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Federated National to buy out remainder of Fla. homeowners insurance JV

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Federated National to buy out remainder of Fla. homeowners insurance JV

Federated National Holding Co. has struck a deal to buy the rest of the Monarch Delaware Holdings LLC joint venture that owns Florida-based homeowners insurance carrier Monarch National Insurance Co.

Federated National agreed to purchase Crosswinds Investor Monarch LP's class A membership interests in Monarch Delaware Holdings for $12.3 million and Transatlantic Reinsurance Co.'s membership interests for $4.4 million. Federated National and Crosswinds Investor Monarch each currently own 42.4% membership interests in Monarch Delaware Holdings, and Alleghany Corp. unit Transatlantic Reinsurance holds about 15.2% membership interests.

Per terms of the agreement, the outstanding principal and accrued but unpaid interest due on the $5.0 million note from Monarch National Holding Co. to Transatlantic Reinsurance will be repaid in full.

Crosswinds Investor Monarch is a majority-owned subsidiary of publicly traded private equity firm Crosswinds Holdings Inc. As a limited partner of Crosswinds Investor Monarch, Crosswinds Holdings will receive about $10.5 million of the proceeds.

Each of Crosswinds Re and Transatlantic Reinsurance will have a right of first refusal through Dec. 31, 2018, to participate in the Federated National's catastrophe excess of loss reinsurance program, at market rates and terms, up to a placement of $10 million in reinsurance limit in the aggregate from Crosswinds and up to a placement of $10 million in reinsurance limit in excess of its placement on Federated National's current catastrophe excess of loss reinsurance program from Transatlantic Reinsurance.

In addition, Crosswinds or an affiliate, will serve as the portfolio manager to Monarch National Insurance for a fee of $300,000 for one year. The existing investment management agreement with Crosswinds Holdings subsidiary Crosswinds AUM LLC would terminate on closing of the proposed transaction.

The proposed transaction is expected to close in the first quarter of 2018. The deal hinges on Federated National securing the required financing to purchase the venture partners' interests, receipt of regulatory approval from the Florida Office of Insurance Regulation, completion of certain transaction documents and other closing conditions.