A.M. Best Revises Outlook to Stable for Dallas National Insurance Company

Business Wire, May 30, 2008

OLDWICK, N.J. -- A.M. Best Co. has revised the outlook to stable from negative and affirmed the financial strength rating of B (Good) and the issuer credit rating of "bbb" for Dallas National Insurance Company (DNIC) (Dallas, TX).

The change in outlook reflects DNIC's stabilization of risk-adjusted capitalization driven by continued operating profitability and more moderate growth in premium volumes and liabilities in 2007, which were in line with A.M. Best's expectations. The stable outlook also reflects management's more moderate growth projections while maintaining historical profitability, which should result in supportive risk-adjusted capitalization over the intermediate term.

The ratings reflect DNIC's adequate risk-adjusted capitalization, historical underwriting and operating profitability and the financial support provided by its owner. The positive rating attributes are driven by the company's historical profitability on its core general liability book of business, the controls in place through its affiliation with its high deductible workers' compensation clients and the explicit support from its owner as evidenced by capital contributions in years past.

Largely offsetting the positive rating factors are DNIC's rapid growth in premium volume and associated liabilities in recent years (although moderating in 2007) and the uncertainties associated with this growth and the company's expansion into additional states and new lines of business and its elevated common stock leverage. As such, A.M. Best will continue to monitor DNIC's performance and capitalization over the foreseeable future, especially during a period of increased competitive pressures throughout the property and casualty industry.

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.