-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IdXD5/8waYgvBf/TKb63EB97+tHclyKmiSTzqE+dzCTTtrirJCnP27VM2pbtpT+h 5WMB73AcJtwOaDCKOdkr4Q== 0000950112-95-002922.txt : 19951118 0000950112-95-002922.hdr.sgml : 19951118 ACCESSION NUMBER: 0000950112-95-002922 CONFORMED SUBMISSION TYPE: SC 14D9 PUBLIC DOCUMENT COUNT: 9 FILED AS OF DATE: 19951109 SROS: NYSE SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: SCOR US CORP CENTRAL INDEX KEY: 0000798363 STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY INSURANCE [6331] IRS NUMBER: 751791342 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D9 SEC ACT: 1934 Act SEC FILE NUMBER: 005-39126 FILM NUMBER: 95588599 BUSINESS ADDRESS: STREET 1: 110 WILLIAM ST STE 1800 STREET 2: 18TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10038-3995 BUSINESS PHONE: 2129788200 MAIL ADDRESS: STREET 1: 110 WILLIAM STREET STREET 2: 18TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10038 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: SCOR US CORP CENTRAL INDEX KEY: 0000798363 STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY INSURANCE [6331] IRS NUMBER: 751791342 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D9 BUSINESS ADDRESS: STREET 1: 110 WILLIAM ST STE 1800 STREET 2: 18TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10038-3995 BUSINESS PHONE: 2129788200 MAIL ADDRESS: STREET 1: 110 WILLIAM STREET STREET 2: 18TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10038 SC 14D9 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ SCHEDULE 14D-9 SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO SECTION RULE 14(D)(4) OF THE SECURITIES EXCHANGE ACT OF 1934 ------------------------ SCOR U.S. CORPORATION (Name of Subject Company) SCOR U.S. CORPORATION (Name of Person Filing Statement) COMMON STOCK, PAR VALUE $0.30 PER SHARE (Title of Class of Securities) 784027104 (CUSIP Number of Class of Securities) ------------------------ JOHN T. ANDREWS, JR. SENIOR VICE PRESIDENT AND GENERAL COUNSEL 2 WORLD TRADE CENTER NEW YORK, NEW YORK 10048-0178 TELEPHONE: (212) 390-5200 (Name, address (including zip code) and telephone number (including area code) of person authorized to receive notices and communications on behalf of the persons filing statement) ------------------------ COPY TO: PHILLIP R. MILLS, ESQ. DAVIS POLK & WARDWELL 450 LEXINGTON AVENUE NEW YORK, NY 10017 (212) 450-4000 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ITEM 1. SECURITY AND SUBJECT COMPANY. The name of the subject company is SCOR U.S. Corporation (the "Company"). The address of the principal executive offices of the Company is Two World Trade Center, New York, New York 10048-0178. The title of the class of equity securities to which this Statement relates are the shares of the common stock, par value $.30 per share, of the Company (the "Shares"). ITEM 2. TENDER OFFER OF THE BIDDER. This Statement relates to the tender offer made by SCOR S.A., societe anonyme organized under the laws of The French Republic ("Parent"), to purchase all outstanding Shares not currently beneficially owned directly or indirectly by Parent at a price of $15.25 per Share (the "Offer Price") net to the seller in cash, without interest thereon, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated November 9, 1995 (the "Offer to Purchase") and the related Letter of Transmittal (which together constitute the "Offer"), copies of which are filed as exhibits hereto and are incorporated herein by reference. The Offer is disclosed in a Tender Offer Statement on Schedule 14D-1 (the "Schedule 14D-1") filed with the Securities and Exchange Commission (the "Commission") on November 9, 1995. The address of the principal executive offices of Parent, as reported in the Schedule 14D-1, is 1 Avenue du President Wilson, 92074 Paris La Defense Cedex, France. The offer is being made pursuant to an Agreement and Plan of Merger, dated as of November 2, 1995, as amended (the "Merger Agreement"), among Parent, the Company and SCOR Merger Sub Corporation, a newly-formed Delaware corporation and a wholly-owned subsidiary of Parent ("Purchaser"). The Merger Agreement provides, among other things, that upon the terms and subject to the conditions thereof, and in accordance with the provisions of the General Corporations Law of the State of Delaware (the "DGCL") and the Restated Certificate of Incorporation (the "Restated Certificate") and By-Laws of the Company, Purchaser will be merged with and into the Company (the "Merger") as soon as practicable following the consummation of the Offer and the satisfaction or waiver of certain other conditions, with each Share issued and outstanding immediately prior to the effective time of the Merger (other than Shares held in the treasury of the Company or held by any wholly-owned subsidiary thereof and Shares held by Parent or any of its subsidiaries, which shall be canceled and extinguished without any conversion thereof and without any payment made with respect thereunto, and other than Dissenting Shares (as defined below)) being, by virtue of the Merger and without any action on the part of the holder thereof, converted into the right to receive an amount in cash, without interest, equal to the Offer Price. ITEM 3. IDENTITY AND BACKGROUND. (a) The name and business address of the Company, which is the person filing this Statement are set forth in Item 1 above. (b) Except as described herein, to the knowledge of the Company, as of the date hereof there are no material contracts, agreements or understandings (other than in the ordinary course of business), or any potential or actual conflicts of interest between the Company or its affiliates and (i) the Company, its executive officers, directors or affiliates or (ii) Parent or its executive officers, directors or affiliates. Interests of Special Committee On September 28, 1995, the Board of Directors of the Company (the "Board" or "Board of Directors") created a special committee comprised of those directors who are not officers of Parent or the Company or any affiliate of either of them (the "Special Committee") to consider and make recommendations with respect to the Proposal (as defined below). The members of the Special Committee are John R. Cox, Raymond H. Deck, Michel J. Gudefin, Richard M. Murray, John W. Popp, David J. Sherwood and Ellen E. Thrower. Mr. Sherwood serves as Chairman and Mr. Cox serves as Vice Chairman of the Special Committee. Mr. Cox currently serves as a Director of the Company and has been Director of the Company since 1994. Mr. Cox beneficially owns 1,000 Shares. Mr. Deck currently serves as a Director of the Company and has been a Director of the Company since 1986. Mr. Deck beneficially owns 7,100 Shares. Mr. Gudefin currently serves as a Director of the Company and has been a Director of the Company since 1990. Mr. Gudefin beneficially owns 18,000 Shares. Mr. Murray currently serves as a Director of the Company and has been a Director of the Company since 1990. Mr. Murray beneficially owns 3,000 Shares. Mr. Popp currently serves as a Director of the Company and has been a Director of the Company since 1990. Mr. Popp beneficially owns 1,000 Shares. Mr. Sherwood currently serves as a Director of the Company and has been a Director of the Company since 1987. Mr. Sherwood beneficially owns 1,100 Shares. Ms. Thrower currently serves as a Director of the Company and has been a Director of the Company since 1995. Ms. Thrower beneficially owns no Shares. In consideration of the services rendered on the Special Committee, the members of the Special Committee each received $1,000.00 for attendance at each meeting of the Special Committee. Mr. Sherwood will be receiving an annual retainer fee, which is to be determined, for serving as Chairman of the Special Committee. Interests of Certain Persons Certain contracts, agreements, arrangements and understandings between the Company or its affiliates and certain of its directors, executive officers or affiliates are described at pages 5 through 26 of the Company's Proxy Statement dated April 28, 1995 relating to its 1995 Annual Meeting of Stockholders (the "1995 Proxy Statement"). A copy of the 1995 Proxy Statement is attached as an exhibit hereto and the portions thereof referred to herein are incorporated herein by reference.(1) The Company has granted options to purchase Shares to key executives, directors and key employees under the Company's 1986 Stock Incentive Plan for Key Executives, the Company's 1990 Stock Option Plan for Directors and the Company's 1991 Stock Option Plan for Key Employees, respectively. See "The Merger Agreement--Certain of the Covenants of the Company and Parent" under Item 3(b) below for a description of the treatment of employee stock options in the Merger. Jacques P. Blondeau has served as Chairman of the Board of Directors of the Company since September 30, 1994 and as a Director of the Company since 1988. Mr. Blondeau is also Chairman of SCOR Reinsurance Company ("SCOR Re"). Mr. Blondeau serves as a Trustee of the Voting Trust as described below that holds the stock of SCOR Re on behalf of the Company. Mr. Blondeau is Chairman of the Board and Chief Executive Officer of Parent. Mr. Blondeau was President-- - ------------ (1) The following are corrections to information contained in the 1995 Proxy Statement: (1) the bonus of Nolan E. Asch, Senior Vice President and Chief Actuary of the Company, for 1992 as listed on page 11 of the 1995 Proxy Statement was $20,000, not $0 as indicated therein; and (2) the expiration date for the 9,071 options of Mr. Asch listed on page 13 of the 1995 Proxy Statement is December 2, 2004, not November 30, 2004 as indicated therein. 2 Operations of Societe Commercial de Reassurance ("SCOR Paris") from 1988 until 1990. Serge M.P. Osouf has served as Vice Chairman of the Board of Directors of the Company and SCOR Re since September 30, 1994, and has been a Director of the Company since September 1993, and of SCOR Re since December 1991. Mr. Osouf serves as the General Manager of Parent and Chairman of SCOR Vie, a subsidiary of Parent. Patrick Peugeot has served as a Director of the Company since 1983 and of SCOR Re since 1985. Mr. Peugeot is also a Voting Trustee of SCOR Re. Mr. Peugeot had served as Chairman of the Board and Chief Executive Officer of Parent from 1989 until 1994 and of SCOR Paris from 1983 until 1990. Francois Reach has served as a Director of the Company since March 1989 and of SCOR Re since June 1994. Mr. Reach has served as Chairman and Chief Executive Officer of REAFIN, the finance company subsidiary of Parent since October 1994. Mr. Reach has served as Deputy General Manager of Parent since October 1994. As of October 31, 1995, all executive officers and directors of the Company as a group beneficially owned an aggregate of 82,161 Shares and held stock options to purchase 815,900 Shares. Together, such Shares and Shares purchasable upon exercise of such stock options aggregate approximately 4.94% of the 18,170,971 Shares outstanding on October 31, 1995. If the transaction is consummated, such persons will receive an aggregate of $1,252,955.25 in cash for their Shares and, in addition, an aggregate of $2,728,528.375 in respect of the cash-out of their stock options. See "The Merger Agreement" below for a discussion of the treatment of stock options in the Merger. The following table sets forth, as of October 31, 1995, the number of Shares and stock options owned by, and the aggregate amounts to be received by, each executive officer and director of the Company and Parent who owns any Shares or stock options and all executive officers and directors as a group pursuant to the transaction (after giving effect to the payments to be made in respect of Shares and stock options, but without taking into account such individuals' cost bases in their Shares, pursuant to the terms of the Merger Agreement). Other than the individuals named below, no executive officer or director of the Company or Parent owns any Shares. TOTAL SHARES CASH AMOUNT BENEFICIALLY OUTSTANDING TO BE NAME OWNED OPTIONS RECEIVED - ---------------------------------- ------------ ----------- ------------ Louis Adanio...................... 10,409 36,480 $262,339.75 John T. Andrews, Jr............... -0- 109,000 284,750.00 Nolan E. Asch..................... 14,188 61,671 356,334.875 Jacques P. Blondeau............... -0- 102,000 328,278.00 John R. Cox....................... 1,000 6,000 45,250.00 Jeffrey D. Cropsey................ 4,552 13,000 150,668.00 Raymond H. Deck................... 7,100 18,000 160,400.00 John D. Dunn, Jr.................. -0- 25,000 126,250.00 Francis J. Fenwick................ -0- 7,800 48,750.00 Howard B. Fischer................. 4,412 31,760 156,743.00 Linda J. Grant.................... 100 15,300 53,650.00 Michel Gudefin.................... 18,000 18,000 326,625.00 Jerome Karter..................... -0- 166,000 560,300.00 Dominique LaVallee................ 1,400 19,000 83,850.00 Jean Masse........................ -0- 6,000 39,375.00 Richard M. Murray................. 3,000 18,000 97,875.00 Serge M.P. Osouf.................. -0- 13,000 74,500.00 Patrick Peugeot................... 15,900 95,789 584,395.00 John W. Popp...................... 1,000 18,000 67,375.00 Francois Reach.................... -0- 6,000 30,000.00 Robert D. Sawicki................. -0- 9,100 56,875.00 David J. Sherwood................. 1,100 18,000 68,900.00 Ellen E. Thrower.................. -0- 3,000 18,000.00 3 The Merger Agreement provides for the indemnification of the current and former directors and officers of the Company from and after the Effective Time (as defined below), and the maintenance of a policy of directors' and officers' liability insurance for a period of six years after the Effective Time. See "The Merger Agreement--Certain of the Covenants of the Company and Parent" below. The directors, officers and employees of the Company may be indemnified against certain actions, claims and liabilities pursuant to the Company's By-Laws. Indemnification The Restated Certificate and the By-Laws contain provisions which state that no director shall be personally liable to the Company or its stockholders for monetary damages with respect to claims by the Company or the stockholders for breaches of fiduciary duty as a director. The provisions do not limit director liability for monetary damages (a) for any breach of the director's duty of loyalty to the Company or its stockholders, (b) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (c) under Section 174 of Title 8 of the DGCL (i.e., unlawful dividends or other unlawful payments) or (d) for any transaction from which the director derived an improper personal benefit. The By-Laws of the Company provide that each director and each officer or former director or officer of the Company or each person who may have served at the Company's request as a director or officer of another corporation in which the Company owned shares of capital stock or of which the Company is a creditor, may be indemnified by the Company against liabilities imposed upon such director or officer and expenses reasonably incurred by such director or officer in connection with any claim made against such director or officer, or any action, suit or proceeding to which such director or officer may be a party by reason of such person being, or having been, a director or officer of the Company, and against such sums as independent counsel selected by the Board of Directors shall deem reasonable payment made in settlement of any such claim, action, suit or proceeding primarily with a view of avoiding expenses of litigation; provided, however, that no director or officer shall be indemnified with respect to matters as to which such director or officer shall be adjudged in such action, suit or proceeding to be liable for negligence or misconduct in performance of duty, or with respect to any matters which such indemnification would be against public policy. Such indemnification is in addition to any other rights to which directors or officers may be entitled. The Company, its directors and its officers are covered under a Directors and Officers Insurance Including Company Reimbursement Policy (the "D&O Insurance") effective for the period from June 22, 1995 to June 22, 1996. Pursuant to the policy, the insurer agreed (1) to pay on behalf of the Company's directors and officers loss from certain claims arising from such directors' or officers' wrongful acts, except for any loss which the Company pays to or on behalf of such directors or officers as indemnification and (2) to reimburse the Company for loss from certain claims which the Company pays to or on behalf of the directors or officers as indemnification. Contracts and Transactions between the Company and Parent. Ownership of the Company. Parent currently owns approximately 80% of the outstanding Shares and therefore has the ability to control the Company through the election of a majority of the Board and voting at meeting of stockholders. Six of the thirteen members of the Board also serve as directors and/or officers of Parent, its subsidiaries or affiliates or are officers of the Company ("Affiliated Directors"). Share Repurchases. On November 2, 1994, Parent acquired directly from certain of the Company's Executive Officers 82,000 Shares at the then prevailing market price of $11.125 per Share, specifically: 44,000 Shares from John T. Andrews, Jr., Senior Vice President, General Counsel and Secretary; 9,071 Shares from Nolan E. Asch, Senior Vice President and Chief Actuary; 4 3,929 Shares from R. Daniel Brooks, Senior Vice President; and 25,000 Shares from Jerome Karter, President and Chief Executive Officer. Each of these senior officers had, at the request of the Company, voluntarily agreed not to sell any Shares held by them in connection with the privately placed offering of convertible subordinated debentures of the Company in 1993, and were prevented from selling during certain other periods thereafter in accordance with Company policy. The proceeds from these sales to Parent were applied exclusively to reduce indebtedness of the sellers to the Company. In addition, on November 2, 1994, under the Company's Stock Incentive Plan for Key Employees, the Company granted to each of such officers options to purchase a corresponding number of Shares at an exercise price of $11.125 per Share, which was equal to the per share market price on that date. Loan Agreement. On October 2, 1995, the Company, as borrower, entered into a Loan Agreement with Parent, as lender, which provides for a term loan to the Company of a principal sum of $20 million from Parent. The term of the loan is one year commencing on October 2, 1995 and is subject to renewal for an additional term of one year at the option of the Company. The interest rate for the loan during any three month interest period is the rate equal to 0.2% plus the applicable three month London Interbank Offered Rate. Interest is payable two days prior to the end of each three month interest period. The proceeds of the loan are restricted to the repayment of, or the repayment of indebtedness incurred in respect of the repayment of, a bank financing obtained by the Company. In October 1995, the Company borrowed $20 million under this loan agreement. Credit Agreement. As of November 2, 1995, the Company had outstanding $75,950,000 aggregate principal amount of 5 1/4% Convertible Subordinated Debentures due April 1, 2000 (the "Debentures"), which were issued by the Company on March 29, 1993 at a price equal to the principal amount thereof through a private offering. The Debentures are not redeemable by the Company prior to April 3, 1996, and outstanding Debentures are currently convertible into approximately 2.99 million Shares at a conversion price of $25.375 per Share. Under the terms of the indenture pursuant to which the Debentures were issued (the "Indenture"), in the event that Parent beneficially owns, after giving effect to the purchase of Shares pursuant to the Offer or the acquisition of Shares pursuant to the Merger, in excess of 90% of the outstanding Shares (a "Repurchase Event"), the holders of the Debentures shall have the right to require the Company to repurchase the Debentures at a repurchase price equal to 100% of the principal amount thereof together with accrued and unpaid interest to the date of such repurchase, which date shall be 45 days after the date on which the Company notifies the holders of the Debentures of such Repurchase Event. On January 24, 1995, the Company, as borrower, entered into a Credit Agreement (the "Credit Agreement") with Parent, as lender. The Credit Agreement provides that during term of the Credit Agreement (the "Revolving Credit Period"), which is five years, the Company may borrow amounts from time to time from Parent, which amounts in the aggregate at any one time do not exceed $20 million. During the Revolving Credit Period, the Company may borrow, repay or prepay any loans under the Credit Agreement subject to the terms thereof. The interest rate on each loan during any three month interest period is the rate equal 0.5% plus the applicable three month London Interbank Offered Rate. Interest is payable at the end of each three month interest period unless added to the outstanding principal balance of such loan at the option of the Company. The proceeds of the Credit Agreement are restricted to the repurchase of the Debentures in the market or the repayment of any debt incurred in order to repurchase Debentures. In addition, Parent may provide or arrange financing necessary for the Company to satisfy its obligation to repurchase Debentures in accordance with the terms of the Indenture. Retrocession Agreements. SCOR Re, like most reinsurance companies, enters into retrocession arrangements for many of the same reasons primary insurers seek reinsurance, including increasing their premium writing and risk capacity without requiring additional capital and reducing 5 the effect of individual or aggregate losses. Historically, SCOR Re has retroceded risks to retrocessionaires on both a proportional and excess of loss basis. Since a reinsurer remains liable to a ceding company with respect to any risk subject to a retrocession agreement, such retrocessionaires are subject to an initial review of financial condition before final acceptability is confirmed and to subsequent reviews on an annual basis. From 1974 through 1986, virtually all of SCOR Re's retrocessions had been to affiliates. Based on the increased surplus resulting from the Company's public offering in 1986, SCOR Re significantly decreased the total amount of reinsurance retroceded, a large portion of which continues to be retroceded to affiliates. All reinsurance agreements with affiliates must be submitted to the New York Insurance Department for prior review. In 1994, 11.5% of gross premiums written by the Company were retroceded to Parent, compared with 15.6% and 14.0% in 1993 and 1992, respectively. Under its 1995 retrocessional program, SCOR Re retains a maximum of $2.0 million as to any one ceding company program for treaty business. SCOR Re retains a maximum of $3.9 million and $1.0 million per risk for facultative property and facultative casualty business, respectively. Under its 1994 retrocessional program SCOR Re retained a maximum of $2.0 million as to any one ceding company program for treaty business and a maximum of $3.3 million and $1.1 million per risk for facultative property and facultative casualty business, respectively. SCOR Re purchases coverage against the accumulation of losses resulting for a single catastrophic event. As with most reinsurers, SCOR Re retains a share of its catastrophe exposures. In 1995, SCOR Re has general catastrophe retrocessional coverage, which covers property exposures only, for generally 78% of $48 million in excess of $20 million per occurrence. The Company also has underlying coverage for $15 million in excess of $5 million per occurrence after a $5 million deductible. Parent participates in SCOR Re's 1995 general catastrophe retrocessional program for a total limit of approximately $13.7 million. Pursuant to a Net Aggregate Excess of Loss Retrocessional Agreement dated as of July 1, 1986 (the "1986 Retrocessional Agreement"), Parent reinsured SCOR Re for adverse loss development from pre-1986 business that exceeded the total of loss reserves established as of June 30, 1986 and premiums earned after June 30, 1986 from such pre-1986 business. The 1986 Retrocessional Agreement provided protection to the Company for business underwritten by SCOR Re only and did not provide coverage for pre-1986 business underwritten by any other subsidiary. However, business underwritten by General Security Assurance Corporation of New York ("General Security") and The Unity Fire and General Insurance Company ("Unity Fire") is protected against adverse development by a separate net aggregate excess of loss retrocessional agreement, as described below. The 1986 Retrocessional Agreement terminated on December 31, 1993, at which time Parent's liability to SCOR Re was $16.2 million. This amount is the actuarially determined expected ultimate loss from the pre-1986 business in excess of the "aggregate deductible" (which is defined as the total of net outstanding loss and loss expense reserves, net incurred but not reported ("IBNR") loss reserves and net unearned premium reserves established as of June 30, 1986 for the pre-1986 business, plus all net premiums and future net premium adjustments earned after June 30, 1986 under retrospectively rated treaties for such business). During the first quarter of 1994, SCOR Re received $16.2 million from Parent in settlement of its liability under this agreement. On May 4, 1994, SCOR Re and Parent entered into a Second Net Aggregate Excess of Loss Retrocessional Agreement ("the 1994 Retrocessional Agreement") dated as of May 4, 1994 and effective as of January 1, 1994, which protects the same business covered under the 1986 Retrocessional Agreement. Under this Agreement, SCOR Re is responsible for any further adverse development up to $8.8 million beyond the $16.2 million of adverse development recognized under 6 the 1986 Retrocessional Agreement, at which point the 1994 Retrocessional Agreement attaches and provides coverage for up to $10 million of any additional adverse development. SCOR Re paid a premium of $2 million for this coverage, which expires on December 31, 2004. At December 31, 1994, no recovery was recognized under the 1994 Retrocessional Agreement. In addition, based on the experience under the 1994 Retrocessional Agreement, SCOR Re is eligible to receive a contingent commission of up to 27.75% of the premium. SCOR Re is a party to two additional retrocession agreements providing for significant premium payments to Parent. First, pursuant to the Catastrophe Excess of Loss Reinsurance Contract for the 1994 year, SCOR Re paid Parent a premium for that year of approximately $3.80 million for the coverage specified under that reinsurance contract in respect of losses under policies covering treaty and facultative reinsurance assumed by SCOR Re resulting from certain property exposures. Losses arising from the earthquake in Northridge, California in 1994 resulted in a restatement of the coverage under the contract for an additional premium of approximately $3.5 million. Second, pursuant to the Catastrophe Excess of Loss Reinsurance Contract for the 1995 year, SCOR Re is required to pay each of Parent and one of its affiliates, SCOR Reassurance, by way of quarterly installments, a premium of approximately $2.04 million for that year for the coverage to be provided by each of them as specified under that reinsurance contract in respect of losses under policies covering treaty and facultative reinsurance assumed by SCOR Re resulting from certain casualty occurrences. Parent entered into a Net Aggregate Excess of Loss Retrocessional Agreement with each of Unity Fire and General Security, pursuant to which Parent agreed to reinsure those companies to the extent that their net ultimate incurred losses (as defined in the agreements) arising in 1989 and prior accident years exceed an aggregate deductible. As a result of an assumption by General Security of the rights, liabilities and obligations of Unity Fire, the Net Aggregate Excess of Loss Retrocessional Agreement with Unity Fire was terminated and the net Aggregate Excess of Loss Retrocessional Agreement with General Security was amended (as so amended, the "Agreement") to include the protection formerly provided to Unity Fire by its retrocessional agreement with Parent. As a result of a merger of General Security into SCOR Re, the protection under the Agreement is now for the benefit of SCOR Re. The aggregate deductible is defined as the sum of net outstanding loss and loss expense reserves and net IBNR loss reserves as of December 31, 1989, for 1989 and prior accident years, as documented in the 1989 statutory financial statements of Unity Fire and General Security. This amount has been established at a combined aggregate of $93.8 million. The annual premium for this protection is $210,000 through 2004. The Agreement continues in force until all covered losses are settled. The retrocession of risks underwritten by a reinsurer does not legally discharge it from liability for any part of the risk retroceded. Accordingly, the operating subsidiaries of the Company, which includes SCOR Re, General Security Insurance Company, Unity Fire and General Security Indemnity Company (collectively, the "Operating Subsidiaries") would be required to pay the full amount of the loss associated with the reinsured risk if for any reason Parent or any other retrocessionaire was unable or failed to meet its reinsurance obligations. Generally, under the New York Insurance Law, retrocessionaires which are not licensed or otherwise authorized reinsurers in New York must provide letters of credit or other permitted assets to secure their obligations to the ceding reinsurer (based on the ceding reinsurer's current estimate of the ceded liability) in order for the ceding reinsurer to take credit on its statutory financial statements for the reinsurance ceded. This security can be applied by the ceding reinsurer toward discharging its own liability in the event of a default by the retrocessioinaire. At December 31, 1994, the amount of estimated liability for which retrocessionaires were liable to the Operating Subsidiaries was approximately $265.7 million, of which approximately $215.2 million was secured by letters of credit in favor of, or funds held by, the Operating Subsidiaries. Additionally, an amount of $37.6 million represents the liability on reinsurance ceded to New York licensed or authorized reinsurance companies, which are not required to 7 provide additional security in order for the ceding reinsurer to take credit for the reinsurance ceded. The amounts of estimated liability recoverable from retrocessionaires at December 31, 1993 and 1992 were approximately $285.1 million and $289.2 million, respectively. The Operating Subsidiaries' exposure to amounts deemed unrecoverable from retrocessionaires has been limited and to the extent it has been exposed, paid losses, outstanding losses and incurred but not reported losses recoverable from retrocessionaires which are determined to be uncollectible are charged to operations. Voting Trust. The New York Insurance Law prohibits (with certain exceptions) the issuance of a license to a company that is owned or financially controlled in whole or in part by a government, unless an insurer was so owned or financially controlled prior to the effective date of such statute. Unity Fire was so owned or financially controlled prior to such effective date. Because Parent, the controlling stockholder of the Company, was indirectly partially owned by certain French insurance companies which were majority owned by the French Government, the Company, in 1984, to permit SCOR Re to obtain a New York insurance license, established a voting trust for its holdings of capital stock of SCOR Re. The voting trust was irrevocable for a period of ten years (through June 6, 1994), unless SCOR Re's New York license was withdrawn. In 1994, in order for SCOR Re to retain its New York license and obtain a California insurance license, the SCOR Reinsurance Company 1994 Voting Trust Agreement, among SCOR Re, the Company and the Voting Trustees designated therein was entered as of June 6, 1994, thereby renewing the voting trust for an additional period of three years. The five voting trustees under the voting trust possess and are entitled to exercise all the rights and powers of absolute owners of the capital stock of SCOR Re, except to pass any voting right or ownership interest to others. Decisions of the voting trustees may be made by majority vote, provided that such majority consists of at least two voting trustees who are not officers, directors or stockholders of Parent. The voting trustees are required to forward any dividends paid by SCOR Re to the Company as the registered holder of the voting trust certificates evidencing beneficial ownership of SCOR Re's stock. Transfers of voting trust certificates may only be made by the registered holder thereof. The current voting trustees are as follows: Patrick Peugeot, Jacques P. Blondeau, Allan M. Chapin, Michel J. Gudefin, and David J. Sherwood. All of the voting trustees are Directors of the Company, with the exception of Mr. Chapin, who is a partner of Sullivan & Cromwell, United States legal counsel of Parent. Ownership of Commercial Risk. In January 1992, the Company acquired 19.8% of the stock of Commercial Risk, a Bermuda holding company for two insurance subsidiaries. The purchase price was approximately $9.9 million. As a result of a recapitalization of Commercial Risk in 1994, the Company currently owns approximately 12.87% of the outstanding stock of Commercial Risk. Parent owns approximately 52.27% of the outstanding stock of Commercial Risk. Services Agreement. Pursuant to an Amended Service Agreement dated as of June 11, 1992 between the Company and Parent, the Company and Parent have agreed to reimburse the other for services provided by various personnel. The amount of the reimbursement for the services provided is determined by allocation of the actual costs, including salary and related expenses. Reinsurance. The Operating Subsidiaries assume reinsurance from Parent and other affiliated companies primarily on a quota share or surplus share basis. Written premiums assumed from these companies (and the percentage of gross written premiums) were approximately $7.85 million (2.6%), $8.38 million (2.5%) and $6.70 million (2.2%) for the years ended December 31, 1994, 1993 and 1992, respectively. Of these amounts, approximately $6.96 million, $7.93 million and $6.28 million for 1994, 1993 and 1992, respectively, were assumed from Parent. 