EXEL, Financial Security Assurance Holdings To Form Two Financial Guaranty Insurance Companies

Financial Security Assurance Holdings Ltd. says it will enter into a joint venture with EXEL Limited to form two new Bermuda-based financial guaranty insurance companies. The companies will each be capitalized with a minimum of $100 million. The joint venture is subject to regulatory approval.

One company, to be named Financial Security Assurance International Ltd., will be a subsidiary of FSA and its policies are expected to carry FSA's Aaa/AAA/AAA claims-paying ratings. The other company, X.L. Financial Assurance Ltd., will be a subsidiary of EXEL, and its policies are expected to carry X.L.'s AA claims-paying rating. As part of the deal, FSA will swap approximately $80 million of its shares for a similar amount of EXEL common stock. FSA will have a minority interest in the EXEL company, and EXEL will have a minority interest in the FSA company.

``This joint venture solidifies the strong working relationship that has developed between our companies,'' says Robert P. Cochran, chairman and CEO of FSA. ``The combined expertise and financial resources of the two companies, aggregating to approximately $5.5 billion in capital and $12 billion in assets, will create a powerful worldwide financial guaranty capability.'' EXEL has been a significant provider of reinsurance to FSA.

``We have spent a lot of time with FSA's senior management and staff,'' says Brian M. O'Hara, president and CEO of EXEL. ``They have extensive experience, and like us, are conservative risk managers. This is an area that we identified some time ago as providing strong growth potential for our organization and builds on EXEL's structural advantages and considerable experience in the long-tailed risk business. It provides us with significant advantages at a time when convergence of the insurance and financial markets is increasing and risk securitization is becoming an important part of our customers' needs.''

FSA plans to underwrite much of its international business through its new majority-owned subsidiary. The new subsidiary will be a party to the FSA inter-company pooling agreement, and its policies will be protected by the same claims-paying resources as any FSA-insured issue.