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Capitalization Transaction Consummated By Associated Industries Insurance Services, Inc.

July 1, 1999
Source: Associated Industries Insurance Services, Inc

Associated Industries Insurance Services, Inc. (AIIS) is pleased to announce the consummation of a capitalization transaction with Overseas Partners Re (OP Re) as the strategic investor. OP Re is providing the Company $23 million in common equity and senior debentures, as well as providing substantial proportional reinsurance capacity.

AIIS owns and manages Associated Industries Insurance Company, Inc. (AIIC), one of the largest domestic workers' comp insurance carriers in Florida. OP Re is a reinsurance subsidiary of Overseas Partners Ltd. (OPL), both of Hamilton, Bermuda. OPL is one of the largest reinsurance companies in the world, with assets of $4.4 billion and a surplus of more than $2.5 billion rated A+ (superior) by the A.M. Best Company, Inc., in recognition of its superior operating results, strong financial position, and excellent underwriting stability.

OP Re has acquired from Associated Industries of Florida (AIF) a 22-percent equity position in AIIS for $8 million and, in a related transaction, is providing $15 million additional capital to AIIS which will result in an $11 million increase in AIIC's capital and surplus. AIF will retain 49.9 percent ownership in AIIS and the Board of Directors of AIF has allocated 28.1 percent to management options.

Allen J. Keesler, Jr., Chairman of the Board of AIF stated, "AIIS Management, prior to this outstanding deal, has already provided AIF with over $31 million of operating revenue. We anticipate that within the next five years this AIIS/OP Re deal will provide ultimate revenues of another $60 to $70 million. All of these revenues have been, and will continue to be, utilized to present the views of the business community to government." Keesler further observed that "...The AIF Board's unanimous vote for this transaction and the allocation of 28.1 percent of the shares of the Company to AIIS Management is a reflection of the tremendous appreciation which the Board has for management's development of this significant asset of AIF without any capital infusion from AIF or its members."

D. Scott Davis, President & CEO of OP Re stated, "We are pleased to have this opportunity to continue and expand our relationship with AIIS. Our investment reflects our confidence in AIIS management and their strategic plan for the growth of the company."

"The arrangement with OP Re puts in place a final step that allows us to further our goals of becoming a regional carrier and providing competitive and dependable workers' comp coverage for America's business future," explained Jon L. Shebel, AIF's President & CEO.

Last year, AIIS began the search for a strategic investor to provide capital for AIIC's continued growth in Florida and into other states (AIIC holds licenses in Georgia, Alabama and Mississippi). OP Re was selected from a pool of potential investors because of its strong management and financial performance as well as its historic and on-going relationship with AIIC.

"Our search for an equity investor was diligent and purposeful, as we believed we needed an organization whose business philosophy aligned with ours," said Shebel. "We found that in OP Re and look forward to a continuing long term working relationship with them."

AIIC is currently in the process of appointing independent agents in Alabama, Georgia, and Mississippi as the first step in marketing workers' comp policies in those states. The company is also pursing licenses to sell policies in more southeastern states. The strategy involves gradual and controlled moves into those markets with an initial focus on Florida employers with operations in those states.

"Once we establish AIIC's reputation for quality products and excellent service in these other states, our marketing efforts will expand," said Kathy Mackay, AIIC's chief underwriting officer. "We look forward to the additional business opportunities this infusion of capital brings to us." Mackay further stated that "...AIIS will continue to utilize independent agents as our distribution channel."

AIIC was started by Associated Industries of Florida (AIF) as a commercial self-insurance fund in 1987. That self-insurance fund was converted in 1996 to a capitalized stock insurance company based upon the strength of its financials without raising outside capital or incurring debt. OP Re was instrumental in the Company's conversion by providing reinsurance and, thus, began its relationship with AIIS/AIIC.

AIF is a statewide employers association representing more than 10,000 businesses who collectively employ more than 1 million people. Member companies range from large multinational corporations to small family-owned enterprises. AIF is commonly known as "The Voice of Florida Business."