8 The Operating Subsidiaries also retrocede reinsurance to Parent and other affiliated companies, primarily on a quota share or surplus share basis. The total written premiums approximately ceded by the Company's subsidiaries under retrocession agreements to affiliated companies in 1994 were approximately $35.64 million. Parent provides letters of credit in favor of the Operating Subsidiary in amounts equal to its estimated liability under its reinsurance agreements with such companies (as re-estimated on a quarterly basis). The amount of letters of credit provided by Parent at December 31, 1994 was approximately $134.5 million and at December 31, 1993 was approximately $123 million. Software. The Company has agreed in principle with Parent for the purchase by Parent of the Company's New Treaty System ("NTS"). The purchase price is approximately $1.5 million. To date, the Company has expended approximately $10.2 million in researching, developing and implementing NTS. The Merger Agreement. The following is a description of certain provisions of the Merger Agreement. Such description does not purport to be complete and is qualified in its entirety by reference to the Merger Agreement, a copy of which is filed as an exhibit hereto. The Offer. Pursuant to the Merger Agreement, Purchaser is obligated to commence the Offer no later than five business days following the date of the Merger Agreement. The Merger Agreement provides that the obligation of Purchaser to consummate the Offer and to accept for payment and purchase the Shares tendered pursuant to the Offer shall be subject only to the conditions set forth in the Merger Agreement, which are described below under the caption "The Merger Agreement--Conditions to the Offer." Subject to the terms and conditions of the Offer, Purchaser will promptly pay for all Shares duly tendered that it is obligated to purchase thereunder. The Board of Directors and a majority of the members of the Special Committee shall recommend acceptance of the Offer to its stockholders in a Solicitation/Recommendation Statement on Schedule 14D-9, as such statement may be amended or supplemented from time to time, to be filed with the Commission upon commencement of the Offer; provided, however, that if the Board of Directors determines that its fiduciary duties require it to amend or withdraw its recommendation, such amendment or withdrawal shall not constitute a breach of the Merger Agreement. Purchaser will not without the prior written consent of the Company decrease the price per Share or change the form of consideration payable in the Offer, decrease the number of Shares sought or change the conditions to the Offer. Purchaser shall not terminate or withdraw the Offer unless at the expiration date of the Offer the conditions to the Offer set forth below have not been satisfied or waived. Conditions to the Offer. The Merger Agreement provides that, notwithstanding any other provision of the Offer, Purchaser shall not be obligated to accept for payment any Shares or, subject to any applicable rules and regulations of the Commission, including Rule 14e-1(c) (relating to Purchaser obligation to pay for or return tendered Shares promptly after termination or withdrawal of the Offer) or pay for, and may delay the acceptance for payment of or payment for, any tendered Shares unless there have been validly tendered and not withdrawn prior to the expiration date of the Offer a number of Shares that, together with any Shares currently beneficially owned directly or indirectly by Parent, constitutes at least 90% of the total Shares outstanding as of the date the Shares are accepted for payment pursuant to the Offer (the "Minimum Tender Condition"), or if on or after November 2, 1995, and at or before the time of payment for any of such Shares 9 (whether or not any Shares have theretofore been accepted for payment or paid for pursuant to the Offer), any of the following events shall occur: (a) there shall be any statute, rule, regulation, judgment, injunction or other order, enacted, promulgated, entered, enforced or deemed applicable to the Offer or the Merger or any other action shall have been taken by any government, legislative body, court or governmental, regulatory or administrative agency, authority, tribunal or commission, domestic, supranational or foreign (each, a "Governmental Entity"), or any other person, domestic, supranational or foreign (i) challenging the legality of the acquisition by Purchaser of the Shares; (ii) restraining, delaying or prohibiting the making or consummation of the Offer or the Merger or obtaining from the Company, Parent or Purchaser any damages in connection therewith; (iii) relating to assets of, or prohibiting or limiting the ownership or operation by Parent or Purchaser of all or any portion of the business or assets of, the Company, Parent or Purchaser (including the business or assets of their respective affiliates and subsidiaries) or imposing any limitation on the ability of Parent or Purchaser to conduct such business or own such assets; (iv) imposing limitations on the ability of Parent or Purchaser (or any affiliate of Parent or Purchaser) to acquire or hold or to exercise full rights of ownership of the Shares, including, without limitation, the right to vote the Shares purchased by them on all matters properly presented to the stockholders of the Company or (v) having a substantial likelihood of any of the foregoing. (b) there shall have occurred (i) any general suspension of, or limitation on times or prices for, trading in securities on any national securities exchange or in the over-the-counter market in the United States or France or (ii) a declaration of a banking moratorium or any suspension of payments in respect of banks in the United States or France (whether or not mandatory); (c) the Company shall have breached or failed to perform in any material respect any of its covenants, obligations or agreements under the Merger Agreement or any representation or warranty of the Company set forth in the Merger Agreement shall have been inaccurate or incomplete in any material respect when made or thereafter shall become inaccurate or incomplete in any material respect; (d) any change, including, without limitation, any change arising out of or related to any natural disaster (including hurricanes and earthquakes), shall have occurred or been threatened or become known (or any condition, event or development shall have occurred or been threatened or become known involving a prospective change) in the business, properties, assets, liabilities, condition (financial or otherwise), or results of operations of the Company or any of its subsidiaries that could reasonably be expected to be materially adverse to the Company and its subsidiaries taken as a whole; (e) all consents, registrations, approvals, permits, authorizations, notices, reports or other filings required to be made or obtained by the Company, Parent, Purchaser or any stockholder of Parent with or from any Governmental Entity in connection with the Offer and the Merger shall not have been made or obtained except where the failure to make or to obtain, as the case may be, such consents, registrations, approvals, permits, authorizations, notices, reports or other filings could not reasonably be expected to have a material adverse effect on the condition (financial or otherwise), properties, assets, liabilities, business or results of operations of the Company and its subsidiaries taken as a whole; (f) the Special Committee of the Board of Directors shall have adversely amended or modified or shall have withdrawn its recommendation of the Offer or the Merger, or shall have 10 failed to reconfirm publicly such recommendation upon request by Parent or Purchaser, or shall have resolved to do any of the foregoing; or (g) the Agreement shall have been terminated in accordance with its terms or Purchaser shall have reached an agreement or understanding with the Special Committee providing for termination of the Offer; which, in the reasonable judgment of Purchaser with respect to each and every matter referred to above, and regardless of the circumstances (including any action or inaction by Purchaser, Parent or any affiliate of Parent) giving rise to any such condition, makes it inadvisable to proceed with the Offer or with such acceptance for payment or payment. The foregoing conditions are for the sole benefit of Purchaser and may be asserted by Purchaser regardless of the circumstances (including any action or inaction by Purchaser, Parent or any affiliate of Parent) giving rise to any such conditions or may be waived by Purchaser in whole or in part at any time and from time to time in its sole discretion. The failure by Purchaser at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right and each such right shall be deemed an ongoing right which may be asserted at any time and from time to time. Any determination by Purchaser concerning the events described above will be final and binding on all holders of the Shares. The Merger. The Merger Agreement provides that, upon the terms and subject to the conditions thereof, at the time at which the Company and Parent file a certificate of merger with the Secretary of State of the State of Delaware and make all other filings or recordings required by the DGCL in connection with the Merger, Purchaser shall merge with and into the Company in accordance with the DGCL. The Merger shall become effective on the date on which the Certificate of Merger is duly filed with the Secretary of State of the State of Delaware (the "Effective Time"). As a result of the Merger, the separate corporate existence of Purchaser will cease, and the Company will be the Surviving Corporation (as defined in the Merger Agreement). At the Effective Time, (i) each Share issued and outstanding immediately prior to the Effective Time (other than Shares owned by Parent, Purchaser or any other direct or indirect subsidiary of Parent (collectively, "Parent Companies") or Shares that are owned by the Company or any direct or indirect subsidiary of the Company or Shares ("Dissenting Shares") which are held by stockholders ("Dissenting Stockholders") properly exercising appraisal rights pursuant to Section 262 of the DGCL (collectively, "Excluded Shares")) shall be converted into the right to receive, without interest, an amount in cash (the "Merger Consideration") equal to $15.25 and (ii) all Shares, by virtue of the Merger and without any action on the part of the holders thereof, shall no longer be outstanding and shall be canceled and returned and shall cease to exist, and each holder of a certificate representing any such Shares (other than Excluded Shares) shall thereafter cease to have any rights with respect to such Shares, except the right to receive the Merger Consideration for such Shares upon the surrender of such certificate in accordance with the Merger Agreement or the right, if any, to receive payment from the Surviving Corporation of the "fair value" of such Shares as determined in accordance with Section 262 of the DGCL. At the Effective Time, each Share issued and outstanding at the Effective Time and owned by any of Parent Companies or held in the Company's treasury or owned by the Company or any direct or indirect subsidiary of the Company shall cease to be outstanding, shall be canceled and retired without payment of any consideration therefor and shall cease to exist. At the Effective Time each share of common stock, par value $1.00 per share, of Purchaser issued and outstanding immediately prior to the Effective Time shall, by virtue of the Merger and 11 without any action on the part of Purchaser or the holders of such shares, be converted into one share of common stock of the Surviving Corporation. The Merger Agreement provides that the Dissenting Shares will not be converted into or represent the right to receive the Merger Consideration. Holders of such shares will be entitled to receive payment of the "fair value" of such Shares held by them in accordance with the provisions of Section 262 of the DGCL, except that all Dissenting Shares held by stockholders who fail to perfect or who effectively withdraw or lose their rights to dissent will thereupon be deemed to have been converted into, as of the Effective Time, the right to receive, without any interest thereon, the Merger Consideration, upon surrender of the certificate or certificates that formerly evidenced such Shares. The Merger Agreement provides that, at the Effective Time, the Restated Certificate and the By-Laws of the Company in effect at the Effective Time will be the Certificate of Incorporation and By-Laws of the Surviving Corporation, except that Article 4A of the Company's Restated Certificate shall be amended to read in its entirety as follows: "The aggregate number of shares of stock which the Corporation shall have the authority to issue is 1,000 shares of Common Stock, par value $0.01 per share." Agreements of Parent and the Company. The Merger Agreement provides that in the event that Parent, Purchaser or any other subsidiary of Parent shall acquire at least 90% of the outstanding Shares pursuant to the Offer or otherwise, Parent, Purchaser and the Company have agreed, at the request of Parent or Purchaser, to take all necessary and appropriate action to cause the Merger to become effective as soon as practicable after the acceptance for payment and purchase of Shares by Purchaser pursuant to the Offer without a meeting of stockholders of the Company in accordance with Section 253 of the DGCL. The Merger Agreement provides that the directors and officers of the Company as of the Effective Time shall be the directors and officers, respectively, of the Surviving Corporation until their successors have been duly elected or appointed and qualified or until the earlier death, resignation or removal in accordance with the Surviving Corporation's Certificate of Incorporation and By-Laws. Certain of the Covenants of the Company and Parent. The Company has agreed that, prior to the Effective Time (unless Parent shall otherwise agree in writing and except as otherwise expressly contemplated by the Merger Agreement), the business of the Company and its subsidiaries shall be conducted only in the ordinary and usual course consistent with past practice and, to the extent consistent therewith, each of the Company and its subsidiaries have agreed to use its best efforts to preserve its business organization intact (including maintaining all of its Permits (as defined in the Merger Agreement)) and to maintain its existing relations with customers, suppliers, employees and business associates and it shall take no action that would adversely affect the ability of the parties to consummate promptly the transactions contemplated by the Merger Agreement. Pursuant to the Merger Agreement, if required following termination of the Offer, the Company will take all action necessary to convene a meeting of holders of Shares as promptly as practicable to consider and vote upon the approval of the Merger Agreement and the Merger. The Company has agreed that the Board, subject to their fiduciary requirements of applicable law, shall recommend such approval and that the Company shall take all lawful action to solicit such approval. Parent has agreed to vote all Shares then owned by Parent Companies (including all Shares currently owned by Parent Companies) in favor of the Merger Agreement. 12 Parent and the Company have each agreed in the Merger Agreement, subject to the terms and conditions provided therein, to make promptly their respective Regulatory Filings and Purchaser Regulatory Filings (as each term is defined therein) and thereafter to make any other required submissions with respect to the Offer and the Merger and to use their respective best efforts to take promptly, or cause to be taken promptly, all other action and do, or cause to be done, all other things necessary, proper or appropriate under applicable laws and regulations to consummate and make effective the transactions contemplated by the Merger Agreement as soon as practicable. Prior to the Effective Time, the Company has agreed in the Merger Agreement to take such actions as may be necessary such that at the Effective Time each stock option outstanding, pursuant to the Company's stock and option plans (an "Option"), whether or not then vested shall be canceled and only entitle the holder thereof, upon surrender thereof, to receive an amount in cash equal to the difference, if positive, between the Merger Consideration and the exercise price per Share of such Option multiplied by the number of Shares previously subject to such Option. Parent and the Company have agreed that from and after the Effective Time, the Surviving Corporation and Parent will indemnify and hold harmless each present and former director and/or officer of the Company, determined as of the Effective Time (the "Indemnified Parties"), that is made a party or threatened to be made a party to any threatened, pending or completed, action, suit, proceeding or claim, whether civil, criminal, administrative or investigative, by reason of the fact that he or she was a director or officer of the Company or any subsidiary of the Company prior to the Effective Time and arising out of actions or omissions of the Indemnified Party in any such capacity occurring at or prior to the Effective Time (a "Claim") against any costs or expenses (including reasonable attorneys' fees), judgments, fines, amounts paid in settlement pursuant to the Merger Agreement, losses, claims, damages or liabilities (collectively, "Costs") reasonably incurred in connection with any Claim, whether asserted or claimed prior to, at or after the Effective Time, to the fullest extent that the Company would have been permitted under Delaware law. The Surviving Corporation and Parent shall also advance expenses (including attorneys' fees), as incurred by the Indemnified Party to the fullest extent permitted under applicable law provided such Indemnified Party provides an undertaking to repay such advances if it is ultimately determined that such Indemnified Party is not entitled to indemnification. Any Indemnified Party wishing to claim indemnification under the Merger Agreement, upon learning of any such claim, shall promptly notify the Surviving Corporation and Parent thereof, but the failure to so notify shall not relieve the Surviving Corporation or Parent of any liability it may have to such Indemnified Party if such failure does not materially prejudice the indemnifying party. In the event of any such claim, action, suit, proceeding or investigation (whether arising before or after the Effective Time), (i) Parent or the Surviving Corporation shall have the right to assume the defense thereof and Parent shall not be liable to such Indemnified Parties for any legal expenses of other counsel or any other expenses subsequently incurred by such Indemnified Parties in connection with the defense thereof, except that if Parent or the Surviving Corporation elects not to assume such defense or counsel for the Indemnified Parties advises that there are issues which raise conflicts of interest between Parent or the Surviving Corporation and the Indemnified Parties, the Indemnified Parties may retain counsel satisfactory to them, and Parent or the Surviving Corporation shall pay all reasonable fees and expenses of such counsel for the Indemnified Parties promptly as statements therefor are received; provided, however, that the Surviving Corporation and Parent shall be obligated to pay for only one firm or counsel for all Indemnified Parties in any jurisdiction unless the use of one counsel for such Indemnified Parties would present such counsel with a conflict of interest, (ii) the Indemnified Parties will cooperate in the defense of any such matter and (iii) Parent shall not be liable for any settlement effected without its prior written consent; and provided further that the Surviving Corporation and Parent, respectively, shall not 13 have any obligation hereunder to any Indemnified Party when and if a court of competent jurisdiction shall ultimately determine, and such determination shall have become final and non-appealable, that the indemnification of such Indemnified Party in the manner contemplated hereby is prohibited by applicable law. If such indemnity is not available with respect to any Indemnified Party, then the Surviving Corporation and the Indemnified Party shall contribute to the amount payable in such proportion as is appropriate to reflect relative faults and benefits. If a claim for indemnification or advancement is not paid in full by the Surviving Corporation or Parent within thirty days after a written claim therefor has been received by the Surviving Corporation or Parent, the Indemnified Party may any time thereafter bring suit against the Surviving Corporation or Parent to recover the unpaid amount of the claim and, if successful in whole or in part, the Indemnified Party shall be entitled to be paid also the expense of prosecuting such claims. Neither the failure of the Surviving Corporation or Parent (including their Boards of Directors, independent local counsel or shareholders) to have made a determination prior to the commencement of such suit that indemnification of the Indemnified Party is proper in the circumstances because he or she has met the applicable standard of conduct, nor an actual determination by the Surviving Corporation or Parent (including their Boards of Directors, independent legal counsel, or shareholders) that the Indemnified Party has not met such applicable standard of conduct, shall be a defense to the suit or create a presumption that the Indemnified Party has not met the applicable standard of conduct. In addition, the Surviving Corporation agreed to maintain the Company's existing officers' and directors' liability insurance or equivalent liability insurance ("D&O Insurance") for a period of six years after the Effective Time so long as the annual premium therefor is not in excess of the last annual premium paid prior to the date of the Merger Agreement (the "Current Premium"); provided, however, if the existing D&O Insurance expires, is terminated or canceled during such six-year period, the Surviving Corporation agreed to use its best efforts to obtain as much D&O Insurance as can be obtained for the remainder of such period for a premium not in excess (on an annualized basis) of 200 percent of the Current Premium. In lieu of this insurance arrangement, the Surviving Corporation may, on or before the expiration of the Offer, enter into alternative insurance arrangements provided that such arrangements are approved by the members of the Special Committee and Parent. The Company has agreed in the Merger Agreement that if Purchaser or any other Parent Company shall have purchased Shares pursuant to the Offer, to take all necessary action to enter into a supplemental indenture prior to the Effective Time with the Trustee (as defined in the Debentures) pursuant to the indenture under which the Debentures were issued, to provide, among other things, that on and after the Effective Time the Debentures will be convertible only into the Merger Consideration. If any takeover statute shall become applicable to the Merger, the Offer or the other transactions contemplated pursuant to the Merger Agreement, the Company has agreed in the Merger Agreement that the Company and the members of the Board shall grant such approvals and take such actions as are necessary so that the transactions contemplated pursuant to the Merger Agreement may be consummated as promptly as practicable on the terms contemplated by the Merger Agreement and otherwise act to eliminate or minimize the effects of such statute or regulation on the transactions contemplated by the Merger Agreement. The Company and Parent each have agreed in the Merger Agreement to use (and cause its subsidiaries to use) its best efforts to cause the conditions set forth in Article VII of the Merger Agreement to be satisfied and to consummate the Merger and the other transactions contemplated 14 by the Merger Agreement. The Company further agreed to use (and to cause its subsidiaries to use) its best efforts (including providing information and communication) to obtain all necessary waivers, consents and approvals from other parties to material agreements, leases and other contracts and to obtain as promptly as practicable all necessary approvals, authorizations and consents of Governmental Entities (including applicable insurance regulators) required to be obtained in order to consummate the transactions contemplated by the Merger Agreement, and each of the parties to the Merger Agreement agree to cooperate with the others in obtaining all such consents, waivers, approvals and authorizations. In the Merger Agreement, Parent agreed to vote (or consent with respect to) or cause to be voted (or a consent to be given with respect to) any Shares (including all Shares currently owned) and any shares of common stock of Purchaser beneficially owned by it or any of its subsidiaries or with respect to which it or any of its subsidiaries has the power (by agreement, proxy or otherwise) to cause to be voted (or to provide a consent), in favor of the adoption and approval of the Merger Agreement at any meeting of stockholders of the Company or Purchaser, respectively, at which the Merger Agreement shall be submitted for adoption and approval and at all adjournments or postponements thereof (or, if applicable, by any action of stockholders of either the Company or Purchaser by consent in lieu of a meeting). In the Merger Agreement, Parent and the Company agreed that no amendment to the Certificate of Incorporation or By-Laws of the Surviving Corporation shall reduce in any way the elimination of personal liability of directors of the Company contained therein or adversely affect any existing right of any director or officer (or former director or officer) to be indemnified with respect to acts, omissions or events occurring prior to the Effective Time. Representations and Warranties. The Merger Agreement contains various customary representations and warranties of the parties thereto including among others, representations as to corporate organization and qualification, capitalization, corporate authority, no violation of charter or by-laws, debt instruments or material agreements of the Company or applicable law resulting from the transaction, accuracy of the Company's public filings, including financial statements, absence of any material adverse change in the Company's business and absence of undisclosed liabilities. Conditions to Certain Obligations. The respective obligations of the Company, Parent and Purchaser to consummate the Merger are subject to the fulfillment of the following conditions: (i) in the event of a Company stockholder meeting upon termination of the Offer to vote for the approval of the Merger Agreement and the Merger, the Merger Agreement shall have been duly approved by the holders of a majority of the Shares, in accordance with applicable law and the Restated Certificate and the Company's By-Laws; (ii) Purchaser (or one of Parent Companies) shall have purchased Shares pursuant to the Offer; and (iii) no court or other Governmental Entity of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any statute, rule, regulation, judgment, decree, injunction or other order (whether temporary, preliminary or permanent) which is in effect and prohibits consummation of the Merger. Termination. The Merger Agreement may be terminated and the Merger may be abandoned (i) at any time prior to the Effective Time, before or after the approval by holders of Shares, by the mutual consent of Parent and the Company, by action of their respective boards of directors; (ii) by action of the board of directors of either Parent or the Company if (a) Purchaser or any Parent Company, shall have terminated the Offer without purchasing any Shares pursuant thereto, provided, in the case of termination of the Merger Agreement by Parent, such termination of the Offer is not in violation of the terms of the Offer, or (b) without fault of the terminating party, the Merger shall not have been consummated by March 31, 1996, whether or not such date is before or after the 15 approval by holders of Shares; (iii) at any time prior to the Effective Time, before or after the approval by holders of Shares, by action of the board of directors of Parent, if (a) the Company shall have failed to comply in any material respect with any of the covenants or agreements contained in the Merger Agreement to be complied with or performed by the Company at or prior to such date of termination, or (b) the Board of Directors or the Special Committee shall have withdrawn or modified in a manner adverse to Parent or Purchaser its approval or recommendation of the Offer, the Merger Agreement or the Merger or the Board of Directors or the Special Committee, upon request by Parent, shall fail to reaffirm such approval or recommendation, or shall have resolved to do any of the foregoing; (iv) at any time prior to the Effective Time, before or after the approval by holders of Shares by action of the Board of Directors, if Parent or Purchaser (a) shall have failed to comply in any material respect with any of the covenants or agreements contained in the Merger Agreement to be complied with or performed by Parent or Purchaser at or prior to such date of termination or (b) shall have failed to commence the Offer within five days of the execution of the Merger Agreement; provided however that no action taken by the Board of Directors with respect to termination of the Merger Agreement and the Merger shall be effective unless such action is approved by the affirmative vote of at least a majority of the members of the Special Committee. Payment of Expenses. Whether or not the Merger shall be consummated, the Company, Parent and Purchaser shall pay its own expenses incident to preparing for, entering into and carrying out the Merger Agreement and the consummation of the Merger. Modification or Amendment. Subject to the applicable provisions of the DGCL, at any time prior to the Effective Time, Parent, the Company and Purchaser may modify or amend the Merger Agreement, by written agreement executed and delivered by duly authorized officers of the respective parties. Waiver of Conditions. The conditions to each of the Company, Parent or Purchaser's obligations to consummate the Merger are for the sole benefit of such party and may be waived by such party in whole or in part to the extent permitted by applicable law. The Letter Agreement In a Letter Agreement dated as of November 8, 1995, among Parent, Purchaser and the Company (the "Letter Agreement"), the parties agreed to modify the Minimum Tender Condition to eliminate the consideration of options for purposes of calculating whether Parent beneficially owned, directly or indirectly, at least 90% of the Shares. (c) Background of the Offer. In a letter to the Board of Directors dated September 25, 1995, that was delivered to the Board on September 26, 1995, from Jacques Blondeau on behalf of Parent, Parent made a proposal to acquire in a negotiated transaction any and all outstanding Shares not currently owned by Parent at a price of $14.00 per Share in cash (the "Proposal"). In such letter and at a meeting of the Board of Directors held on September 28, 1995, Parent described the Proposal. On September 26, 1995, Parent issued a press release announcing the Proposal and its terms. On September 27, 1995, Sullivan & Cromwell, United States legal counsel to Parent, met with the Company's General Counsel and other members of the Company's legal department to discuss regulatory implications of the Company becoming a wholly-owned subsidiary of Parent. Sullivan & Cromwell also requested that Parent's financial advisor be given the opportunity to perform a due diligence investigation on the Company. 16 At the Board meeting on September 28, 1995, the Board established and selected the Special Committee, among other things, to evaluate and make a recommendation to the Board regarding the Proposal and to negotiate the terms of the Proposal. The Board authorized the Special Committee to retain financial and legal advisors. Thereafter, the Special Committee retained Davis Polk & Wardwell ("Davis Polk") as its legal advisor to assist in its consideration of, and negotiations with respect to, the Proposal. Neither the Special Committee nor any of its advisors were authorized to solicit any offers or proposals by any third party for the acquisition of the Company. In a meeting with the Special Committee held on September 28, 1995, a representative of Parent advised the Special Committee that Parent would likely commence a tender offer for the Shares in advance of entering into a merger agreement, but that Parent would defer commencing the tender offer to give the Special Committee time to retain legal and financial advisors and begin their review of the Proposal. The Special Committee and Parent agreed that it was in the best interests of the Company and its stockholders to resolve promptly whether Parent would be acquiring the Shares not already owned by it and that the Special Committee would endeavor to be in a position to respond to the Proposal by October 26, 1995, the date of a previously scheduled meeting of the Executive Committee of the Board of Directors. On September 29, 1995, the Company issued a press release concerning the terms of the Proposal and announcing that a special committee of independent directors had been formed to consider the Proposal with the assistance of independent legal and financial advisors. On September 29 and October 3, 1995, Sullivan & Cromwell called Davis Polk to discuss issues potentially associated with the possible commencement of a tender offer and to inquire as to the timing for retention of a financial advisor. During those conversations, Davis Polk expressed concern that a tender offer might place the Special Committee under timing constraints in responding to the Proposal. During the conversation on October 3, Davis Polk also indicated that Goldman Sachs would be provided with access to confidential information concerning the Company only after and to the extent that the Special Committee and its financial advisor determined that such access was appropriate. On October 2, 1995, a purported class action lawsuit relating to the Proposal was filed in the Delaware Chancery Court, New Castle County, naming Parent, the Company and certain directors of the Company as defendants. The action alleges, among other things, that the defendants have breached or will breach their fiduciary duties in connection with the offer from Parent and seeks to enjoin the Proposal or to recover damages. See "Item 8(a)--Certain Legal Proceedings" for a description of such action and similar actions. On October 10, 1995, Sullivan & Cromwell called Davis Polk to discuss again the timing of the retention by the Special Committee of its financial advisor and the possibility of a tender offer by Parent for the Shares prior to entering into a merger agreement. During the course of that telephone call, Davis Polk reiterated concerns relating to the commencement of a tender offer before the Special Committee had delivered its response to the Proposal. At a meeting of the Special Committee on October 10, 1995, the Special Committee retained Dillon, Read & Co. Inc. ("Dillon Read") as its financial advisor to assist in its evaluation of, and negotiations with respect to, the Proposal. 17 During the weeks of October 9, October 16 and October 23, 1995, the Special Committee's advisors conducted a detailed investigation of the Company and review of the Proposal. As part of its due diligence investigation, Dillon Read, among other things, interviewed senior management of the Company. On September 29, October 4, October 10, October 11, October 20, twice on October 24, October 26, October 30, October 31 and November 2, 1995, the Special Committee met or participated in teleconferences with its financial and/or legal advisors to discuss the terms of the Proposal, the Company's business, the progress of Dillon Read's investigation of the Company and its business and the legal responsibilities of the Special Committee. On October 19, 1995, Sullivan & Cromwell, legal advisors to Parent, delivered to Davis Polk a proposed form of the Merger Agreement. During the next week and thereafter, Davis Polk reviewed the terms and conditions of the Merger Agreement and negotiated such terms and conditions with Sullivan & Cromwell. At a meeting of the Special Committee and its financial and legal advisors held on October 20, 1995, Dillon Read made an oral presentation to the Special Committee with respect to the Company and the Proposal. Dillon Read discussed with the Special Committee, among other things, a preliminary valuation analysis of the Company, which included a comparable company trading analysis, a comparable company acquisition analysis, an economic book value analysis, a discounted cash flow analysis and a close out acquisition premium analysis. Davis Polk also discussed with the Special Committee provisions of the Merger Agreement. At a meeting of the Special Committee held in the morning of October 24, 1995, Dillon Read made another oral presentation to the Special Committee. At the meeting on October 24, 1995, based on the reports and advice of its advisors, the Special Committee determined that it should seek an increase in the price proposed by Parent. Later that day, Parent's and the Special Committee's respective financial advisors had two separate conversations to discuss the status of the Special Committee's evaluation of the Proposal. In such discussions, the Special Committee's advisors conveyed to Parent's advisors the Special Committee's view that Parent should increase its proposed price. At a meeting of the Special Committee and its financial and legal advisors held on October 26, 1995, Dillon Read updated the Special Committee with respect to its valuation analysis. On that day, Parent's representatives and legal advisors had several meetings and conversations with members of the Special Committee and the Special Committee's legal advisors. At meetings among Parent and the Special Committee and their respective legal advisors on October 26, 1995, Parent and the Special Committee and their respective advisors explored the possibility of an acceptable revised Proposal at a price in excess of $14.00 per Share in cash. Following numerous discussions, Jacques P. Blondeau, Chairman and Chief Executive Officer of Parent, informed David J. Sherwood, Chairman of the Special Committee, that Parent was not prepared to offer a price in excess of $15.00 per Share. Mr. Sherwood responded that he believed that the Special Committee would insist on more than $15.00 per Share but that he would consult with the Special Committee and Dillon Read. After discussions with Dillon Read and Davis Polk, the Special Committee instructed Davis Polk to contact Sullivan & Cromwell and indicate that the Special Committee was not prepared to endorse an offer of $15.00 per Share. On October 27, 1995, Dillon Read and Goldman Sachs again discussed their respective views on the value of the Company. During that discussion, Goldman Sachs discussed Parent's reasons for having made an offer to purchase the Shares that it did not already own at a price of $14.00 per Share, including Goldman Sachs' analyses contained in a presentation to management of Parent. In response to that discussion by Goldman Sachs, Dillon Read indicated that the Special Committee 18 would probably not accept a price per Share that did not represent at least a moderate premium over the book value. On October 30, 1995, Davis Polk communicated to Sullivan & Cromwell that the Special Committee would not support an offer at $15.00 per Share but would likely consider a price that represented a premium over the book value. On October 31, 1995, Sullivan & Cromwell informed Davis Polk that Parent would agree to a transaction at $15.25 if such transaction were supported by the Special Committee, was the subject of a favorable fairness opinion of Dillon Read, was approved by counsel for the various plaintiffs in pending shareholder actions filed following Parent's initial proposal and was effected pursuant to a mutually acceptable merger agreement. Davis Polk confirmed that $15.25 would satisfy the criteria of the Special Committee and would likely be considered favorably by the Special Committee. During the course of the day and evening on November 1, 1995, Sullivan & Cromwell and Davis Polk continued their negotiations of the terms of the Merger Agreement. On November 1, 1995, representatives of counsel to plaintiffs in the shareholder actions agreed with Sullivan & Cromwell that they were prepared to negotiate a settlement if a price per share of $15.25 were offered to the Company's stockholders. At a meeting of the Special Committee held on November 2, 1995, the Special Committee and its advisors reviewed and considered the recent discussions concerning the Proposal and the terms of the draft Merger Agreement. Following such review, the Special Committee and its advisors reviewed the revised Proposal to acquire the Shares at a price of $15.25 per Share in cash. Dillon Read then presented its opinion that the consideration of $15.25 per Share in cash to be paid in the Offer and Merger pursuant to the revised Proposal would be fair to the Company's public stockholders from a financial point of view. (See "Item 4(b)--Reasons for the Board's Recommendation; Opinion of Financial Advisor"). The Special Committee unanimously determined that, in light of Dillon Read's opinion and the other factors considered by the Special Committee, the Offer and the Merger pursuant to the revised Proposal would be fair to and in the best interests of the Company's public stockholders and that it would recommend that, subject to the satisfactory resolution of certain provisions of the Merger Agreement, the Board approve and adopt the Merger Agreement and the transactions contemplated thereby, including the Offer and the Merger, and recommend to the Company's stockholders that they accept the Offer and tender their Shares pursuant to the Offer. (See "Item 4(a)--Recommendation of the Special Committee and the Board" for a description of the determinations and recommendations made by the Special Committee and the factors considered in connection therewith.) The Board then met and received the recommendation of the Special Committee concerning the revised Proposal. At such meeting, the Special Committee reviewed with the Board their investigation of the Proposal, the course of their discussions and negotiations with Parent's advisors and the factors considered by the Special Committee in reaching its determinations and recommendations concerning the revised Proposal. The Board (including the Affiliated Directors), based upon, among other things, the recommendation of the Special Committee, unanimously approved and adopted the Merger Agreement and the transactions contemplated thereby, including the Offer and the Merger, and authorized the execution and delivery of the Merger Agreement. (See "Item 4(a)--Recommendation of the Special Committee and the Board".) Thereafter, on November 2, 1995, Sullivan & Cromwell and Davis Polk completed their negotiation of the Merger Agreement. The Company and Parent executed and delivered the Merger Agreement and issued a press release announcing the transaction on November 3, 1995. 