A.M. Best Affirms Ratings of Century Insurance Group and Comments on Announced Merger with Meadowbrook Insurance Group

  
    
  
  
    
      A.M. Best Co. has affirmed the financial strength ratings of A- 
      (Excellent) and the issuer credit ratings (ICR) of “a-” 
      of Century Insurance Group (Century) (Westerville, OH) 
      and its members. A.M. Best also has affirmed the ICR of “bbb-” 
      of Century’s publicly traded ultimate parent 
      company, ProCentury Corporation (ProCentury) (Westerville, OH) 
      (NASDAQ: PROS). The outlook for the ratings is stable. (See below for a 
      detailed listing of the companies and ratings.)
    
    
      Concurrently, A.M. Best has taken into consideration ProCentury’s 
      announced merger with Meadowbrook Insurance Group, Inc. 
      (Meadowbrook) (Southfield, MI) (NYSE: MIG), and A.M. Best believes the 
      ratings of Century will remain unchanged following the consummation of 
      the definitive merger agreement. The transaction is expected to close in 
      third quarter 2008. At the close of the transaction, the ICR of 
      ProCentury likely will be withdrawn, as the company is expected to be 
      removed from NASDAQ and delisted.
    
    
      Subsequent to the planned merger, the chairman and chief executive 
      officer of Century, Ed Feighan, will vacate his current position. Aside 
      from Mr. Feighan’s departure, the majority of 
      ProCentury’s executive management team is 
      expected to remain in tact. Based on discussions with management, there 
      are presently no plans to reorganize ProCentury and, as such, A.M. Best 
      sees no change to the company operationally or strategically.
    
    
      Along with the pending transaction, these rating affirmations also take 
      into account ProCentury’s fourth quarter 
      financial results, the continuation of its improved operating 
      profitability and the group’s ability to 
      sustain solid profit margins despite an increasingly competitive market 
      environment over the past couple of years. Additionally, the ratings 
      recognize Century’s adequate capitalization 
      and liquidity along with the financial flexibility afforded it by being 
      part of a publicly traded company. Underwriting results continue to 
      improve, indicative of Century’s focus on 
      growing its core book of diversified small to medium-sized surplus lines 
      business.
    
    
      These positive rating factors are partially offset by Century’s 
      elevated underwriting leverage, marginal five-year average operating 
      returns and challenges associated with the ongoing emergence of 
      construction defect claims. The most recent reserve development, 
      however, has been more favorable, indicating that the considerable 
      efforts taken to fortify the reserve base are manifesting in the 
      enhanced results.
    
    
      Century is a niche insurance organization focused on offering specialty 
      insurance products designed to meet the specific insurance needs of 
      targeted insurance groups. The insureds are comprised of small to 
      medium-sized surplus lines businesses. Century’s 
      efforts are concentrated on those businesses it considers underserved by 
      the standard market.
    
    
      Last week ProCentury issued a press release announcing the execution of 
      the definitive merger agreement with Meadowbrook in a deal valued 
      at approximately $272.6 million in cash and stock to be paid to 
      ProCentury’s shareholders. Under the proposed 
      transaction, the combined entity will adopt and operate under the 
      Meadowbrook name and will continue to trade on the NYSE under the ticker 
      symbol MIG. Robert S. Cubbin, Meadowbrook’s 
      chief executive officer, will continue in his current role for the post 
      merger combined entity, while two ProCentury board members will join 
      Meadowbrook’s Board of Directors.
    
    
      Under the terms of the merger agreement, shareholders of ProCentury will 
      be entitled to receive either $20.00 in cash or Meadowbrook common stock 
      having the same value, subject to a specific stipulation. This 
      stipulation is that each ProCentury shareholder will have the option to 
      elect to receive cash or Meadowbrook common stock, subject to prorating, 
      so that the maximum in total cash consideration will not exceed 45% of 
      the total consideration paid. This transaction is subject to shareholder 
      and regulatory approvals.
    
    
      The FSR of A- (Excellent) and ICRs of “a-” 
      have been affirmed for Century Insurance Group and its following 
      members:
    
    
      
        Century Surety Company
      
      
        ProCentury Insurance Company
      
    
    
      The ICR of “bbb-” 
      has been affirmed for ProCentury Corporation.
    
    
      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.