On Feb. 4, 2003, Standard&Poor's Ratings Services lowered its counterparty credit and financial strength ratings on Argonaut Group Inc.'s property/casualty insurance companies (Argonaut; see list) to 'BBB+' from 'A' based on the likely capital strain associated with the announced asbestos and environmental study and the company's declining capitalization. These ratings remain on CreditWatch with negative implications. Argonaut's capitalization and equity have declined in the past three years. Offsetting these negative factors are the company's improving operating performance, conservative but solid management, strong distribution channels, successful efforts in increasing diversification, focused loss reserving posture, and conservative investment profile. Standard&Poor's believes Argonaut will continue to face challenges associated with the execution risk from its recent acquisitions, loss reserve