19 On November 8, 1995, Purchaser, Parent and the Company agreed to modify the Minimum Tender Condition pursuant to the Letter Agreement. On November 9, 1995, pursuant to the Merger Agreement, the Parent commenced the Offer. ITEM 4. THE SOLICITATION OR RECOMMENDATION. (a) Recommendation of the Special Committee and the Board. On November 2, 1995, the Special Committee determined that each of the Offer and the Merger is fair to, and in the best interests of, the stockholders of the Company (other than Parent) and determined to recommend that the Board approve and adopt the Merger Agreement and the transactions contemplated thereby, including the Offer and the Merger, and to recommend to the Company's stockholders that they accept the Offer and tender their Shares pursuant to the Offer. At a meeting held on November 2, 1995, the Board (including six Parent designees) unanimously determined that each of the Offer and the Merger is fair to, and in the best interests of, the stockholders of the Company (other than Parent), approved and adopted the Merger Agreement and the transactions contemplated thereby, including the Offer and the Merger, and determined to recommend that the Company's stockholders accept the Offer, tender their Shares pursuant to the Offer and approve and adopt the Merger Agreement. Copies of a letter to stockholders communicating the Board's determination and recommendation and of a press release relating thereto are filed as exhibits hereto and are incorporated herein by reference. (b) Reasons for the Board's Recommendation; Opinion of Financial Advisor. Reasons for Recommendation. See Item 3(b) for a description of certain events preceding the Board of Director's consideration of the Offer and the Merger. The Special Committee received presentations from, and reviewed the Offer and the Merger with, senior management of the Company as well as the Special Committee's financial advisor, Dillon Read. The Special Committee, in determining whether to recommend the approval of the Merger Agreement and the transactions contemplated thereby to the full Board of Directors, considered a number of factors, including, but not limited to, the following: (i) The belief, based on its familiarity with the Company's business, its current financial condition and results of operations and its future prospects, and the current and anticipated developments in the Company's industry, that the consideration to be received by the Company's stockholders in the Offer and Merger reflects fairly the Company's intrinsic value. (ii) The presentations made by the Company's management and Dillon Read at the meeting held on October 20, 1995 as to various financial and other considerations deemed relevant to the evaluation of the Offer and the Merger, including, but not limited to, a review of (A) the business prospects and financial condition of the Company, (B) historical business information and financial results of the Company, (C) nonpublic financial and operating results of the Company, (D) financial projections and budget prepared by the Company's management, (E) information obtained from meetings with senior management of the Company, (F) the trading range and volume history of the Shares, (G) public financial information of comparable companies and (H) public information of comparable acquisitions. (iii) The opinion of Dillon Read that the consideration to be received by the Company's stockholders pursuant to the Merger Agreement is fair to such stockholders (other than Parent) from a financial point of view. In considering Dillon Read's opinion, the Board was 20 aware that Dillon Read is entitled to the fee described in Item 5 in accordance with the terms of its engagement. (iv) The relationship between the consideration to be received by stockholders as a result of the Offer and the Merger and the historical market prices and recent trading activity of the Shares. (v) The recognition that, following consummation of the Offer and the Merger, the current Stockholders of the Company will no longer be able to participate in any increases or decreases in the value of the Company's business and properties. The Board and the Special Committee concluded, however, that this consideration did not justify foregoing the opportunity for stockholders to receive an immediate and substantial cash purchase price for their Shares. (vi) The fact that the terms of the Offer, and the increase in the consideration offered to the public stockholders from $14.00 per Share to $15.25 per Share, were determined through arm's-length negotiations with Parent by the Special Committee and its financial and legal advisors, all of whom are unaffiliated with Parent, and the judgment of the Special Committee and Dillon Read that, based upon the negotiations that transpired, a price higher than $15.25 per Share could not likely be obtained and that further negotiations with Parent could cause Parent to abandon the Offer, with the resulting possibility that the market price for the Shares could fall substantially below $15.25, and possibly $14.00, per Share, or to commence a tender offer without the involvement of the Special Committee at a price less than $15.25 per Share. (vii) Parent's ownership of approximately 80% of the currently outstanding Shares and the effects of such ownership on the alternatives available to the Company and the fact that, as a practical matter, no strategic alternative could be effected without the support of Parent; and the consequences of continuing to operate the Company as a majority-owned subsidiary of Parent. (viii) The terms and conditions of the Merger Agreement, the fact that there are no unusual requirements or conditions to the Offer and the Merger, and the fact that Parent has the financial resources to consummate the Offer and the Merger expeditiously. (ix) The fact that the consideration to be paid to the Company's public stockholders in the transaction is all cash. (x) The fact that the transaction has been structured to include a first-step cash tender offer for any and all outstanding Shares, thereby enabling stockholders who tender their Shares to receive promptly $15.25 per Share in cash, and the fact that any public stockholders who do not tender their Shares or properly exercise appraisal rights will receive the same price per Share in the subsequent Merger. (xi) The possible conflicts of interest of certain directors and members of management of both the Company and Parent discussed above under "Item 3(b)--Interests of Special Committee" and "Item 3(b)--Interests of Certain Persons." (xii) The fact that, while no appraisal rights are available to stockholders as a result of the Offer, stockholders who do not tender pursuant to the Offer will have the right to dissent from the Merger and to demand appraisal of the fair value of their Shares under the DGCL. See "Item 3(b)--The Merger Agreement." The Special Committee considered each of the factors listed above during the course of its deliberations prior to recommending that the Company enter into the Merger Agreement. In light of its knowledge of the business and operations of the Company and its business judgment, the Special Committee believed that each of these factors supported its conclusions. In view of the 21 wide variety of factors considered, the Special Committee did not find it practicable to, and did not, quantify the specific factors considered in making its determination, although the Special Committee did place a special emphasis on the opinion and analysis of Dillon Read which in turn did place a special emphasis on a valuation range determined using an analysis of trading values of comparable companies and an economic book value analysis (as described below under "Opinion of Financial Advisor"). The Board of Directors of the Company, a majority of the members of which were members of the Special Committee, approved the Merger Agreement and the transactions contemplated thereby after receiving a report from the Special Committee on its deliberations and recommendation. In reaching this decision, the Board of Directors principally considered the recommendation of the Special Committee and its familiarity with the Company's business, its current financial condition and results of operations and future prospects, and current and anticipated developments in the Company's industry. (b) Opinion of Financial Advisor On November 2, 1995, Dillon Read delivered its opinion to the Special Committee to the effect that the consideration to be paid to the holders of Stock and certain of the Company's stock options pursuant to the Merger Agreement is fair to such holders (other than Parent) from a financial point of view as of the date thereof. A copy of Dillon Read's opinion is attached hereto as Exhibit 7. The summary of the opinion set forth herein is qualified in its entirety by Exhibit 7 which is incorporated herein by reference. Stockholders are urged to read the opinion in its entirety for a description of the assumptions made, matters considered and procedures followed by Dillon Read. The consideration to be paid pursuant to the Offer and Merger was determined by negotiations on behalf of the Company and Parent and was not determined by Dillon Read. In arriving at its opinion, Dillon Read, among other things, (1) reviewed certain publicly available business and financial information relating to the Company; (2) reviewed the reported price and trading activity for the Shares; (3) reviewed certain internal financial information and other data provided to us by the Company relating to the business and prospects of the Company, including financial projections prepared by the management; (4) conducted discussions with members of the senior management of the Company; (5) reviewed the financial terms, to the extent publicly available, of certain acquisition transactions which Dillon Read considered relevant; (6) reviewed publicly available financial and securities market data pertaining to certain publicly-held companies in lines of business generally comparable to those of the Company; and (7) conducted such other financial studies, analyses and investigations, and considered such other information as Dillon Read deemed necessary and appropriate. In reaching its opinion and conducting its analysis, Dillon Read did not assume any responsibility for independent verification of any of the foregoing information and relied upon it being complete and accurate in all material respects. Dillon Read was not requested to and did not make an independent evaluation or appraisal of any assets or liabilities (contingent or otherwise) of the Company or any of its subsidiaries, nor were they furnished with any such evaluation or appraisal. Dillon Read also assumed that all of the information, including the projections, provided to Dillon Read by the Company's management was prepared on a basis reflecting the best currently available estimates and judgments of the Company's management as to the future of the financial performance of the Company and was based upon the historical performance and certain estimates and assumptions which were reasonable at the time made. In addition, Dillon Read was not asked to and did not express any opinion as to the after-tax consequences of the sale of such Shares by the stockholders. Dillon Read's opinion is based on economic, monetary and market conditions existing on the date thereof. In rendering its opinion, Dillon Read did not render any opinion as to the value of the Company and did not make any recommendation to the stockholders with respect to the advisability of voting in favor of the transaction. No limitations were imposed by the Special Committee, the Company or Parent upon Dillon Read with respect to the investigations made or the procedures followed by Dillon Read in 22 rendering its opinion, and the Company and the members of its management cooperated fully with Dillon Read in connection with its investigation. In delivering its opinion and making its presentation to the Board and the Special Committee, Dillon Read discussed certain financial and comparative analyses and other matters it deemed relevant. Among the various financial analyses that Dillon Read discussed were: (i) Comparable Trading Analysis. Dillon Read undertook a comparable public company analysis. In conducting this analysis, Dillon Read reviewed certain financial results of seven companies in the reinsurance industry which Dillon Read believed to be comparable to the Company. Dillon Read calculated trading multiples of (1) 1996 expected earnings per share (based on median estimates supplied by Institutional Brokers Estimate System database), (2) book value as of June 30, 1995 and (3) surplus as of June 30, 1995. Such multiples ranged between 11.0x and 15.0x, 1.0x and 1.3x, and 1.1x and 1.4x, respectively. Based on such multiples, Dillon Read estimated a reference range of $14.49 to $18.98 per Share. (ii) Comparable Acquisition Analysis. Dillon Read reviewed 32 acquisitions of property/ casualty reinsurance companies in the United States and Europe, which had occurred between 1987 and 1995 and summarized financial ratios and statistics for the nine most comparable transactions in the United States. The values of certain multiples (i.e., net income, book value, net premiums and market value) for all nine transactions were derived, as available. Such multiples ranged between 8.9x and 24.6x, 0.8x and 1.8x, 0.6x and 1.7x, and 1.3x and 1.6x, respectively. The multiples were then applied (1) to the Company's net premiums for the twelve month period ending September 30, 1995 and (2) to the Company's book value as of September 30, 1995. On this basis, Dillon Read estimated an average reference range of between $14.70 to $20.32 per Share. (iii) Economic Book Value Analysis. Dillon Read calculated the economic book value of the Company as of September 30, 1995. In calculating the economic book value of the Company, Dillon Read took into consideration the following factors, among others: (1) good will of the Company, (2) mark-to-market of the investment portfolio, (3) adjustments for the market value of the electronic data processing system and leasehold improvements, (4) adjustments for the valuation of the deferred income tax benefits and publicly traded debt, (5) ranges of differences between the stated amounts and net present value of the prepaid reinsurance, loss reserves and unearned premiums and (6) a range of value for any reserve deficiency. Based on such information, Dillon Read estimated a reference range of $15.24 to $17.08 per Share. (iv) Discounted Cash Flow Analysis. Dillon Read calculated the present value of future cash flows that the Company could be expected to generate over the next five years (the "Discounted Cash Flow Analysis"). In preparing the Discounted Cash Flow Analysis, Dillon Read took into consideration the following: (1) the Company's recent operating and financial performance including, (a) management's business plan for fiscal year 1995 and (b) the historical operating results for the three most recently completed fiscal years, (2) management's business plan for fiscal 1996 and 1997 and (3) projections, reports and other materials prepared by the Company and its managements or representatives that were provided to Dillon Read. In addition, representatives of Dillon Read met with representatives of the Company's management to discuss the Company's current and projected operations. In developing its Discounted Cash Flow Analysis for each case, Dillon Read took the "free cash flow" that the Company was expected to generate from fiscal year 1995 to 2000 and discounted these cash flows to present values. Dillon Read applied discount rates ranging from 11% to 13% determined as the most appropriate range for the Company. Dillon Read arrived at this range of appropriate discount rates by determining the weighted average cost of capital for publicly 23 traded companies in businesses similar to the Company. To approximate the residual value of the Company after this five-year period, Dillon Read applied multiples of operating income ranging from 10.5x to 12.5x. Dillon Read's determination of the most appropriate range of multiples was based on an assessment of the multiples of operating income which have been paid in recent publicly announced acquisitions of similar businesses. These residual value estimates were then discounted to present value using each of the above range discount rates. Dillon Read summed the discounted cash flows and residual value for each multiple of operating income described above, which indicated a matrix of present values for the Company of $14.48 to $19.05 per Share. (v) Premium Analysis. Dillon Read reviewed 29 transactions involving the close-out of minority shareholder positions, which had occurred between 1990 and 1995. Dillon Read considered only those transactions in which between 10% and 45% of all outstanding shares of a target corporation were acquired in the close-out transaction and in which the acquiring company owned approximately 100% of the target corporation stock upon completion of the transaction. For each company, Dillon Read calculated for each target corporation the premium paid for each share over the trading value of such share (1) one day prior to the transaction, (2) one week prior to the transaction and (3) four weeks prior to the transaction. Dillon Read then calculated the average of all premiums paid over the target corporation's trading price at each valuation date (calculated as a percentage of such share price). Applying such average premiums to the Company's trading value at each such valuation date, Dillon Read estimated a reference range of $14.37 to $15.63 per Share. The summary set forth above does not purport to be a complete description of either Dillon Read's analyses or presentations to the Special Committee. Dillon Read believes that its analyses must be considered as a whole and that selecting portions of its analyses and of the factors considered by it, without considering all factors and analyses, could create an incomplete view of the processes underlying its opinion. The preparation of a fairness opinion is a complex process and not necessarily susceptible to partial analyses or summary description. In its analyses, Dillon Read made numerous assumptions with respect to industry performance, general business and economic conditions and other matters, many of which are beyond the Company's control. Any estimates contained therein are not necessarily indicative of actual values, which may be significantly more or less favorable than as set forth therein. Estimates of value of companies do not purport to be appraisals or necessarily reflect the prices at which companies may actually be sold. Because such estimates are inherently subject to uncertainty, none of the Company, Parent, Dillon Read and any other person assumes responsibility for their accuracy. ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED. The Company has retained Dillon Read as the Special Committee's financial advisor in connection with the Merger, the Offer and other matters arising in connection therewith pursuant to an engagement letter dated October 10, 1995 (the "Engagement Letter") between the Company and Dillon Read. The Engagement Letter provides, among other things, that the Company will pay to Dillon Read a fee equal to $500,000. In addition, the Company has agreed to reimburse Dillon Read for its reasonable out-of-pocket expenses, including reasonable legal expenses, and to indemnify Dillon Read against certain liabilities. The Special Committee selected Dillon Read as its financial advisor because Dillon Read is an internationally recognized investment banking firm and regularly engages in the valuation of businesses and their securities in connection with mergers and acquisitions. Neither the Company nor any person acting on its behalf intends currently to employ, retain or compensate any other person to make solicitations or recommendations to stockholders in connection with the Offer. 24 ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES. (a) No transactions in the Shares have been effected during the past 60 days by the Company or, to the best of the Company's knowledge, by an executive officer, directors, affiliate or subsidiary of the Company. (b) To the best of the Company's knowledge, except for Shares the sale of which may trigger liability for the holder(s) under Section 16(b) of the Exchange Act, each executive officer, director and affiliate of the Company currently intends to tender all Shares over which he or she has sole dispositive power to Parent. ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTION BY THE SUBJECT COMPANY. (a) Except as described in Item 3(b), no negotiation is being undertaken or is underway by the Company in response to the Offer which relates to or would result in (i) an extraordinary transaction, such as a merger or reorganization, involving the Company or any subsidiary of the Company, (ii) a purchase, sale or transfer of a material amount of assets by the Company or any subsidiary of the Company, (iii) a tender offer for or other acquisition of securities by or of the Company or (iv) any material change in the present capitalization or dividend policy of the Company. (b) Except as described under Item 3 and Item 4, there are no transactions, board resolutions, agreements in principle or signed contracts in response to the Offer which relate to or would result in one or more of the matters referred to in paragraph (a) of this Item 7. ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED. (a) Certain Legal Proceedings. Between September 27 and October 2, 1995, Parent, the Company and the Company's directors were named as defendants in five actions (the "Underlying Actions") commenced in the Court of Chancery of the State of Delaware in and for New Castle County. The complaints in the Underlying Actions alleged, among other things, that (i) Parent's proposal was the product of unfair dealing inasmuch as defendants possess non-public information concerning the financial condition and prospects of the Company, (ii) Parent's proposed offer price of $14.00 cash per Share to be paid to the putative class members was inadequate and unfair and (iii) the conduct of defendants constituted self-dealing in violation of their fiduciary duties to the putative class members. On October 24, 1995, an order was entered in each of the Underlying Actions (1) consolidating the Underlying Actions for all purposes in one action (the "Consolidated Action"), (2) designating the complaint in action No. 14577 as the complaint in the Consolidated Action and (3) designating the law firms of Bernstein Litowitz Berger & Grossman; Wechsler Harwood Halebian & Feffer LLP; and Wolf Popper Ross Wolf & Jones, L.L.P. as plaintiffs' co-lead counsel and the law firms of Chimicles, Jacobsen & Tikellis and Rosenthal, Monhait, Gross & Goddess, P.A. as plaintiffs' Delaware co-liaison counsel. On November 1, 1995, plaintiffs' counsel agreed with Sullivan & Cromwell that such plaintiffs' counsel were prepared to negotiate a settlement if a price per Share of $15.25 were offered to the Company's stockholders. An agreement in principle has been reached with plaintiffs' counsel to settle the litigation based on Parent's increase of the Offer Price to $15.25. This settlement is subject to approval of the Court and confirmatory discovery. 25 ITEM 9. MATERIAL TO BE FILED AS EXHIBITS. Exhibit 1 --Offer to Purchase, dated November 9, 1995. Exhibit 2 --Letter of Transmittal. Exhibit 3 --Proxy Statement dated April 28, 1995 relating to SCOR U.S. Corporation's 1995 Annual Meeting of Stockholders. Exhibit 4** --Agreement and Plan of Merger, dated as of November 2, 1995 between SCOR U.S. Corporation, SCOR S.A. and SCOR Merger Sub Corporation. Exhibit 5* --Letter to Stockholders of SCOR U.S. Corporation dated November 9, 1995. Exhibit 6 --Press Release issued by SCOR S.A. and SCOR U.S. Corporation on November 3, 1995. Exhibit 7* --Opinion of Dillon, Read & Co. Inc. dated November 2, 1995. Exhibit 8 --Engagement Letter, dated October 10, 1995, between Dillon, Read & Co. Inc. and SCOR U.S. Corporation. Exhibit 9 --Report of Dillion, Read & Co. Inc. to the Special Committee of the Board of Directors of SCOR U.S. Corporation dated November 2, 1995. Exhibit 10 --Letter Agreement dated as of November 8, 1995 among SCOR S.A., SCOR U.S. Corporation and SCOR Merger Sub Corporation. ------------ * Included in copies of this Schedule 14D-9 mailed to stockholders. ** Incorporated by reference from the Company's Report on Form 8-K, dated November 6, 1995. 26 SIGNATURE After reasonable inquiry and to the best of its knowledge and belief, the undersigned certifies that the information set forth in this statement is true, complete and correct. SCOR U.S. CORPORATION Dated: November 9, 1995 By: /s/ JEROME KARTER --------------------------------------- JEROME KARTER President and Chief Executive Officer 27 EXHIBIT INDEX EXHIBIT DESCRIPTION PAGE - ------------ ----------------------------------------------------- ---- Exhibit 1 --Offer to Purchase, dated November 9, 1995. Exhibit 2 --Letter of Transmittal. Exhibit 3 --Proxy Statement dated April 28, 1995 relating to SCOR U.S. Corporation's 1995 Annual Meeting of Stockholders. Exhibit 4** --Agreement and Plan of Merger, dated as of November 2, 1995 between SCOR U.S. Corporation, SCOR S.A. and SCOR Merger Sub Corporation. Exhibit 5* --Letter to Stockholders of SCOR U.S. Corporation dated November 9, 1995. Exhibit 6 --Press Release issued by SCOR S.A. and SCOR U.S. Corporation on November 3, 1995. Exhibit 7* --Opinion of Dillon, Read & Co. Inc. dated November 2, 1995. Exhibit 8 --Engagement Letter, dated October 10, 1995, between Dillon, Read & Co. Inc. and SCOR U.S. Corporation. Exhibit 9 --Report of Dillion, Read & Co. Inc. to the Special Committee of the Board of Directors of SCOR U.S. Corporation dated November 2, 1995. Exhibit 10 --Letter Agreement dated as of November 8, 1995 among SCOR S.A., SCOR U.S. Corporation and SCOR Merger Sub Corporation. - ------------ * Included in copies of this Schedule 14D-9 mailed to stockholders. ** Incorporated by reference from the Company's Report on Form 8-K, dated November 6, 1995. EX-2 2 Exhibit 2 LETTER OF TRANSMITTAL To Tender Shares of Common Stock of SCOR U.S. CORPORATION Pursuant to the Offer to Purchase dated November 9, 1995 by SCOR MERGER SUB CORPORATION A Wholly Owned Subsidiary of SCOR S.A. ------------------------------------------------------------------------------- THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, DECEMBER 8, 1995, UNLESS THE OFFER IS EXTENDED. ------------------------------------------------------------------------------- The Depositary for the Offer is: THE BANK OF NEW YORK
By Facsimile Transmission By Mail: (for Eligible Institutions only): By Hand or Overnight Courier: Tender & Exchange Department (212) 815-6213 Tender & Exchange Department P.O. Box 11248 101 Barclay Street Church Street Station Confirm by telephone: Receive and Deliver Window New York, New York 10286-1248 (800) 507-9357 New York, New York 10286
------------------- DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED. This Letter of Transmittal is to be completed by stockholders ("Stockholders") if certificates for Shares (as defined below) are to be forwarded herewith or if tenders of Shares are to be made by book-entry transfer to the account maintained by the Depositary at The Depository Trust Company, Midwest Securities Trust Company or Philadelphia Depository Trust Company (collectively, the "Book-Entry Transfer Facilities"), pursuant to the procedures set forth in the section of the Offer to Purchase entitled "THE OFFER--3. Procedure for Tendering Shares". Stockholders who tender Shares by book-entry transfer are referred to herein as "Book-Entry Stockholders" and other Stockholders are referred to herein as "Certificate Stockholders." Stockholders whose certificates are not immediately available, or who cannot comply with the book-entry transfer procedures on a timely basis or who cannot deliver their certificates and all other documents required hereby to the Depositary on or prior to the Expiration Date (as defined in the Offer to Purchase), may nevertheless tender their Shares according to the guaranteed delivery procedure set forth in the section of the Offer to Purchase entitled "THE OFFER--3. Procedure for Tendering Shares". See Instruction 2. DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY FOR THIS OFFER (AS DEFINED HEREIN). Stockholders who wish to tender their Shares must, at a minimum, complete columns (1) through (3) (other than Book-Entry Stockholders, who are not required to complete columns (2) and (3)) in the "Description of Shares Tendered" table below. If only those columns are completed, a Stockholder will be deemed to have tendered all of its Shares listed in the table. If a Certificate Stockholder wishes to tender with respect to less than all of its Shares, column (4) must also be completed, and such Certificate Stockholder should refer to Instruction 4. / / CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE DEPOSITARY AT ONE OF THE BOOK-ENTRY TRANSFER FACILITIES AND COMPLETE THE FOLLOWING: Name of Tendering Institution ______________________________________________ Check One: / / The Depository Trust Company / / Midwest Securities Trust Company / / Philadelphia Depository Trust Company Account Number _______________________________________________________________ Transaction Code Number ______________________________________________________ / / CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING: Name(s) of Registered Stockholder(s) _______________________________________ Window Ticket Number (if any) ______________________________________________ Date of Execution of Notice of Guaranteed Delivery _________________________ Name of Institution that Guaranteed Delivery _______________________________ If Delivery by Book-Entry Transfer: Name of Tendering Institution ________________________________________________ Check One: / / The Depository Trust Company / / Midwest Securities Trust Company / / Philadelphia Depository Trust Company Account Number _______________________________________________________________ Transaction Code Number ______________________________________________________
- ---------------------------------------------------------------------------------------------------------------- DESCRIPTION OF SHARES TENDERED - ---------------------------------------------------------------------------------------------------------------- NAME(S) AND ADDRESS(ES) OF REGISTERED STOCKHOLDER(S) (PLEASE FILL IN BLANK EXACTLY AS NAME(S) SHARES TENDERED APPEAR(S) ON THE CERTIFICATE(S)) (ATTACH ADDITIONAL LIST IF NECESSARY) - ---------------------------------------------------------------------------------------------------------------- (1) (2) (3) (4) - ---------------------------------------------------------------------------------------------------------------- TOTAL NUMBER OF SHARES CERTIFICATE REPRESENTED BY NUMBER NUMBER(S)* CERTIFICATE(S)* OF SHARES TENDERED** -------------------------------------------------------------------- -------------------------------------------------------------------- -------------------------------------------------------------------- -------------------------------------------------------------------- -------------------------------------------------------------------- TOTAL SHARES - ---------------------------------------------------------------------------------------------------------------- * Need not be completed by Book-Entry Stockholders. ** Unless a Certificate Stockholder otherwise indicates, it will be assumed that all Shares evidenced by any certificate(s) delivered to the Depositary are being tendered. See Instruction 4. - ----------------------------------------------------------------------------------------------------------------
NOTE: SIGNATURES MUST BE PROVIDED BELOW PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY Ladies and Gentlemen: The undersigned hereby tenders to SCOR Merger Sub Corporation, a newly organized Delaware corporation (the "Purchaser"), and a wholly owned subsidiary of SCOR S.A., a societe anonyme organized under the laws of The French Republic ("Parent"), the above-described shares of Common Stock, par value $0.30 per share (the "Shares"), of SCOR U.S. Corporation, a Delaware corporation (the "Company"), pursuant to the Purchaser's Offer to Purchase all of the outstanding Shares not currently beneficially owned directly or indirectly by Parent at a price of $15.25 per Share, net to the seller in cash, without interest thereon, upon the terms and subject to the conditions set forth in the Offer to Purchase dated November 9, 1995 (the "Offer to Purchase"), receipt of which is hereby acknowledged, and in this Letter of Transmittal (together with the Offer to Purchase, the "Offer"). The undersigned understands that the Purchaser reserves the right to transfer or assign, from time to time, in whole or in part, to one or more of its affiliates, the right to purchase the Shares tendered herewith. Upon the terms and subject to the conditions of the Offer, and effective upon acceptance for payment of the Shares tendered herewith in accordance with the terms of the Offer, including if the Offer is extended or amended, the terms or conditions of any such extension or amendment, the undersigned hereby sells, assigns and transfers to, or upon the order of, the Purchaser, all right, title and interest in and to all of the Shares that are being tendered hereby, and any and all cash dividends, distributions, rights, other Shares and other securities issued or issuable in respect thereof on or after the date of the Offer to Purchase (collectively, "Distributions"), and irrevocably appoints the Depositary the true and lawful agent and attorney-in-fact of the undersigned with respect to such Shares (and all such Distributions), with full power of substitution (such power of attorney being deemed to be an irrevocable power coupled with an interest), to (a) deliver certificates for such Shares (and all such other shares or securities) or transfer ownership of such Shares (and all such Distributions) on the account books maintained by a Book-Entry Transfer Facility, together in any such case with all accompanying evidences of transfer and authenticity, to or upon the order of the Purchaser, (b) present such Shares (and all such Distributions) for transfer on the books of the Company and (c) receive all benefits and otherwise exercise all rights of beneficial ownership of such Shares (and all such Distributions), all in accordance with the terms and the conditions of the Offer. The undersigned hereby irrevocably appoints the designees of the Purchaser, and each of them, the attorneys-in-fact and proxies of the undersigned, each with full power of substitution, to vote in such manner as each such attorney and proxy or any substitute thereof shall deem proper in the sole discretion of such attorney-in-fact and proxy or such substitute, and otherwise act (including pursuant to written consent) with respect to all of the Shares tendered hereby (and any associated Distributions) which have been accepted for payment by the Purchaser, without further action, prior to the time of such vote or action, which the undersigned is entitled to vote at any meeting of stockholders of the Company (whether annual or special and whether or not an adjourned meeting), by written consent or otherwise. Such appointment shall be effective when, and only to the extent that, the Purchaser deposits the payment for such Shares (and any associated Distributions) with the Depository. This proxy and power of attorney shall be irrevocable and coupled with an interest in the Shares. Upon the effectiveness of such appointment, without further action, all prior proxies with respect to the Shares (and any associated Distributions) at any time given by the undersigned will be revoked, and no subsequent proxies will be given nor subsequent written consents executed (or, if given or executed, will not be deemed effective) with respect thereto by the undersigned. The undersigned understands that in order for Shares to be deemed validly tendered, immediately upon the Purchaser's acceptance of such Shares for payment, the Purchaser or its designees must be able to exercise full voting rights with respect to such Shares (and any associated Distributions). By accepting the Offer through the tender of Shares pursuant to the Offer, the undersigned hereby agrees to release, and hereby releases, all claims with respect to and in respect of the Shares other than the right to receive payment for such tendered shares and that, upon payment for the Shares, the undersigned waives any right to attack, and will be barred from thereafter attacking, in any legal proceeding the fairness of the consideration paid in the Offer. The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer the Shares (and any associated Distributions) tendered hereby and that when the same are accepted for payment by the Purchaser, the Purchaser will acquire good, marketable and unencumbered title thereto, free and clear of all liens, restrictions, charges and encumbrances, and the same will not be subject to any adverse claim. The undersigned will, upon request, execute and deliver any additional documents deemed by the Depositary or the Purchaser to be necessary or desirable to complete the sale, assignment, and transfer of the Shares (and any associated Distributions) tendered hereby. In addition, the undersigned shall promptly remit and transfer to the Depositary for the account of the Purchaser any and all Distributions in respect of the Shares tendered hereby, accompanied by appropriate documentation of transfer; and, pending such remittance or appropriate assurance thereof, the Purchaser shall be entitled to all rights and privileges as owner of any such Distributions and may withhold the entire purchase price or deduct from the purchase price the amount or value thereof, as determined by the Purchaser in its sole discretion. All authority herein conferred or agreed to be conferred shall not be affected by and shall survive the death or incapacity of the undersigned and any obligation of the undersigned hereunder shall be binding upon the heirs, personal representatives, successors and assigns of the undersigned. Subject to the withdrawal rights set forth in the section of the Offer to Purchase entitled "THE OFFER--4. Rights of Withdrawal", the tender of Shares hereby made is irrevocable. The undersigned understands that tenders of Shares pursuant to any one of the procedures described in the section of the Offer to Purchase entitled "THE OFFER--3. Procedure for Tendering Shares" and in the Instructions hereto will constitute a binding agreement between the undersigned and the Purchaser upon the terms and subject to the conditions of the Offer. Unless otherwise indicated herein under "Special Payment Instructions", please issue the check for the purchase price and/or return any certificates for Shares not tendered or not accepted for payment in the name(s) of the registered holder(s) appearing under "Description of Shares Tendered". Similarly, unless otherwise indicated under "Special Delivery Instructions", please mail the check for the purchase price and/or return any certificates for Shares not tendered or not accepted for payment (and accompanying documents, as appropriate) to the address(es) of the registered holder(s) appearing under "Description of Shares Tendered". In the event that both the Special Delivery Instructions and the Special Payment Instructions are completed, please issue the check for the purchase price and/or issue any certificates for Shares not so tendered or accepted for payment in the name of, and deliver said check and/or return such certificates to, the person or persons so indicated. The undersigned recognizes that Purchaser has no obligation, pursuant to the Special Payment Instructions, to transfer any Shares from the name of the registered holder thereof if the Purchaser does not accept for payment any of the Shares so tendered. SPECIAL PAYMENT INSTRUCTIONS (SEE INSTRUCTIONS 1, 5, 6 AND 7) To be completed ONLY if certificate(s) for Shares not tendered or not accepted for payment and/or the check for the purchase price of Shares accepted for payment are to be issued in the name of someone other than the undersigned. Issue check and/or certificate(s) to: Name: ____________________________________ PLEASE TYPE OR PRINT __________________________________________ Address: __________________________________ __________________________________________ (INCLUDE ZIP CODE) __________________________________________ (TAX IDENTIFICATION OR SOCIAL SECURITY NO.) (SEE SUBSTITUTE FORM W-9 ON REVERSE SIDE) SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 1, 5, 6 AND 7) To be completed ONLY if certificate(s) for Shares not tendered or not accepted for payment and/or the check for the purchase price of Shares accepted for payment are to be sent to someone other than the undersigned, or to the undersigned at an address other than that shown above. Mail check and/or certificate(s) to: Name: ____________________________________ PLEASE TYPE OR PRINT __________________________________________ Address: __________________________________ __________________________________________ (INCLUDE ZIP CODE) __________________________________________ (TAX IDENTIFICATION OR SOCIAL SECURITY NO.) (SEE SUBSTITUTE FORM W-9 ON REVERSE SIDE) IMPORTANT SIGN HERE (ALSO COMPLETE SUBSTITUTE FORM W-9 BELOW) Signature(s) of Stockholders(s)_______________________________________________ ________________________________________________________________________________ Dated: ____________, 1995 (Must be signed by registered Stockholder(s) exactly as name(s) appear(s) on the certificate(s) for the Shares or on a security position listing or by person(s) authorized to become registered holder(s) by certificate(s) and documents transmitted herewith. If signature is by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, please provide the following information and see Instruction 5.) Name(s)_________________________________________________________________________ ________________________________________________________________________________ (Please Print) Capacity (Full Title)___________________________________________________________ Address_________________________________________________________________________ ________________________________________________________________________________ (Including Zip Code) Area Code and Telephone Number__________________________________________________ Tax Identification or Social Security No._______________________________________ (ALSO COMPLETE SUBSTITUTE FORM W-9 BELOW) GUARANTEE OF SIGNATURE(S) (SEE INSTRUCTIONS 1 AND 5) Authorized Signature____________________________________________________________ Name and Title__________________________________________________________________ (Please Type or Print) Name of Firm____________________________________________________________________ Address_________________________________________________________________________ (Include Zip Code) Dated: ____________, 1995 INSTRUCTIONS Forming Part of the Terms and Conditions of the Offer 1. GUARANTEE OF SIGNATURES. Except as otherwise provided below, all signatures on this Letter of Transmittal must be guaranteed by a financial institution (including most banks, savings and loan associations and brokerage houses) which is a participant in the Securities Transfer Agents Medallion Program, the New York Stock Exchange Medallion Signature Program or the Stock Exchange Medallion Program (an "Eligible Institution"). Signatures on this Letter of Transmittal need not be guaranteed (a) if this Letter of Transmittal is signed by the registered holder(s) of the Shares (which term, for purposes of this document, shall include any participant in one of the Book-Entry Transfer Facilities whose name appears on a security position listing as the owner of Shares) tendered herewith and such holder(s) have not completed the box labeled "Special Payment Instructions" or the box labeled "Special Delivery Instructions" on this Letter of Transmittal or (b) if such Shares are tendered for the account of an Eligible Institution. See Instruction 5 of this Letter of Transmittal. 