A.M. Best Revises Outlook to Negative for Alabama Municipal Insurance Corporation

Business Wire, June 3, 2008

OLDWICK, N.J. -- A.M. Best Co. has revised the outlook to negative from stable and affirmed the financial strength rating (FSR) of A- (Excellent) and issuer credit rating (ICR) of "a-" for Alabama Municipal Insurance Corporation (AMIC) (Montgomery, AL).

The negative outlook reflects AMIC's concentration in mortgage-backed and other asset-backed securities, which resulted in significant realized and unrealized capital losses through first quarter 2008 and a modest decline in surplus and risk-adjusted capitalization. While management expects underwriting results to be sound in 2008 and has taken steps to reduce the volatility in its investment portfolio, the potential for further reductions in capital should AMIC sustain additional investment losses or experience a large shock loss is elevated. As such, A.M. Best will be closely monitoring AMIC's investment and underwriting results and will take appropriate action should deterioration in either cause risk-adjusted capital to no longer support the company's current ratings.

The ratings reflect AMIC's strong historic operating performance, adequate risk-adjusted capitalization and favorable liquidity. Somewhat offsetting these positive factors, in addition to the investment concerns described above, are adverse loss reserve development on several earlier accident years and risk concentration, with all business written in Alabama.

For Best's Ratings, an overview of the rating process and rating methodologies, please visit www.ambest.com/ratings.> Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.