Acceptance Companies Rated

August 5, 2002

Fitch Ratings assigned a “B-” Long-Term issuer rating to Acceptance Insurance Companies Inc. (Acceptance) and a “CCC+” rating to Acceptance’s $94.875 million 9.00 percent Trust Preferred Securities, due 2027. Acceptance is the parent company of Nebraska-based American Growers Insurance Company. The rating outlook is stable.

The rating considers the company’s recent unfavorable, but improving, overall earnings and resulting weak debt coverage, the uncertainty of future earnings and cash flow to meet debt servicing needs, as well as the company’s concentration in the crop insurance market.

Through American Growers, Acceptance offers a variety of crop insurance coverage. This segment reported an underwriting profit in 2001 of $10.1 million, a marked improvement from the underwriting loss of $22.6 million posted for the previous year. This improvement was due in part to more favorable weather conditions in 2001 compared to the previous year.

Acceptance also has run-off property/ casualty coverage through subsidiary Acceptance Insurance Company. These operations reported an underwriting loss of $34.0 million for 2001, compared to an underwriting loss of $21.2 million for the previous year. The increase in the loss was due in part to a reserve strengthening that the company undertook in the general liability lines of business.

American Growers had statutory total admitted assets of $193 million and policyholder’s surplus of $75.4 million at Dec. 31, 2001. The company primarily writes multi-peril crop insurance and other crop insurance products. Net premiums written increased 51 percent in 2001 to approximately $81 million, due in part to the acquisition of the crop insurance assets of IGF Insurance Company during the year.

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