C.A. Bancorp Inc. Announces Agreement for Insurance Joint Venture
TORONTO, ONTARIO -- (Marketwired) -- 07/21/14 -- C.A. Bancorp Inc.
("CAB" or the "Company") (TSX: BKP) and Federated National Holding
Company ("FNHC"), an insurance holding company, issued a joint press
release today announcing an agreement to form a new Florida-based
property and casualty insurance carrier (the "Joint Venture") to be
named Monarch National Insurance Company ("Monarch"). Transatlantic
Reinsurance Company ("TransRe") is taking a minority position in the
The Company has entered into a Subscription Agreement (the
"Agreement") committing USD$14 million to the Joint Venture subject
to the satisfaction of a number of conditions including receipt of
regulatory approvals, the entering into of the definitive agreements
described herein and completion of the closing of the subscription by
December 31, 2014.
The Company intends to establish a majority-owned entity ("CAB
Holdco") to make a USD$12 million equity investment in the Joint
Venture. CAB has received a commitment from a third party investor
to fund the remaining USD$2 million investment in the Joint Venture
in exchange for a minority position in CAB Holdco.
Pursuant to the Agreement, the parties to the Joint Venture have
agreed to organize Monarch Delaware Holdings LLC ("Monarch Parent"),
which will become the indirect parent of Monarch following receipt of
the approval of the Florida Office of Insurance Regulation (the
"Florida OIR"). Monarch Parent is expected to have an initial equity
capitalization of USD$33 million. CAB Holdco and FNHC are each
expected to own 42.4% of Monarch Parent's equity, with capital
contributions of USD$14 million each for voting interests, and
TransRe will own the remaining 15.2%, with a capital contribution of
USD$5 million for a non-voting interest.
The Agreement provides that, upon receipt of all required regulatory
approvals from the Florida OIR and satisfaction of the other closing
conditions as outlined therein, the parties will enter into the
-- Monarch Parent, Monarch National Holding Company, an intermediate
holding company of Monarch ("Monarch Holding") and/or Monarch will enter
into an Investment Management Agreement (the "Investment Agreement")
with CAB or a newly formed affiliate of CAB ("CAB AUM"), pursuant to
which CAB AUM will manage the Monarch investment portfolio. The
management fee, on an annual basis, will be 0.75% of assets under
management up to $100 million; 0.50% of assets under management of more
than $100 million but less than $200 million; and 0.30% of assets under
management of more than $200 million.
-- Monarch will enter into a Managing General Agent and Claims
Administration Agreement (the "MGA Agreement") with Federated National
Underwriters, Inc. ("FNU"), a wholly owned subsidiary of FNHC, pursuant
to which FNU will provide underwriting, accounting, reinsurance
placement and claims administration services to Monarch. For its
services under the MGA Agreement, FNU will be entitled to receive 4% of
Monarch's total written annual premium, excluding acquisition expenses
payable to agents, for FNU's managing general agent services; 3.6% of
Monarch's total earned annual premium for FNU's claims administration
services; and a per-policy administrative fee of USD$25 for each policy
underwritten for Monarch. FNHC will also receive an annual expense
reimbursement for accounting and related services.
-- TransRe will provide USD$5 million in senior debt to Monarch Holding.
The debt will bear interest at 6% per annum, which will be payable
annually; will mature in six years; and will be prepayable without
-- Monarch will enter into a Reinsurance Capacity Right of First Refusal
Agreement with TransRe, pursuant to which TransRe will have a right of
first refusal for all quota share and excess of loss reinsurance that
Monarch deems necessary in its sole discretion for so long as TransRe
remains a member of Monarch Parent or the senior debt remains
outstanding. Pursuant to this agreement, TransRe will have the right to
provide, at market rates and terms, a maximum of 15% of any reinsurance
coverage obtained by Monarch in any individual reinsurance contract.
The Limited Liability Company Agreement to be entered into upon the
formation of Monarch Parent (the "LLC Agreement") will provide that
it will be managed by a seven-member Board of Managers, three of whom
will be designated by the CAB Holdco, three of whom will be
designated by FNHC, and one who will be jointly selected by FNHC and
CAB Holdco. The LLC Agreement will provide that certain material
transactions must be approved by a supermajority of the managers,
including a termination or amendment of the Investment Management
Agreement or the MGA Agreement. FNHC will be entitled to receive a
termination fee equal to the aggregate fees paid under the MGA
Agreement for the 12 calendar months prior to the date of
termination, if the MGA Agreement is terminated other than for cause.
The LLC Agreement will also provide the members with certain
redemption, tag-along, drag-along and buy-sell rights.
CDJ Global Catalyst, LLC, the manager of C.A. Bancorp has
discretionary authority over certain managed accounts that currently
hold in the aggregate shares of FNHC's common stock totaling less
than 1% of the FNHC's outstanding shares.
A copy of the Agreement and joint press release will be filed under
the Company's SEDAR profile at www.sedar.com.
C.A. Bancorp Inc.
CAB is a publicly traded Canadian merchant bank and alternative asset
manager with a primary focus on the insurance industry.
Caution Regarding Forward-Looking Information
This release may contain forward-looking statements about C.A.
Bancorp and Monarch. Forward-looking statements generally can be
identified by the use of forward-looking terminology such as "may",
"will", "expect", "intend", "estimate", "anticipate", "believe",
"should", "plans" or "continue" or the negative thereof or variations
thereon or similar terminology. Although C.A. Bancorp believes that
the expectations reflected in such forward-looking statements are
reasonable, it can give no assurance that such expectations will
prove to be correct. These forward-looking statements are subject to
a number of risks and uncertainties, not all of which are known to
C.A. Bancorp, including receipt of any required regulatory approvals,
completion of definitive documentation and corporate structures and
the timing thereof, market conditions, currency risk, concentration
of investments, limited operating experience, reliance on key
personnel and management and counterparties, risks in the insurance
industry and the Florida market and execution risk. Actual results
could differ materially from those anticipated in these
forward-looking statements. Reference should also be made to the risk
factors published in the Company's continuous disclosure documents
including its most current annual information form available at
C.A. Bancorp Inc.
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