A.M. Best Affirms Ratings of Republic Companies and Assigns Issuer Credit Ratings

A.M. Best Co. has affirmed the financial strength rating
(FSR) of A- (Excellent) of Republic Companies Group (Republic) and has
assigned issuer credit ratings (ICR) of "a-" to its property/casualty
insurance operating companies. Concurrently, A.M. Best has assigned an
ICR of "bbb-" to Republic's parent, Republic Companies Group, Inc.
(Nasdaq:RUTX). The executive offices are located in Dallas, Texas. The
outlook for all ratings is stable.
   The ratings recognize Republic's improved risk-adjusted
capitalization due to a continuation of its recently favorable
underwriting performance. The improvement has been derived from
management's aggressive corrective underwriting actions, enhanced
catastrophe reinsurance programs and a re-focusing of its operating
strategy as a regional writer targeting niche opportunities through
its multi-channel network, resulting in a surplus appreciation of
approximately 25% over the past two years. In addition, Republic
improved its capital base following the initial public offering (IPO)
of its parent company in August 2005, as the majority of the IPO's
proceeds were utilized to redeem preferred stock and accrued preferred
dividends.
   Partially offsetting these strengths is Republic's regional
concentration of risk and its exposure to weather-related events.
However, a conservative reinsurance program mitigates this exposure
both on a severity and frequency basis. Furthermore, revised
underwriting criteria and disciplined underwriting assists in
mitigating the group's potential exposures in catastrophe prone areas.
This is evident in the favorable underwriting performance despite an
active 2005 hurricane season, in which Republic produced an
underwriting profit for the second consecutive year. This is in stark
contrast to prior years, when Republic was under previous ownership in
which fluctuating operating performance, combined with sizeable
capital losses and dividends resulted in historical surplus
volatility.
   The FSR of A- (Excellent) has been affirmed and ICRs of "a-" have
been assigned to Republic Companies Group and its following
property/casualty affiliates:

   --  Republic Fire & Casualty Insurance Company

   --  Republic Lloyds

   --  Republic Underwriters Insurance Company

   --  Republic-Vanguard Insurance Company

   --  Southern County Mutual Insurance Company

   --  Southern Insurance Company

   --  Southern Underwriters Insurance Company

   --  Southern Vanguard Insurance Company

   An ICR of "bbb-" has been assigned to Republic Companies Group,
Inc.
   For Best's Ratings, an overview of the rating process and rating
methodologies, please visit www.ambest.com/ratings.
   For current Best's Ratings, independent data and analysis on more
than 3,000 individual property/casualty companies and A.M. Best
groups, please visit www.ambest.com/pc.
   A.M. Best Co., established in 1899, is the world's oldest and most
authoritative insurance rating and information source. For more
information, visit A.M. Best's Web site at www.ambest.com.