Mutual Risk Management To Receive $112.5 Million from Investors Led by XL

April 19, 2001

Bermuda-based Mutual Risk Management Ltd. will receive a much needed capital injection of $112.5 million in the form of senior convertible debentures from a group of investors headed by XL Capital Ltd. The company has experienced large losses from several programs, mainly workers compensation, and is currently negotiating settlements with reinsurers.

“The principal use of the proceeds from the investment will be to increase the statutory capital of Mutual Risk’s U.S. insurance companies, the Legion Companies,” said the announcement. It also plans to “restructure its Program Business segment to transform it into a specialty insurance operation by retaining more underwriting risk in the larger, more profitable programs it currently underwrites and by purchasing less reinsurance.”

In addition to XL the investment group includes First Union Capital Partners, High Ridge Capital and Century Capital Partners II. Mutual Risk will name three XL executives to its board, and one new board member from each of the other venture capital groups.

The debentures give “as if converted” voting rights to the investors, and carry a 9.3 percent annual coupon. Unless the investors exercise their right to exchange the notes for Mutual Risk shares at a $7.00 exercise price, they are due for repayment in five years.

XL’s CEO Brian M. O’Hara characterized the investment as “an opportunity to both support and benefit from Mutual Risk’s unique franchise in the Alternative Market.” He saw the adoption of the proposed new business model as “the right decision for this marketplace” and predicted that it would “enhance results going forward.”

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