. Furthermore, Mississippi Casualty continues to maintain a 100% quota share reinsurance agreement with Southern Casualty on the automobile business.

These positive rating factors are offset by the increased risk profile of Mississippi Casualty, as well as ongoing execution risk regarding implementation of improved risk management on the book formerly written by Mississippi Mutual.

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.