Continues To Face Decades-Old Asbestos Liability Claims
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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.