A.M. Best Assigns ‘A-‘ Rating to James River Insurance Co.

July 7, 2003

A.M. Best Co. has assigned an initial financial strength rating of A- (Excellent) to James River Insurance Company (James River) (Wilmington, Del.). The rating outlook is stable.

The company is the insurance subsidiary of James River Group, Inc., a Delaware holding company organized in September 2002 for the purpose of capitalizing and acquiring an insurance company with the authorization to write property/casualty insurance on an excess and surplus lines (E&S) basis in multiple states.

On June 30, 2003, James River Group, Inc. received approval from the state of Ohio to acquire Fidelity Excess and Surplus Insurance Company (Cincinnati), a clean shell, formerly owned by Great American Financial Property & Casualty Group. Fidelity has been renamed James River Insurance Company.

The rating reflects James River’s strong initial capital base, the excellent track record of its management team in running an E&S lines company and its sound business plan to target specific segments of the E&S lines market place that may be currently underserved. The capital base for James River has been amassed through significant capital contributions of several primary investors that have not only provided the majority of the company’s initial financing but have explicitly expressed their desire to provide additional capital support if the opportunity arises.

James River Group, Inc. is led by J. Adam Abram, president and chief executive officer, who brings extensive insurance experience and a demonstrated track record of producing strong results. A.M. Best expects that Abram and the James River management team will establish strong underwriting, risk management and pricing controls to ensure pricing discipline and adherence to their plan to serve the small to middle E&S lines market. Opportunities for well-capitalized, committed surplus lines carriers with sound underwriting fundamentals are still present in the current marketplace, which has hardened considerably over the past couple of years. Short-term expectations for a continuing hard market provide a good environment for James River to make a solid entry into the market, utilizing the distribution relationships previously established by management in its prior history operating Front Royal, Inc.

These strengths are partially offset by the challenges associated with a start-up company. New capital has rapidly entered the E&S market over the past 18 to 24 months and could potentially dampen expected returns as losses begin to develop.

A.M. Best will closely monitor James River’s premium growth in the short term to ensure that capitalization remains supportive of the rating and will maintain close scrutiny over operating results to see that rating expectations are achieved.

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