S&P’s Affirms Alfa Insurance Group Ratings

April 23, 2003

Standard & Poor’s Ratings Services announced it affirmed the “AA” long-term counterparty credit and financial strength ratings on the members of Alabama-based Alfa Insurance Group (Alfa), based on the group’s extremely strong capital, consistently strong operating performance and strong liquidity. These strengths are offset by Alfa’s geographic concentration and the competitive market conditions it faces.

S&P’s also assigned its “AA” long-term counterparty credit and financial strength ratings to Alfa Specialty Insurance Corp. Affirmed was its “A-1+” commercial paper rating on Alfa Corp.

The outlook on all these companies is stable.

Alfa has demonstrated strong operating performance, with an ROR of about 15 percent as of year-end 2002. However, it is subject to earnings volatility arising from its catastrophe exposure in Alabama. Alfa updated its reinsurance program in January 2003 to mitigate this exposure.

“Standard & Poor’s expects that Alfa will reduce the earnings volatility arising from its property catastrophe losses,” noted S&P’s credit analyst Polina Chernyak. “In addition, Standard & Poor’s expects Alfa to continue to diversify its geographic concentration and business risk by improving the performance of Virginia Mutual Insurance Co., which will allow Alfa to reenter the North Carolina homeowner market, continue its growth in Georgia and Mississippi, and continue its assumed catastrophe reinsurance programs.”

Alfa is expected to maintain its extremely strong capital position and its strong operating performance. It is also expected to mitigate its earnings volatility by diversifying its geographic concentration and business risk.

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