A.M. Best Comments on the Proposed Merger of Argonaut Insurance Group and PXRE Group, Ltd.

  
    
  
  
    
      A.M. Best Co. has commented that the financial strength rating of 
      A (Excellent) and the issuer credit ratings of “a” 
      of Argonaut Insurance Group (Argonaut) (San Antonio, TX), Colony 
      Insurance Group (Richmond, VA) and their subsidiaries along with the 
      various debt ratings of Argonaut Group, Incorporated (Argonaut 
      Group) (San Antonio, TX) (NASDAQ: AGII) remain unchanged. This 
      comment follows yesterday’s announcement of 
      the proposed merger of Argonaut Group and PXRE Group, Ltd. (PXRE) 
      (Hamilton, Bermuda) (NYSE: PXT). Upon the completion of the merger, PXRE 
      will be renamed Argo Group International Holdings Limited (Argo Group), 
      headquartered in Hamilton, Bermuda. The outlook for all ratings remains 
      stable.
    
    
      A.M. Best has evaluated the proposed merger and believes that the 
      combined entity will leverage the strengths of both operations, which 
      should allow the organization to grow in its existing markets, expand 
      its product offerings, as well as recognize various synergies and cost 
      savings. The business plan includes significant actions taken to 
      strengthen PXRE’s risk management and internal 
      controls.
    
    
      Peleus Reinsurance Ltd. (Peleus Re), a subsidiary of PXRE, was 
      formed as a start-up Bermudian reinsurance company. Today, A.M. Best 
      assigned an FSR of A- (Excellent) and an ICR of “a-” 
      to Peleus Re (see A.M. Best’s press release of 
      March 15, 2007 for further details).
    
    
      Peleus Re will become a strategic reinsurance unit that will continue as 
      a separate operating company within PXRE providing capacity to Argonaut’s 
      primary insurance entities via quota share reinsurance. In addition, 
      Peleus Re will provide property catastrophe, pro rata and risk excess 
      reinsurance coverage on a worldwide basis.
    
    
      The merger is expected to close by the end of third quarter 2007, 
      subject to shareholder and regulatory approvals.
    
    
      For Best’s Debt Ratings, all other Best’s 
      Ratings, an overview of the rating process and rating methodologies, 
      please visit www.ambest.com/ratings.
    
    
      Founded in 1899, A.M. Best Company is a full-service credit rating 
      organization dedicated to serving the financial services industries, 
      including the banking and insurance sectors. For more information, visit www.ambest.com.