Arkwright introduces innovative financing structure.

WALTHAM, Mass.--(BUSINESS WIRE)--May 6, 1996--Arkwright Mutual Insurance Co., a worldwide provider of commercial property insurance and related risk management services, has created a finance entity containing investor capital now available to the company.

This entity increases Arkwright's financial flexibility by providing a cost-effective supplement to traditional reinsurance, and a funding source for corporate development. Arkwright believes a conservative and balanced portfolio utilizing internally generated surplus, investor capital and reinsurance programs will optimize the cost and availability of its financial resources.

Central to Arkwright's new financing structure is the establishment of the Arkwright CSN Trust, a Delaware business trust. The Trust has issued $100 million in trust notes to private investors. Net proceeds generated through the issuance of these notes were used to purchase U.S. Government securities, which, currently, are being held by the Trust. Over the next 20 years, Arkwright may, with the approval of the Massachusetts Commissioner of Insurance, exchange its surplus notes for some, or all, of the U.S. Government securities held by the Trust. The company has until 2026 to repay any surplus notes issued to the Trust.

Arkwright's President and Chief Executive Officer William J. Poutsiaka remarked on the customer-related benefits and unique features. "Our clients will benefit from our greater financial flexibility, now similar to that of a public firm, yet retain the long-term advantages they enjoy as owners of their mutual company supplier. While similar financing structures have been used before, the unique feature we've introduced is the ability for the company to redeem its surplus notes, until 2016, by delivering U.S. government securities back to the Trust. This would enable Arkwright to, again, issue new surplus notes to the Trust during this period."

According to Poutsiaka, Arkwright chose a contingent structure rather than a direct issuance that immediately raises surplus, because the company does not need additional surplus at this time, a conclusion shared by analysts, customers and regulators familiar with the company's high level of financial strength. The company does, however, anticipate future strategic and operational requirements for surplus, and considers this transaction the solution to prepare for those opportunities.

"The contingent surplus available positions us to, among other things, withstand reinsurance market volatility similar to what was experienced industrywide following Hurricanes Andrew and Iniki," Poutsiaka explained. "This innovative approach helps Arkwright address a range of financing needs by providing additional capacity through capital markets in addition to the traditional reinsurance market that has met our needs under most circumstances."

The offering of trust notes was underwritten by Merrill Lynch & Co. and Morgan Stanley & Co. Inc. The trust notes have been rated by the following agencies: Duff & Phelps (A), Standard & Poor's (BBB) and Moody's (Baa3).

Arkwright Mutual Insurance Co. is a global supplier of commercial property insurance products and related risk management services. Since 1850, the company has served industrial, commercial, institutional and governmental organizations. Arkwright Mutual Insurance Co.'s overall performance is rated A+ (Superior) by A.M. Best Co. Its claims-paying ability is rated AA- (Very High) by Duff and Phelps, and A- (Good) by Standard & Poor's. Moody's has rated Arkwright's financial strength A3 (Good).

Because of the private nature of this transaction, no further disclosure of information concerning this matter is anticipated by Arkwright to the general public.

CONTACT: Arkwright Mutual Insurance Co.

Johanna Hetherton, 617/890-9300, ext. 3680