21st Century Notes Frances Losses

September 7, 2004

Florida-based 21st Century Holding Co. has reported losses related to Hurricane Frances which made its way through the Sunshine State in recent days.

Edward (Ted) Lawson, president and chairman of the Board of 21st Century Holding Company, commented about Federated National Insurance Company, a subsidiary of 21st Century, “First and foremost we would like to assure all of our policyholders that were effected by Hurricane Frances that our adjusters are in the stricken area and working hard to help take care of them. Our claim lines are open 24 hours a day, 7 days a week. Our offices are staffed and we are responding to our policyholders needs.

“Right now it’s too early to come out with accurate estimates of total damage inflicted by Hurricane Frances or to quantify the effects on the company but a few things appear to be clear. First of all, this storm will not impair Federated National or its ability to write business in the future. We believe Federated National easily has enough reinsurance to handle this storm and pay its claims. Furthermore, at this time it does not look like the damages from Hurricane Frances will penetrate our reinsurance layers. Therefore, we should not have to buy additional coverage for a possible third event. American Vehicle, 21st Century’s other insurance subsidiary, has no reimbursement agreements or reinsurance contracts with Federated National. American Vehicle writes general liability and personal auto and will not be affected by this hurricane. American Vehicle intends to launch its new auto program in 30 days and has recently been approved to write general liability in Kentucky, which will make four states, Florida, Georgia, Louisiana and now Kentucky, in which it writes general liability.

“After Hurricane Charlie, A.M. Best issued a release and advised certain insurance companies operating in Florida, including the company, that they were under review regarding ratings. The company was advised that it had to meet certain suggested requirements to maintain its rating. Management is continuing discussion with A.M. Best with a view to compliance. Management reportedly believes that in the event there is a downgrade, there will be no adverse effect upon the company or its operations.

“Hurricane Frances, now coupled with Hurricane Charley, will reduce our 2004 earnings per share guidance to $0.50 to $1.50 per share from $2.50 per share. 2005 guidance is also being adjusted to approximately $4.00 per share from $4.50 to $5.00 per share. In the short run, profitability and growth are being impacted, but over time higher rates normally compensate. In the meantime, even after two major hurricanes this year, we’re still going to be profitable. This year’s story is about hurricanes, next year will be about growth and profitability.”

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