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[March 09, 2010]

A.M. Best Affirms Ratings of DHC Group and Its Members

OLDWICK, N.J. --(Business Wire)-- A.M. Best Co. has affirmed the financial strength rating (FSR) of B- (Fair) and issuer credit ratings (ICR) of "bb-" of DHC Group (DHC) (Long Beach, CA (News - Alert)) and its members. The outlook for all ratings is stable. (Please see below for a detailed listing of the companies.) Concurrently, A.M. Best has withdrawn the FSR of B- (Fair) and ICR of "bb-" of Danielson Insurance Company (DICO) and assigned an NR-5 (Not Formally Followed) to the FSR and an "nr" to the ICR. Effective March 5, 2010, DICO was merged with and into its parent, National American Insurance Company of California (NAICC).

Ultimate financial control of DHC and its members rests with Covanta Holding Corporation (Covanta), a publicly held company that is primarily involved in the waste disposal and energy services industry.

The ratings reflect DHC's unfavorable operating performance and decline in policyholder surplus. Offsetting these rating factors are management's initiatives to improve operating income through a focus on its surety and specialty automobile books of business.

Significant underwriting losses over several years were the result of inadequate rates and significant adverse loss reserve development from its run-off lines of business, rising loss costs and an above average underwriting expense ratio. As a result of substantial operating losses, surplus has deteriorated significantly from historical levels. To address the group's adverse loss reserve deficiencies and loss of capital, Covanta has contributed $7.0 million to DHC since 2008. This continued financial support is contemplated in DHC's current ratings.

As part of the strategies to reverse DHC's negative trends, management continues to de-emphasize its historically unprofitable lines of business. Additional efforts include further development of the group's surety division, a new livery program and investments in technology.

The FSR of B- (Fair) and ICRs of "bb-" have been affirmed for DHC Group and its following pooled members: National American Insurance Company of California Danielson National Insurance Company For Best's Credit Ratings, an overview of the rating process and rating methodologies, please visit www.ambest.com/ratings.

The principal methodologies used in determining these ratings, including any additional methodologies and factors that may have been considered, can be found at www.ambest.com/ratings/methodology.

Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.

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