S&P Downgrades Acceptance Insurance Cos.

August 20, 2001

Standard & Poor’s took rating actions on Acceptance Insurance Companies Inc. (AICI) and its insurance operating subsidiaries.

S&P downgraded American Growers Insurance Co. (AGIC) because of declining earnings and uncertain prospects for recovery in the near term. Acceptance Insurance Co. (AIC) was downgraded because of operating losses in the last several years and uncertain capital adequacy. S&P lowered its ratings on AICI, the parent company, because of its dependence on AGIC and AIC for its long-term ability to service its obligations.

AGIC is primarily an insurer of crop yields under the multi-peril crop insurance and crop revenue coverage programs administered by the Federal Crop Insurance Corp., a federal agency. The company also writes standard crop hail insurance and a variety of private-sector specialty coverages.

AIC, Acceptance Insurance Indemnity Co. (AIIC), and Acceptance Casualty Insurance Co. (ACC) are multi-line property/casualty companies that were part of an inter-affiliated pool. In the past 14 months, a large part of their operations has been sold, including Redland Insurance Co., an insurer that was previously part of the pool and was sold last year. On Aug. 9, 2001, AICI sold AIIC and ACC to McM Corp., a property/casualty insurance holding company, leaving Acceptance Insurance Company as AICI’s sole p/c insurer. This company will be entirely in runoff and will house the reserves of AIIC and ACC as well as certain reinsured risks of Redland.

AICI is a holding company and the parent of AIC and AGIC, as well as of several organizations that provide marketing support to AGIC.

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