Best Affirms Rating for American Compensation

April 15, 2005

A.M. Best Co. has affirmed the financial strength rating of B+ (Very Good) of American Compensation Insurance Company (ACIC), a subsidiary of RTW Inc. (both of Bloomington, Minn.), and revised the outlook to positive from stable.

Concurrently, A.M. Best has assigned issuer credit ratings of “bbb-” and “bb-” to ACIC and RTW, respectively. The outlook for these ratings is positive.

The ratings reflect ACIC’s improved capitalization and profitability over the last three years. Prior to 2002, ACIC’s operating performance was severely impacted by adverse loss reserve development, largely the result of its expansion into several states during the soft workers’ compensation market conditions of the late 1990s.

After changing its executive management team in December 2001, the company closed unprofitable regions, reduced premiums in force, improved pricing and refocused on its specific underwriting niche and intense claims and case management. ACIC has produced modest underwriting profits since the management change, leading to stronger pre-tax and net returns on premium and surplus.

The company’s surplus also improved considerably over the last three years, driven by underwriting and investment income, favorable tax refunds and realized capital gains.

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