2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES OR BOOK-ENTRY CONFIRMATIONS; LOST CERTIFICATES. This Letter of Transmittal is to be used either (i) if certificates are to be forwarded herewith or (ii) unless an Agent's Message (as defined in the Offer to Purchase) is used in lieu of this Letter of Transmittal, if delivery of Shares is to be made pursuant to the procedures for book-entry transfer set forth in the section of the Offer to Purchase entitled "THE OFFER--3. Procedure for Tendering Shares". Certificates for all physically delivered Shares, or confirmation of any book-entry transfer into the Depositary's account at one of the Book-Entry Transfer Facilities of Shares tendered by book-entry transfer, as well as a properly completed and duly executed Letter of Transmittal (or facsimile thereof) with any required signature guarantees (or, in the case of book-entry transfer, an Agent's Message in lieu of this Letter of Transmittal), and any other documents required by this Letter of Transmittal, must be received by the Depositary at one of its addresses set forth herein on or prior to the Expiration Date (as defined in the Offer to Purchase). Stockholders whose certificates are not immediately available, or who cannot complete the procedures for book-entry transfer on a timely basis or who cannot deliver their certificates and all other required documents to the Depositary on or prior to the Expiration Date, may nevertheless tender their Shares by properly completing and duly executing the Notice of Guaranteed Delivery pursuant to the guaranteed delivery procedure set forth in the section of the Offer to Purchase entitled "THE OFFER--3. Procedure for Tendering Shares". Pursuant to such procedure: (i) such tender must be made by or through an Eligible Institution; (ii) a properly completed and duly executed Notice of Guaranteed Delivery substantially in the form provided by the Purchaser must be received by the Depositary on or prior to the Expiration Date; and (iii) certificates for physically delivered Shares (or a Book-Entry Confirmation (as defined in the Offer to Purchase) with respect to such Shares), together with a properly completed and duly executed Letter of Transmittal (or facsimile thereof) with any required signature guarantees (or, in the case of book-entry transfer, an Agent's Message in lieu of this Letter of Transmittal) and any other documents required by this Letter of Transmittal, must be received by the Depositary within three New York Stock Exchange, Inc. trading days after the date of execution of such Notice of Guaranteed Delivery. If any certificate(s) for the Shares tendered hereby have been lost or destroyed, that fact should be indicated on the face of this Letter of Transmittal. In such event, the Depositary will forward additional information and documentation necessary to be completed in order to effectively deliver such lost or destroyed certificate(s). IF SHARE CERTIFICATES ARE DELIVERED SEPARATELY TO THE DEPOSITARY, A PROPERLY COMPLETED AND DULY EXECUTED LETTER OF TRANSMITTAL MUST ACCOMPANY EACH SUCH DELIVERY. THE METHOD OF DELIVERY OF SHARE CERTIFICATES AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER. THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT SUCH CERTIFICATES AND DOCUMENTS BE SENT BY REGISTERED MAIL, PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY. No alternative, conditional or contingent tenders will be accepted and no fractional Shares will be purchased. By execution of this Letter of Transmittal (or facsimile thereof), a Stockholder waives any right to receive any notice of the acceptance of the Shares for payment. 3. INADEQUATE SPACE. If the space provided herein is inadequate, the certificate numbers and/or the number of Shares should be listed on a separate schedule attached hereto. 4. PARTIAL TENDERS (APPLICABLE TO CERTIFICATE STOCKHOLDERS ONLY). If fewer than all the Shares evidenced by any certificate submitted are to be tendered by a Certificate Stockholder, fill in the number of Shares which are to be tendered in the box entitled "Number of Shares Tendered". In such cases, new certificate(s) for the remainder of the Shares that were evidenced by your old certificate(s) will be sent to you, unless otherwise provided in the appropriate box on this Letter of Transmittal, as soon as practicable after the Expiration Date. All Shares represented by certificates delivered to the Depositary will be deemed to have been tendered unless otherwise indicated. 5. SIGNATURES ON LETTER OF TRANSMITTAL; STOCK POWERS AND ENDORSEMENTS. If this Letter of Transmittal is signed by the registered holders of the Shares tendered hereby, the signature must correspond with the names as written on the face of the certificate(s) without alteration, enlargement or any change whatsoever. If any of the Shares tendered hereby are owned of record by two or more joint owners, all such owners must sign this Letter of Transmittal. If any of the tendered Shares are registered in different names on several certificates, it will be necessary to complete, sign and submit as many separate Letters of Transmittal as there are different registrations of certificates. If this Letter of Transmittal or any certificates or stock powers are signed by trustees, executors, administrators, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and proper evidence satisfactory to the Purchaser of their authority so to act must be submitted. If this Letter of Transmittal is signed by the registered holder(s) of the Shares listed and transmitted hereby, no endorsements of certificates or separate stock powers are required unless payment is to be made to, or certificates for Shares not tendered or purchased are to be issued in the name of, a person other than the registered holder(s). Signatures on such certificates or stock powers must be guaranteed by an Eligible Institution. If this Letter of Transmittal is signed by a person other than the registered holder of the certificate(s) listed, the certificate(s) must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name or names of the registered holder or holders appear on the certificates(s). Signatures on such certificates or stock powers must be guaranteed by an Eligible Institution. 6. STOCK TRANSFER TAXES. The Purchaser will pay or cause to be paid any stock transfer taxes with respect to the transfer and sale of Shares to it or its order pursuant to the Offer. If, however, payment of the purchase price is to be made to, or (in the circumstances permitted hereby) if certificates for Shares not tendered or accepted for payment are to be registered in the name of, any person other than the registered holder, or if tendered certificates are registered in the name of any person other than the person(s) signing this Letter of Transmittal, the amount of any stock transfer taxes (whether imposed on the registered holder or such person) payable on account of the transfer to such person will be deducted from the purchase price if satisfactory evidence of the payment of such taxes, or exemption therefrom, is not submitted. EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR TRANSFER TAX STAMPS TO BE AFFIXED TO THE CERTIFICATES LISTED IN THIS LETTER OF TRANSMITTAL. 7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check is to be issued in the name of, and/or certificates for Shares not tendered or not accepted for payment are to be issued or returned to, a person other than the signer of this Letter of Transmittal or if a check and/or such certificates are to be mailed to someone other than the signer of this Letter of Transmittal or to an address other than that shown above, the appropriate boxes on this Letter of Transmittal should be completed. 8. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions or requests for assistance may be directed to, or additional copies of the Offer to Purchase, this Letter of Transmittal, the Notice of Guaranteed Delivery and other tender offer materials may be obtained from, the Information Agent (as defined in the Offer to Purchase) or the Dealer Managers (as defined in the Offer to Purchase) at their respective addresses set forth below or from your broker, dealer, commercial bank or trust company. 9. SUBSTITUTE FORM W-9. Each tendering stockholder is required to provide the Depositary with a correct Taxpayer Identification Number ("TIN"), generally the stockholder's social security or federal employer identification number, on Substitute Form W-9 below. Failure to provide the information on the form may subject the tendering stockholder to 31% federal income tax withholding on the payment of the purchase price. The box in Part 3 of the form may be checked if the tendering stockholder has not been issued a TIN and has applied for a number or intends to apply for a number in the near future. If the box in Part 3 is checked and the Depositary is not provided with a TIN within 60 days, the Depositary will withhold 31% of all payments of the purchase price thereafter until a TIN is provided to the Depositary. 10. WAIVER OF CONDITIONS. Subject to the terms of the Offer, the Purchaser reserves the right to waive any of the specified conditions to the Offer, in whole or in part, in the case of any Shares tendered. IMPORTANT: EITHER THIS LETTER OF TRANSMITTAL (OR A FACSIMILE COPY THEREOF), PROPERLY COMPLETED AND DULY EXECUTED, OR, IN THE CASE OF BOOK-ENTRY TRANSFER, AN AGENT'S MESSAGE IN LIEU OF THIS LETTER OF TRANSMITTAL (TOGETHER WITH CERTIFICATES FOR PHYSICALLY DELIVERED SHARES OR CONFIRMATION OF BOOK-ENTRY TRANSFER) AND ALL OTHER REQUIRED DOCUMENTS, OR THE NOTICE OF GUARANTEED DELIVERY, MUST BE RECEIVED BY THE DEPOSITARY ON OR PRIOR TO THE EXPIRATION DATE. IMPORTANT TAX INFORMATION Under the federal income tax law, a stockholder whose tendered Shares are accepted for purchase is required by law to provide the Depositary (as payer) with such stockholder's correct TIN on Substitute Form W-9 below. If such stockholder is an individual, the TIN is his or her social security number. If a stockholder fails to provide a TIN to the Depositary, such stockholder may be subject to a $50 penalty imposed by the Internal Revenue Service. In addition, payments that are made to such stockholder with respect to Shares purchased pursuant to the Offer may be subject to backup withholding of 31%. Certain stockholders (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. In order for a foreign individual to qualify as an exempt recipient, that stockholder must submit a Form W-8, signed under penalties of perjury, attesting to that individual's exempt status. A Form W-8 can be obtained from the Depositary. See the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for additional instructions. If backup withholding applies, the Depositary is required to withhold 31% of any payments made to the stockholder or payee. Backup withholding is not an additional tax. Rather, the tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained from the Internal Revenue Service. The box in Part 3 of the Substitute Form W-9 may be checked if the tendering stockholder has not been issued a TIN and has applied for a TIN or intends to apply for a TIN in the near future. If the box in Part 3 is checked, the stockholder or other payee must also complete the Certificate of Awaiting Taxpayer Identification Number below in order to avoid backup withholding. Notwithstanding that the box in Part 3 is checked and the Certificate of Awaiting Taxpayer Identification Number is completed, the Depositary will withhold 31% of all payments made prior to the time a properly certified TIN is provided to the Depositary. WHAT NUMBER TO GIVE THE DEPOSITARY The stockholder is required to give the Depositary the social security number or employer identification number of the record owner of the Shares or of the last transferee appearing on the transfers attached to, or endorsed on, the Shares. If the Shares are in more than one name or are not in the name of the actual owner, consult the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for additional guidance on which number to report. SUBSTITUTE TO BE COMPLETED BY ALL STOCKHOLDERS (SEE INSTRUCTION 9) FORM W-9 PAYER'S NAME: THE BANK OF NEW YORK PART 1--PLEASE PROVIDE YOUR TIN IN THE _______________ BOX AT RIGHT AND CERTIFY BY SIGNING SOCIAL SECURITY AND DATING BELOW NUMBER OR__________________________ EMPLOYER IDENTIFICATION NUMBER PART 2--CERTIFICATES--UNDER PENALTIES OF PERJURY, I CERTIFY THAT: (1) The number shown on this form is my correct Taxpayer Identification Number (or I am waiting for a number to be issued to me); and DEPARTMENT OF THE TREASURY INTERNAL REVENUE SERVICE (2) I am not subject to backup withholding because (i) I am exempt from backup withholding (ii) I have not been notified by the Internal Revenue Service (the "IRS") that I am subject to backup withholding as a result of a failure to report all interest or dividends, or (iii) the IRS has notified me that I am no longer subject to backup withholding. Certification Instructions--You must cross out item (2) in Part 2 above if you have been notified by the IRS that you are subject to backup withholding because of under-reporting interest or dividends on your tax return. However, if after being notified by the IRS that you were subject to backup withholding you received another notification from the IRS stating that you are no longer subject to backup withholding, do not cross out item(2). PAYER'S REQUEST FOR TAXPAYER IDENTIFICATION NUMBER (TIN) PART 3 SIGNATURE ___________________ DATE ____________ AWAITING NAME (PLEASE PRINT)______________________________ TIN / / NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATIONS OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 3 OF SUBSTITUTE FORM W-9 CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (i) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office or (ii) I intend to mail or deliver an application in the near future. I understand that if I do not provide a taxpayer identification number within 60 days, 31% of all reportable payments made to me thereafter will be withheld until I provide a number. - ------------------------------------------ ------------- Signature Date - ------------------------------------------ Name (Please Print) The Information Agent for the Offer is: D.F. KING & CO., INC. UNITED STATES EUROPE 77 Water Street Royex House, Aldermarbury Square New York, New York 10005 London, England EC2V 7HR CALL TOLL-FREE: 1-800-714-3313 (44) 171-600-5005 (COLLECT) The Dealer Managers for the Offer are: GOLDMAN, SACHS & CO. 85 Broad Street New York, New York 10004 (Toll Free) 800-323-5678 GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER.--Social Security numbers have nine digits separated by two hyphens; i.e. 000-00-0000. Employer identification numbers have nine digits separated by only one hyphen: i.e. 00-0000000. The table below will help determine the number to give the payer. - ------------------------------------------------------ FOR THIS TYPE OF ACCOUNT: GIVE THE SOCIAL SECURITY NUMBER OF-- - ------------------------------------------------------ 1. An individual's account The individual 2. Two or more individuals The actual owner of (joint account) the account or, if combined funds, the first individual on the account(1) 3. Husband and wife (joint The actual owner of account) the account or, if joint funds, the first individual on the account(1) 4. Custodian account of a The minor(2) minor (Uniform Gift to Minors Act) 5. Adult and minor (joint The adult or, if the account) minor is the only contributor, the minor(1) 6. Account in the name of The ward, minor, or guardian or committee incompetent person(3) for a designated ward, minor or incompetent person 7. a. The usual revocable The grantor-trustee(1) savings trust account (grantor is also trustee) b. So-called trust The actual owner(1) account that is not a legal or valid trust under State law 8. Sole proprietorship The owner(4) account - ------------------------------------------------------ FOR THIS TYPE OF ACCOUNT: GIVE THE EMPLOYER IDENTIFICATION NUMBER OF-- - ------------------------------------------------------ 9. A valid trust, estate, The legal entity (Do or pension trust not furnish the identifying number of the personal representative or trustee unless the legal entity itself is not designated in the account title.)(5) 10. Corporate account The corporation 11. Religious charitable, The organization or educational organization account 12. Partnership account The partnership held in the name of the business 13. Association, club, or The organization other tax-exempt organization 14. A broker or registered The broker or nominee nominee 15. Account with the The public entity Department of Agriculture in the name of a public entity (such as a State or local government, school district, or prison) that receives agricultural program - ------------------------------------------------------ (1) List first and circle the name of the person whose number you furnish. (2) Circle the minor's name and furnish the minor's social security number. (3) Circle the ward's, minor's or incompetent person's name and furnish such person's social security number. (4) Show the name of the owner. (5) List first and circle the name of the legal trust, estate, or pension trust. NOTE: If no name is circled when there is more than one name, the number will be considered to be that of the first name listed. GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 PAGE 2 OBTAINING A NUMBER If you don't have a taxpayer identification number or you don't know your number, obtain Form SS-5, Application for a Social Security Number Card (for individuals), or Form SS-4, Application for Employer Identification Number (for businesses and all other entities), at the local office of the Social Security Administration or the Internal Revenue Service and apply for a number. PAYEE EXEMPT FROM BACKUP WITHHOLDING Payees specifically exempted from backup withholding on ALL payments include the following: . A corporation. . A financial institution. . An organization exempt from tax under section 501(a), or an individual retirement plan, or a custodial account under Section 403(b)(7). . The United States or any agency or instrumentality thereof. . A State, the District of Columbia, a possession of the United States, or any subdivision or instrumentality thereof. . A foreign government, a political subdivision of a foreign government, or any agency or instrumentality thereof. . An international organization or any agency, or instrumentality thereof. . A registered dealer in securities or commodities registered in the U.S. or a possession of the U.S. . A real estate investment trust. . A common trust fund operated by a bank under section 584(a). . An exempt charitable remainder trust, or a nonexempt trust described in section 4947(a)(1). . An entity registered at all times under the Investment Company Act of 1940. . A foreign central bank of issue. Payments of dividends and patronage dividends not generally subject to backup withholding include the following: . Payments to nonresident aliens subject to withholding under section 1441. . Payments to partnerships not engaged in a trade or business in the U.S. and which have at least one nonresident partner. . Payments of patronage dividends where the amount received is not paid in money. . Payments made by certain foreign organizations. . Payments made to a nominee. Payments of interest not generally subject to backup withholding include the following: . Payments of interest on obligations issued by individuals. Note: You may be subject to backup withholding if this interest is $600 or more and is paid in the course of the payer's trade or business and you have not provided your correct taxpayer identification number to the payer. . Payments of tax-exempt interest (including exempt-interest dividends under section 852). . Payments described in section 6049(b)(5) to non-resident aliens. . Payments on tax-free covenant bonds under section 1451. . Payments made by certain foreign organizations. . Payments made to a nominee. Exempt payees described above should file a Substitute Form W-9 to avoid possible erroneous backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, SIGN AND DATE THE FORM AND RETURN IT TO THE PAYER. Certain payments other than interest, dividends, and patronage dividends, that are not subject to information reporting are also not subject to backup withholding. For details, see sections 6041, 6041A(a), 6042, 6044, 6045, 6049, 6050A, and 6050N, and the regulations under those sections. PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividend, interest, or other payments to give taxpayer identification numbers to payers who must report the payments to IRS. The IRS uses the numbers for identification purposes and to help verify the accuracy of tax returns. Payers must be given the numbers whether or not recipients are required to file a tax return. Payers must generally withhold 31% of taxable interest, dividend, and certain other payments to a payee who does not furnish a taxpayer identification number to a payer. Certain penalties may also apply. PENALTIES (1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail to furnish your taxpayer identification number to a payer, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect. (2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you make a false statement with no reasonable basis which results in no imposition of backup withholding, you are subject to a penalty of $500. (3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.-- Willfully falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment. FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE SERVICE Unless otherwise noted herein, all references to section numbers or regulations are references to the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder. EX-3 3 Exhibit 3 SCOR U.S. CORPORATION 110 WILLIAM STREET NEW YORK, NEW YORK 10038 April 28, 1995 Dear Stockholder: Your Board of Directors joins us in extending to you a cordial invitation to attend the Annual Meeting of Stockholders of SCOR U.S. Corporation, a Delaware corporation ("SCOR U.S."), to be held at 10:30 a.m. (New York time) on June 16, 1995, at Morgan Guaranty Trust Company of New York, 60 Wall Street, 46th Floor, New York, New York. At this meeting you will be asked to consider and vote upon the election of four Directors and the ratification of the appointment of KPMG Peat Marwick as independent auditors of SCOR U.S. for 1995. Please date, sign and return the enclosed proxy card in the postage paid envelope provided as soon as possible whether or not you plan to attend the meeting. You are, of course, welcome to attend the Annual Meeting and vote in person. The proceedings of the Annual Meeting will be summarized in our second quarter report to stockholders. Very truly yours, /s/ JACQUES P. BLONDEAU JACQUES P. BLONDEAU Chairman of the Board of Directors /s/ JEROME KARTER JEROME KARTER President and Chief Executive Officer SCOR U.S. CORPORATION 110 WILLIAM STREET NEW YORK, NEW YORK 10038 ------------ NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD JUNE 16, 1995 ------------ The Annual Meeting of the Stockholders of SCOR U.S. Corporation, a Delaware corporation ("SCOR U.S."), will be held on June 16, 1995 at 10:30 a.m. (New York time) at Morgan Guaranty Trust Company of New York, 60 Wall Street, 46th Floor, New York, New York, for the following purposes: (1) To elect four Directors, each for a term of three years; (2) To ratify the appointment of KPMG Peat Marwick as independent auditors of SCOR U.S. for 1995; and (3) To transact such other business as may properly come before the meeting or any adjournment or postponement thereof. Only holders of record of shares of SCOR U.S. Common Stock, par value $.30 per share ("Shares") at the close of business on April 18, 1995, the record date for the Annual Meeting, are entitled to notice of and to vote at the Annual Meeting and at any adjournment or postponement thereof. Whether or not you plan to attend the Annual Meeting, we ask you to sign, date and return the enclosed proxy card in the postage paid envelope provided. This will ensure representation of your Shares in the event that you are unable to attend the Annual Meeting. Your proxy may be revoked in the manner described in the accompanying Proxy Statement at any time before it has been voted at the Annual Meeting. By the Order of the Board of Directors /s/ JOHN T. ANDREWS, JR. JOHN T. ANDREWS, JR. Corporate Secretary April 28, 1995 PROXY STATEMENT SCOR U.S. CORPORATION ------------ ANNUAL MEETING OF STOCKHOLDERS TO BE HELD JUNE 16, 1995 ------------ This Proxy Statement is being furnished to stockholders of SCOR U.S. Corporation, a Delaware corporation ("SCOR U.S." or the "Company"), in connection with the solicitation of proxies by its Board of Directors (the "Board") for use at its Annual Meeting of Stockholders to be held at 10:30 a.m. (New York time) on June 16, 1995 at Morgan Guaranty Trust Company of New York, 60 Wall Street, 46th Floor, New York, New York, and at any adjournment or postponement thereof (the "Annual Meeting"). This Proxy Statement and the attached Notice of Annual Meeting of Stockholders and form of proxy are first being mailed to stockholders of SCOR U.S. on or about April 28, 1995. PURPOSE OF THE ANNUAL MEETING At the Annual Meeting, stockholders of SCOR U.S. will be asked: (1) To elect four Directors, each for a term of three years; (2) To ratify the appointment of KPMG Peat Marwick as independent auditors of SCOR U.S. for 1995; and (3) To transact such other business as may properly come before the meeting or any adjournment or postponement thereof. GENERAL INFORMATION DATE, TIME AND PLACE The Annual Meeting will be held at 10:30 a.m. (New York time) on June 16, 1995 at Morgan Guaranty Trust Company of New York, 60 Wall Street, 47th Floor, New York, New York. RECORD DATE; VOTING RIGHTS Stockholders of record at the close of business on April 18, 1995 (the "Record Date") are entitled to notice of the meeting and to vote shares of Common Stock, par value $.30 per share, of SCOR U.S. ("Shares") held on that date at the Annual Meeting. Each Share is entitled to one vote. As of the Record Date, a total of 18,164,620 Shares were outstanding, of which 14,547,756 were owned beneficially or of record by SCOR S.A. This Proxy Statement and the accompanying form of proxy are first being sent to stockholders on or about April 28, 1995. PROXY PROCEDURES Proxies are solicited from stockholders by the Board in order to provide every stockholder an opportunity to vote on all matters scheduled to come before the Annual Meeting, whether or not such stockholder attends in person. When the enclosed proxy card is properly executed and returned, the Shares represented will be voted by the proxyholders named on the card in accordance with the stockholder's directions. Stockholders are urged to indicate their vote on each matter by marking the appropriate box on the card. If no choice is specified, the Shares will be voted as recommended by the Board. The Board and management know of no matters, other than those set forth on the proxy card, that will be presented for consideration at the Annual Meeting. Execution of a proxy, however, confers on the designated proxyholders discretionary authority to vote the Shares represented in accordance with their judgment on other business, if any, that may come before the Annual Meeting. Any stockholder executing a proxy may revoke that proxy at any time before it is voted by a later dated proxy, by written revocation addressed to the Corporate Secretary of SCOR U.S. at 110 William Street, Suite 1800, New York, New York, 10038, or by voting in person at the Annual Meeting. The expense incurred in this solicitation of proxies will be borne by SCOR U.S. Proxies will be solicited on behalf of the Board by Georgeson & Company, Inc. for a fee which is not expected to exceed $6,000. Expenses incurred by Georgeson & Company, Inc. will be reimbursed by SCOR U.S. Proxies may also be solicited in person or by telephone by officers or other employees of SCOR U.S. and its subsidiaries who will not be additionally compensated therefor. VOTE REQUIRED; QUORUM Under the Company's By-laws and the applicable provisions of the Delaware General Corporation Law, the presence in person or by proxy of a majority of the Shares outstanding on the Record Date shall constitute a quorum. The presence of SCOR S.A. at the Annual Meeting will assure the presence of a quorum. Tabulation of proxies and the votes cast at the Annual Meeting will be conducted by an independent agent and certified to by independent election inspectors. The election inspectors will treat abstentions and votes withheld as Shares that are present and entitled to vote for purposes of determining the presence of a quorum and as a non-affirmative vote for purposes of determining the approval of any matter submitted to the stockholders for a vote. If a broker or other nominee physically indicates on the proxy that it does not have discretionary authority as to certain Shares to vote on a particular matter ("broker non-votes"), such Shares will be treated as present and entitled to vote for purposes of determining the presence of a quorum but as not voted and not present for purposes of determining the approval of any matter submitted to the stockholders for a vote. In the election of Directors, Shares present but not voting will be disregarded (except for quorum purposes) and the candidates for election receiving the highest number of affirmatives votes of the Shares entitled to be voted for them, up to the number of nominees, will be elected. With regard to the ratification of the appointment of the independent auditors of the Company, such matter must be approved by the affirmative vote of the holders of a majority of the Shares entitled to vote and present in 2 person or represented by proxy at the Annual Meeting. Broker non-votes will have no effect on the outcome of either such vote. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT As of the Record Date, SCOR S.A. owned 14,547,756 Shares or approximately 80% of the outstanding Shares. The address of SCOR S.A. is Immeuble SCOR-Cedex 39, 92074 Paris La Defense, France. HCS, a French societe anonyme whose address is that of SCOR S.A., owns approximately 48.5% of the outstanding shares of SCOR S.A. and, consequently, may be deemed to be the beneficial owner of the Shares owned by SCOR S.A. SCOR U.S. is not aware of any other person or group of persons that owns more than 5% of the Shares. The following table reflects information, as of the Record Date, regarding the beneficial ownership of the Company's equity securities individually for each Director and Named Executive Officer and for all Directors and all executive officers as a group: AMOUNT OF BENEFICIAL OWNERSHIP
PERCENT NUMBER OF SHARES OF OF SHARES NAMED EXECUTIVE OFFICERS COMMON STOCK (1)(2) OUTSTANDING - --------------------------------------------------------------- ------------------- ----------- Jacques P. Blondeau (3)(4)..................................... 75,999 * Jerome Karter (3)(4)........................................... 105,998 * Patrick Peugeot (3)(4)......................................... 105,689 * John T. Andrews, Jr............................................ 31,999 * Jeffrey Cropsey (5)............................................ 4,552 * R. Daniel Brooks............................................... 38,314 * Nolan Asch..................................................... 47,454 * DIRECTORS - --------------------------------------------------------------- John Cox....................................................... 1,000 * Raymond H. Deck................................................ 17,600 * Michel Gudefin (6)............................................. 28,500 * Jean Masse..................................................... 0 * Richard M. Murray.............................................. 13,500 * Serge M.P. Osouf............................................... 0 * John W. Popp................................................... 11,500 * Francois Reach................................................. 900 * David J. Sherwood.............................................. 11,600 * Directors and all executive officers as a group (22 individuals)................................................... 555,196 3.06%
- ------------ * Less than 1% (1) Unless otherwise indicated, the persons named have sole voting and investment power over the number of Shares shown as being beneficially owned by them. The table includes (i) 75,999, 89,789, 105,998, 31,999, 28,332, 33,266 respectively, issuable to Messrs. Blondeau, Peugeot, (Footnotes continued on following page) 3 (Footnotes continued from preceding page) Karter, Andrews, Brooks, and Asch under stock options exercisable within sixty days granted pursuant to the Stock Incentive Plan for Key Executives ("SIP") and the Stock Option Plan for Key Employees ("SOP"), (ii) 10,500 Shares issuable to each of Messrs. Deck, Gudefin, Murray, Popp and Sherwood under stock options exercisable within sixty days granted pursuant to the Stock Option Plan for Directors ("DP") and (iii) 462,153 Shares issuable to all Directors and executive officers as a group under stock options exercisable within 60 days granted pursuant to the SIP, SOP and DP, as the case may be. (2) The shares listed in the table exclude 14,547,756 Shares beneficially owned by SCOR S.A. with respect to which Mr. Blondeau, a director and officer of SCOR S.A., and Messrs. Osouf and Reach, officers of SCOR S.A., disclaim beneficial ownership. (3) Messrs. Blondeau, Karter and Peugeot are also Directors of SCOR U.S. (4) Messrs. Blondeau and Peugeot each served in the position of Chief Executive Officer ("CEO") during the fiscal year ended December 31, 1994 and therefore are included in the category of "Named Executive Officers". Mr. Peugeot held the position of CEO during the period from January 1, 1994 to June 16, 1994, when he resigned. Mr. Blondeau was elected and served as CEO from June 16, 1994 until he resigned on September 30, 1994. Mr. Karter was elected as CEO of SCOR U.S. on September 30, 1994 and continues to serve in that position. (5) Mr. Cropsey received a restricted stock award of 4,552 shares pursuant to the SIP. The shares were awarded on December 16, 1993. One-quarter of the shares (1,138) will vest on the second anniversary of the date of the grant and each one-year anniversary thereafter, starting on December 16, 1995. (6) Includes 10,000 Shares held by Mr. Gudefin's wife. PROPOSAL ONE ELECTION OF DIRECTORS GENERAL At the Annual Meeting, four Directors are to be elected to hold office until the Annual Meeting in 1998. The Board currently consists of 13 Directors including one vacancy due to the resignation of Mr. Elios Pascual on January 1, 1995. The terms of office of Messrs. Blondeau, Cox, Karter, Peugeot and the vacant seat expire at the Annual Meeting. Each of Messrs. Blondeau, Cox, Karter, and Peugeot has been nominated for election. Management knows of no reason why any of these nominees will be unable to serve, but in such event the proxies received will be voted for such substitute nominees as the Board may recommend. The Board intends to elect an additional director to fill the vacant seat in accordance with the terms of the Company's By-Laws. The names, terms of office and certain other information with respect to the persons nominated for election as Directors and other persons serving as Directors are set forth below. 4 INFORMATION CONCERNING NOMINEES FOR TERMS EXPIRING IN 1998 NAME DIRECTOR SINCE: - -------------------------------------------------------------- --------------- Jacques P. Blondeau........................................... 1988 John R. Cox................................................... 1994 Jerome Karter................................................. 1989 Patrick Peugeot............................................... 1983 THE BOARD RECOMMENDS A VOTE FOR ALL NOMINEES. DIRECTORS OF SCOR U.S. The Directors of SCOR U.S. and their respective age and terms of office are as follows:
POSITIONS, OFFICES AND PRINCIPAL TERM NAME AGE OCCUPATIONS WITH SCOR U.S. EXPIRES - ------------------------------------------- ---- -------------------------------- ------- Jacques P. Blondeau (1)(2)................. 50 Chairman of the Board 1995 Serge M.P. Osouf (1)(2).................... 51 Vice Chairman of the Board 1997 John R. Cox (1)(3)......................... 62 Director 1995 Raymond H. Deck (1)(2)(4).................. 72 Director 1997 Michel J. Gudefin (3)(4)................... 71 Director 1996 Director, President and Chief Jerome Karter (1).......................... 57 Executive Officer 1995 Jean Masse (2)............................. 50 Director 1996 Richard M. Murray (3)...................... 72 Director 1997 Patrick Peugeot (2)........................ 57 Director 1995 John W. Popp (3)(4)........................ 72 Director 1996 Francois Reach (2)......................... 46 Director 1996 David J. Sherwood (1)(3)(4)................ 72 Director 1996
