Fitch Reports on Alfa’s Exposure to Ivan

September 21, 2004

Following the devastation of Hurricane Ivan last week, which will produce large insured losses in Alabama and the Florida panhandle, Fitch has examined the potential impact of this event on Alfa Insurance Group (Alfa Group).

Current Alfa Group ratings are as follows: Alfa Corporation’s (Alfa Corp.) commercial paper program and long-term issuer rating are ‘F1+’ and ‘A’, respectively, and Alfa Group’s insurer financial strength (IFS) rating is ‘AA’.

As the second largest writer of homeowners insurance in Alabama with a market share of approximately 21% at year-end 2003, Alfa Group will report significant insured losses from this event.

Based on current information, Fitch does not expect Alfa Group’s gross losses from Hurricane Ivan to approach or exceed the gross limit of its catastrophe reinsurance program, and losses net of reinsurance and taxes as a percentage of capital are likely to be within expectations for such an event as incorporated into the current ratings.

Alfa Group purchases substantial catastrophe reinsurance coverage to protect against large weather-related losses, such that a gross loss of $410 million from a catastrophic event would correspond to a pretax loss net of reinsurance of approximately $128 million. On an after-tax basis, this loss would correspond to approximately 5% of the Alfa Group’s combined policyholders’ surplus of $1.6 billion at year-end 2003.

Also, an intercompany pooling agreement among members of the Alfa Group allocates the bulk of catastrophe-related losses to the mutual insurance company members of the Alfa Group, with a very modest portion of losses retained by stock insurers owned by Alfa Corp.

Fitch will continue to monitor any developments of losses as more concrete estimates of Alfa Group’s losses from this event materialize and would review all ratings if the actual losses significantly exceeded current expectations.Entity/Issue/Type Action Rating/OutlookAlfa Insurance Corp.Alfa General Insurance Corp.Alfa Mutual Fire Insurance Co.Alfa Mutual General Ins. Co.Alfa Mutual Insurance Co.Alfa Specialty Insurance Corp.Virginia Mutual Insurance Co.Alfa Life Insurance Corp.–Insurer financial strength ‘AA’/Stable.Alfa Corporation–Long-term issuer ‘A+’ /Stable;–Commercial paper ‘F1+’.

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