S&P Assigns AmWINS ‘B’ Rating; Outlook Stable

April 14, 2005

Standard & Poor’s Ratings Services has assigned its ‘B’ counterparty credit rating to American Wholesale Insurance Group Inc. (AmWINS). The outlook is stable.

At the same time, Standard & Poor’s assigned its ‘B’ senior secured debt rating to the company’s $110 million first lien term loan and assigned its ‘CCC+’ senior secured subordinated debt rating to AmWINS $40 million second lien term loan.

“The ratings reflect the company’s good prospective competitive position and diversified revenue base,” noted Standard & Poor’s credit analyst Donovan Fraser. “Offsetting these strengths is the limited track record since beginning operations in 2002 coupled with significant prospective execution and integration risks.”

“The company will utilize the proceeds to acquire Stewart Smith Group, refinance its existing credit facility, and provide additional working capital for the business,” Fraser added.

Prospective operating performance, leverage, and coverage metrics are at the bottom end of the scale when compared with Standard & Poor’s interactively rated group of insurance brokers; however, Standard & Poor’s believes that the company will continue to remain cash flow positive and be able to meet its restrictive covenants in the near to intermediate term.

Standard & Poor’s expects EBITDA interest coverage in excess of
2x (incorporating the imputed interest on noncancelable operating
leases) and total debt to EBITDA of less than 4x in 2005. Standard &
Poor’s estimates that the company will need to achieve EBITDA margins significantly in excess of its three-year average of 16.3% and the 2004 level of 18.5% to meet its restrictive debt covenants given the increased leverage and decreased coverage metrics.

Partially offsetting Standard & Poor’s concerns is the current EBITDA margin run-rate of about 22% (excluding start-up costs). In addition, Stewart Smith Group is expected to add to EBITDA margins and not detract from them in 2005.

Standard & Poor’s believes that the company will continue to remain cash flow positive and meet its restrictive covenants in the near to intermediate term.

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