- ------------ (1) Executive Committee. (2) Finance Committee. (3) Audit Committee. (4) Compensation Committee. BIOGRAPHICAL SUMMARIES OF THE DIRECTORS OF SCOR U.S. Jacques P. Blondeau has served as Chairman of the Board of SCOR U.S. since September 30, 1994 and as a Director since 1988. Mr. Blondeau is also Chairman of SCOR Reinsurance Company ("SCOR Re"), the Company's principal operating subsidiary. Mr. Blondeau serves as a Trustee of the Voting Trust that holds the stock of SCOR Re on behalf of SCOR U.S. From November, 1988 to September 30, 1994, Mr. Blondeau had been Vice Chairman and President of SCOR U.S. and Vice Chairman of the Board of SCOR Re. He also served as Chief Operating Officer of SCOR U.S. from November, 1988 to June, 1994. From June 16, 1994 to September 30, 1994, he served as Chief Executive Officer of SCOR U.S. He is Chairman of the Board and Chief Executive Officer of SCOR S.A., a French-based global reinsurance company. Prior to being elected to these positions in SCOR 5 S.A., he served as the President and Chief Operating Officer. Mr. Blondeau was President-Operations of Societe Commercial de Reassurance ("SCOR Paris") from 1988 until 1990, when SCOR Paris was merged into SCOR S.A. From 1984 to 1988, Mr. Blondeau was Chairman and President of Pechiney Australia and President of Howmet Resources, Inc. (U.S.), a subsidiary of Pechiney Corporation. From 1980-1984, he held various top-level positions with the Pechiney Corporation. Mr. Blondeau's business address is that of SCOR S.A. Serge M.P. Osouf has served as Vice Chairman of the Board of Directors of SCOR U.S. and SCOR Re since September 30, 1994, and has been a Director of SCOR U.S. since September, 1993, and of SCOR Re since December, 1991. Mr. Osouf serves as the General Manager of SCOR S.A. and prior to taking this position in September, 1994, had been the President-Reinsurance Operations of SCOR S.A. since 1993. He is currently Chairman of SCOR Vie and from 1987 to 1993 was General Manager of SCOR Reassurance, two subsidiaries of SCOR S.A. Mr. Osouf's business address is that of SCOR S.A. Jerome Karter has served as a Director of SCOR U.S. since February, 1989, and as its President and Chief Executive Officer since September 30, 1994. Prior to September, 1994, he had served as Executive Vice President of SCOR U.S. since December, 1989. Mr. Karter has also served as a Director, President and Chief Executive Officer of SCOR Re since February, 1989. Prior to his employment at SCOR, he held various management positions both in the United States and Europe with major domestic and multinational insurance companies since 1961. He held senior management positions for Factory Mutual International in London and Affiliated F.M. Insurance Company in Paris from 1969 to 1978. He subsequently served as General Manager-Europe for the Insurance Company of North America (now CIGNA Corporation) and INA Reinsurance Company S.A. in Brussels from 1978 to 1984. Immediately prior to joining SCOR U.S., Mr. Karter was a Senior Vice President and Manager of the International Department of Johnson & Higgins in New York from 1984 to 1989. Mr. Karter's business address is that of SCOR U.S. John R. Cox has served as a Director of SCOR U.S. and SCOR Re since June, 1994. Mr. Cox has also served as a Director of Firemark Global Insurance Fund since 1993. Until February 3, 1995, he was a Director and a Member of the Audit Committee of ACE Limited ("ACE") and its subsidiary companies. From 1990 to 1993 he was a Director of Bankers Insurance Company Limited. From 1985 to 1991 he was Chairman of the Board and Chief Executive Officer of ACE. From 1983 to 1985, he was Executive Vice President of American Can Company, subsequently known as Primerica Corporation and now The Travelers Corporation, and Chairman and Chief Executive Officer of Associated Madison Companies, Inc., its financial services holding company subsidiary. From 1975 to 1983 Mr. Cox held various key executive positions in CIGNA Corporation. Mr. Cox's business address is 44 Herbert Terrace, West Orange, New Jersey. Raymond H. Deck has been a Director of SCOR U.S. since 1986 and of SCOR Re since 1985. He has been President of Chase Insurance Enterprises, Inc., a division of Chase Enterprises, a private company with investments in real estate, communications and the insurance industry, since 1986. He has also been a Director of Accel International Corporation since 1990. Prior to 1986, he was a Director and Executive Vice President of the Hartford Insurance Group. Mr. Deck's business address is that of Chase Insurance Enterprises, Inc., One Commercial Plaza, Hartford, Connecticut 06103. Michel J. Gudefin has been a Director of SCOR U.S. since 1989 and of SCOR Re since June 1990 and is a Voting Trustee of SCOR Re. Mr. Gudefin is retired. From 1988 to 1989 he was Vice Chairman 6 of Howmet Corporation, the principal operating subsidiary of Pechinery Corporation. From 1976 to 1988, Mr. Gudefin was President and Chief Executive Officer of Pechiney Corporation. Until December 31, 1993, he was a Director of Pechiney Corporation and Howmet Corporation. He is currently a Director of Southwire Corporation and a Vice President and Director of Intrend Corporation. Mr. Gudefin's business address is that of SCOR U.S. Jean P. Masse has been a Director of SCOR U.S. and SCOR Re since March 1995. From June 16, 1994 until March 1995, he was Director Emeritus of SCOR Re after having served as a Director of SCOR Re from 1990 to 1994. He served as a Director and President of The Unity Fire and General Insurance Company from December 1982 until 1990, and during that time also served as President and Treasurer of the Rockleigh Management Corporation, which was merged with and into the Company in 1990. Mr. Masse's business address is Tour Voltaire, 1 place Des Dgres, Cedex 58, 92059 Paris La Defense, France. Richard M. Murray has served as a Director of SCOR U.S. and SCOR Re since 1990. He was Chairman and executive advisor of The Nippon Management Corporation from 1987 to 1991. Since 1990, he has been Vice Chairman of La Prov Corporation, a wholly-owned U.S. subsidiary and liaison office of Grupo Nacional Provincial S.A., a leading Mexican insurance company. He was a Vice President of The Travelers Corporation from 1967 to 1987. Mr. Murray's business address is that of La Prov Corporation, 80 Broad Street, New York, New York 10004-2203. Patrick Peugeot has served as a Director of SCOR U.S. since 1983 and of SCOR Re since 1985. Mr. Peugeot is also a Voting Trustee of SCOR Re. He served as Chairman of the Board of SCOR U.S. from 1983 until September 30, 1994, and as Chief Executive Officer of SCOR U.S. from December 1988 until June 16, 1994. He was also Chairman of the Board of SCOR Re until September 1994. Mr. Peugeot had served as Chairman of the Board and Chief Executive Officer of SCOR S.A. from 1989 until 1994 and of SCOR Paris from 1983 until 1990. Mr. Peugeot was Chairman of Caisse Centrale de Reassurance ("CCR") from 1983 to 1985. He is Honorary Chairman of CCR and has served as Honorary Chairman of SCOR S.A. since August 30, 1994. He is now Vice Chairman and President of La Mondiale, a French mutual life insurance company. He is also Vice Chairman of Partner Europe. Mr. Peugeot's business address is that of La Mondiale, located at 8 boulevard Malesherbes 75008 Paris. John W. Popp, a Director of SCOR U.S. since March 1990 and SCOR Re since 1989, is a business consultant. He was a Partner of Peat, Marwick, Mitchell & Co. (now KPMG Peat Marwick LLP) from 1955 to 1982. Mr. Popp has been a Director of Old Republic International Corporation since 1993. Mr. Popp's business address is that of SCOR U.S. Francois Reach has served as a Director of SCOR U.S. since March 1989 and of SCOR Re since June 1994. Mr. Reach has served as Chairman and CEO of REAFIN, the finance company subsidiary of SCOR S.A. since October 1994. He was Chief Investment Officer and Treasurer of SCOR S.A. from 1983 until October, 1994, when he became Deputy General Manager of SCOR S.A. From 1986 to 1994, he was President of REAFIN. He is also Managing Director of Finimosa (Spain) and of Finimo Kft (Hungary). Mr. Reach's business address is that of SCOR S.A. David J. Sherwood has served as a Director of SCOR U.S. and of SCOR Re since 1987. He is also a Voting Trustee of SCOR Re. Mr. Sherwood has served as Chairman of the Board of Governors of the New York Insurance Exchange since 1985. He was President of The Prudential Insurance Company of America from 1978 to 1984. Mr. Sherwood's business address is that of the New York Insurance Exchange, c/o Willkie Farr & Gallagher, One Citicorp Center, 153 East 53rd Street, New York, New York 10022. 7 EXECUTIVE OFFICERS The executive officers of SCOR U.S. and their respective age and titles are as follows:
NAME AGE OFFICE - ---------------------------------- --- --------------------------------------------------- Louis A. Adanio................... 41 Senior Vice President of SCOR Re John T. Andrews, Jr............... 53 Senior Vice President, General Counsel and Secretary of SCOR U.S. and SCOR Re Nolan E. Asch..................... 45 Senior Vice President and Chief Actuary of SCOR U.S. and SCOR Re Jacques P. Blondeau............... 50 Chairman of the Board of Directors of SCOR U.S. and SCOR Re Jeffrey D. Cropsey................ 52 Senior Vice President and Chief Financial Officer of SCOR U.S. and SCOR Re John D. Dunn, Jr.................. 49 Senior Vice President of SCOR U.S. and SCOR Re Francis J. Fenwick................ 39 Vice President and Controller of SCOR U.S. and SCOR Re Howard B. Fischer................. 35 Vice President, Finance/Planning and Analysis of SCOR U.S. and SCOR Re Linda J. Grant.................... 34 Vice President and Treasurer of SCOR U.S. and SCOR Re Jerome Karter..................... 57 President and Chief Executive Officer of SCOR U.S. and SCOR Re Dominique Lavallee................ 36 Senior Vice President of SCOR U.S. and SCOR Re Serge M.P. Osouf.................. 51 Vice Chairman of the Board of Directors of SCOR U.S. and SCOR Re
SELECTED BIOGRAPHICAL SUMMARIES Louis A. Adanio has served as Senior Vice President and Facultative Manager of SCOR Re since May 1994. From June 1990 to May 1994, Mr. Adanio had been Senior Vice President and Facultative Property Manager of SCOR Re. From June 1989 to June 1990, Mr. Adanio had been Vice President and Facultative Property Manager of SCOR Re. Mr. Adanio's business address is that of SCOR Re. John T. Andrews, Jr. has been Senior Vice President, General Counsel and Secretary of SCOR U.S. and SCOR Re since 1989. He was Senior Vice President and General Counsel of Primerica Corporation now known as The Travelers Corporation from 1987 to 1988, Senior Vice President and General Counsel of Associated Madison Companies, Inc., a subsidiary of Primerica, from 1985 to 1987, and Vice President and General Counsel of Prudential Reinsurance Company from 1977 to 1985. Mr. Andrews' business address is that of SCOR U.S. Nolan E. Asch, a Fellow of the Casualty Actuarial Society, has been Senior Vice President since 1990 and Chief Actuary of SCOR U.S. and SCOR Re since June 1994. Mr. Asch had been Actuary of SCOR U.S. since 1990 and of SCOR Re since 1989. He was Vice President and Actuary of SCOR Re from 1984 to 1989. Previously he was Vice President, Casualty Underwriting of AFIA. Mr. Asch's business address is that of SCOR U.S. Jeffrey D. Cropsey, a certified public accountant, has been Senior Vice President and Chief Financial Officer of SCOR U.S. and SCOR Re since November 1993. From 1990 through part of 1993, he was Chief Financial Officer of Phoenix Re Corporation. From 1988 to 1990, he was a Vice President 8 in the individual insurance operations at The Equitable Life Assurance Society of the United States. From 1984 to 1988, he was a partner with Peat Marwick Main & Co. From 1970 to 1984 he held positions from staff accountant through partner with Touche Ross & Co., except for 1980 to 1982 when, during a leave of absence from Touche Ross, he was a Practice Fellow at the Financial Accounting Standards Board. Mr. Cropsey's business address is that of SCOR U.S. John D. Dunn, Jr. has been Senior Vice President of SCOR U.S. and Senior Vice President and Treaty Manager of SCOR Re since July 1994. From September 1985 to 1994 he was Executive Vice President and a Director of Mercantile and General Reinsurance Company of America and TOA Reinsurance Company of America. He was a Vice President of Winterthur Insurance Company from April to September, 1985. He was a Senior Vice President and a Director of San Francisco Reinsurance Company from 1983 to 1985 and of Buffalo Reinsurance Company from 1976 to 1983. Mr. Dunn's business address is that of SCOR U.S. Francis J. Fenwick has been Vice President and Controller of SCOR U.S. and SCOR Re since October 1994. He was a Vice President and Financial Reporting Manager of Signet Star Reinsurance Company from 1993 to 1994 and held various offices at North Star Reinsurance Company, now known as Signet Star Reinsurance Company from 1987 to 1993. He was a Senior Auditor at American International Group and at Fireman's Fund Insurance Companies from 1986 to 1987 and 1984 to 1986, respectively. Mr. Fenwick's business address is that of SCOR U.S. Howard B. Fischer has been Vice President, Finance/Planning and Analysis of SCOR U.S. since January 1991 and of SCOR Re since October 1993. From November 1988, until January 1991, Mr. Fischer was Vice President/Assistant to the President of SCOR U.S. Mr. Fischer's business address is that of SCOR U.S. Linda J. Grant has served as Vice President and Treasurer of SCOR U.S. and SCOR Re since November 1994. From 1989 to 1994, Ms. Grant was Vice President and Assistant Treasurer of SCOR U.S. and SCOR Re. She also held various positions at SCOR Re from 1984 to 1989. Ms. Grant's business address is that of SCOR U.S. Dominique Lavallee has served as Senior Vice President of SCOR U.S. and SCOR Re and as Manager of SCOR Re's Underwriting Services Department since September 1994. He was Vice President of SCOR Re from 1991 to 1994. From 1988 to 1991 he was a Vice President of SCOR Reinsurance Company of Canada, and from 1984 to 1988 he was an Assistant Vice President of SCOR Paris. Mr. Lavallee's business address is that of SCOR U.S. BOARD OF DIRECTORS MEETINGS AND COMMITTEES The Board held six meetings and acted by unanimous written consent on five occasions during 1994. During 1994 all incumbent directors attended at least 75% of the meetings of the Board and committees thereof on which they served except for two former directors, Mr. David Dillard and Mr. Elios Pascual. Mr. Dillard attended 50% of such meetings prior to his retirement from the Board of Directors on June 16, 1994. Mr. Pascual attended 30% of such meetings, dating from his election in June, 1994, until his resignation on January 1, 1995. For the Board as a whole, including Messrs. Pascual and Dillard, average attendance at the meetings was 87% during 1994. The Board has four standing committees: the Audit Committee, the Compensation Committee, the Executive Committee and the Finance Committee. Only non-employee directors currently serve on the 9 Audit and Compensation Committees. The Board of Directors does not have a nominating committee. The functions normally performed by a nominating committee are performed by the Board. The Audit Committee's functions include: (1) review of the scope and findings of audits conducted by SCOR U.S.'s independent auditors, KPMG Peat Marwick; (2) review of SCOR U.S.'s accounting policies and practices for purposes of making recommendations to the Board and management of SCOR U.S.; (3) review of the actuarial policies and practices of SCOR U.S.'s reinsurance and insurance subsidiaries; and (4) review of significant transactions among SCOR U.S. and its subsidiaries and SCOR S.A. and its other subsidiaries and affiliates. The members of the Audit Committee are Messrs. Sherwood (Chairman), Cox, Gudefin, Murray and Popp. Mr. Dillard retired from the Board and the Audit Committee on June 16, 1994 and Mr. Cox was appointed to the Audit Committee on that same date. The Audit Committee held four meetings during 1994. The Compensation Committee's functions include reviewing compensation policies and practices. Prior to June 16, 1994, the Committee was specifically responsible for: (a) reviewing and approving the compensation of all senior executive officers who do not serve on the Board; (b) reviewing and recommending to the Board the compensation of senior executives who also serve on the Board; (c) reviewing new executive compensation programs or modifications to existing programs; and (d) administering the annual incentive, long-term performance incentive and stock option plans of the Company. On June 16, 1994, the powers of the Committee were amended to modify items (a) and (b) above to provide the Compensation Committee would also be responsible for reviewing and approving the compensation of all individuals at or to be elected to the rank of Vice President or above and/or who have current or proposed salaries of $100,000 or above. The members of the Compensation Committee are Messrs. Deck (Chairman), Gudefin, Popp and Sherwood. Mr. Elios Pascual was elected to the Board and the Compensation Committee upon Mr. Dillard's retirement there in June 1994. Mr. Pascual served on the Board and the Compensation Committee until his resignation on January 1, 1995. The Compensation Committee held eight meetings during 1994. The Executive Committee has the authority to exercise all the powers of the Board in the management of the business and affairs of the company except as limited by applicable laws. The members of the Executive Committee are Messrs. Blondeau (Chairman), Cox, Deck, Karter, Osouf and Sherwood. Mr. Peugeot resigned as a member and Chairman of the Executive Committee on September 30, 1994, and Mr. Blondeau was elected Chairman of the Committee on September 30, 1994. Messrs. Deck and Cox were elected to the Committee on June 16, 1994. The Executive Committee held eight meetings and acted by unanimous written consent on one occasion during 1994. The Finance Committee's functions include: (1) supervising the investment policies and practices of the Company as directed by the Board; (2) providing advice to the Boards of the Company's operating subsidiaries concerning their investment decisions; and (3) designating the officers of the Company who have the authority to effect investment decisions as approved by the Board. The members of the Finance Committee are Messrs. Reach (Chairman), Blondeau, Deck, Osouf, Peugeot and Masse. Upon Mr. Peugeot's resignation from the Board and Committee on September 30, 1994, Mr. Reach was elected Chairman of the Committee. Messrs. Jolivet and Pascual resigned from the Committee and the Board on January 1, 1995, and Messrs. Osouf and Masse were elected to the Committee on September 30, 1994, and March 24, 1995, respectively. The Finance Committee held four meetings during 1994. 10 BOARD OF DIRECTORS RETIREMENT POLICY In June 1992, the Board voted to amend the Company's By-Laws to provide that no individual shall be elected or re-elected as member of the Board subsequent to his or her attaining the age of 72. SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION The following table sets forth, for the fiscal years ended December 31, 1992, 1993 and 1994, the cash compensation paid by the Company and its subsidiaries, as well as certain other compensation paid or accrued by such entities for those years, to or with respect to the Chief Executive Officer and each of the persons who were the four most highly compensated executive officers of the Company during its most recent fiscal year (the "Named Officers"), for services rendered in all capacities as executive officers during such period: SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION: ANNUAL COMPENSATION AWARDS ------------------------------------------ ------------------------- OTHER SECURITIES NAME AND ANNUAL RESTRICTED UNDERLYING ALL OTHER PRINCIPAL POSITION YEAR SALARY ($)(1) BONUS ($) COMPENSATION ($) STOCK ($)(2) OPTIONS (#) COMPENSATION ($)(3) - ------------------------ ---- ------------- --------- ---------------- ------------ ----------- ------------------- Jacques Blondeau (4).... 1994 $ 175,000 $ -- $-- $ -- 10,000 -$- Chairman of the 1993 175,000 -- -- -- 24,000 -- Board and Former 1992 174,692 -- -- -- -- -- Chief Executive Officer Jerome Karter........... 1994 $ 301,641 $ -- $ 46,243(5) $ -- 38,000 $43,364 President and Chief 1993 289,112 75,000 39,348(5) -- 33,000 52,044 Executive Officer 1992 290,910 25,000 109,598(5) -- -- 53,367 Patrick Peugeot (4)..... 1994 $ 153,750 $ -- $-- $ -- 3,000 -$- Former Chief 1993 205,000 -- -- -- 24,000 -- Executive Officer 1992 205,846 -- 57,993(6) -- -- -- John T. Andrews, Jr..... 1994 $ 240,913 $ -- $ 48,833(7) $ -- 57,000 $32,799 Senior Vice President, 1993 230,072 65,000 244,883(7) -- 30,000 35,135 General Counsel and 1992 229,787 20,000 -- -- -- 34,251 Secretary Nolan E. Asch........... 1994 $ 180,685 $ -- $ 8,771(8) $ -- 15,071 $12,678 Senior Vice President 1993 172,554 40,000 24,335(8) -- -- 7,703 and Chief Actuary 1992 172,341 -- 27,689(8) -- -- 9,825 R. Daniel Brooks........ 1994 $ 216,300 $ -- $-- $ -- 8,000 $14,669 Senior Vice President 1993 214,846 35,000 -- -- 22,000 13,851 1992 218,711 16,000 -- -- -- 17,779 Jeffrey D. Cropsey 1994 $ 216,544 $ -- $-- $ -- 13,000 $25,980 (9)..................... 1993 36,346 90,000 -- $ 58,607 -- -- Senior Vice President 1992 N/A N/A N/A N/A N/A N/A and Chief Financial Officer
- ------------ (1) Company executives, including the Named Officers, are paid bi-weekly. As a result of this cycle, the Named Officers received 27 payments of base salary in 1992 rather than the usual 26. The data in the table includes the extra payments and, accordingly, overstates the 1992 base salary by 1/26th or 3.8%. (2) Except for that made to Mr. Cropsey, no restricted stock awards were made to any of the Named Officers during the last three fiscal years and none of them owns any shares of restricted stock of the Company. Mr. Cropsey received a restricted stock award of 4,552 shares pursuant to the SIP. The shares were awarded on (Footnotes continued on following page) 11 (Footnotes continued from preceding page) December 16, 1993. One-quarter of the shares (1,138) will vest on the second anniversary of the date of the grant and each one-year anniversary thereafter, starting on December 16, 1995. (3) The amounts shown in this column are derived from the following figures: (A) For 1994: (i) Mr. Karter: $22,016--amount accrued by the Company pursuant to the retirement provisions of Mr. Karter's employment contract with the Company; $21,347--Company contributions and credits to the SCOR U.S. Group Savings Plan ("GSP") and the SCOR U.S. Group Supplemental Retirement Plan ("SRP"), which is provided to certain executives whose benefits under the GSP are capped by federal law; (ii) Mr. Andrews: $15,561-- amount accrued by the Company pursuant to the retirement provisions of Mr. Andrews' employment contract with the Company; $17,238--Company contributions and credits to the GSP and SRP; (iii) Mr. Cropsey: $21,274--amount accrued by the Company pursuant to the retirement provisions of Mr. Cropsey's Special Severance and Pension Benefits Agreement with the Company; $4,733--Company contributions and credits to the GSP; (iv) Mr. Brooks: $14,669--Company contributions and credits to the GSP and SRP; and (v) Mr. Asch: $12,679--Company contributions and credits to the GSP and SRP; (B) for 1993: (i) Mr. Karter: $33,197 - amount accrued by the Company pursuant to the retirement provisions of Mr. Karter's employment contract with the Company; $18,847-- Company contributions and credits to the GSP and the SRP; (ii) Mr. Andrews: $20,131--amount accrued by the Company pursuant to the retirement provisions of Mr. Andrews' employment contract with the Company; $15,004--Company contributions and credits to the GSP and SRP; (iii) Mr. Cropsey: Not-applicable; (iv) Mr. Brooks: $13,851--Company contributions and credits to the GSP and SRP; and (v) Mr. Asch: $7,703--Company contributions and credits to the GSP and SRP; and (C) for 1992: (i) Mr. Karter: $29,374--amount accrued by the Company pursuant to the retirement provisions of Mr. Karter's employment contract with the Company; $23,993--Company contributions and credits to the GSP and the SRP; (ii) Mr. Andrews: $15,320--amount accrued by the Company pursuant to the retirement provisions of Mr. Andrews' employment contract with the Company; $18,931--Company contributions and credits to the GSP and SRP; (iii) Mr. Cropsey: Not-applicable; (iv) Mr. Brooks: $17,779--Company contributions and credits to the GSP and SRP; and (v) Mr. Asch: $9,825--Company contributions and credits to the GSP and SRP. (4) Mr. Peugeot and Mr. Blondeau did not participate in the Company's Annual Incentive Plan, Pension Plan, GSP or SRP due to their participation in equivalent plans at SCOR S.A. (5) Other Annual Compensation for Mr. Karter includes forgiven interest on loans from the Company and certain tax reimbursement payments related thereto of $22,785 and $15,190, respectively, in 1994, $22,400 and $2,682, respectively, in 1993, an adjusted tax reimbursement payment in 1994 of $8,269 relating to 1993, and certain tax reimbursement payments in connection with the exercise of stock options of $109,598 in 1992. (6) Other Annual Compensation for Mr. Peugeot includes $57,993 for certain tax reimbursement payments in 1992 in connection with the exercise of stock options. (7) Other Annual Compensation for Mr. Andrews includes forgiven interest on loans from the Company and certain tax reimbursement payments related thereto of $29,300, and $19,533, respectively, in 1994, and $26,512 and $10,738, respectively in 1993, and certain tax reimbursement payments in connection with the exercise of stock options of $198,423 in 1993. (8) Other Annual Compensation for Mr. Asch includes forgiven interest on loans from the Company and certain tax reimbursement payments related thereto of $5,262 and $3,508, respectively, in 1994, and $5,764 and $2,334, respectively, in 1993. In addition, Mr. Asch received $16,235 and $27,689 in 1993 and 1992 respectively, for tax reimbursement payments in connection with the exercise of stock options. (9) The 1993 figure reflects Mr. Cropsey's pro-rata salary due to a November 1, 1993 date of hire. 12 STOCK OPTIONS The following table contains information regarding the grant of stock options under the Company's SOP and the SIP to the Named Officers during the year ended December 31, 1994. In addition, in accordance with rules of the Commission, the following table sets forth the hypothetical grant date present value with respect to the referenced options, using the Black-Scholes Option Pricing Model. OPTION GRANTS IN 1994
INDIVIDUAL GRANTS (1) ---------------------------------------------------------------------------- NUMBER % OF TOTAL OF SECURITIES OPTIONS GRANT UNDERLYING GRANTED TO EXERCISE OR DATE OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION PRESENT NAME GRANTED (#) FISCAL YEAR (2) ($/SH) (3) DATE VALUE $ (4) - ------------------------------- ------------- --------------- ----------- ---------- ----------- Jacques Blondeau............... 10,000 2.35% $ 9.00 11/30/2004 $ 3,600.00 Chairman of the Board of Directors and Former Chief Executive Officer Jerome Karter.................. 13,000 8.94% $ 9.00 11/30/2004 $ 4,680.00 President and Chief 25,000 $11.125 12/02/2004 $ 7,745.00 Executive Officer Patrick Peugeot (5)............ None N/A N/A N/A N/A Former Chief Executive Officer John T. Andrews, Jr............ 13,000 13.41% $ 9.00 11/30/2004 $ 4,680.00 Senior Vice President, 44,000 $11.125 12/02/2004 $ 13,631.20 General Counsel and Corporate Secretary Nolan E. Asch.................. 6,000 3.54% $ 9.00 11/30/2004 $ 2,160.00 Senior Vice President 9,071 $11.125 11/30/2004 $ 2,810.20 Chief Actuary R. Daniel Brooks............... 8,000 2.81% $ 9.00 11/30/2004 $ 2,880.00 Senior Vice President 3,929 $11.125 12/02/2004 $ 1,217.20 Jeffrey Cropsey................ 13,000 3.06% $ 9.00 11/30/2004 $ 4,680.00 Senior Vice President and Chief Financial Officer
- ------------ (1) The option shown in the above table represent options granted under both the SIP and SOP, respectively. The options were granted on November 30, 1994 under the SOP and November 2, 1994 under the SIP. The SOP is administered by the Board's Compensation Committee. The Compensation Committee determines the eligibility of employees, the number of shares to be granted and the terms of such grants. All stock options granted in fiscal year 1994 are non-qualified options receiving no special tax benefit, have an exercise price equal to the fair market value on the date of grant, vest at a rate of approximately 33.33 percent per year, on the, second, third and fourth anniversary of the grant date and have a term of ten years. No incentive stock options or stock appreciation rights were granted in 1994 pursuant to the SOP. To the extent not already exercisable and not expired upon a Change in Control (as defined), the options become exercisable upon the later of (i) six months after their grant date or (ii) the date of a Change in Control. (Footnotes continued on following page)
13 (Footnotes continued from preceding page) The SIP is also administered by the Compensation Committee. The Committee determines the eligibility of employees, the number of shares to be granted and the terms of such grants. All stock options granted in the fiscal year 1994 are non-qualified stock options, have an exercise price equal to the fair market value on the date of grant, vest on the six month anniversary of the grant date, and have a term of ten years and one month. At the Compensation Committee's discretion, an individual may be eligible for a tax bonus upon the exercise of a stock option grant. (2) Options to purchase an aggregate of 425,175 shares were granted in fiscal year 1994 under the SOP and SIP plans, with 343,175 granted to employees under the SOP and 82,000 granted to key executives under the SIP. (3) Under the SOP, the exercise price may be paid either (i) in cash, (ii) through the delivery of Shares with a Fair Market Value (as defined) on the immediately preceding Trading Day (as defined) equal to the total option price or (iii) by a combination of the methods described in (i) and (ii) for the full purchase price therefor; provided that, in the case of payment pursuant to methods described in (ii) or (iii) above, the Shares delivered to SCOR U.S. shall have been held by the optionee for at least six months and shall not secure any obligation of the optionee to SCOR U.S. If so provided under the terms of a stock option, the Compensation Committee may, at its sole discretion, permit an optionee, in lieu of the methods of payment set forth above, to pay for any portion of the purchase price of the Shares to be issued or transferred that exceeds the par value of such Shares, by delivery of a full-recourse promissory note of the optionee in such form as the Compensation Committee may approve. Under the SOP, any such promissory note shall be secured by Shares having a Fair Market Value on the Trading Day immediately prior to the date of delivery of the note equal to at least two times the principal amount of the note. Under both the SOP and SIP, any such promissory note shall have a maturity of five years or less, as the Compensation Committee may determine in its sole discretion, and shall be payable in equal installments of principal and interest at least annually, or more frequently as the Compensation Committee may determine in its sole discretion. The Compensation Committee shall determine in its sole discretion the interest rate to be charged by SCOR U.S. with respect to the loan evidenced by the promissory note, but such rate shall in no event cause the loan to be considered a below-market loan to which Section 7872 of the Internal Revenue Code of 1986 (the "Code") applies. Payment of the exercise price under the SIP may be made by the same methods as apply to the SOP, except that under the SIP any promissory note shall be secured by shares having a Fair Market Value on the Trading Day immediately prior to the date of delivery of the note that is equal to the principal amount of the note. (4) The estimated fair value of stock options is measured at the grant date in accordance with the Black-Scholes Option Pricing Model. The assumptions used in such option pricing model are: expected volatility, 27.89%; expected dividend yield, 2.01%; expected option term, 10 years; and risk-free rate of return, 7.84%. No adjustments have been made for non-transferability or risk of forfeiture. The actual value, if any, a Named Officer may realize will depend on the excess of the stock price over the exercise a price on the date the option is exercised. Consequently, there is no assurance the value realized by a Named Officer will be at or near the value estimated above. These amounts should not be used to predict stock performance. (5) Mr. Peugeot did not receive any stock options under the SOP or SIP for the fiscal year ended December 31, 1994. He did however receive a non-qualified stock option grant of 3,000 shares under the DP on September 30, 1994, at an grant price of $11.25 per share. The options will vest at a rate of 50% per year, on the first and second anniversary of the grant date, and have a term of ten years. For a more complete description of the DP, see "COMPENSATION OF DIRECTORS". 14 STOCK OPTION EXERCISES AND YEAR-END VALUE TABLE The following table shows stock option exercises by the Named Officers during the fiscal year ended December 31, 1994, including the aggregate value of gains on the date of exercise. In addition, this table includes the number of shares covered by both exercisable and non-exercisable stock options as of December 31, 1994. Values for "in-the money" options represent the positive spread between the exercise price of any such existing stock options and the year-end price of the Common Stock. The market price of the Common Stock as of the close of business on December 31, 1994, was $8.375 per share. AGGREGATED OPTION EXERCISES IN 1994 AND YEAR-END VALUES
VALUE OF UNEXERCISED NUMBER OF UNEXERCISED STOCK IN-THE-MONEY STOCK NUMBER OF VALUED OPTIONS SHARES ACQUIRED REALIZED OPTIONS AT 12/31/94 (#) AT 12/31/94($) (2) UPON EXERCISE OF UPON ------------------------------- --------------------------- NAME OPTION (#) EXERCISE (1) EXERCISABLE UNEXERCISABLE (2) EXERCISABLE UNEXERCISABLE - ------------------------ ---------------- ------------ ----------- ----------------- ----------- ------------- Jacques Blondeau........ -- -- 75,999 26,000 -- -- Chairman and Former Chief Executive Officer Jerome Karter........... -- -- 105,998 60,002 -- -- President and Chief Executive Officer Patrick Peugeot......... -- -- 89,789 19,001 -- -- Former Chief Executive Officer John T. Andrews, Jr..... -- -- 31,999 77,001 -- -- Senior Vice President, General Counsel and Secretary Nolan E. Asch........... -- -- 33,266 28,405 -- -- Senior Vice President and Chief Actuary R. Daniel Brooks........ -- -- 28,332 26,597 -- -- Senior Vice President Jeffrey D. Cropsey...... -- -- -- 13,000 -- -- Senior Vice President and Chief Financial Officer
- ------------ (1) Market value of underlying securities at exercise, minus the exercise price. (2) Based on the December 31, 1994 stock price which was $8.375 per share, there were no "in-the-money" stock options. LONG-TERM INCENTIVES The Company granted no awards to the Named Officers during 1994 under the Performance Incentive Plan, a long-term incentive plan ("PIP"). Participation in the PIP is limited to select senior 15 executives of the Company, including the Named Officers. Under the PIP, grants of performance units ("Units") are made every other year to eligible senior executives. At the time when an award of Units is made, the Compensation Committee must determine a Performance Period (as defined) of at least five years with respect to such Units and must determine a minimum threshold of annual compound appreciation of the adjusted book value per share of the Company's Common Stock. A Unit vests at the end of the applicable Performance Period. If such appreciation exceeds the threshold rate, each Unit has a value, subject to adjustment in certain events, equal to the difference between (i) the adjusted book value per share of Common Stock at the end of the Performance Period plus the dividends paid on a share of Common Stock at the commencement of the Performance Period and (ii) the adjusted book value per share of Common Stock at the commencement of the Performance Period. Participants may receive any payments under the Performance Plan at the end of the applicable Performance Period. They may elect to receive such payments in a lump sum or in periodic installments. Units are non-transferable except to a designated beneficiary at the death of a Participant. Participants leaving the employ of SCOR U.S. for any reason other than death, disability or retirement may receive payments pursuant only to Units that have vested prior to the termination of employment. Participants or their designated beneficiaries may receive partial payment before the end of a Performance Period in the event of death, disability or retirement. In the event of a Change of Control (as defined), Units vest immediately and Participants become entitled to receive awards pursuant thereto. See also, "REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION--PERFORMANCE INCENTIVE PLAN". COMPENSATION OF DIRECTORS Compensation of Directors who are not employees of SCOR U.S. currently consists of an annual retainer of $13,000, a fee of $2,000 for attendance at each quarterly meeting of the Board, $1,500 for attendance at other meetings of the Board (provided that if such a meeting is held jointly with the Board of any subsidiary of which such person is also a Director, the fee is $2,000) and a fee of $1,000 for attendance at each meeting of a committee of the Board. The Chairman of a committee of the Board receives an annual retainer of $1,000. The fees that a Director can receive for attending Board and committee meetings on any one day may not exceed $3,000. Directors who are employees of SCOR U.S. or any of its subsidiaries receive no additional compensation for their services as Directors. In June 1991, the stockholders of the Company approved the DP, which provided for the automatic annual grant to each SCOR U.S. Director who is not an employee of SCOR U.S. or its subsidiaries or affiliates (including SCOR S.A., or any of its respective subsidiaries or affiliates) of a non-statutory stock option to purchase 3,000 shares of SCOR U.S. Common Stock, as of the date which is three business days following the date of each Annual Meeting of Stockholders. In June 1994, the stockholders of the Company approved an amendment to the DP. The DP now provides for the automatic grant to each Eligible Director of a non-statutory option to purchase 3,000 Shares of SCOR U.S. Common Stock as of the following dates: (1) an annual grant on the date that is three business days following the date of each Annual Meeting of Stockholders; and (2) a grant on the date the individual becomes an Eligible Director (unless he or she becomes a Director on the date of the Annual Meeting). An Eligible Director is now defined as a member of the Board of SCOR U.S. or its subsidiaries, who is not an employee of SCOR U.S. or its subsidiaries, but may be a employee or director of SCOR S.A., its subsidiaries, or affiliates. 16 COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION The members of the Compensation Committee during 1994 were: Raymond H. Deck (Chairman), Michel J. Gudefin, Elios Pascual, John W. Popp, and David J. Sherwood. Mr. Dillard resigned from the Board and the Compensation Committee, effective June 16, 1994, and was replaced by Mr. Pascual on that same date. Mr. Pascual subsequently resigned from the Board and the Committee, effective January 1, 1995. No current officer of the Company serves on the Compensation Committee and there are no "interlocks" as defined by the Commission. CERTAIN AGREEMENTS Effective February 27, 1989, SCOR Re entered into a five-year employment agreement with Mr. Karter which provides for a base salary of not less than $240,000. Pursuant to a modification of the agreement in 1991, Mr. Karter agreed to terminate his right to receive annual and long-term bonuses set forth in the agreement in exchange for participation in the SCOR U.S. Annual Incentive Plan and the PIP, plus a payment of $13,332 representing the long-term bonus accrued under the agreement. Under the agreement, SCOR Re is also obligated to provide supplemental retirement benefits to Mr. Karter under a formula that, among other factors, gives Mr. Karter pension credit for five years of service with his prior employer. The agreement is terminable upon death, or by SCOR Re upon disability (exceeding six months), or with or without "Cause" (as defined in the agreement) at any time. In the case of termination by SCOR Re without Cause or if SCOR Re elects not to renew or further renew the agreement, Mr. Karter is entitled to a severance payment equal to (i) his full salary through the date of termination, plus (ii) any annual or long-term bonus payable if not yet paid, plus (iii) an amount equal to the salary payable for the remaining balance of the employment period or, if greater, an amount equal to twice the then annual salary. If payments under the agreement would constitute "excess parachute payments" under the Code, such payments shall be reduced if and to the extent that such a reduction would yield a greater payment to Mr. Karter after payment of all taxes than if such reduction were not made. SCOR Re would also be obligated to provide supplemental pension benefits based on a maximum of ten years' service credit. The agreement is automatically renewable for successive periods of one year, unless Mr. Karter or SCOR Re gives six months' advance notice of intention not to renew. Effective November 13, 1989, SCOR U.S. entered into a three-year employment agreement with Mr. Andrews, which provides for a base salary of at least $200,000, and participation in SCOR U.S.'s bonus and benefit plans. Under the agreement, SCOR U.S. is also obligated to provide supplemental retirement benefits to Mr. Andrews under a formula that, among other factors, gives Mr. Andrews pension credit for an additional five years of service with the Company. The agreement is terminable upon death, or by SCOR U.S. upon disability (exceeding six months), or with or without "Good Cause" (as defined in the Agreement) at any time. In the case of termination by SCOR U.S. without Good Cause, Mr. Andrews is entitled to a severance payment of his monthly salary immediately prior to such termination for the shorter of one year or the balance of the term of the agreement and continued participation in SCOR U.S.'s death and medical insurance plans for such period. The agreement is automatically renewable for successive periods of one year, unless Mr. Andrews or SCOR U.S. gives six months' advance notice of intention not to renew. Effective November 1, 1993, SCOR U.S. entered into a Special Severance and Pension Benefits agreement with Mr. Jeffrey D. Cropsey, Senior Vice President and Chief Financial Officer. Under the 17 agreement, if Mr. Cropsey's employment with SCOR U.S. is terminated for any reason other than death, disability (exceeding six months) or "Good Cause" (as defined in the agreement) prior to November 1, 1996, Mr. Cropsey is entitled to a severance payment of his monthly salary immediately prior to such termination for a period of one year or less depending upon the date of such termination. Under the agreement, SCOR U.S. is also obligated to provide supplemental retirement benefits to Mr. Cropsey under a formula that, among other factors, gives Mr. Cropsey pension credit for five years of service with his former employer. Effective July 25, 1994, SCOR U.S. entered into a two year employment agreement with John Dunn, Jr., which provides for a base salary of at least $215,000 and participation in SCOR U.S.'s bonus and benefit plans. Under the agreement, SCOR U.S. is also obliged to provide supplemental retirement benefits to Mr. Dunn under a formula that, among other factors, gives Mr. Dunn pension credit for an additional five years of service with the company. The agreement is terminable upon death, or by SCOR U.S. upon disability (exceeding six months), or with "Good Cause" (as defined in the Agreement) at any time. In the case of termination by SCOR U.S. without Good Cause, Mr. Dunn is entitled to a severance payment equal to his monthly salary immediately prior to such termination for the longer of one year or the balance of the term of the agreement and continued participation in SCOR U.S.'s death and medical insurance plans for such period. The agreement is automatically renewable for successive periods of one year each, unless Mr. Dunn or SCOR U.S. gives at least three months' advance notice of intention not to renew. PENSION PLANS The following table shows the estimated pension benefits payable to a covered participant at normal retirement age under the Company's Pension Plan, as well as its Supplemental Retirement Plan that provides benefits that would otherwise be denied participants by reason of certain Code limitations on qualified plan benefits, based on remuneration that is covered under the plans and years of service with the Company and its subsidiaries: PENSION PLAN TABLE
