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

Business Wire, Oct 2, 1998

NEW YORK--(BUSINESS WIRE)--Oct. 2, 1998--Financial Security Assurance Holdings Ltd. (NYSE:FSA) today announced its intention to enter into a joint venture with EXEL Limited ("EXEL") (NYSE:XL) 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. In conjunction with the formation of the two new companies, 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," said 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," he added. EXEL has been a significant provider of reinsurance to FSA.

"We have spent a lot of time with FSA's senior management and staff," said Brian M. O'Hara, President and Chief Executive Officer 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," he added.

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.

This press release contains forward-looking statements regarding, among other things, the Company's plans and prospects. Important factors, including general market conditions and the competitive environment, could cause actual results to differ materially from those described in such forward-looking statements. Certain of these factors are described in more detail under the heading "Forward-Looking Statements" in Item 1 of the Company's Annual Report on Form 10-K for the year ended December 31, 1997. Forward-looking statements in this release are expressly qualified by all such factors. The Company undertakes no obligation to revise or update any forward-looking statements to reflect changes in events or expectations or otherwise.

Through its wholly owned subsidiary, Financial Security Assurance Inc., the company guarantees scheduled payments of principal and interest of municipal bonds and asset-backed securities, including residential mortgage-backed securities. FSA's claims-paying ability is rated Triple-A by Fitch IBCA, Moody's, S&P and Japan Rating and Investment Information, Inc. Headquartered in New York, FSA has offices in San Francisco and Dallas. It also has a London-based U.K. subsidiary, Financial Security Assurance (U.K.) Limited, and representative offices in Madrid, Paris, Singapore, Sydney and Tokyo.