Crosswinds Holdings Inc.
TSX : CWI

Crosswinds Holdings Inc.

March 20, 2015 08:30 ET

Crosswinds Announces Closing of Joint Venture and Approval of Monarch National Insurance Company

TORONTO, ONTARIO--(Marketwired - March 20, 2015) - Crosswinds Holdings Inc. ("Crosswinds" or the "Company") (TSX:CWI) today announced the closing of its joint venture transaction to form a new property and casualty insurance carrier in Florida known as Monarch National Insurance Company ("Monarch Insurance") and the receipt of a certificate of authority from the Florida Office of Insurance Regulation ("OIR") for Monarch Insurance to begin writing Florida homeowner's insurance. Federated National Holding Company (NASDAQ:FNHC) and Transatlantic Reinsurance Company ("TransRe") are also parties to the joint venture.

Colin King, Crosswinds' Chief Executive Officer said, "This joint venture represents the consummation of a Crosswinds platform investment in the insurance industry. We are excited to be entering into this venture with high caliber partners, each of whom brings a tremendous amount of expertise to the table."

Michael H. Braun, FNHC's Chief Executive Officer and President, said, "We are pleased that Florida's OIR has granted Monarch Insurance's certificate of authority and expect to begin writing new business this month. This is a great opportunity to expand our product offerings to our existing partner agents in the Florida homeowners market and to achieve greater economies of scale from our operations. We look forward to working closely with our joint venture partners as we launch and grow Monarch Insurance in the coming years."

Joint Venture Interests

Crosswinds invested USD$12 million in the joint venture through its majority owned limited partnership, Crosswinds Investor Monarch LP ("Crosswinds LP"), which invested an aggregate of USD$14 million in Monarch Delaware Holdings LLC, the indirect parent company of Monarch Insurance ("Monarch Delaware"), for a 42.4% interest (50% of the voting interests) in the joint venture. The other USD$2 million invested by Crosswinds LP was contributed by an individual investor. Crosswinds holds an 86% interest and all of the voting units in Crosswinds LP. Crosswinds LP is managed by its general partner and Crosswinds' wholly owned subsidiary, Crosswinds Monarch GP LLC.

FNHC also invested USD$14 million for a 42.4% interest (50% of the voting interests). TransRe invested USD$5 million for a 15.2% non-voting interest in Monarch Delaware and has advanced an additional USD$5 million in debt evidenced by a 6-year promissory note bearing 6% annual interest payable by Monarch National Holding Company, a wholly owned subsidiary of Monarch Delaware and the direct parent of Monarch Insurance.

In connection with the joint venture and as previously disclosed, the Monarch entities have entered into an Investment Management Services Agreement with Crosswinds AUM LLC, a wholly owned subsidiary of Crosswinds pursuant to which Crosswinds AUM LLC will receive investment management fees for managing the investment portfolios of the Monarch entities. The management fee, on an annual basis, is 0.75% of assets under management up to USD$100 million, 0.50% of assets under management of more than USD$100 million but less than $200 million, and 0.30% of assets under management of more than USD$200 million. In addition, Monarch Insurance entered into a Managing General Agent and Claims Administration Agreement with a wholly owned subsidiary of FNHC and a Reinsurance Capacity Right of First Refusal Agreement with TransRe.

The parties also entered into a limited liability company agreement for Monarch Delaware which governs the terms of the joint venture, including, among other things, how the joint venture will be managed and the rights and obligations of the parties. Monarch Delaware will be managed by a seven member Board of Managers three of whom have been designated by Crosswinds, three of whom have been designated by FNHC, and one of whom will be jointly selected by Crosswinds and FNHC within six months.

Additional details about the joint venture will be available on Crosswinds' website and in its disclosure filings available at www.sedar.com.

About Crosswinds Holdings Inc.

Crosswinds Holdings Inc. is a publicly traded Canadian private equity firm and asset manager with a primary focus on the insurance industry.

About FNHC

Federated National Holding Company (NASDAQ:FNHC) is authorized to underwrite, and/or place through its wholly-owned subsidiaries, homeowners' multi-peril, commercial general liability, federal flood, personal auto and various other lines of insurance in Florida and various other states. Through its subsidiaries, FNHC markets and distributes its own and third-party insurers' products and other related services through a network of independent agents. FNHC also utilizes a select number of general agents for the same purpose.

This release includes certain forward-looking statements. 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 the Company 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. Additional important factors that could cause actual results to differ materially from expectations include, among other things, general economic and market factors, regulations in the insurance industry and performance of the Company's investments. 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 most recent management discussion and analysis and annual information form which are available at www.sedar.com.

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