GROSS ANNUAL BENEFITS AVERAGE PENSIONABLE COMPENSATION --------------------------------- FOR 5 HIGHEST PAID CONSECUTIVE 15 OR MORE YEARS IN LAST 10 YEARS OF SERVICE 5 YEARS 10 YEARS YEARS - ------------------------------------------------------------- ------- -------- ---------- $ 50,000........................................... $ 7,667 $ 15,333 $ 23,000 75,000............................................. 11,500 23,000 34,000 100,000............................................ 15,333 30,667 46,000 125,000............................................ 19,167 38,333 57,500 150,000............................................ 23,000 46,000 69,000 200,000............................................ 30,667 61,333 92,000 250,000............................................ 38,333 76,667 115,000 300,000............................................ 46,000 92,000 138,000 350,000............................................ 53,667 107,333 161,000 400,000............................................ 61,333 122,667 184,000 450,000............................................ 69,000 138,000 207,000 500,000............................................ 76,667 153,333 230,000
A participant's remuneration covered by the Pension Plan is his or her average base salary (as reported in the Summary Compensation Table) for the five highest paid consecutive calendar plan years 18 during the last ten years of the participant's career. Covered Compensation for Named Officers as of the end of the last calendar year is: Mr. Karter: $376,641; Mr. Andrews: $304,913; Mr. Cropsey: $231,544; Mr. Brooks: $251,300 and Mr. Asch: $223,162. Estimated credited years of service for purposes of the Pension Plan and Supplemental Retirement Plan for each of the named executives is as follows: Mr. Karter: 5; Mr. Andrews: 5; Mr. Cropsey: 1; Mr. Brooks: 18; and Mr. Asch: 10. Benefits shown are computed as a straight single life annuity beginning at age 65. CERTAIN TRANSACTIONS AND RELATIONSHIPS WITH DIRECTORS AND EXECUTIVE OFFICERS On November 2, 1994, SCOR S.A., the majority stockholder of the Company, acquired directly from certain of its Named Executive Officers, 82,000 Shares at the then prevailing market price of $11.125 per Share, specifically: 44,000 Shares from John T. Andrews, Jr., Senior Vice President, General Counsel and Secretary; 9,071 Shares from Nolan E. Asch, Senior Vice President and Chief Actuary; 3,929 Shares from R. Daniel Brooks, Senior Vice President; and 25,000 Shares from Jerome Karter, President and CEO. Each of these senior officers had, at the request of the Company, voluntarily agreed not to sell any Shares held by them in connection with the privately placed offering of convertible subordinated debentures of SCOR U.S. in 1993, and were prevented from selling during certain other periods thereafter in accordance with Company policy. The proceeds from these sales to SCOR S.A. were applied exclusively to reduce indebtedness of the sellers to SCOR U.S. described below. In addition, on November 2, 1994, under the SIP, SCOR U.S. granted to each of such officers options to purchase a corresponding number of Shares at an exercise price of $11.125 per Share, which was equal to the per share market price on that date. Mr. Karter, President and Chief Executive Officer, is indebted to SCOR U.S. in respect of a promissory note executed in connection with his purchase of a new residence. The largest aggregate amount of indebtedness outstanding on the note at any time during 1994 was $100,000. Partial payment has been made and $64,125 is the amount outstanding as of April 18, 1995. The note is due in 1996. He was also indebted to SCOR U.S. in respect of a promissory note executed in connection with the exercise of stock options. The largest amount of indebtedness outstanding on the note at any time during 1994 was $242,250, which amount has been paid in full as of December 31, 1994. Mr. Karter is also indebted to SCOR U.S. in respect of a promissory note executed in connection with certain personal financial requirements. The largest amount of outstanding indebtedness on this note at any time during 1994 was $126,465, which is also the amount outstanding as of April 18, 1995. The note is due in 1996. No interest is charged by the Company on any of the above loans. Mr. Andrews, Senior Vice President, General Counsel and Corporate Secretary, was indebted to SCOR U.S. in respect of two promissory notes executed during 1993 in connection with the exercise of stock options. The largest amount of outstanding indebtedness on the notes at any time during 1994 was $523,000, which amount has been paid in full as of December 31, 1994. Mr. Andrews is also indebted to SCOR U.S. in respect of a promissory note executed in connection with certain personal financial requirements. The largest amount outstanding on these notes at any time during 1994 was $80,000, which is also the amount outstanding as of April 18, 1995. The note is due in 1996. Mr. Andrews is also indebted to SCOR U.S. in respect of a promissory note in the principal amount of $33,800, executed in connection with certain personal financial requirements. The largest amount outstanding on this note at any time during 1994 was $33,800, which is also the amount outstanding as of April 18, 1995. The note is due in 1996. No interest is charged by the Company on any of the above loans. 19 Mr. Asch, Senior Vice President and Actuary, was indebted to SCOR U.S. in respect of various promissory notes executed in connection with the exercise of stock options. The largest aggregate amount outstanding on the notes at any time during 1994 was $108,909, which amount was paid in full as of December 31, 1994. In connection with the relocation to the United States of Sylvain Boueil, a Senior Vice President of the Company until September 30, 1994, the Company serves as guarantor on a primary residence mortgage loan, payable on demand, from Banque Francaise du Commerce Exterieur to Mr. Boueil in the principal amount of $765,000. Also in connection with the purchase of this residence, Mr. Boueil was indebted to SCOR U.S. during 1994 in respect of a demand promissory note in favor of SCOR U.S. The largest amount of indebtedness outstanding on the note at any time during 1994 was $102,408. The amount outstanding as of April 18, 1995 was $103,496. The note bears interest at 5.12%. In connection with the relocation to the United States of Dominique Lavallee, a Senior Vice President of the Company, SCOR Services, Inc., a wholly-owned subsidiary of the Company, is guarantor of a 30-year term home mortgage loan from The Bank of New York to Mr. Lavallee in the principal amount of $224,000. Also in connection with the purchase of this residence, Mr. Lavallee is indebted to SCOR U.S. in respect of a demand promissory note in favor of SCOR U.S. The largest amount of indebtedness outstanding on the note at any time during 1994 was $24,000. The amount outstanding as of April 18, 1995 was $12,469.20. The note bears interest at 7.82%. Mr. Michael Walsh, Senior Vice President and Treasurer until his resignation on November 18, 1994, was indebted to SCOR U.S. in respect of various promissory notes executed in connection with the exercise of stock options. The largest aggregate amount outstanding on the notes at any time during 1994 was $171,289. The amount of the indebtedness was paid in full as of December 31, 1994. Pursuant to a service agreement, SCOR U.S. and SCOR S.A. have agreed to reimburse the other for services provided by various personnel. The amount of the reimbursement for the services provided is determined by allocation of the actual costs, including salary and related expenses. Such payments were immaterial during 1994. SCOR U.S.'s operating subsidiaries assume reinsurance from SCOR S.A. and other affiliated companies primarily on a quota share or surplus share basis. Written premiums assumed from these companies (and the percentage of gross written premiums) were approximately $7,845,000 (2.6%), for the year ended December 31, 1994. Of this amount, approximately $6,959,000 was assumed from SCOR S.A. SCOR U.S.'s operating subsidiaries also retrocede reinsurance to SCOR S.A. and other affiliated companies, primarily on a quota share or surplus share basis. The total written premiums written ceded by SCOR U.S.'s subsidiaries under retrocession agreements to affiliated companies in 1994 were $35,644,000. Pursuant to a Net Aggregate Excess of Loss Retrocessional Agreement dated as of July 1, 1986 ("the 1986 Retrocessional Agreement"), SCOR S.A. reinsured SCOR Re for adverse loss development from pre-1986 business that exceeded the total of loss reserves established as of June 30, 1986, and premiums earned after June 30, 1986, from such pre-1986 business. The 1986 Retrocessional Agreement provided protection to the Company for business underwritten by SCOR Re only and did not provide coverage for pre-1986 business underwritten by General Security Assurance Corporation of 20 New York ("General Security"). However, business underwritten by General Security and The Unity Fire and General Insurance Company ("Unity Fire") is protected against adverse development by a separate net aggregate excess of loss retrocessional agreement, as described below. The 1986 Retrocessional Agreement terminated on December 31, 1993, at which time SCOR S.A.'s liability to SCOR Re was $16,224,000. This amount is the actuarially determined expected ultimate loss from the pre-1986 business in excess of the "aggregate deductible" (which is defined as the total of net outstanding loss and loss expense reserves, net incurred but not reported loss reserves and net unearned premium reserves established as of June 30, 1986 for the pre-1986 business, plus all net premiums and future net premium adjustments earned after June 30, 1986 under retrospectively rated treaties for such business). During the first quarter of 1994, SCOR Re received $16.2 million from SCOR S.A. in settlement of its liability under this agreement. SCOR Re and SCOR S.A. entered into a new Net Aggregate Excess of Loss Agreement (the "1994 Retrocessional Agreement") effective January 1, 1994, which protects the same business covered under the 1986 Retrocessional Agreement. Under this Agreement, SCOR Re is responsible for any further adverse development up to $8,800,000, at which point the 1994 Retrocessional Agreement attaches and provides coverage for up to $10,000,000 of any additional adverse development. SCOR Re paid a premium of $2,000,000 for this coverage, which expires on December 31, 2004. At December 31, 1994, no recovery was recognized under this Agreement. In addition, based on the experience under the 1994 Retrocessional Agreement, SCOR Re is eligible to receive a contingent commission of up to 27.75% of the premium. SCOR S.A. entered into a Net Aggregate Excess of Loss Retrocessional Agreement (the "1990 Retrocessional Agreement") with each of Unity Fire and General Security, pursuant to which SCOR S.A. agreed to reinsure those companies to the extent that their net ultimate incurred losses (as defined in the agreements) arising in 1989 and prior accident years exceed an aggregate deductible. As a result of the January 1, 1991 assumption by General Security of the rights, liabilities and obligations of Unity Fire, the Net Aggregate Excess of Loss Retrocessional Agreement with Unity Fire was terminated and the Net Aggregate Excess of Loss Retrocessional Agreement with General Security was amended (as so amended, the "Agreement") to include the protection formerly provided to Unity Fire by its retrocessional agreement with SCOR S.A. As a result of the merger of General Security into SCOR Re, the protection under the Agreement is now for the benefit of SCOR Re. The aggregate deductible is defined as the sum of net outstanding loss and loss expense reserves and net incurred but not reported loss reserves as of December 31, 1989, for 1989 and prior accident years, as documented in the 1989 statutory financial statements of Unity Fire and General Security. This amount has been established at a combined aggregate of $93,830,000. The annual premium for this protection is $210,000 through 2004. The Agreement continues in force until all covered losses are settled. At December 31, 1994, SCOR S.A.'s estimated liability under the Agreement was approximately $11.7 million. SCOR S.A. provides letters of credit in favor of SCOR U.S.'s operating subsidiary in amounts equal to its estimated liability under its reinsurance agreements with such companies (as re-estimated on a quarterly basis). The amount of letters of credit provided by SCOR S.A. at December 31, 1994 was approximately $134,500,000. 21 COMPENSATION POLICIES AND PERFORMANCE GRAPH The disclosure contained in this section of the Proxy Statement shall not be deemed incorporated by reference into any prior filing by the Company pursuant to the Securities Act of 1933 or the Securities Exchange Act of 1934 that incorporates future filings or portions thereof (including this Proxy Statement or any part thereof). REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION During 1994, the Compensation Committee (the "Committee") of the Board of Directors of SCOR U.S. was composed of five non-employee directors who have never served as officers of or been employed by the Company. The Committee met eight times during 1994. Mr. Karter, the Chief Executive Officer, and certain other executive officers of the Company may attend meetings of the Committee, but are not present during discussions or deliberations regarding their own compensation. The Compensation Committee reviews compensation policies and practices and prior to June 16, 1994 was specifically responsible for (a) reviewing and approving the compensation of all senior executive officers who do not serve on the Board; (b) reviewing and recommending to the Board the compensation of senior executives who also serve on the Board; (c) reviewing new executive compensation programs or modifications to existing programs; and (d) administering the annual incentive, long-term performance incentive and stock option plans of the Company. On June 16, 1994, the powers of the Committee were amended to modify items (a) and (b) above to provide that it is responsible for reviewing and approving the compensation of all individuals at or to be elected to the rank of Vice President or above and/or who have current or proposed salaries of $100,000 or above. The Committee approved base salary levels, annual incentive awards and stock option grants for all executive officers, except the CEO, prior to June 16, 1994. Subsequent to that date, the Committee assumed the responsibility of approving all actions relating to the compensation of all executives officers, including the CEO. Prior to the amendment of the Committee's powers on June 16, 1994, the Board approved without modification all compensation recommendations of the Committee in 1994 relating to the CEO. COMPENSATION PHILOSOPHY. The overall compensation program is designed to motivate executives to achieve short and long-term business objectives, reward executives for their achievements and align the interests of executives and shareholders. As such, the total compensation package emphasizes variable incentive pay contingent on Company and individual performance. As the executive's responsibility level within the Company increases, the portion of the total compensation package based on Company performance and long-term equity based awards increases. Compensation opportunities provided to executive officers are competitive with similar positions in the industry in order to attract and retain executives of superior talent who are critical to the Company's success. The Committee reviews the results of an annual comparison of company performance and executive compensation levels of a group of domestic publicly-held professional reinsurance companies (the "Peer Group") and other companies in the property/casualty industry. The Peer Group of ten reinsurance companies used in 1994 for compensation comparisons is identical to the group of companies included in the peer index of the shareholder return performance 22 graph included in this proxy statement. This Peer Group may change as the Company or its competitors change their focus, merge or are acquired, or as new competitors emerge. The Peer Group used in 1994 is identical to the Peer Group used in the 1993 review. As a matter of Company policy, Jacques P. Blondeau, Chairman, and Serge Osouf, Vice Chairman, do not participate in the Company's Annual Incentive, Pension, Savings and Supplemental Retirement Plans due to their participation in similar plans at SCOR S.A., the principal shareholder of the Company. For other officers of the Company, the executive compensation program at present comprises base salary, annual incentive awards and stock options. In addition, certain senior executives receive long-term performance unit incentives. BASE SALARY. To attract and retain superior talent, salaries are managed at a percentile level above the median of the Peer Group and broader industry market data. The Committee reviews and approves (or recommends to the Board as noted above) base salaries annually and considers competitive salary levels, individual contributions and individual responsibility levels. The total compensation program is designed to limit fixed base salary increases and place greater emphasis on performance-based incentives. The Committee approved or recommended a base salary level to be effective April 1, 1994 for each executive officer. ANNUAL INCENTIVES. The 1994 Annual Incentive Plan (the "Plan") was designed to reward participating executives for annual company performance and individual contribution towards the Company's success. Company performance factors upon which the Plan is based include return on equity, combined ratio and expense control. These factors are weighted 45%, 45% and 10%, respectively, in determining an overall company performance award factor. Specific threshold, target and superior performance levels are defined for each of these three measures at the beginning of each annual performance period. Individual performance is based on predetermined criteria relative to business/functional goals and individual position responsibilities. Company and individual performance components of the annual incentive award are weighted according to the participant's level and function. The more senior executive levels are rewarded relatively more on the basis of Company performance. The corresponding Company and individual performance weightings for the Named Officers annual incentive awards were 80% and 20%, respectively. Target awards, representing the pre-established guideline amount to be paid each year if annual goals are achieved, are set to reflect competitive peer group and industry practices. The target award for the Named Officers is 35% of base salary. Actual annual incentive payments may range from 0% to 150% of target awards to the extent that Company and individual performance meet the identified goals. Awards under the annual incentive plan are made in March of each year for performance in the prior year. The 1994 Annual Incentive Plan provides that if the Company has no net income for the year under generally accepted accounting principles ("GAAP") no payments will be made under the Plan design. Since the Company had a net loss for 1994, no payments were made under the Plan to any participant, including the Named Officers. LONG-TERM INCENTIVE PROGRAM. SCOR's Long-Term Incentive Program consists of stock options and a long-term performance incentive plan. Stock option awards constitute 100% of the long-term incentive compensation for all participants, except certain senior executives. Such senior executives, 23 including the Named Officers, receive 50% of long-term incentive compensation opportunity in stock options and 50% in performance incentive units. Target award guidelines for all long-term plans have been established so that the total long-term incentive award opportunities for senior executives are competitive with peer group levels, with actual award values varying with Company performance. STOCK OPTION PLANS. Stock option awards are intended to reinforce the importance of shareholder value creation and allow key employees to accumulate equity ownership in the Company. Target option award guidelines reflect competitive peer group practices and have been established as a percentage of base salary representing a targeted gain from options. The targeted gain amount is divided by the projected gain in value per option (based on an assumed stock price growth rate) to determine the target number of options to award the executive. The Committee may also consider Company and individual performance assessments when determining the actual number of shares granted and increase or decrease individual awards accordingly. The number of options previously awarded to and currently held by executive officers is reviewed but is not an important factor in determining the size of current grants. Stock option grants were made in 1994 to select senior executives, including the Named Officers, under the SIP, adopted in 1986. The term of each option is ten years and one month. Options from the 1994 grant vest is six months from the date of grant. The exercise price of each option is equal to 100% of the fair market value of a share of the Company's common stock on the business day immediately prior to the date of the option grant. Stock option grants under the SOP, adopted in 1991, were also made in 1994 to all employees of SCOR U.S., including the Named Officers. The term of each option is ten years and options from the 1994 grant vest over a four year period. The exercise price of each option is equal to 100% of the fair market value of a share of the Company's common stock on the date of the option grant. These option grants were awarded to promote a stronger relationship between key employees and the Company's strategic business goals, as well as shareholder value creation. PERFORMANCE INCENTIVE PLAN. The performance incentive plan is limited in participation to select senior executives, including the Named Officers, whose decisions have the greatest potential to impact long-term Company performance. Performance units are designed to link a portion of executive compensation to the Company's growth in book value over a five year period. The target award guidelines for this group of executives reflect competitive compensation practices and represent a targeted gain from the performance units of 42.5% of base salary. This percentage amount of salary is divided by a targeted 5 year growth in book value per share and accrued dividends to determine the target number of units to be awarded to the executive. The Committee may also consider Company and individual performance assessments when determining the actual number of units granted and increase or decrease individual awards accordingly. The number of performance units previously awarded to and currently held by executive officers is reviewed but is not an important factor in determining the size of current awards. Grants are made every other year with a unit base value equal to the book value per share of Company common stock on December 31 of the preceding year. Depending on actual growth in book value at the end of the five year performance period, targeted gains may or may not be realized. A 24 minimum threshold growth in book value that is established by the Committee at the beginning of the performance period must be reached in each performance period before any cash awards are made, and executives must remain with the Company until the end of the five year period (excluding death, disability or normal retirement). Since the inception of the plan in 1991, grants have been made to executives, including the Named Officers, in 1991 and 1993, and the first plan payout, if any, would be for the performance period ending December 31, 1995. Total executive compensation is highly dependent upon achievement of performance goals and actual Company performance and, thus, may fall above or below the targeted levels. CEO COMPENSATION. On September 30, 1994, Mr. Jerome Karter became Chief Executive Officer and President of SCOR U.S. Prior to that appointment, Mr. Karter was Executive Vice President of SCOR U.S. Prior to Mr. Karter being named CEO, Mr. Patrick Peugeot and Mr. Jacques Blondeau, currently Chairman of the Board of SCOR S.A., each held the position. Mr. Peugeot served as CEO of the Company until his resignation therefrom on June 16, 1994. Mr. Blondeau then served as CEO from June 16, 1994 to September 30, 1994. Mr. Peugeot remained as Chairman of the Board until September 30, 1994 when he resigned from that position. Mr. Blondeau was elected Chairman of the Board on September 30, 1994. During the time in 1994 when Mr. Peugeot and Mr. Blondeau served as CEO, no compensation actions were taken with respect to Mr. Peugeot. Mr. Blondeau's base salary was increased to $205,000 in September, 1994, representing a 17% increase from 1992. This increase was made in consideration of his responsibilities with the Company, as well as the fact that his base salary had not been increased since April, 1992. The compensation of the Company's current Chief Executive Officer, Mr. Karter, consists of base salary, annual incentive, stock options and performance incentive units, and is based on the policies and programs as described above. In 1994, Mr. Karter's annual base salary was $304,623, representing a 4.4% increase from 1993 that reflected his responsibilities as Executive Vice President, prior to being named CEO. No action was taken with respect to Mr. Karter's base salary at the time of his appointment as CEO. As previously described, Mr. Karter did not receive an annual incentive award for 1994 performance. Under the SIP, Mr. Karter was awarded a stock option grant on November 2, 1994 of 25,000 shares of Common Stock with an exercise price of $11.125 . Mr. Karter also received a stock option grant on November 30, 1994 under the SOP of 13,000 shares of Common Stock with an exercise price of $9.00. This award was a part of the option grants made by the Company to all employees. Both stock option grants were awarded to align the CEO's interests with the shareholders of the Company and increase the CEO's stake in long term company success. The Compensation Committee believes that compensation decisions made with respect to the current CEO, Mr. Karter, and the other executive officers, including the Named Officers, are consistent with the Company's compensation philosophy and appropriately tie 1994 compensation to Company business objectives, absolute and relative Company performance and competitive market practices, as defined by the Peer Group and broader property/casualty insurance industry data. 25 Section 162(m) of the Code, enacted in 1993, generally disallows a tax deduction to public companies for compensation over $1 million paid to the Company's Chief Executive Officer and four other most highly compensated executive officers. Qualifying performance based compensation will not be subject to the deduction limit if certain requirements are met. It is the intent of the Committee to have the Company provide compensation, to the extent possible, that is tax deductible in compliance with the new section 162(m) of the Internal Revenue Code. At this time the Committee is not amending any compensation plans to maintain deductibility under the definition of "performance based compensation" as none of the SCOR U.S. executives, including the CEO, are expected to receive non-qualifying performance based compensation above the $1 million cap. COMPENSATION COMMITTEE Raymond H. Deck, Chairman (1) Michel J. Gudefin John W. Popp David J. Sherwood - ------------ (1) Appointed Committee Chairman on September 30, 1993. 26 CORPORATE PERFORMANCE GRAPH The following graph compares the Company's Common Stock performance with the performance of the Standard & Poor's 500 Stock Index ("S&P 500"), and the current Peer Group Index (" Peer Group"), by measuring the changes in common stock prices from December 31, 1989 plus reinvested dividends. The Current Peer Index includes the following publicly traded reinsurance companies: American Re Corporation, General Re Corporation, NAC Re Corporation, National Re Corporation, PXRE Corporation (name changed from Phoenix Re Corporation in 1994), Piedmont Management Company, Inc., Re Capital Corporation, Transatlantic Holdings Inc., Trenwick Group Inc. and Zurich Reinsurance Centre Holdings, Inc. Total return indices reflect reinvested dividends and are weighted on a market capitalization basis at the beginning of each relevant time period. COMPARISON OF FIVE YEAR CUMULATIVE TOTAL SHAREHOLDER RETURN AMONG SCOR U.S., S&P 500 AND PEER GROUP 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 SCOR U.S. $100 $89 $113 $130 $99 $66 S&P 500 $100 $97 $126 $135 $149 $150 Peer Group* $100 $107 $123 $148 $135 $153 * Market capitalization weightings for peer group companies were made as of the beginning of each year, per SEC regulations. The graph assumes $100 invested on 12/31/89 in the Company's Common Stock, S&P 500 Index, and the Peer Group Index. Values are as of December 31 of specified year assuming that dividends are reinvested. PROPOSAL TWO RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS While stockholder approval is not required, the Board has determined to submit to stockholders for their ratification the appointment of KPMG Peat Marwick as independent auditors of SCOR U.S. for the year 1995. In the event of a negative vote on this proposal, the Board may nevertheless appoint 27 KPMG Peat Marwick as independent auditors of SCOR U.S. for the year 1995 unless the Board finds other compelling reasons for making a change. Disapproval of this resolution will be considered as advice to the Board to select other independent auditors for the year 1996. Representatives of KPMG Peat Marwick will be present at the Annual Meeting and will be given an opportunity to make a statement and answer any questions at such time. THE BOARD RECOMMENDS A VOTE FOR RATIFICATION. COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT Section 16(a) of the Securities Exchange Act of 1934 requires the Company's officers and directors, and persons who own more than 10% of a registered class of the Company's common stock, to file reports of ownership and changes in ownership with the Securities and Exchange Commission and the New York Stock Exchange. Based on the Company's review of all insider's filings and written representations from reporting persons, the Company believes there were no Section 16(a) violations for 1994, except for Mr. R. Daniel Brooks, who at the time of the filing was a Section 16(a) officer and on whose behalf one report on Form 4, reporting one transaction, was inadvertently not timely filed by the Company. STOCKHOLDERS PROPOSALS Any holder of Shares desiring to make a proposal for inclusion in proxy material for the Annual Meeting of SCOR U.S. stockholders to be held in June 1996 must ensure that such proposal is received by the Secretary of SCOR U.S. at the address set forth above no later than December 29, 1995. OTHER BUSINESS The Board does not intend to bring any other business before the Annual Meeting and does not know of any matters to be brought before the Annual Meeting by others. If any other matter should come before the Annual Meeting, it is the intention of the persons named in the accompanying proxy to vote the proxy on behalf of the stockholders they represent in accordance with their judgment. By Order of the Board of Directors /s/ JOHN T. ANDREWS, JR. JOHN T. ANDREWS, JR. Corporate Secretary April 28, 1995 PLEASE MARK, SIGN AND DATE THE ENCLOSED PROXY AND MAIL IT PROMPTLY. NO POSTAGE STAMP IS NECESSARY IF MAILED IN THE UNITED STATES. 28 PROXY 1995 ANNUAL MEETING OF STOCKHOLDERS THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS The undersigned hereby authorizes John T. Andrews, Jr., Jeffrey D. Cropsey and Maxine H. Verne, or any one of them, with full power of substitution, to represent the undersigned and to vote all Common Stock of SCOR U.S. Corporation, a Delaware corporation ("SCOR U.S."), owned by the undersigned at the Annual Meeting of Stockholders of SCOR U.S. to be held at 10:30 a.m., New York time, on June 16, 1995, at Morgan Guaranty Trust Company of New York, 60 Wall Street, 47th floor, New York, New York, and any adjournment thereof, as provided on the reverse side hereof. The Board of Directors favors the appointment of proxies with authority to vote FOR the election as directors of all nominees named in the proxy statement and FOR proposal (2). This proxy will be voted in accordance with any specification made on the reverse side hereof. Where no contrary specification is made hereon, this proxy will be voted FOR the election as directors of all nominees named on the reverse side hereof, FOR approval of proposal (2), and in accordance with the discretion of the proxy holders on any other matters or proposals (not known at the time of solicitation) which may properly come before the meeting or any adjournment thereof. The undersigned hereby revokes any proxies heretofore given by the undersigned. (Continued and to be dated and signed on the reverse side.) SCOR U.S. CORPORATION P.O. BOX 11286 NEW YORK N.Y. 10203-0286 (1) Election of Directors FOR all nominees WITHHOLD AUTHORITY to vote *EXCEPTIONS listed below listed below for all nominees listed below Jacques P. Blondeau, John R. Cox, Jerome Karter, Patrick Peugeot (INSTRUCTION: To withhold authority to vote for any individual nominee mark the "EXCEPTION" box and write that nominee's name on the line provided below.) EXCEPTIONS ------------------------------------------------------------------------------------------- (2) Proposal to ratify the appointment of KPMG Peat FOR AGAINST ABSTAIN Marwick as independent Auditors of the Corporation for the fiscal year ending December 31, 1995 Address Change and/or Comments Signature should conform exactly to the name shown on this proxy. Executors, administrators, guardians, trustees, attorneys, officers signing for corporations should give full titles. ---------------------------------------- Dated , 1995 ---------------------------------------- (Signature of Shareholder) ---------------------------------------- (Signature of Shareholder) Votes must be indicated X (x) in Black or Blue ink. Sign, Date and Return the Proxy Card Promptly Using the Enclosed Envelope.
