A.M. Best Upgrades FSR for NJM Insurance Group

April 5, 2004

A.M. Best Co. has upgraded the financial strength ratings to A++ (Superior) from A+ (Superior) for the NJM Insurance Group (West Trenton, N.J.). The outlook for the ratings is stable.

The ratings reflect the group’s superior capitalization, strong operating performance and dominant local market presence. These positive rating attributes are partially offset by the group’s business concentration within New Jersey. The group’s positive rating attributes are derived from management’s adherence to sound operating fundamentals that are reflected in its moderate underwriting leverage, conservative investment risk and prudent loss reserving practices. Its direct marketing approach and efficient cost structure have consistently produced one of the lowest underwriting expense ratios in the industry. This significant expense advantage, combined with favorable loss experience and strong investment income, has enabled the group to provide significant policyholder dividends while continuing to increase surplus each year.

The group’s statewide market leader position is augmented by its extensive workers’ compensation managed care capabilities, its own preferred provider network, strong business persistency and reputation for providing quality service. Furthermore, the group enjoys greater operating flexibility as policyholder dividends are declared by coverage.

As a result of the business concentration within New Jersey, the group is exposed to risk from market volatility, legislative changes and judicial decisions. It has been subject to a difficult operating environment, reflective of regulatory constraints and uncertainty due to the political nature of the state’s insurance markets.

However, the group’s proven track record of consistently strong earnings, superior capital position and extensive local market knowledge outweigh the concentration and regulatory concerns. Moreover, recently passed legislation is designed to increase capacity in the New Jersey personal auto market, promote competition in the state, reduce fraud and lower the number of uninsured motorists. The group’s overall underwriting results have been tempered by large discretionary policyholder dividend payments, which over the last five years, have added an average of approximately 20 points annually to the combined ratio. Nonetheless, these policyholder’s dividend payments have significantly enhanced customer loyalty, resulting in superior business persistency and strong overall operating performance.

A.M. Best has also affirmed the financial strength ratings of A (Excellent) of New Jersey Indemnity Insurance Company and New Jersey Casualty Insurance Company, two of New Jersey Manufacturers Insurance Company’s subsidiaries.

The financial strength ratings of A++ (Superior) have been upgraded for NJM Insurance Group and the following members:

— New Jersey Manufacturers Insurance Company

— New Jersey Re-Insurance Company

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