A.M. Best Affirms FSR for Stonewood Insurance Co.

A.M. Best Company has affirmed the financial strength rating of A- (Excellent) of Stonewood Insurance Company, which was licensed in November 2003 to provide workers’ compensation insurance for the residential construction industry in North Carolina. The company is an insurance subsidiary of James River Group Inc., which is headquartered in Chapel Hill, N.C.

In its published Rating Rationale, A.M. Best stated, “The rating reflects the company’s solid performance in its initial year of operation, the strong track record of its management team in producing profitable results, adequate capitalization and a sound business plan designed to capitalize on opportunities to provide workers’ compensation insurance within the same residential construction market in North Carolina where management has already exhibited its expertise.” A.M. Best expanded on the management team’s prior experience and expertise by saying, “While at Builders Mutual, the executive team had successfully produced operating returns and profitability that far exceeded the industry and its peers”.

A.M. Best also indicated, “Furthermore, the rating considers management’s intention to prudently manage capital in accordance with levels previously discussed with A.M. Best, its importance to the James River Group Inc. and the benefits to be gained from James River Group Inc.’s pending Initial Public Offering (IPO).” A.M. Best noted, “Proceeds from this prospective offering are to be infused into the company and its affiliate, James River Insurance Company, to support near-term operating plans of each operating entity. These rating factors are offset by the significant challenges and uncertainties associated with any newly formed, start-up company, including the successful execution of business plans, lack of scale and management’s ability to compete and grow its business profitably. The company enjoys the prospect of additional financial support by James River Group Inc. In the first quarter of 2005, James River Group, Inc. contributed $3 million of additional capital to Stonewood.”

On June 16, 2005, A.M. Best also affirmed the financial strength rating of A- (Excellent) of James River Insurance Company.

“We are pleased that A.M. Best’s analysis of our first year operating results led them to affirm Stonewood Insurance Company with an ‘Excellent’ rating as well as our affiliate, James River Insurance Company,” said Ken Mitchell, Stonewood President and Chief Executive Officer.

About Stonewood Insurance Company

Licensed in November 2003, Stonewood provides workers’ compensation insurance for homebuilders, including general contractors and related artisan contractors, operating within the state of North Carolina. Stonewood is led by C. Kenneth Mitchell, who has more than 20 years experience in the workers’ compensation and the homebuilding markets in North Carolina. Based in Raleigh, North Carolina, Stonewood Insurance Company is a wholly owned subsidiary of James River Group, Inc.

James River Group, Inc. owns and operates property and casualty insurance companies that underwrite specialized insurance for business. The Group is headquartered in Chapel Hill, NC. James River Insurance Company, an excess and surplus lines company headquartered in Richmond, Virginia, is approved to write business in 48 states plus Washington, D.C. For more information about Stonewood Insurance Company, please contact Ken Mitchell, 919-882-3500, kmitchell@stonewoodins.com.

For additional information about A.M. Best and the current rating of Stonewood Insurance Company, visit www.ambest.com.