EX-5 4 Exhibit 5 SCOR U.S. -------------------- SCOR November 9, 1995 Dear Stockholders: I am pleased to inform you that on November 2, 1995, SCOR U.S. Corporation (the "Company") entered into an Agreement and Plan of Merger (the "Merger Agreement") providing for the acquisition of all publicly held shares of common stock of the Company by SCOR S.A. SCOR S.A. currently beneficially owns approximately 80% of the outstanding shares of the Company. Pursuant to the Merger Agreement, SCOR Merger Sub Corporation, a wholly owned subsidiary of SCOR S.A., commenced today a tender offer to purchase any and all outstanding shares of the Company's common stock at a price of $15.25 per share in cash. Following completion of the tender offer and satisfaction of certain other conditions, SCOR Merger Sub Corporation will be merged with and into the Company and each share of the Company's common stock then outstanding (other than shares of stockholders properly exercising appraisal rights under Delaware law and shares owned by SCOR S.A., SCOR Merger Sub Corporation or any other direct or indirect subsidiary of SCOR S.A.) will be converted into the right to receive $15.25 per share in cash. Following consummation of the merger, the Company will no longer be publicly owned, but will be wholly owned by SCOR S.A. A Special Committee of the Company's Board of Directors consisting of seven directors unaffiliated with SCOR S.A. carefully considered SCOR S.A.'s proposal and determined that the SCOR S.A. offer and the merger are fair to and in the best interests of the Company's public stockholders. The Company's Board of Directors, based upon the recommendation of the Special Committee, unanimously approved and adopted the Merger Agreement and the transactions contemplated thereby, and recommends that stockholders accept the offer and tender their shares. In arriving at its determinations, the Special Committee and the Company's Board gave careful consideration to a number of factors, including the opinion of the Special Committee's financial advisor that the consideration to be received by the Company's public stockholders in the offer and merger is fair to such stockholders from a financial point of view as of the date thereof. Detailed information about the deliberations of the Special Committee and the Board of Directors and their determinations and recommendations are contained in the enclosed offering materials. Accompanying this letter is SCOR Merger Sub Corporation's Offer to Purchase, dated November 9, 1995, together with related materials, including a Letter of Transmittal to be used for tendering your shares. These documents set forth the terms and conditions of the offer and provide instructions as to how to tender your shares. I urge you to read the enclosed material carefully before making your decision with respect to tendering your shares in the offer. Sincerely, /s/ JEROME KARTER -------------------------------------- JEROME KARTER President and Chief Executive Officer SCOR U.S. CORPORATION TWO WORLD TRADE CENTER NEW YORK, NEW YORK 10048-D178 TELEPHONE (212) 390-5200 FAX (212) 390-5415 EX-6 5 Exhibit 6 LOGO NEWS RELEASE FOR IMMEDIATE RELEASE Contact: John T. Andrews, Jr. Jean Alisse General Counsel General Counsel SCOR U.S. Corporation SCOR S.A. (212) 390-5224 (33-1) 46-98-73-63 SCOR U.S. BOARD AGREES TO SCOR S.A. $15.25 PER SHARE OFFER New York, N.Y./Paris, France, November 3, 1995--SCOR U.S. Corporation (NYSE:SUR) ("SCOR U.S.") and SCOR S.A. announced today that they have entered into a definitive agreement (the "Merger Agreement") providing for the merger (the "Merger") of SCOR Merger Sub Corporation ("Merger Sub"), a newly organized Delaware corporation and a wholly owned subsidiary of SCOR S.A., into SCOR U.S. upon the terms and subject to the conditions contained in the Merger Agreement. Pursuant to the Merger Agreement, Merger Sub has agreed to commence a tender offer (the "Offer") for all of the outstanding shares of common stock, par value $0.30 per share, of SCOR U.S. at a price of $15.25 per share, net to the seller in cash, without interest thereon, subject to terms and conditions set forth in the Merger Agreement and to be set forth in the tender offer documents. If the Offer is successfully completed, holders of the 5-1/4% Convertible Subordinated Debentures due April 1, 2000 of SCOR U.S. would have the right to require SCOR U.S. to repurchase such Convertible Debentures at a price equal to 100% of the principal amount thereof, together with accrued and unpaid interest to the repurchase date. The Board of Directors, and Special Committee of the Board of Directors, of SCOR U.S. have unanimously approved the Merger Agreement, the Offer and the Merger - more- and determined that the terms of the Offer and the Merger are fair to, and in the best interest of, the stockholders of SCOR U.S. The Board of Directors has recommended that all stockholders of SCOR U.S. accept the Offer and tender their shares. Dillon, Read & Co. Inc. has acted as financial advisor to the Special Committee of the Board of Directors of SCOR U.S. and has advised the Special Committee that the consideration to be received by the stockholders of SCOR U.S. is fair to the stockholders (other than SCOR S.A.) from a financial point of view as of the date hereof. SCOR S.A. currently owns approximately 80% of the outstanding shares of common stock of SCOR U.S. Approximately 3.6 million shares of SCOR U.S. common stock are owned by the public. SCOR U.S. Corporation, a holding company, provides property and casualty insurance and reinsurance in the treaty and facultative market through its operating subsidiaries. All of SCOR U.S. Corporation's operating insurance and reinsurance subsidiaries are rated "A" (excellent) by A.M. Best Company. SCOR S.A., a French company, operates principally as a reinsurance company. Together with its subsidiaries, it ranks as the largest professional reinsurer in France and among the largest in the world. Goldman, Sachs & Co. are acting as dealer managers for the Offer and Goldman Sachs International has acted as financial advisor to SCOR S.A. EX-7 6 Exhibit 7 [ Dillon, Read & Co. Inc. Letterhead ] November 2, 1995 SCOR U.S. Corporation Two World Trade Center, 23rd Floor New York, New York 10048-0178 Attention: Special Committee of the Board of Directors Gentlemen: You have advised us that SCOR S.A. ("SCOR S.A.") proposes to acquire all of the publicly held outstanding common stock, par value $0.30 per share, (the "Shares") of SCOR U.S. Corporation (the "Company") not currently held by SCOR S.A. from the holders thereof (the "Selling Shareholders") at a purchase price of $15.25 per share (the "Transaction"). You have requested our opinion as to whether the consideration to be paid pursuant to the Transaction is fair to the Selling Shareholders, from a financial point of view, as of the date hereof. In arriving at our opinion, we have, among other things: (i) reviewed certain publicly available business and financial information relating to the Company; (ii) reviewed the reported price and trading activity for the Shares of the Company; (iii) reviewed certain internal financial information and other data provided to us by the Company relating to the business and prospects of the Company, including financial projections prepared by the management of the Company; (iv) conducted discussions with members of the senior management of the Company; (v) reviewed the financial terms, to the extent publicly available, of certain acquisition transactions which we considered relevant; (vi) reviewed publicly available financial and securities market data pertaining to certain publicly-held companies in lines of business generally comparable to those of the Company; and (vii) conducted such other financial studies, analyses and investigations, and considered such other information as we deemed necessary and appropriate. In connection with our review, with your consent, we have not assumed any responsibility for independent verification of any of the foregoing information and have relied upon it being complete and accurate in all material respects. We have not been requested to and have not made an independent evaluation or appraisal of any assets or liabilities (contingent or otherwise) of the Company or any of its subsidiaries, nor have we been furnished with any such evaluation or appraisal. Further, we have assumed, with your consent, that all of the information, including the projections provided to us by the Company's management, was prepared in good faith and was reasonably prepared on a basis reflecting the best currently available estimates and judgments of the Company's management as to the future financial performance of the Company, and was based upon the historical performance and certain estimates and assumptions which were reasonable at the time made. In addition we have not been asked to, and do not express any opinion as to the after-tax consequences of the Transaction to any Selling Shareholder. In addition, our opinion is based on economic, monetary and market conditions existing on the date hereof. In rendering this opinion, we are not rendering any opinion as to the value of the Company or making any recommendation to the Selling Shareholders with respect to the advisability of voting in favor of the Transaction. Dillon, Read & Co. Inc. ("Dillon Read"), as part of its investment banking business, is engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, negotiated underwriting, competitive biddings, secondary distributions of listed and unlisted securities, private placements and valuations of estate, corporate and other purposes. Dillon Read has received a fee for rendering this opinion. This opinion is being rendered solely to the Special Committee of the Board of Directors of the Company for its use in evaluating the Transaction and is not for the benefit of, nor being rendered to, the Selling Shareholders or any other person. Based upon and subject to the foregoing, we are of the opinion that the consideration to be received in the Transaction by the Selling Shareholders is fair to the Selling Shareholders, from a financial point of view, as of the date hereof. Very truly yours, DILLON, READ & CO. INC. /s/William P. Powell By: William P. Powell Managing Director EX-8 7 Exhibit 8 Dillon, Read & Co. Inc. 535 Madison Avenue New York, New York 10022 212-906-7000 October 10, 1995 SCOR U.S. Corporation 110 William Street New York, NY 10038-3995 Attention: Special Committee of the Board of Directors Gentlemen: 1. We understand that the Board of Directors of SCOR U.S. Corporation (the "Company") has received from SCOR S.A. a proposal whereby SCOR S.A. would acquire all of the publicly held outstanding shares of common stock, par value $0.30 per share (the "Common Shares"), of the Company not currently owned by SCOR S.A. at a purchase price of $14.00 in cash per Common Share. As used in this letter, the term "Transaction" refers to any transaction pursuant to which SCOR S.A. or any other affiliated entity acquires the outstanding minority interest in the capital stock or assets of the Company, whether by way of merger, consolidation, reorganization or other business combinations, a tender or exchange offer, a recapitalization or otherwise. 2. This letter confirms the agreement of the Company to engage Dillon, Read & Co. Inc ("Dillon Read") to serve as financial advisor to the Special Committee of the Company's Board of Directors (the "Special Committee") with respect to the proposed Transaction. If requested, Dillon Read shall render a written opinion (the "Opinion") relating to the fairness from a financial point of view of the consideration to be received by the public holders of Common Shares pursuant to the proposed Transaction, which Opinion shall be updated in connection with obtaining approval from shareholders of the Company in connection with the Transaction. 3. For Dillon Read's services hereunder, the Company agrees to pay fees to Dillon Read in cash as follows: (a) $250,000 upon the execution of this Agreement, and Dillon Read & Co. Inc. (b) $250,000 upon the completion or abandonment of this Transaction, which for purposes of this subsection (b) shall be the earliest of (i) the successful completion of the Transaction, (ii) the date the Company or SCOR S.A. abandons or terminates the Transaction, (iii) the date the Special Committee advises Dillon Read that it does not require Dillon Read's Opinion and (iv) October 10, 1996. This additional fee shall be payable whether or not a Transaction is consummated. No additional fee shall be paid in connection with any reconsideration pursuant to Paragraph 7 below. Whether or not (i) a Transaction is consummated or (ii) an Opinion is required, the Company will reimburse Dillon Read, upon its demand from time to time, for the expenses reasonably incurred and adequately documented by it on or after October 10, 1995 in entering into and performing services pursuant to this Agreement (including the fees and disbursements of Dillon Read's counsel). 4. In the ordinary course of its business, Dillon Read may trade the securities of both the Company and the acquiror for its own account and for the accounts of customers, and it may at any time hold a long or short position in such securities. In doing so, Dillon Read is aware of its duties and responsibilities under applicable law. 5. The Company will make available to Dillon Read all information concerning the Company's business, assets, operations or financial condition which Dillon Read reasonably requests in connection with the performance of its services hereunder. The Company will make its management and other personnel and appropriate representatives of its independent public accountants and its advisors available to Dillon Read for discussions and consultations at such times as Dillon Read may reasonably request in connection with the performance of its services hereunder. The Company understands that in rendering services hereunder Dillon Read will be relying, without independent verification, upon the accuracy and completeness of all information that is or will be furnished to Dillon Read by or on behalf of the Company and Dillon Read will not in any respect be responsible for the accuracy or completeness thereof. As a condition to Dillon Read's being furnished such information, Dillon Read agrees to treat such information confidentially and to use such information solely for the purpose of performing its responsibilities hereunder and such information will not be disclosed except to employees who need such information in connection with the Transaction or as required by law. 6. The written Opinion rendered by Dillon Read pursuant to this Agreement may be reproduced in full in any disclosure document relating to the Transaction that is mailed by the Company, SCOR S.A. or its affiliates to its shareholders; provided, however, that all reference to Dillon Read in any such disclosure document and the description or inclusion of its Opinion and advice shall be subject to Dillon Read's prior written consent with respect to form and substance. Except (a) as permitted by the immediately preceding sentence or (b) to the extent legally required (after consultation with Dillon Read and its counsel, none of (a) the name of Dillon Read, (b) any advice Dillon Read & Co. Inc. rendered by Dillon Read to the Company or the Special Committee or (c) any communication from Dillon Read in connection with the services performed by Dillon Read pursuant to this Agreement will be quoted or referred to orally or in writing by the Company or any of its affiliates or any of their agents, without Dillon Read's prior written consent. 7. With respect to any opinion delivered prior to the completion of the Transaction, it is understood that Dillon Read may reconsider its opinion upon review of any disclosure document relating to the Transaction in final form and any report, document, release or communication published or filed by or on behalf of the Company in connection with the Transaction and upon review of such other information as may hereafter be disclosed or otherwise becomes available to Dillon Read. 8. In the event that Dillon Read becomes involved in any action, proceeding, investigation or inquiry in connection with any matter referred to in this Agreement or arising out of the matters contemplated by this Agreement, the Company will reimburse Dillon Read for its legal and other expenses (including the cost of any investigation and preparation) as they are incurred by Dillon Read in connection therewith provided that such legal and other expenses do not arise primarily out of a final judicial determination of gross negligence or bad faith on the part of Dillon Read in performing the services which are the subject of this Agreement. The Company also agrees to indemnify Dillon Read and hold it harmless against any losses, claims, damages or liabilities in connection with any matter referred to in this Agreement or arising out of the matters contemplated by this Agreement, unless it shall be finally judicially determined that such losses, claims, damages or liabilities arise primarily out of the gross negligence or bad faith of Dillon Read in performing the services which are the subject of this Agreement; and if such indemnification were for any reason not to be available, to contribute to the losses, claims, damages and liabilities involved in the proportion that the Company's interest bears to Dillon Read's interest in the matters contemplated by this Agreement. For purposes of this paragraph, the term Dillon Read shall include Dillon Read, its officers, directors, employees, agents and controlling persons. The foregoing agreement shall be in addition to any rights that any indemnified party may have at common law or otherwise. 9. Dillon Read's services hereunder may be terminated by the Special Committee at any time without liability or continuing obligation of the Special Committee except that Dillon Read's fees pursuant to Section 3 hereof shall become immediately payable in full and except for expenses incurred by Dillon Read as a result of services rendered prior to the date of termination and provided that the provisions of Sections 5, 6, 7 and 8 hereof shall remain operative and in full force and effect regardless of any termination. 10. This Agreement shall be governed by and construed in accordance with the laws of the State of New York without regard to principles of conflicts of law. 11. This Agreement shall be binding upon Dillon Read and the Company and the successors and assigns of both and any successor of any substantial portion of the Company's and Dillon Read's respective businesses and/or assets. Dillon Read & Co. Inc. If the foregoing correctly sets forth our understanding, please indicate your acceptance thereof in the space provided below, whereupon this Agreement and your acceptance shall constitute a binding agreement between us. Very truly yours, DILLON, READ & CO INC. By: /s/ David M. Dickson, Jr. ------------------------- David M. Dickson, Jr. Senior Vice President Accepted and agreed to as of the date first above written: SCOR U.S. CORPORATION By: /s/ David J. Sherwood ------------------------ David J. Sherwood On behalf of the Company and the Special Committee of the Board of Directors EX-9 8 CONFIDENTIAL SCOR U.S. Corporation Presentation to the Special Committee of the Board of Directors November 2, 1995 Dillon, Read & Co. Inc. Confidential TABLE OF CONTENTS Tab --- Overview . . . . . . . . . . . . . . . . . . . . . . . . . . A Overview of SCOR U.S. Corporation . . . . . . . . . . . . . . B SCOR U.S. Valuation Indicators . . . . . . . . . . . . . . . C Exhibits -------- Analysis of Comparable Trading Companies . . . . . . . . . . 1 Analysis of Comparable Acquisitions . . . . . . . . . . . . . 2 Premiums Paid in Minority "Close Outs" . . . . . . . . . . . 3 Discounted Cash Flow Analysis . . . . . . . . . . . . . . . . 4 Weighted Average Cost of Capital Analysis . . . . . . . . . . 5 Dillon, Read & Co. Inc. SCOR U.S. Corporation OVERVIEW Confidential SUMMARY OF THE OFFER - Shareholders of SCOR U.S. Corporation ("SCOR") other than SCOR S.A. will receive $15.25 per share in cash - SCOR S.A. currently owns 80% of the outstanding shares of common stock of SCOR - Including the assumption of SCOR debt, the implied valuation of the offer is as follows: (Dollars in Millions) Implied SCOR Cash Offer Valuation --------- ------------ Equity Value $55.4(a) $277.0(a) Convertible Subordinated Debentures 76.0 Notes Payable 25.0 Commercial Paper 20.6 ------------ Total Asset Valuation $398.6 ============ - -------------------- (a) Assumes the acquisition of 20% of SCOR, or 3,632,924 common shares. Excludes 1,576,951 stock options outstanding at option price per share ranges of $8.00 - $17.00. Dillon, Read & Co. Inc. A - 1 SCOR U.S. Corporation
Confidential PROPOSAL MULTIPLES Sensitivity Analysis Offer Offer Price $14.00 $15.00 $15.25 $16.00 ---------- ---------- ---------- ---------- Total Equity Value ($MM) $254.3 $272.5 $277.0 $290.6 P/E: SCOR Statistic - ------------------------------------- ---------------- 1995E E.P.S.(a) $0.92 15.2x 16.3x 16.6x 17.4x 1996E E.P.S.(a) 0.97 14.4 15.5 15.7 16.5 1995E E.P.S.(b) $1.01 13.9x 14.9x 15.1 15.8x 1996E E.P.S.(b) 1.19 11.8 12.6 12.8 13.4 Price as a Multiple of: - ------------------------------------- Book Value (9/30/95) (Primary)(c) $15.27 0.91x 0.98x 1.00x 1.05x (F-D)(c) 15.03 0.93 0.99 1.01 1.06 Surplus (9/30/95) (Primary)(c) 14.13 0.99 1.06 1.08 1.13 (F-D)(c) 13.96 1.00 1.07 1.09 1.14 Premium Over Market: - ------------------------------------- Day before Offer $11.125 25.8% 34.8% 37.1% 43.8% 52-Week High, Pre-Offer 11.625 20.4 29.0 31.2 37.6 52-Week Low, Pre-Offer 7.500 86.7 100.0 103.3 126.7
- -------------------- (a) Source: I/B/E/S. (b) Based on management October projections. (c) Based on primary book value of $277.4MM, surplus of $256.8MM, options of 1,066,789 (under $15.25) and exercise proceeds of $11.849MM. Dillon, Read & Co. Inc. A - 2 SCOR U.S. Corporation OVERVIEW OF SCOR U.S. Confidential REINSURANCE INDUSTRY - Primary insurance companies continue to direct business towards financially secure reinsurers who are perceived to be long-term players. - Increasing consolidation is evident - Ceding companies flight to quality is also evident - Since 1987, increasing global competition, including from Bermuda based reinsurers (established after Hurricane Andrew in 1992) together with increasing retention by primary insurance companies, has resulted in generally soft market conditions across many lines of business. - Supply of reinsurance is directly related to levels of surplus in the industry, which was expanded in the early 1990's as a response to many catastrophes - Cyclicality in the reinsurance industry is now experienced in different lines and regions at different times - The Bermuda companies may become more broad - based competitors for all reinsurers (including casualty) depending on a number of competitive factors. - To the extent the Bermudians become more broad - based, the increased competition could intensify market competition and create pricing pressure Dillon, Read & Co. Inc. B - 1 SCOR U.S. Corporation
Confidential COMPETITIVE POSITION 1994 6/30 Premiums 1995 Combined Ratio -------------- Broker Market Earned Surplus 1994 1995 - ------------------------------------- --------- ---------- -------- -------- Transatlantic Re/Putnam Re $851,183 $668,494 105.7% 103.1% Zurich Reinsurance Centre 221,814 645,621 114.6 108.0 Prudential Reins. 722,454 639,693 118.4 107.2 Kemper Reinsurance 317,399 451,627 108.8 104.5 NAC Reins. 375,870 435,607 105.7 103.9 Underwriters Reins 182,282 409,038 107.0 102.4 TIG Reinsurance 394,458 402,246 104.4 103.3 Skandia Ameriaca Reins. 164,026 347,093 124.6 124.4 Constitution Reins. 466,103 290,413 101.0 104.2 SCOR U.S. 229,904 251,890 118.7 105.7 Trenwick America Reins. 132,683 243,739 103.1 96.9 Signet Star Reins. 182,976 224,221 113.8 103.1 Winterthur Reins. 207,880 222,919 109.1 106.7 Gerling Global 92,772 141,597 112.8 105.4 Folksamerica Group 154,070 117,252 109.2 103.8 Chartwell 101,632 115,101 105.7 104.4 Frankona 111,424 114,481 103.3 104.3 Christiania General 140,592 113,550 111.7 104.8 Generali 110,391 105,375 114.7 107.9 Reinsurance Corp. of N.Y. 129,372 97,379 120.4 109.7 Direct-Writer Market - ------------------------------------ General Re $2,417,071 $4,227,923 101.2% 99.3% Employers Reins. 2,100,119 2,808,540 104.6 102.7 American Re 1,442,571 1,120,108 103.8 99.4 Swiss Re NA 831,014 NA NA Munich Re Group 666,908 783,999 116.7 105.2 National Reins. 333,123 386,374 98.4 98.1
Dillon, Read & Co. Inc. B - 2 SCOR U.S. Corporation
Confidential RELATIONSHIP WITH BROKERS - SCOR's relationship with the intermediaries appears well diversified and balanced 1991 to July 1995 Written Premiums -------------------------------------------------------------- Broker Treaty % of Total Facultative % of Total - ----------------------------- --------- ---------- ----------- ----------- Blanch $154,085 15.9% -- -- John P. Woods 118,480 12.2 -- -- Guy Carpenter 114,996 11.8% $3,352 4.5% Sedgwick Re 83,259 8.6% 11,270 15.1% Bails 73,271 7.5% 58 0.1% Alexander Re 62,159 6.4% 3,584 4.8% Intere 44,523 4.6% 59 0.1% Aon 43,859 4.5% 6,614 8.9% Wilcox 35,977 3.7% 3 0.0% Towers Perrin 31,869 3.3% -- -- Marsh & McLennan -- -- 11,077 14.9% RFC Intermediaries Inc. -- -- 6,581 8.8% Willis Corroon Corporation -- -- 5,132 6.9% Alexander Howden -- -- 3,603 4.8% Willis Faber 18,516 1.9% 3,289 4.4% Alexander & Alexander -- -- 2,703 3.6%
Dillon, Read & Co. Inc. B - 3 SCOR U.S. Corporation
Confidential CEDING COMPANY BUSINESS - SCOR U.S. has a number of large ceding company relationships which account for a relatively large percentage of its business 1992 1993 1994 1995 Through July 1 ------------------------------ -------------------------- --------------------------- --------------------------- N $25,120 19.3% N $27,000 16.5% A $26,896 16.4% A $31,014 25.8% A 15,238 11.7% A 17,285 10.5% K 18,001 11.0% B 15,375 12.8% Q 14,079 10.8% K 17,241 10.5% C 18,000 11.0% C 10,000 8.3% B 9,550 7.3% O 16,425 10.0% B 17,375 10.6% D 8,893 7.4% R 6,191 4.8% M 10,000 6.1% L 10,341 6.3% E 8,145 6.8% O 5,734 4.4% B 8,526 5.2% D 9,329 5.7% F 5,308 4.4% F 5,703 4.4% D 8,078 4.9% E 8,495 5.2% G 4,669 3.9% G 5,391 4.1% E 7,641 4.7% M 5,327 3.3% H 4,275 3.6% K 5,098 3.9% P 5,390 3.3% F 5,209 3.2% I 3,900 3.3% S 5,000 3.8% G 5,277 3.2% H 5,200 3.2% J 3,761 3.1% Other 32,874 25.3% Other 41,256 25.1% Other 39,515 24.1% Other 24,642 20.5% -------- ------ -------- ------ -------- ------ -------- ------ Total $129,978 100.0% Total $164,119 100.0% Total $163,689 100.0% Total $119,981 100.0% ======== ====== ======== ====== ======== ====== ======== ======
Dillon, Read & Co. Inc. B - 4 SCOR U.S. Corporation Confidential RECENT DEVELOPMENTS Date Event - ------- ------------------------------------------------------------- 9/26/95 Offer by SCOR to acquire 20% of SCOR U.S. Corporation that it doesn't already own at $14/share 3/10/95 SCOR U.S. reduces regular quarterly dividend from $0.36 to $0.20 annually 3/09/95 SCOR S.A. postpones capital reorganization 1/30/95 SCOR U.S. management sale of stock to SCOR S.A. 8/94 SCOR S.A. CEO resigns Dillon, Read & Co. Inc. B - 5 SCOR U.S. Corporation Confidential
SCOR PRINCIPAL OPERATING UNITS Audit SCOR U.S. Committee | of the Board | | | | | | ------------------------------------------|----------------------------------------Reserving | | Committee | | | | | | | | | SUPPORT | UNDERWRITING | ----------------------------------------------------------------------------------------------------------- | | | | | | | | | | | | Chief | Underwriting | Facultative/ | | General Chief Info Financial | Services Treaty Alt. Risk Bonds | Counsel Officer Officer | SCOR Re SCOR Re SCOR Re SCOR Re | | | | | -Law -Information -Finance | -Actuarial -Treaty Prop/Cas -Facultative Prop/Cas -Surety & Fidelity | -Human Services -Accounting | -Claims -Treaty Catastrophe -Alternative Risk | Resources -Investments| -Retro -Insurance | & Administration | Management | -Investor | -Underwriting | Relations | Stds | --------|--------- Communications/ | | Risk Morgard, SCOR Re Management Inc. California Re
Dillon, Read & Co. Inc. B - 6 SCOR U.S. Corporation Confidential NET PREMIUMS EARNED (Dollars in 000s) Year Ended December 31, Nine Months Ended ----------------------- ------------------- 1993 1994 1994 1995 TREATY - ------ Property Pro Rata NA NA $47,366 $41,351 Property per Risk NA NA 4,226 3,072 Property Catastrophe NA NA 9,233 4,580 Non-Standard Auto $33,944 $40,107 27,005 32,694 Casualty NA NA 38,643 40,651 Other NA NA 17,995 21,559 FACULTATIVE - ----------- Property 29,240 32,878 8,935 10,740 Casualty 29,549 30,300 16,139 20,764 Other NA NA 920 1,562 OTHER NA NA 2,747 5,364 - ----- TOTAL $236,051 $228,244 $173,209 $182,337 ----- Dillon, Read & Co. Inc. B - 7 SCOR U.S. Corporation Confidential NET LOSS RATIO (Dollars in 000s) Year Ended December 31, Nine Months Ended ----------------------- ------------------ 1993 1994 1994 1995 ---------- ----------- --------- -------- TREATY - ------ Property Pro Rata NA NA 125.4% 77.4% Property per Risk NA NA 54.2 31.4 Property Catastrophe NA NA 70.7 14.8 Non-Standard Auto 64.4% 83.9% 78.1 72.1 Casualty NA NA 89.9 62.0 Other NA NA 63.5 61.9 FACULTATIVE - ----------- Property 38.8% 65.0% 44.5% 53.0% Casualty 70.9 70.0 50.4 48.4 Other NA NA 177.8 126.4 OTHER NA NA 120.5% 157.9% - ----- TOTAL 66.2% 83.8% 88.1% 66.9% ----- Dillon, Read & Co. Inc. B - 8 SCOR U.S. Corporation Confidential NET COMBINED RATIO (Dollars in 000s) Year Ended December 31, Nine Months Ended ----------------------- --------------------- 1993 1994 1994 1995 --------- --------- -------- ---------- TREATY - ------ Property Pro Rata NA NA 164.5% 120.6% Property per Risk NA NA 35.7 93.5 Property Catastrophe NA NA 84.3 94.1 Non-Standard Auto 97.7% 120.4% 118.4 107.1 Casualty NA NA 127.9 90.4 Other NA NA 99.8 103.4 FACULTATIVE - ----------- Property 66.4% 94.0% 89.4% 98.8% Casualty 97.7 98.8 84.5 79.9 Other NA NA 191.6 149.9 OTHER NA NA 166.3% 194.0% - ----- TOTAL 105.1% 123.0% 123.3% 103.9% ----- Dillon, Read & Co. Inc. B - 9 SCOR U.S. Corporation Confidential PROPERTY PRO RATA - The Company totally readjusted its strategy with regard to this market - Historically, Property pro rata been responsible for largest share of CAT losses - Competitors are not writing new proportional business - SCOR reduced its exposure over 50% and will continue to reallocate volume - Reduce CAT exposures dramatically and capped most treaties
(Dollars in 000s) Year Ended Nine Months December 31, Ended Projected -------------- ----------------------- ---------------------------------- 1993 1994 1994 1995 1995 1996 1997 ----- ----- ----------- ---------- --------- --------- ---------- Premiums Earned NA NA $47,366 $41,351 $78,199 $52,430 $41,369 Expense Ratio NA NA 125.4% 77.4% 57.0% 64.0% 63.1% Combined Ratio NA NA 164.5 120.6 92.5 100.2 99.9 Dillon, Read & Co. Inc. B - 10 SCOR U.S. Corporation Confidential PROPERTY PER RISK - Highly competitive market due to excess capacity in broker and direct market and Bermuda and London. - Ceding companies having trouble in the pro rata market have increased reinsurance opportunities in excess market - SCOR has small and profitable niche here - Difficult to expand due to expanding direct writers
(Dollars in 000s) Year Ended Nine Months December 31, Ended Projected -------------- ------------------- ---------------------------------- 1993 1994 1994 1995 1995 1996 1997 Premiums Earned NA NA $4,226 $3,072 $7,510 $11,671 $15,916 Expense Ratio NA NA 54.2% 31.4% 82.2% 85.6% 85.3% Combined Ratio NA NA 35.7 93.5 124.1 123.1 97.0
Dillon, Read & Co. Inc. B - 11 SCOR U.S. Corporation Confidential PROPERTY CATASTROPHE - Lower rates on line renewals will be evident this renewal season due to increased capital and competition - Bermuda continues to increase its involvement on programs - Bermuda capital appears likely to remain in place - Business is still adequately priced and SCOR appears able to manage its CAT exposure
(Dollars in 000s) Year Ended Nine Months December 31, Ended Projected 1993 1994 1994 1995 1995 1996 1997 Premiums Earned NA NA $9,233 $4,580 $7,987 $7,987 $7,987 Expense Ratio NA NA 70.7% 14.8% 59.8% 59.9% 59.9% Combined Ratio NA NA 84.3 94.1 92.6 90.1 88.1 Dillon, Read & Co. Inc. B - 12 SCOR U.S. Corporation Confidential NON STANDARD AUTO - - Increased primary and reinsurer competition have resulted in pricing pressure recently - SCOR has developed this line well but profitability has attracted competition - Construction Re has lion's share of market while Hartford and Gerling Global have become active (Dollars in 000s) Year Ended Nine Months December 31, Ended Projected -------------------- ------------------- ----------------------------------- 1993 1994 1994 1995 1995 1996 1997 Premiums Earned $33,944 $40,107 $27,005 $32,694 $64,984 $84,098 $105,984 Expense Ratio 64.4% 83.9% 78.1% 72.1% 66.3% 65.7% 65.2% Combined Ratio 97.7 120.4 118.4 107.1 101.3 100.3 99.2
Dillon, Read & Co. Inc. B - 13 SCOR U.S. Corporation Confidential CASUALTY ALL OTHER - - SCOR's desire to balance its casualty and property books requires greater participation in this line of business - Casualty is currently underpriced and highly competitive - Competitive conditions will limit growth opportunities in commercial and private auto and excess liability covers - More MGA proposals and programs being written and SCOR is expected to participate
(Dollars in 000s) Year Ended Nine Months December 31, Ended Projected ------------- -------------------- --------------------------------- 1993 1994 1994 1995 1995 1996 1997 ----- ----- ------- -------- -------- ------- ------- Premiums Earned NA NA $38,643 $40,651 $46,006 $51,035 $55,379 Expense Ratio NA NA 89.9% 62.0% 81.6% 71.2% 68.0% Combined Ratio NA NA 127.9 90.4 112.1 100.3 95.3
Dillon, Read & Co. Inc. B - 14 SCOR U.S. Corporation Confidential PROPERTY FACULTATIVE - - Considered SCOR's core business; the Company has an excellent record focusing on energy, petrochemicals and chemicals - Excellent historical loss ratio - Recent downward pressure on rates due to increased retentions and more capacity - General property market may be reaching bottom - SCOR plans a steady expansion of the facultative franchise
(Dollars in 000s) Year Ended Nine Months December 31, Ended Projected --------------------- -------------------- -------------------------------- 1993 1994 1994 1995 1995 1996 1997 -------- -------- -------- ------- -------- -------- -------- Premiums Earned $29,240 $32,878 $8,935 $10,740 $17,818 $21,911 $25,502 Expense Ratio 38.8% 65.0% 44.5% 53.0% 56.5% 55.5% 55.4% Combined Ratio 66.4 94.0 89.4 98.8 107.2 101.5 97.9
Dillon, Read & Co. Inc. B - 15 SCOR U.S. Corporation Confidential CASUALTY FACULTATIVE - - Extremely heavy competition has limited growth - Pricing improvement not evident in this line of business - Company will concentrate on smaller lines of buffer layer business in the automobile or general liability lines - Intent to focus on developing niches of expertise; will achieve better spread of risk and less volatility
(Dollars in 000s) Year Ended Nine Months December 31, Ended Projected --------------------- -------------------- -------------------------------- 1993 1994 1994 1995 1995 1996 1997 -------- -------- -------- ------- -------- -------- -------- Premiums Earned $29,549 $30,300 $16,139 $20,764 $25,969 $29,739 $35,819 Expense Ratio 70.9% 70.0% 50.4% 48.4% 87.0% 83.6% 85.0% Combined Ratio 97.7 98.8 84.5 79.9 123.7 115.9 114.3
Dillon, Read & Co. Inc. B - 16 SCOR U.S. Corporation Confidential EXPENSE RATIO (GAAP)(a) YEAR EXPENSE RATIO WRITTEN PREMIUMS PER EMPLOYEE ---- ------------- ----------------------------- 1990 40.5% $1.3 MM 1991 38.9 1.3 1992 43.8 1.7 1993 38.9 1.8 1994 38.6 1.9 1995E 36.7 2.0 --------- a) U/W year; includes commission ratio Dillon, Read & Co. Inc. B - 17 SCOR U.S. Corporation Confidential INCOME STATEMENT
Year Ended December 31, LTM Ended --------------------------------------------- Sept 30, (Dollars in 000s, except per share data) 1992 1993 1994 1995 --------- -------- -------- --------- Revenues: Net Premiums Earned $192,050 $236,051 $228,244 $237,374 Net Investment Income 42,880 42,044 40,990 42,378 Net Realized Investment Gains/(Losses) 15,048 12,930 984 638 --------- -------- -------- --------- Net Revenues 249,978 291,025 270,218 280,390 Losses and Expenses: Losses and Expenses, net 160,545 156,292 191,270 160,664 Commissions, net 55,960 61,324 59,434 60,311 Other Operating Expenses 23,918 26,420 26,009 27,206 Other 4,346 4,073 4,039 2,014 --------- -------- -------- --------- Interest Expense 4,579 8,005 8,920 8,844 Pretax Income 630 34,911 (19,454) 21,351 Income Taxes (Benefit) (3,771) 6,983 (11,262) 4,674 --------- -------- -------- --------- Net Income from Continuing Operations $4,401 $27,928 ($8,192) $16,677 ========= ======== ======== ========= Extraordinary Items -- -- 351 903 Cumulative Effect of Accounting Change 2,848 (2,600) -- -- --------- -------- -------- --------- Net Income $7,249 $25,328 ($7,841) $17,580 ========= ======== ======== ========= Average Shares Outstanding (000s) 18,256 18,395 18,166 18,248 Fully Diluted E.P.S. from Continuing Operations $0.25 $1.45 ($0.45) $0.91 Fully Diluted E.P.S. 0.40 1.33 (0.43) 0.96 GAAP Operating Ratios: Loss Ratio 83.6% 66.2% 83.8% 67.7% Commissions Ratio 29.1% 26.0% 26.0% 25.4% Expense Ratio 14.7% 12.9% 13.2% 12.3% --------- -------- -------- --------- Combined Ratio 127.5% 105.1% 123.0% 105.4% Return on Average Equity 1.7% 10.0% -3.1%
Dillon, Read & Co. Inc. B - 18 SCOR U.S. Corporation Confidential NET ASSETS
(Dollars in 000s) As of December 31, As of ------------------------ Sept 30, ASSETS 1993 1994 1995 -------- ---------- -------- Investments: Fixed Maturities: Available for Sale at Fair Value $581,104 $563,656 $563,515 Held to Maturity at Amortized Cost 24,876 22,871 22,155 Equity Securities at Fair Value 18,951 1,738 204 Short-term Investments at Cost 90,642 83,303 122,794 Other Long Term Investments 1,081 1,225 1,374 ---------- ---------- ---------- Total Investments 716,654 672,793 710,042 Cash 17,096 4,763 13,318 Reinsurance Recoverable on Unpaid Losses 221,843 222,672 226,544 Reinsurance Recoverable on Paid Losses 36,827 23,755 19,939 Premiums Receivable 80,319 72,019 80,996 Investment in Affiliates 10,789 11,532 12,360 Other Assets 110,583 136,181 117,973 ---------- ---------- ---------- Total Assets $1,194,111 $1,143,715 $1,181,172 ========== ========== ========== LIABILITIES OTHER THAN DEBT Reserves for Losses and Loss Expenses $562,209 $604,787 $618,738 Unearned Premiums 114,376 110,082 99,955 Funds Held Under Reinsurance Treaties 39,602 20,758 18,571 Reinsurance Balances Payable 60,233 43,685 27,000 Other Liabilities 10,031 11,348 17,933 ---------- ---------- ---------- Total Liabilities Other than Debt 786,451 790,660 782,197 ---------- ---------- ---------- TOTAL NET ASSETS $407,660 $353,055 $398,975 ========== ========== ==========
Dillon, Read & Co. Inc. B - 19 SCOR U.S. Corporation Confidential CAPITALIZATION
(Dollars in 000s) As of December 31, As of ----------------------- Sept 30, CAPITALIZATION 1993 1994 1995 ------- ------- ------- Debt: Convertible Subordinated Debentures $86,250 $82,350 $75,950 Notes Payable 20,000 20,000 25,000 Commercial Paper 10,721 11,310 20,639 ------- ------- ------- Total Debt 116,971 113,660 121,589 Stockholders' Equity Common Stock 5,490 5,507 5,507 Additional Paid in Capital 112,670 114,556 114,669 Unrealized Appreciation/(Depreciation) of Investments, Net of Deferred Tax Effect 16,634 (21,640) 4,752 Foreign Currency Translation Adjustments 12 (414) (252) Retained Earnings 157,532 143,153 154,482 Treasury Stock (1,649) (1,767) (1,774) ------- ------- ------- Total Stockholders' Equity 290,689 239,395 277,386 ------- ------- ------- TOTAL CAPITALIZATION $407,660 $353,055 $398,975 -------- -------- -------- Total Debt to Capitalization 28.7% 32.2% 30.5% Net Debt to Capitalization 24.5 30.8 27.1
Dillon, Read & Co. Inc. B - 20 SCOR U.S. Corporation Confidential LOSS RESERVES - THE COMPANY HAS TAKEN A CONSERVATIVE APPROACH TOWARD ESTABLISHING PROVISIONS FOR LOSS RESERVES. THE MAJORITY OF SCOR'S BUSINESS IS GENERALLY "SHORTER TAIL" PROPERTY, AND THEREFORE, IT IS GENERALLY EASIER TO DETERMINE LOSS AMOUNTS ON A TIMELY BASIS
($ in millions) Year ended December 31, ________________________________________________________________________________________________________________________________ 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 ________________________________________________________________________________________________________________________________ Initial Reserves For Losses and loss expenses $87 $104 $138 $192 $241 $289 $319 $324 $341 $340 $382 Re-estimated as of: One Year Later $89 $116 $139 $192 $239 $301 $326 $319 $337 $338 Two Years Later 98 115 132 183 234 297 318 302 335 Three Years Later 101 115 123 185 225 292 300 302 Four Years Later 106 120 133 180 223 274 298 Five Years Later 108 137 134 178 213 275 Six Years Later 123 137 131 171 212 Seven Years Later 119 135 127 173 Eight Years Later 118 131 129 Nine Years Later 118 133 Ten Years Later 117 Cumlative amount of liability paid through: One Year Later $33 $33 $30 $42 $59 $62 $85 $92 $121 $94 Two Years Later 48 53 48 73 89 113 139 145 161 Three Years Later 62 66 65 93 115 149 176 159 Four Years Later 71 80 79 106 139 174 180 Five Years Later 81 92 88 123 151 173 Six Years Later 87 100 98 131 143 Seven Years Later 93 107 104 118 Eight Years Later 97 111 91 Nine Years Later 100 101 Ten Years Later 92 Cumulative ($30) ($29) $9 $19 $29 $14 $21 $22 $6 $2 Redemption (Deficiency) -35% -28% 6% 10% 12% 5% 7% 7% 2% 1% Percentage _________________________________________________________________________________________________________________________________
Dillon, Read & Co. Inc. B - 21 SCOR U.S. Corporation Confidential LOSS RESERVES (CONT'D) - - As of 12/31/94, SCOR U.S. studied its IBNR (only facultative casualty and treaty) using alternative methods of analysis (Alternative Method Study) - SCOR typically utilizes Incurred Loss Development method to estimate reserves - The Alternative Method Study utilized the Bornheutter-Ferguson Method Gross IBNR ---------- 12/31/94 (Dollars in Millions)
Alt. Method IBNR Type Estimated Actual Difference - ------------------------------------ ----------- --------- ---------- Property Pro-Rata excl. Catastrophes $11.8 $14.5 $2.7 Property per Risk Excl. Catastrophes 0.9 2.4 1.4 Property Catastrophe 11.1 11.1 0.0 Non-Standard Auto 12.7 12.1 (0.7) Standard Auto 22.1 18.8 (3.3) General Liability 63.7 52.3 (11.3) Professional Liability 10.7 9.3 (1.4) Workers' Compensation 9.1 10.1 1.0 Bonds; Fidelity & Surety 3.2 4.0 0.8 Marine 2.7 0.0 (2.7) Inherent Defect Insurance 0.5 0.0 (0.5) Agricultural 0.1 0.0 (0.1) Facultative Casualty 85.7 80.7 (5.0) ------ ------ ------- Total $243.3 $215.2 ($19.1) ====== ====== =======
Dillon, Read & Co. Inc. B - 22 SCOR U.S. Corporation Confidential LOSS RESERVES (CONT'D) - - KPMG Peat Marwick has periodically reviewed the Loss and Loss Adjustment Expense Reserve - - The last review was December 31, 1993 (no rating agency need in 1994) and resulted in the following analysis: ($ in millions) Low Selected High -------- ---------- -------- Case Reserves $170.4 $170.4 $170.4 IBNR 137.6 154.6 173.6 ----- ----- ----- Total 308.0 325.0 344.0 Covered Reserves 340.4 Differential $32.4 $15.4 $(3.6) ===== ===== ====== Dillon, Read & Co. Inc. B - 23 SCOR U.S. Corporation Confidential RETROCESSION ($ in millions) - - SCOR U.S.'s retrocession program appears adequate in relation to its surplus capacity, gross line capacity and changing market conditions - Record of recovery is excellent - Pricing is independent of SCOR S.A.
