Argonaut Group Reports Higher Revenues, Lower Net Income for 4Q 2004

February 4, 2005

San Antonio-based Argonaut Group Inc. announced financial results for the three months and year ended Dec. 31, 2004, reporting a decrease in net income for fourth quarter 2004 compared with the same period the previous year, but a 16.1 percent increase in year-over-year revenue for the quarter.

The company said highlights for the quarter ended Dec. 31, 2004, include:
· The combined ratio was 94.7 percent versus 98.4 percent during the fourth quarter of 2003;
· Each of Argonaut Group’s four business segments generated an underwriting profit;
· Operating income increased to $23.8 million, a 78 percent increase over the fourth quarter of 2003.

For the year ended Dec. 31, 2004, the company reported:
· Argonaut Group marked record performances in gross written, net written and earned premiums as well as in underwriting income and the combined ratio;
· Argonaut Group’s combined ratio of 99.8 percent, 96.7 percent exclusive of hurricane losses of approximately $19.5 million, compares to a combined ratio of 104.2 percent for the year ended 2003, which was not impacted significantly by catastrophe losses;
· Gross written premiums grew 14.6 percent over 2003 levels, finishing at a record $903.4 million;
· Operating income rose 156 percent to $55.5 million from 2003
· Book value increased 11.5 percent to $19.68 per fully diluted share versus $17.65 per share at Dec. 31, 2003.

For the fourth quarter of 2004, Argonaut Group reported net income of $26.2 million down from net income of $31.0 million during the same three-month period in 2003. The company believes operating income is another meaningful measure of Argonaut Group’s performance. Operating income includes corporate, interest and other expenses, which during the fourth quarter of 2004 totaled $6.7 million versus $1.9 million for the fourth quarter of 2003.

Argonaut Group President and CEO Mark E. Watson III said, “Our solid fourth quarter performance capped off a very productive and successful year for Argonaut Group. During 2004, the Company had several notable achievements—we showed continued improvement in the risk management segment, generated an underwriting profit for the first time in the Company’s history despite the hurricane activity in the third quarter, and produced record results in several key performance areas.

“Since 2002, fully diluted book value per share has increased by almost 30 percent, consistent with our focus on maximizing value for our shareholders. Looking ahead, we believe the Company’s strong fundamentals, diversified product offering, customized approach and national presence position us well for 2005,” Watson said.

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