A.M. Best Rates I-Preferred Term Securities I; An Insurance CDO

Business Wire, March 12, 2003

Business Editors

OLDWICK, N.J.--(BUSINESS WIRE)--March 12, 2003

A.M. Best Co. has assigned ratings to a multi-tranche collateralized debt obligation (CDO) co-issued by two bankruptcy remote special purpose vehicles, I-Preferred Trust Securities Ltd. and I-Preferred Trust Securities Inc. (the "Issuers").

The co-placement agents for the transaction are FTN Financial Capital Markets and Keefe, Bruyette & Woods, Inc.

The rated notes, totaling $328.0 million in principal, are collateralized by trust preferred securities, surplus notes and secondary market securities (collectively, the "Capital Securities"), issued primarily by small to medium-sized U.S. insurance entities. A.M. Best has assigned ratings of "aaa" to Class A Senior Notes, "a-" to Class B Mezzanine Notes and "bbb" to Class C Mezzanine Notes. All the notes have a stated maturity date of 2032, including $31.3 million of unrated Subordinate Income Notes (the "Income Notes"). Notwithstanding, the notes can be redeemed prior to the maturity date through several mechanisms including a successful auction of the Capital Securities which commences on the 10th anniversary.

                             CDO Tranches

Notes                         Amount($mm)       Rating    Coupon
----------------------------------------------------------------------
Class A-1 Senior Notes           174.0            aaa     3M LIBOR
                                                            125 bps
----------------------------------------------------------------------
Class A-2 Senior Notes           12.0             aaa     4.3% / 3M
                                                          LIBOR
                                                            125 bps(a)
----------------------------------------------------------------------
Class A-3 Senior Notes           24.0             aaa     5.00% / 3M
                                                          LIBOR
                                                            125 bps(b)
----------------------------------------------------------------------
Class B-1 Mezzanine Notes        40.6             a-      3M LIBOR
                                                            210 bps
----------------------------------------------------------------------
Class B-2 Mezzanine Notes        33.2             a-      5.15% / 3M
                                                          LIBOR
                                                            210 bps(a)
----------------------------------------------------------------------
Class B-3 Mezzanine Notes        28.2             a-      5.90% / 3M
                                                          LIBOR
                                                            210 bps(b)
----------------------------------------------------------------------
Class C Mezzanine Notes          16.0             bbb     3M LIBOR
                                                            375 bps
----------------------------------------------------------------------
      Total Rated Notes          328.0            -
----------------------------------------------------------------------
Subordinate Income Notes         31.3             N.R.
----------------------------------------------------------------------
  TOTAL RATED & UNRATED NOTES    359.3             -
----------------------------------------------------------------------

(a) The fixed coupon is for the first three years of the transaction.

(b) The fixed coupon is for the first five years of the transaction.

Major considerations in rating the notes included: collateral default risk and associated assumed recoveries based on A.M. Best Financial Strength Ratings (FSR); collateral diversity; structural protection through the "waterfall" and other mechanisms; counterparty swaps and interest rate cap protection; legal documentation; and ongoing monitoring of the transaction.

Brief comments on these considerations follow.

Quantification of Collateral Default Risk: A.M. Best maintains interactive ratings on 29 of the 31 companies in the transaction. The initial weighted average FSR of the underlying insurance entities issuing the Capital Securities is A- (Excellent). The default risk attributed to the Capital Securities is based on A.M. Best's proprietary default statistics. A.M. Best adjusted these default statistics to arrive at a proprietary deferral-adjusted default probability table which aggregates default and interest-deferral probabilities. Based on the deferral-adjusted default probability table, conservative recovery assumptions that recognize the regulatory environment of the insurance industry, the "waterfall" as defined by the indenture and the results of stressed Monte Carlo simulations, A.M. Best determined that defaults on the notes are within the default thresholds established for each rating category.

Collateral Diversity: A.M. Best performed qualitative and quantitative analyses on the participants in the pool on both an individual and aggregate level. In addition, A.M. Best compared the pool's characteristics and performance with industry levels, as well as individual issuers within the pool with their peers. Also considered were the historical performance of pool members; the mix of life companies versus property and casualty companies; regulatory domicile of each issuer; product lines by industry segment; stock vs. mutual companies; investment composition and performance of invested assets; short-tail vs. long-tail business lines of property/casualty companies; operating and underwriting performance of each issuer; dividend-paying capacity of operating companies; and leverage and coverage analyses of each issuer.