A Bermuda domiciled holding company and reinsurance operating company will assume fifty percent of the business of St. Paul Travelers CATRisk operation pending its acquisition by affiliates of San Francisco private equity investors Hellman & Friedman LLC and Friedman Fleischer & Lowe LLC.

CATRisk is a specialty property and casualty insurer providing coverage for clients with significant catastrophe exposures. The company provides non-admitted homeowners insurance primarily in Florida and Texas and admitted residential earthquake in California and Washington. It operates through three interrelated specialty insurance companies: residential earthquake insurers, GeoVera Insurance Company and Pacific Select Property, and surplus lines carrier, USF&G Specialty Insurance Company.

For the fiscal year ended December 31, 2004, CATRisk generated gross written premiums of $220 million. CATRisk?s management team, which founded the business in 1993, will continue to lead the business under FFL and H&F?s ownership. It is expected that CATRisk?s employees will continue in their current positions and that relationships with independent agents, brokers and wholesalers will remain in place.

David L. Lowe, a vice chairman of FFL, said in a Press release: ?Both FFL and H&F have long histories of successful financial services investments. The acquisition of CATRisk represents an opportunity to apply our sector expertise to enhance the value of an outstanding specialty insurance operation.?

The deal, which is subject to regulatory approval, is expected to close in the fourth quarter of 2005. Terms were not disclosed.

A.M. Best Co. reacted by placing the financial strength ratings (FSR) of A+(Superior) and issuer credit ratings (ICR) of ?aa-? of the three brands under review with negative implications because their current ratings are a result of their affiliation with St. Paul Travelers Insurance Companies and their inter-company reinsurance agreements.

Upon completion of the transaction, a newly formed group, will be assigned a rating separate from St. Paul Travelers Insurance Companies, A.M. Best said.

The negative implications indicate that the ratings will likely be downgraded two notches based upon a review of the proposed business plan.

The newly formed group will focus on underwriting catastrophe exposed residential property risks, primarily in California, Florida and Texas.

The San Francisco firm did not respond to a query about the Bermuda companies by Press time. FFL?s previous investments in the financial services sector include Montpelier Re Holdings, Ltd. and Wilton Re Holdings Limited. H&F investments in the insurance sector include Arch Capital Group.