CERG Ceres (MM)

A.M. Best Co. has placed the financial strength rating of B+ (Very Good) and the issuer credit ratings (ICR) of "bbb-" of Ceres Group Inc.'s (Ceres) (Cleveland, OH) (NASDAQ: CERG) primary life/health subsidiaries, Continental General Insurance Company (Omaha, NE) and Central Reserve Life Insurance Company (Cleveland, OH) under review with positive implications. A.M. Best has also placed the ICR of "bb-" of Ceres under review with positive implications. These rating actions follow Great American Financial Resources, Inc.'s (GAFRI) (Cincinnati, OH) (NYSE: GFR) announcement that it has signed a definitive merger agreement to acquire all of the outstanding shares of Ceres for approximately $205 million in cash. GAFRI's ratings are unchanged by these actions. Ceres markets an array of health and life insurance products through two primary business segments, senior and medical. The senior segment includes Medicare supplement, life, long-term care and annuities, while the medical segment includes major medical health insurance for individuals, families, associations and small to mid-size businesses. The proposed acquisition will nearly double GAFRI's book of senior premium income and provides distribution opportunities across all product lines. In addition, the transaction expands its presence in the Medicare supplement market, propelling GAFRI to a top-ten ranking based on Medicare supplement premiums. A.M. Best views the transaction as an effective way for GAFRI to utilize excess capital from the recently announced sale of Chatham Bars Inn and the actual sale of its subsidiary in Puerto Rico. GAFRI's gross investment in Ceres will be partially offset through reinsurance arrangements with Hannover Life Re. In addition, Ceres' medical segment is not consistent with GAFRI's core operations, and A.M. Best expects GAFRI to address this in the near term. The transaction is expected to close by the end of 2006, pending regulatory approval. For Best's Ratings, an overview of the rating process and rating methodologies, please visit www.ambest.com/ratings. For current Best's Ratings, independent data and analysis on more than 1,100 individual life/health companies and A.M. Best groups, please visit www.ambest.com/lh. A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com.