Hello, Embarcadero

CRM Holdings Ltd., a provider of fee-based management services and reinsurance to self-insured workers’ compensation groups, announced that it has signed a stock purchase agreement to acquire privately-held Embarcadero Insurance Holdings Inc. for approximately US $45 million in cash. The deal is expected to close by the end of 2006.

Under terms of the agreement, CRM USA Holdings will acquire outstanding shares of Embarcadero and, upon consummation of the transactions contemplated by the agreement, Embarcadero will be become a wholly-owned subsidiary of CRM USA Holdings. EIH had total assets at Dec. 31, 2005, of $211 million and 2005 net income of $5.2 million. EIH wholly-owned subsidiary Majestic began operations in 1986 and since then has grown its workers’ compensation net earned premiums to US $71.3 million in 2005.

Majestic’s five-year average combined ratio was just under 100 percent through 2005. In June 2006, Majestic was rated “B++” (in English, “very good”) with a positive outlook by insurance industry critics A.M. Best. An interesting outcome of the deal from the media viewpoint was the opportunity to write press shorts headlined that A.M. Best Co. had placed the financial strength rating of B++ under review with negative implications.

This rating action was actually a natural reaction to the sale and, as Best explains, reflects the pending change in Majestic’s ownership, the additional debt taken on by CRM to finance the acquisition and the potential constraints placed on Majestic resulting from acquisition.

Embarcadero, through Majestic Insurance Co., writes workers’ compensation insurance for medium to large size businesses. Majestic is a California domiciled insurance company licensed in fifteen states, and presently operates in California, Arizona, Alaska, Nevada, Oregon and Washington.

A.M. Best Co., established in 1899, is the world’s oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best’s Web site at www.ambest.com. To get directily to Best’s Ratings, independent data and analysis on more than 3,000 individual property/casualty companies go directly to www.ambest.com/pc.