Talbot Underwriting

25 February 2002

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Intermediate Capital Group has provided a $20m letter of credit as part of a $120m credit facility raised recently by Talbot Underwriting. The capital supports its underwriting at Lloydâ€™s in 2002. ICG has creatively structured a letter of credit facility with mezzanine risk and return characteristics. The $120m credit facility is structured with different layers of capital risk. ICG has co-invested alongside Reservoir Capital Group, a US investor, to take the middle layer of capital, at middle risk. Other investors providing capital to Talbot include Talbotâ€™s senior management, Black Diamond, a US merchant bank and advisory company specialising in the insurance industry and a number of leading reinsurance groups. ICG has a letter of credit agreement with Talbot for the underwriting years 2002 and 2003, which are expected to close 31 December 2004 and 2005 respectively. The ICG return will be calculated as a pro rata share of Talbotâ€™s underwriting profits. ICG also have a warrant into the equity of the ultimate company.

Company

Talbot Underwriting was jointly established in November 2001 by the former Alleghany Underwriting Management team, led by CEO Michael Carpenter and director of underwriting Rupert Atkin, and US-based investors from Black Diamond Group LLC, led by Heidi Hutter and Jay Novik. The $120m capital support enables Talbotâ€™s Syndicate 1183, led by Rupert Atkin, to write premium income of Â£180m for the 2002 year of account, after taking account of quota share support. Syndicate 1183 underwrites a diverse range of businesses that are predominately short-tail in nature with a major focus on the marine classes in which it is an established market presence. The syndicate also focuses on direct property, financial institutions and treaty business.

People

Paul Piper, James Davis and Matthew Robinson structured the letter of credit on behalf of ICG.