Farmers Exchanges Announce Renewal Of $500 Million Contingent Surplus Note Facility; Ensures Access To Regulatory Capital After Major Catastrophes

LOS ANGELES, May 3, 2012 /PRNewswire/ --  The Farmers Exchanges are pleased to announce the successful renewal of their contingent surplus loan note facility. The $500 million facility was oversubscribed with a range of bank and non-bank lenders participating in the transaction.

Commerzbank A.G., RBS Securities Inc, and Swiss Re acted as joint bookrunners with active syndication roles on this transaction.

The facility, which was initially developed in 2007, provides the Farmers Exchanges with the ability to issue 10 year surplus notes at any time during a three-year period, in the event of a specified major catastrophe loss, at a pre-agreed price. This transaction aligns with the Farmers Exchanges' focus on preserving their long-term capital strength, even after a major catastrophic event. Therefore, the facility provides capital exactly when needed at a time when Farmers Exchanges and their customers need it the most.

"This innovative transaction is a winner on many fronts as it helps to secure the financial strength of the Farmers Exchanges for the ultimate benefit of our customers," said Ron Myhan, Chief Financial Officer of the Farmers Exchanges. "Most importantly, this transaction provides the Farmers Exchanges with access to regulatory capital precisely when we need it –and at a reasonable cost –after a major catastrophic event," Myhan added. Myhan also thanked the California Department of Insurance for its regulatory approval of the transaction.

"Syndicating a subordinated contingent credit facility with potential exposure for 13 years in the current financial markets was always going to be more challenging than when the first facility was put in place in 2007," said Alan Badanes, Managing Director, Swiss Re. "The success of the deal was based on both the high quality of the Farmers Exchanges' name and franchise, and key structuring elements in the deal, such as the remote catastrophe trigger, which provided a good risk-adjusted return to lenders."

Richard Furk, responsible for insurance coverage in the US, UK and Bermuda at Commerzbank commented: "We were delighted to work again with Farmers Exchanges on this unusual form of capital instrument, bringing together bank and non-bank investors within a difficult market environment."

Swiss Re participated in this transaction via its wholly owned subsidiary, Swiss Re Financial Products.

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