Continues To Face Decades-Old Asbestos Liability Claims ------------------------------------------------------- Published October 18, 2002 Argonaut Group Inc. received asbestos and environmental liability claims arising out of general liability coverage primarily written in the 1970's and into the mid-1980's. They established a specialized claims unit that investigates and adjusts all asbestos and environmental claims. Beginning in 1986, standard liability policies contained an express exclusion for asbestos and environmental related damage. In addition to the previously described general uncertainties encountered in estimating reserves, there are significant additional uncertainties in estimating the amount of potential losses from asbestos and environmental claims. Among the uncertainties impacting the estimation of such losses are: (1) potentially long waiting periods between exposure and emergence of any bodily injury or property damage; (2) difficulty in identifying sources of asbestos or environmental contamination; (3) difficulty in properly allocating responsibility and/or liability for asbestos or environmental damage; (4) changes in underlying laws and judicial interpretation of those laws; (5) potential for an asbestos or environmental claim to involve many insurance providers over many policy periods; (6) long reporting delays from insureds to insurance companies; (7) historical data concerning asbestos and environmental losses, which is more limited than historical information on other types of claims; (8) questions concerning interpretation and application of insurance coverage; and (9) uncertainty regarding the number and identity of insureds with potential asbestos or environmental exposure. The Company believes that these factors continue to render traditional actuarial methods less effective at estimating reserves for asbestos and environmental losses than reserves on other types of losses. They currently underwrite environmental and zollution coverages on a limited number of policies and underground storage tanks. They establish reserves to the extent that, in the judgment of management, the facts and prevailing law reflect an exposure for their ceding company not dissimilar to those results the industry has experienced with regard to asbestos and environmental related claims. Due to the uncertainties discussed above, the ultimate losses may vary materially from current loss reserves and could have a material adverse effect on the business, results of operations and/or financial condition of Argonaut Group, Inc. COMPANY PROFILE Argonaut Group, Inc. (NASDAQ: AGII) 10101 Reunion Place, Ste. 800 San Antonio, TX 78216 Phone: 210-321-8400 Fax: 210-337-2637 Toll Free: 800-222-7811 http://www.argonautgroup.com Employees : 814 Revenue : $ 292,600,000.00 Net Income : $ 2,900,000.00 Assets : $ 1,863,200,000.00 Liabilities : $ 1,415,700,000.00 As of December 31, 2001 Description: Argonaut Group is a holding company with subsidiaries in the insurance and real estate industries. Subsidiary Argonaut Insurance focuses on workers' compensation insurance, which accounts for more than half of Argonaut Group's premiums. Specializing in the construction industry, the division also writes general and automobile lines for commercial clients. Argonaut Great Central sells property, liability, commercial multiple-peril, and workers' compensation policies in some 30 states, focusing on the hospitality industry. Subsidiary AGI Properties conducts real estate leasing in California. Argonaut has acquired specialty insurer Front Royal.