Treaty Facultative Catastrophe --------------------------- --------------------------- --------------------- Property $3 SCOR S.A. $13.0 SCOR S.A. (Prop.) - (Proportional) 4.0 X/S 3.0 Non-Affiliate 2.0 X/S 4.0 SCOR S.A. Casualty - $2.5 X/S 2.5 SCOR S.A. - 1.5 X/S 1.0 SCOR S.A. (experience rated) Prop. CAT $6 SCOR S.A. - $6X/S $20 Pre (Lead) (Proportional) 6X/S 26 Lloyds 6X/S 32 Lasalle 10X/S 38 Non-Affiliate 12X/S 48 PXRE 8X/S 60 Zurich (Sale)
Dillon, Read & Co. Inc. B - 24 SCOR U.S. Corporation Confidential EXPOSURE MANAGEMENT - - SCOR U.S. monitors its total exposure to various catastrophic events quarterly - Company has continued to reduce its estimated exposures primarily through a reduction in its property pro-rata book - Company diversifying its aggregate exposures - - Estimated exposures are in line with SCOR U.S.'s surplus capacity (net of CAT) ($ in Millions) Wind (25 Year Event) Earthquake ($80b Event) -------------------- ----------------------- 1/1/94 $28.6 MM $118.0 MM 7/1/95 21.8 MM 112.5 MM Dillon, Read & Co. Inc. B - 25 SCOR U.S. Corporation Confidential INVESTMENT PORTFOLIO (Dollars in 000s) As of 9/30/95 ------------------------------ Amount % Total ----------- ------------ Taxable Bonds $341,997 48% Tax-Exempt Bonds 210,184 30 ----------- ------------ Total Bonds $552,181 78% Preferred Stock 33,521 5 Common Stock 170 0 Short-Term Investments 122,794 17 Other 1,374 0 ----------- ------------ Total Investments $710,040 100% =========== ============ Average Maturity 4.81 Average Rating Aaa Yield: - ------ Bond Portfolio 6.2% Equity Portfolio 5.3 Dillon, Read & Co. Inc. B - 26 SCOR U.S. Corporation Confidential INVESTMENT PORTFOLIO (CONT'D) - - As of December 1994, the ratings of SCOR's bond portfolio were as follows: (Dollars in 000s) Carrying % Total Bond Portfolio Value Portfolio ------------------------------------------ ---------- ---------- U.S. Treasuries and Agencies $158,571 28.6% Foreign Government and Agencies 14,636 2.6% Aaa 202,626 36.5% Aa 89,607 16.2% A 86,346 15.6% Baa 2,787 0.5% ---------- -------- Total $554,573 100% Dillon, Read & Co. Inc. B - 27 SCOR U.S. Corporation Confidential PRINCIPAL SHAREHOLDERS (a) Shares Held Institution as of 6/95 % of Outstanding - --------------------------------------- ----------- ---------------- Tweedy Browne 949,533 5.2% Dimensional Fund 611,700 3.4 Prudential 213,900 1.2 Wilshire Associates 204,100 1.1 Wells Fargo 184,429 1.0 Sanford Bernstein 106,600 0.5 J.P. Morgan 56,000 0.3 Brandywine Asset Management 53,900 0.3 Mellon Bank 53,621 0.3 California State 51,463 0.3 ---- 13.7% ===== - ------------- (a) Source: Technimetrics, Inc. Dillon, Read & Co. Inc. B - 28 SCOR U.S. Corporation SCOR U.S. VALUATION INDICATORS Confidential VALUATION APPROACH Valuation Approach Proxy - - Comparable Trading Analysis - Trading multiples of comparable reinsurance companies - Correlation of price-to-book trading multiples to ROE for reinsurance comparables - - Comparable Merger Analysis - Multiples and premiums paid for acquisitions in the reinsurance industry - - Economic Book Value Analysis - Adjustments to reported book value - - Discounted Cash Flow Analysis - Based on 1995 - 2000 projections of cash flows - - Premium Analysis - Premiums paid in comparable minority "close out" transactions Dillon, Read & Co. Inc. C - 1 SCOR U.S. Corporation Confidential SCOR U.S. ONE YEAR PRICE AND VOLUME HISTORY
DAILY STOCK PRICE JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC $ 8.50 $ 8.00 $ 8.00 $ 7.50 $ 8.00 $ 9.00 $ 9.00 $ 9.00 $11.00 $11.50 $11.50 $15.50
DAILY VOLUME 1/2/95 0 1/18/95 18,000 2/3/95 5,000 2/21/95 2,500 3/9/95 2,000 3/27/95 2,000 4/12/95 1,500 4/28/95 1,500 5/16/95 1,500 6/1/95 1,500 6/19/95 1,500 7/5/95 1,500 7/21/95 1,500 8/8/95 1,500 8/24/95 1,500 9/11/95 1,500 9/27/95 180,000 10/13/95 1,500 11/1/95 1,500 Dillon, Read & Co. Inc. C - 2 SCOR U.S. Corporation Confidential TRADING VOLUME SINCE ANNOUNCEMENT OF TRANSACTION Rolling Average since Date SUR Volume Announcement ---------- ---------- --------------------- 11/1 2,900 16,646 10/31 13,700 17,156 10/31 13,700 17,288 10/30 5,400 17,432 10/27 800 17,933 10/26 5,100 18,678 10/25 2,600 19,295 10/24 6,700 20,090 10/23 600 20,760 10/20 0 21,821 10/19 11,600 24,388 10/18 4,000 25,188 10/17 11,200 26,600 10/13 1,000 27,700 10/12 1,500 29,754 10/11 4,000 32,108 10/10 14,000 34,664 10/9 5,000 36,730 10/6 4,900 40,256 10/5 1,500 44,675 10/4 2,600 50,843 10/3 3,000 58,883 10/2 13,900 70,060 9/29 44,900 84,100 9/28 34,300 97,167 9/27 73,000 128,600 9/26 184,200 184,200 ----------- Total 466,100 Dillon, Read & Co. Inc. C - 3 SCOR U.S. Corporation Confidential STOCK PRICE PERFORMANCE OF COMPARABLE COMPANIES Pricing Date
American Re Corp General Re Corp NAC Re Corp S&P 500 S&P Financial Transatlantic Hldgs Inc SCOR PXRE 8/31/90 100% 100% 100% 100% 100% 100% 100% 100% 9/28/90 100% 93% 95% 87% 96% 92% 99% 69% 10/31/90 102% 102% 94% 79% 95% 108% 97% 72% 11/30/90 121% 114% 100% 93% 123% 115% 130% 82% 12/31/90 126% 117% 102% 98% 124% 127% 139% 86% 1/31/91 122% 123% 107% 105% 127% 129% 138% 94% 2/28/91 131% 131% 114% 116% 141% 144% 154% 103% 3/29/91 134% 134% 116% 123% 163% 147% 162% 97% 4/30/91 122% 143% 116% 124% 167% 160% 161% 104% 5/31/91 128% 141% 121% 130% 169% 144% 159% 106% 6/28/91 129% 130% 115% 121% 155% 155% 141% 104% 7/31/91 128% 142% 120% 128% 157% 152% 151% 94% 8/30/91 120% 133% 123% 133% 157% 146% 154% 106% 9/30/91 119% 122% 120% 132% 151% 145% 177% 106% 10/31/91 128% 135% 122% 133% 155% 136% 175% 100% 11/29/91 121% 129% 116% 124% 155% 145% 173% 100% 12/31/91 138% 167% 129% 142% 177% 156% 173% 117% 1/31/92 123% 157% 127% 140% 176% 161% 100% 196% 119% 2/28/92 128% 159% 128% 145% 169% 162% 100% 204% 104% 3/31/92 126% 150% 125% 142% 163% 158% 82% 200% 119% 4/30/92 110% 138% 129% 143% 149% 151% 80% 182% 106% 5/29/92 110% 138% 129% 146% 151% 145% 81% 185% 124% 6/30/92 115% 137% 127% 149% 149% 152% 80% 190% 128% 7/31/92 118% 153% 132% 153% 167% 160% 84% 185% 133% 8/31/92 123% 157% 128% 145% 163% 160% 87% 168% 111% 9/30/92 140% 178% 130% 150% 205% 190% 104% 182% 139% 10/30/92 150% 210% 130% 154% 234% 221% 125% 214% 142% 11/30/92 150% 208% 134% 164% 234% 214% 122% 203% 147% 12/31/92 156% 215% 135% 170% 255% 223% 127% 197% 175% 1/29/93 100% 162% 228% 136% 176% 249% 245% 156% 210% 221% 2/26/93 100% 158% 218% 138% 179% 241% 247% 152% 225% 286% 3/31/93 105% 158% 223% 140% 186% 245% 258% 145% 223% 275% 4/30/93 104% 156% 210% 137% 180% 226% 256% 170% 213% 339% 5/31/93 94% 154% 193% 140% 179% 226% 232% 153% 199% 325% 6/30/93 93% 154% 189% 140% 188% 251% 232% 141% 189% 339% 7/30/93 99% 164% 179% 139% 192% 247% 242% 147% 187% 325% 8/31/93 98% 178% 189% 144% 196% 272% 238% 159% 177% 386% 9/30/93 95% 166% 191% 142% 200% 259% 260% 142% 189% 386% 10/29/93 78% 156% 163% 145% 188% 240% 230% 144% 172% 381% 11/30/93 73% 149% 150% 143% 181% 234% 220% 137% 159% 333% 12/31/93 77% 145% 158% 145% 185% 238% 214% 133% 146% 303% 1/31/94 80% 154% 167% 149% 194% 242% 201% 125% 132% 286% 2/28/94 70% 143% 158% 145% 183% 213% 182% 123% 127% 278% 3/31/94 72% 145% 138% 138% 175% 210% 188% 120% 117% 231% 4/29/94 76% 151% 143% 140% 181% 210% 199% 118% 138% 261% 5/31/94 92% 162% 155% 142% 190% 248% 229% 126% 127% 292% 6/30/94 85% 147% 157% 138% 184% 238% 218% 111% 124% 292% 7/29/94 76% 156% 149% 142% 188% 254% 214% 113% 132% 292% 8/31/94 79% 151% 141% 147% 194% 245% 216% 109% 131% 294% 9/30/94 82% 143% 135% 143% 180% 229% 203% 109% 127% 322% 10/31/94 79% 151% 137% 146% 182% 231% 200% 105% 125% 274% 11/30/94 70% 159% 134% 141% 171% 237% 204% 102% 100% 289% 12/30/94 87% 167% 178% 142% 173% 254% 232% 113% 94% 314% 1/31/95 83% 175% 175% 146% 183% 250% 237% 119% 96% 272% 2/28/95 92% 176% 177% 151% 193% 261% 241% 131% 94% 261% 3/31/95 95% 178% 161% 155% 193% 278% 229% 126% 89% 268% 4/28/95 103% 172% 175% 160% 200% 289% 244% 130% 90% 269% 5/31/95 101% 183% 156% 165% 214% 289% 238% 132% 101% 240% 6/30/95 101% 181% 165% 169% 215% 296% 233% 144% 101% 261% 7/31/95 102% 179% 195% 174% 221% 300% 255% 146% 114% 288% 8/31/95 108% 201% 194% 174% 247% 318% 290% 134% 124% 279% 9/30/95 104% 204% 193% 181% 233% 306% 259% 153% 175% 303% 10/31/95 103% 196% 187% 180% 240% 306% 254% 160% 173% 283%
Dillon, Read & Co. Inc. C - 4 SCOR U.S. Corporation Confidential
PRICE-TO-BOOK VALUE RATIOS FOR COMPARABLE COMPANIES(a) Date American Re General Re NAC Re Transatlantic PXRE SCOR 12/31/89 NA 2.67 NA NA 1.05 1.22 3/31/90 NA 2.63 1.85 NA 0.86 1.03 6/30/90 NA 2.51 1.84 1.59 0.85 0.83 9/30/90 NA 2.18 1.38 1.19 0.48 0.72 12/31/90 NA 2.6 1.7 1.48 0.58 0.98 3/31/91 NA 2.48 1.84 1.86 0.65 1.1 6/30/91 NA 2.33 1.72 1.7 0.68 0.94 9/30/91 NA 2.07 1.55 1.59 0.7 1.13 12/31/91 NA 2.26 2.01 1.78 0.79 1.07 3/31/92 NA 2.01 1.62 1.59 0.79 1.19 6/30/92 NA 1.82 1.45 1.41 0.57 1.11 9/30/92 NA 2.16 1.94 1.91 0.66 1.09 12/31/92 NA 2.32 2.33 2.28 0.87 1.19 3/31/93 2.64 2.28 2.31 1.95 1.3 1.29 6/30/93 2.23 2.16 1.9 1.93 1.54 1.07 9/30/93 2.14 2.22 1.87 1.92 1.74 1.04 12/31/93 1.67 1.88 1.41 1.55 1.24 0.81 3/31/94 1.59 1.86 1.3 1.43 0.96 0.74 6/30/94 1.85 1.9 1.49 1.61 1.15 0.81 9/30/94 1.8 1.79 1.32 1.51 1.19 0.83 12/31/94 1.92 2.08 1.84 1.68 1.13 0.64 3/31/95 1.89 2.06 1.45 1.69 0.94 0.55 6/30/95 1.84 1.92 1.12 1.67 1.07 0.61 11/1/95 1.89 2.1 1.56 1.74 1.14 1.02
- ------------ (a) Source: Compustat Industrial. Dillon, Read & Co. Inc. C - 5 SCOR U.S. Corporation Confidential
ONE-YEAR FORWARD P/E RATIOS FOR COMPARABLE COMPANIES (a) (FY + 1 P/E) 12/31/89 3/31/90 6/30/90 9/30/90 12/31/90 3/31/91 6/30/91 9/30/91 12/31/91 3/31/92 6/30/92 9/30/92 -------- ------- ------- ------- -------- ------- ------- ------- -------- ------- ------- ------- General Re 15x 12.5x 13.5x 12x 14x 14x 13x 14x 15x 13.5x 13.5x 15x NAC Re 17 12.5 15 11 14 14 14 13 15 15 12.5 14.5 Transatlantic 8 12 13 13 13 14 12 9 11.5 SCOR 17 8 8 7 9 9 7.5 7.5 8 10 9 7.5 PXRE 13 7.5 25 35 30 20 8 9 19 9 9.5 12 12/31/92 3/31/93 6/30/93 9/30/93 12/31/93 3/31/94 6/30/94 9/30/94 12/31/94 3/31/95 6/30/95 9/30/95 11/1/95 -------- ------- ------- ------- -------- ------- ------- ------- -------- ------- ------- ------- ------- General Re 21x 17x 16x 19x 17x 14.5x 17x 15x 17x 15x 15x 16x 15.5x NAC Re 16 18 17 20 18 13.5 15 14 14 14 14 13.5 15 Transatlantic 19 14 14 16 14.5 12 14 13.5 13 12.5 13 12.5 13 SCOR 36 12 9.5 11.5 12 8 21 16 13 9 9.5 17.5 16.5 PXRE 12 19 14.5 15 12.5 7.5 5.5 6.5 6 5 5 5 5
- ------------ (a) One year forward P/E ratios taken from IBES database (based on median EPS estimates). Dillon, Read & Co. Inc. C - 6 SCOR U.S. Corporation Confidential COMPARABLE COMPANIES - OBSERVATIONS - - Public market valuations of U.S. reinsurers are analyzed on forward price/earnings multiples and on price/book value multiples - Reasonably good correlation between return on equity and price-to-book multiples - Book value multiples distorted due to possible under-reserving by the sector in general and FASB115 - - Historically, significant movements in stock prices have been the result of several factors - Perceived change in industry fundamentals, i.e., an expected turn in P/C pricing - Secular interest rate movements/expectations - Earnings surprises - - Trading multiples suggest that the stronger reinsurers with certain characteristics have achieved premium valuation relative to their peers - Direct reinsurers more profitable than broker reinsurers - Property reinsurers have more volatility in earnings and therefore lower relative P/E - Larger casualty companies with greater market share, and to some extent greater pricing power, more profitable than smaller companies - Non-proportional reinsurers have been more profitable than proportional reinsurers Dillon, Read & Co. Inc. C - 7 SCOR U.S. Corporation Confidential CURRENT 1995E P/E MULTIPLES
Prudential NAC Re Transatlantic Trenwick PXRE General American National 1995E P/E(a) 15.7x 14.7x 13.2x 13.1x 5.2x 15.8x 12.8x 12.0x Broker Average 14.2x(b) Direct Average 13.5x
- ------------- (a) E.P.S. estimates based on I/B/E/S, based on 11/1/95 Stock prices (b) Excludes PXRE Dillon, Read & Co. Inc. C - 8 SCOR U.S. Corporation Confidential CURRENT 1996E P/E MULTIPLES
NAC Re Trenwick Transatlantic Prudential PXRE General American National 1995E P/E(a) 12.6x 11.8x 11.3x 11.3x 5.0x 14.1x 10.7x 10.7x Broker Average 11.8x(b) Direct Average 11.8x
- -------------- (a) E.P.S. estimates based on I/B/E/S, based on 11/1/95 Stock prices (b) Excludes PXRE Dillon, Read & Co. Inc. C - 9 SCOR U.S. Corporation Confidential CURRENT BOOK VALUE TRADING MULTIPLES
Transatlantic NAC Re Trenwick Prudential PXRE General American National Price-to-Book Multiple(a) 1.7x 1.6x 1.5x 1.2x 1.1x 2.1x 1.9x 1.6x Broker Average 1.4x(b) Direct Average 1.9x
- -------------- (a) Based on 11/1/95 Stock price and latest book value Dillon, Read & Co. Inc. C - 10 SCOR U.S. Corporation Confidential COMPARISON OF CURRENT FINANCIAL STATISTICS ($ in millions)
Broker Companies Direct Companies ----------------------------------------------------------- ---------------------------- SCOR U.S. NAC Re PXRE Prudential Transatlantic Trenwick American General National --------- ------ ---- ---------- ------------- -------- -------- ------- -------- PARENT Capitalization - --------------------- Total Debt $121.3 $218.0 $69.7 $19.3 $0.0 $103.5 $450.0 $156.0 $100.0 Preferred 0.0 0.0 0.0 0.0 0.0 0.0 225.0 0.0 0.0 Shareholders' Equity 272.7 405.8 192.4 877.4 894.1 218.8 953.1 5,708.0 346.0 ------- ------- ------ ------ ------ ------ -------- -------- ------ Total Capitalization $394.0 $623.8 $262.1 $896.7 $894.1 $322.3 $1,628.1 $5,864.0 $446.0 ======= ======= ====== ====== ====== ====== ======== ======== ====== Shareholders' Equity/ Total 69.2% 65.1% 73.4% 97.9% 100.0% 67.9% 72.4% 97.3% 77.6% Capitalization Business - -------- % of 1994 Property Business 53% 20% 100% 51% 35% 25% 35% 25% 26% INSURANCE Company - ----------------- Statutory Surplus @ 6/30/95 $243(a) $436 $212(a) $640 $591(a) $244 $1,120 $4,228(a) $386(a) 1994 Statutory Net Income (1) 27 34 3 86 20 130 511 41 LTM Premiums/Surplus(b) 1.0x 1.1x 0.5x 1.4x 1.6x 0.7x 1.5x 1.1x 0.8x LTM Premiums/Reserves 0.4 0.4 1.4 0.4 0.4 0.3 0.4 0.3 0.3 RATINGS - ------- Moody's Senior Debt Rating A3 Baa2 Ba2 NA NA Baa3 Baa2 Aa1+ Baa1 S&P Senior Debt Rating A+ A- BB- NA NA BBB(cvt.) BBB+(sub) AAA A+ S&P Claims-Paying Rating A+ AA- A- A NR A AA AAA NA
- -------------------------------- (a) As of December 31, 1994. (b) As of most recent quarter. Dillon, Read & Co. Inc. C - 11 SCOR U.S. Corporation Confidential
COMPARISON OF CURRENT TRADING LEVELS Broker Companies ---------------------------------------------------------------- SCOR U.S. NAC Re PXRE Prudential Transatlantic Trenwick ---------- -------- ------------ --------------- ---------- Current Price (11/1/95) $15.250 $36.000 $25.125 $20.375 $68.000 $49.500 Year High 15.750 39.000 29.750 20.750 70.375 53.000 % of Year High 96.8% 92.3% 84.5% 98.2% 96.6% 93.4% Equity Value(MM) $277.0 $632.3 $219.2 $1,018.8 $1,560.1 $321.3 Adjusted LTM P/E(a) 20.1x 16.4x 5.5x 16.5x 13.1x 11.9x 1995 E 16.6 14.7 5.2 15.7 13.2 13.1 1996 E 15.7 12.6 5.0 11.3 11.3 11.8 Projected 5 year EPS Growth NA 16.0% 15.0% NA 15.0% 14.0% Rate(b) Market/Book Value 1.0x 1.6x 1.1x 1.2x 1.7x 1.5x Market/Adjusted Book Value(c) 0.8 1.1 1.0 0.9 1.4 1.2 Market/Statutory Surplus 1.1 1.5 1.0 1.6 2.6 1.3 Dividend Yield 1.3% 0.4% 2.4% 0.6% 0.6% 2.3% ROAE 5.5% 12.1% 25.0% 2.9% 14.5% 13.2% Adjusted ROAE (a) 5.3% 10.2% 25.3% 2.5% 14.5% 13.2%
Direct Companies ------------------------------- American General National ---------- --------- --------- Current Price (11/1/95) $38.375 $146.375 $33.625 Year High 43.125 153.250 35.375 % of Year High 89.0% 95.5% 95.1% Equity Value(MM) $1,805.5 $12,006.9 $567.1 Adjusted LTM P/E(a) 14.8x 16.3x 14.5x 1995 E 12.8 15.8 12.0 1996 E 10.7 14.1 10.7 Projected 5 year EPS Growth 15.0% 14.0% 13.0% Rate(b) Market/Book Value 1.9x 2.1 1.6x Market/Adjusted Book Value(c) 1.1 1.6 1.3 Market/Statutory Surplus 1.6 3.2 1.5 Dividend Yield 1.0% 1.3% 0.5% ROAE 14.2% 15.1% 7.9% Adjusted ROAE (a) 14.0% 14.0% 12.2% - -------------------------------- (a) Adjusted earnings exclude the after-tax effect of net investment gains. (b) Source: I/B/E/S. (c) Adjusted book value includes unearned premiums reserve net of after-tax deferred acquisition cost. Dillon, Read & Co. Inc. C - 12 SCOR U.S. Corporation Confidential PRICE-TO-BOOK VS. RETURN ON EQUITY Pretax tax return Multiple of Book Value NRC 14.60% 1.6x ARN 18.20% 2 GRN 18.50% 2.1 TRH 17.40% 1.8 Trenwich 12.90% 1.58 SUR 0.055 1 Dillon, Read & Co. Inc. C - 13 SCOR U.S. Corporation Confidential VALUATION BASED ON TRADING COMPARABLES (Dollars in millions, except per share data) SCOR US Multiple Range Per Share Value Reference Figure Low High Low High - ------------------------- -------- ---- ---- ---- ---- 1996E E.P.S.(a) $1.19 11.0x 15.0x $13.09 $17.85 Latest Book Value(b) $15.03 1.0x 1.3x $15.03 $19.55 Latest Surplus(b) 13.96 1.1 1.4 15.35 19.54 Average $14.49 - $18.98 - -------------------------------- (a) Company projections. (b) Fully diluted, as of September 30, 1995. Dillon, Read & Co. Inc. C - 14 SCOR U.S. Corporation Confidential COMPARISON OF ACQUISITIONS Approach: - -------- - - Reviewed 32 mergers and acquisitions of property/casualty reinsurance companies in the U.S. and in Europe. - - Summarized financial ratios and statistics for 9 most comparable U.S. transactions and reviewed multiples of net income, multiples of book value and tangible book value. Limitations: - ----------- - - Declines in interest rates and other economic factors, including an upturn in the property/catastrophe cycle, fueled a strong market for insurance companies in 1992 and 1993 which didn't exist to the same extent in 1994 and 1995. - - Previous acquisitions generally occurred in different stock market, economic environments and property/casualty cycles. Dillon, Read & Co. Inc. C - 15 SCOR U.S. Corporation Confidential PREMIUMS PAID IN SELECTED U.S. REINSURANCE TRANSACTIONS
($ in millions) Price Paid as a multiple of Acquiree Announcement Aggregate Net Book Net Market ROAE of Date Acquiree/Acquiror Value Income Value Premiums Value Acquiree - ----------- ----------------------------------- --------- -------- ------- ---------- ------- --------- 08/07/95 Piedmont Management Company $85.4 24.6x 1.1x 0.6x 1.3x N.A. Inc./Chartwell Re Corporation 01/06/95 Re Capital/ 131.6 18.0 1.0 1.7 1.4 6.8% Zurich Centre Re 12/21/94 Constitution Re/ 400.0 N.A. 1.4 N.A. N.A. N.A. Exor America Inc. 07/29/93 Underwriters Reinsurance Co. 216.1(1) N.A. 1.4 N.A. N.A. 19.0 (Sub. of Underwriters Re Holding)/ Allegheny Corp. 03/22/93 Kemper Re/Lumbermens Mutual 610.2 N.M. 1.8 N.A. N.A. N.M. 06/09/92 American Re-Insurance Corp. (Aetna) 1,429.5(2) 9.6x 1.2 1.4 N.A. 17.2 American Re Corp. (Formed by KKR.) 03/20/92 Belvedere Corp./ 37.4(3) 18.1 0.8 1.4 1.6x 4.5 Christiana General Insurance (Sub. of UNI Storebrand AS) 01/10/92 Chartwell Re Corp. 71.0 8.9 1.1 N.A. N.A. N.A. (Sub. of NWNL Companies)/ Wand Partners/Michigan Mutual 08/29/89 National Reinsurance Corp./ 395.1 10.4 1.4 N.A. N.A. 13.4 Robert M. Bass & Acadia
Notes: - -------------------------------- Notes: (1) Actual purchase is $201 MM for a 93% interest. Value is grossed up for multiple purposes. (2) GAAP financial data for multiples is as of 12/31/91. (3) Actual purchase is $16.9MM for remaining 45.2% interest. Value is grossed up for multiple purposes. Dillon, Read & Co. Inc. C - 16 SCOR U.S. Corporation Confidential SUMMARY OF SELECTED EUROPEAN REINSURANCE TRANSACTIONS (millions(1))
Implied Price Price/ --------------------------- Announcement % for Net Net Book Date Acquiree/Acquiror Deal Size Acquired 100% Premiums Income Value - ------------ ------------------------------------- ---------- -------- -------- -------- ------ ----- 09/23/94 Cologne Re/General Re DM 902 50.1% 1,800.4 0.4x 13.7x 2.6x 09/02/93 Francaise d'Assurance pour le FF 370.0 20.0% 1,850.0 2.8 12.9 1.0 Commerce Exterieur SA (COFACE)/ Societe Commerciale de Reassurance (SCOR) 25/11/91 Lincoln European Reinsurance USD 11.0 96.6% 11.4 0.7 --- 0.8 Company/ Mapfre SA 16/11/91 Nederlandse Reassurantie Groep DF 1,113 41.0% 276 0.3 9.9 0.8 (NRG)/ Internationale Nederlanden Groep (ING) 17/09/91 Pinnacle Reinsurance Co. Ltd/ USD 63.7 100.0% 63.7 -- 8.0 1.2 Zurich Versicherungs-Gesellschaft 16/05/91 Societe Anonyme Francaise de FF 463 100.0% 463 N.A. N.A. 0.7 Reassurance/ AGF Re 10/07/90 Legal & General (Victory Re)/NRG/ GBP 122 100.0% 122 0.7 N.A. N.A. Nationale Nederlanden 08/05/88 Skandia International Holding AB/ SEK3,600.0 54.0% 6,666.7 0.9 15.2 2.8 Skandia AB 04/01/88 Vittoria Riassicurazioni/ USD 121.2 100.0% 121.2 1.0 N.M. N.M. Societe Commerciale de Reassurance 02/10/87 Baltica Nordisk-Re/ DKR 1,200 100.0% 1,200 108 N.A. 1.6 Employers Re
- --------------- (1) $ Values converted at historic exchange rate existing at time of transaction Dillon, Read & Co. Inc. C - 17 SCOR U.S. Corporation Confidential VALUATION BASED ON ACQUISITION COMPARABLES (Dollars in millions, except per share data) SCOR US Multiple Range Per Share Value Figure --------------- --------------- Reference Low High Low High LTM Net Premiums (a) $237.4 1.1x 1.5x $14.37 $19.60 Latest Book Value (a) $15.03 1.0x 1.4x $15.03 $21.05 Average $14.70 - $20.32 - -------------------------------- (a) Fully diluted, as of September 30, 1995. Dillon, Read & Co. Inc. C - 18 SCOR U.S. Corporation Confidential ECONOMIC BOOK VALUE ANALYSIS (Dollars in millions, except per share data) 9/30/95 ----------- GAAP Equity $277.4 MM Goodwill (6.0) Investment Portfolio 0.5 EDP System and Leasehold Improvements (11.0) Deferred Income Tax Benefit (22.5) Market Adjustment for Debt 7.6 Net Present Value of: Prepaid Reinsurance (3.0) - (2.0) Discount on Reserves 41.4 - 54.2 Imbedded Value of Unearned Prem. 18.0 - 19.6 Reserve Deficiency (20.0) - 0 ------------------ Estimated Economic Book Value $281.4 - 316.8 MM ================== Primary Per Share $15.49 - 17.43 ================== Fully Diluted Per Share $15.24 - 17.08 ================== Dillon, Read & Co. Inc. C - 19 SCOR U.S. Corporation Confidential DISCOUNTED CASH FLOW ANALYSIS - - We have also reviewed a valuation of SCOR based on a discounted cash flow analysis - Discounts cumulative stream of dividends to the present - Assumes a terminal value based on a multiple of earnings in the future - - The discounted cash flow analysis, however, has certain shortcomings relative to the other analyses we have reviewed - Difficulty in projecting earnings beyond one year in the insurance industry - The majority of the value resides in the terminal value - - The key assumptions utilized were as follows: Terminal Year: 2000 Premiums Earned Growth beyond 1997: 7% Investment Income Growth beyond 1997: 8% Discount Rate: 11% - 13% Terminal Multiple of Earnings: 10.5x - 12.5x SAP Tax Rate: 20% Dillon, Read & Co. Inc. C - 20 SCOR U.S. Corporation Confidential
DISCOUNTED CASH FLOW VALUATION - PROJECTIONS (Dollars in millions) SCOR U.S. Projections Dillon Read Projections --------------------------------------------- ------------------------------------ 1995 1996 1997 1998 --- 2000 ---------- ----------- ---------- ----------- ----------- Net Premiums Earned $259.3 $279.5 $329.2 $352.2 $403.3 Net Investment Income 42.4 44.8 47.2 51.0 59.5 Pretax Income(a) 29.3 33.7 41.7 46.8 54.6 Net Income(b) 23.4 27.0 33.4 37.4 40.4 SAP Dividends 24.3 24.3 24.5 25.4 28.0 Growth in Net Premiums Earned 13.6% 7.8% 17.8% 7.0% 7.0% Growth in Investment Income 3.5 5.6 5.4 8.0 8.0 Loss Ratio 67.3 67.2 65.9 65.9 65.9 Commission Ratio 26.7 26.5 27.2 27.2 27.2 Expense Ratio 11.4 10.3 8.6 8.6 8.6 -------- -------- -------- -------- -------- Combined Ratio 105.3 104.0 101.7 101.7 101.7 Net Premiums/End of Year Surplus 1.1x 1.3x 1.3x 1.4x 1.4x
- -------------------------------- (a) Excludes interest expense. (b) Assures a 20% SAP Fox rate Dillon, Read & Co. Inc. C - 21 SCOR U.S. Corporation Confidential
DISCOUNTED CASH FLOW VALUATION (Dollars in millions) - - Per Share Valuation: Multiple of 2000 Earnings --------------------------------------------------------------------------- Discount Rate 10.5x 11.5x 12.5x ----------------- --------------------- ---------------------------- -------------------- 11.0% $15.88 $17.47 $19.05 12.0% 15.17 16.70 18.22 13.0% 14.48 15.95 17.43 - - Indicative Valuation Range: $14.48 - $19.05 per Share
Dillon, Read & Co. Inc. C - 22 SCOR U.S. Corporation Confidential
CLOSE OUT PREMIUM ANALYSIS Value Common Price of Shares % of Date Per Deal Aquired Shares Announced Target Name Acquiror Name Share ($mil) (mil) Acq. - --------- -------------------------- -------------------------- ------ ------- ------- ------- 12/28/94 Fleet Mortgage Group Inc Fleet Financial Group Inc $20.00 $188.1 9.4 19.0 % 09/08/94 Contel Cellular Inc GTE Corp 25.50 254.3 10.0 10.0 08/24/94 Castle & Cooke Homes Inc Dole Food Co Inc 15.75 81.5 5.6 17.0 07/28/94 Chemical Waste Management Inc WMX Technologies Inc 8.85 397.4 44.9 21.4 06/06/94 Ogden Projects Inc Ogden Corp 18.38 110.3 6.0 15.8 03/01/94 FoxMeyer Corp National Intergroup Inc 14.46 79.7 5.5 19.5 06/17/93 Hadson Energy Resources Corp Apache Corp 15.00 39.3 2.6 33.5 04/26/93 Southeastern Public Service Co DWG Corp 25.60 86.1 3.4 29.0 11/13/92 Brand Cos Inc Rust International Inc 18.75 185.0 9.9 44.0 08/17/92 PHLCORP Inc Leucadia National Corp 25.78 139.9 5.4 36.9 03/02/92 Grace Energy Corp WR Grace & Co 19.00 77.3 4.1 16.6 02/06/92 Spelling Entertainment Inc Charter Co(American Financial) 7.25 43.0 5.8 18.0 09/18/91 Arkla Exploration Co Arkla Inc 15.44 92.6 6.0 18.0 08/02/91 Envirosafe Services Inc EnviroSource Inc 11.69 16.8 1.4 37.4 07/28/91 Country Lake Foods Inc Land O' Lakes Inc 15.30 22.6 1.6 34.5 06/13/91 Weigh-Tronix Staveley Industries PLC 22.00 25.3 1.2 44.3 03/01/91 Metcalf & Eddy Cos Inc Air & Water Technologies Corp 19.25 51.0 2.7 18.0 01/25/91 Medical Management of America Investor Group 8.25 12.9 1.6 23.7 01/03/91 Ocean Drilling & Exploration Murphy Oil Corp 19.39 391.8 20.1 39.0 11/11/90 US WEST NewVector Group Inc US WEST Inc 45.03 437.5 9.7 19.0 10/23/90 ERC Environmental and Energy Ogden Corp 15.13 33.6 2.2 38.8 07/31/90 Freeport-McMoRan Oil and Gas Freeport McMoRan Inc 10.88 46.2 4.3 18.5 07/19/90 Caesars New Jersey Inc Ceasars World Inc 22.58 48.4 2.2 13.4 07/12/90 TVX Broadcast Group Inc Paramount Communications 9.50 61.4 6.5 21.0 07/06/90 Mack Trucks Inc Renault Vehicules Industriels 6.25 103.7 16.6 40.0 05/17/90 DST Systems Inc Kansas City Southern Inds Inc 15.85 39.1 2.2 11.5 05/08/90 ISS International Service Sys ISS International Service A/S 12.00 15.4 1.3 34.0 03/02/90 Shearson Lehman Brothers Hldgs American Express Co 12.90 360.0 27.9 39.0 01/24/90 Copperweld Corp Imetal SA 17.00 78.0 4.6 44.4 % Owned Premium Premium Premium After 1 Day 1 Week 4 Weeks Date Trans- Prior Prior Prior Announced action to Deal to Deal to Deal - --------- ------- -------- ------- ------- 12/28/94 100 % 19.4% 18.5% 18.5% 09/08/94 100 43.7% 37.8% 36.0% 08/24/94 100 35.4% 41.5% 55.5% 07/28/94 100 10.6% 8.9% 1.1% 06/06/94 100 5.8% 17.6% 20.5% 03/01/94 100 7.1% 9.1% 11.2% 06/17/93 100 26.3% 27.7% 25.0% 04/26/93 100 65.2% 63.8% 86.2% 11/13/92 100 4.9% 13.6% 4.9% 08/17/92 100 12.1% 15.2% 28.9% 03/02/92 100 24.6% 21.6% 7.8% 02/06/92 100 52.6% 45.0% 45.0% 09/18/91 100 8.4% 28.7% 30.0% 08/02/91 100 16.9% 11.3% -2.6% 07/25/91 100 39.1% 45.7% 53.0% 06/13/91 98 41.9% 41.9% 44.3% 03/01/91 100 22.2% 16.7% 24.2% 01/25/91 100 65.0% 65.0% 65.0% 01/03/91 100 14.1% 24.1% 9.2% 11/11/90 100 47.6% 58.0% 83.8% 10/23/90 100 37.5% 44.1% 44.1% 07/31/90 100 36.0% 42.6% 47.4% 07/19/90 100 40.0% 49.2% 44.5% 07/12/90 100 26.7% 90.0% 85.2% 07/06/90 100 19.0% 19.0% 21.8% 05/17/90 99 24.3% 40.9% 51.0% 05/08/90 100 54.8% 60.0% 60.0% 03/02/90 100 -0.8% 18.6% 7.5% 01/24/90 100 47.8% 41.7% 33.3% - ------------------------------------------------------- All Close outs: Average 29.2% 35.1% 35.9% Median 26.3% 37.8% 33.3% High 65.2% 90.0% 86.2% Low -0.8% 8.9% -2.6% - -------------------------------------------------------
Dillon, Read & Co. Inc. C-23 SCOR U.S. Corporation Confidential CLOSE OUT PREMIUM VALUATION SUR Implied Stock Applicable Offer Price Premium Price ----------- ---------------- ----------- 1 Day Prior to Transaction $11.125 29.2% $14.37 1 Week Prior to Transaction 11.500 35.1% 15.54 4 Weeks Prior to Transaction 11.500 35.9% 15.63 Valuation Based on Premium Analysis $14.37 - $15.63 Dillon, Read & Co. Inc. C - 24 SCOR U.S. Corporation Confidential SUMMARY OF VALUATION INDICATORS PRICE PER SHARE HIGH LOW Comparable Trading $18.98 $14.49 Comparable Acquisitions 20.32 14.70 Economic Book Value Analysis 17.08 15.24 Discounted Cash Flow 19.05 14.48 Premium Analysis 15.63 14.37 Dillon, Read & Co. Inc. C - 25 SCOR U.S. Corporation
Dillon, Read & Co. Inc. SCOR U.S. Corporation Analysis of Comparable Companies CURRENT TRADING STATISTICS (Dollars in millions) Broker Companies ------------------------------------------------------------------------- SCOR U.S. NAC Re PXRE Corp. Prudential Re Transatlantic Trenwick ----------- ----------- ----------- ---------------- --------------- ---------- Current Price as of 11/01/95 $15.250 $36.000 $25.125 $20.375 $68.000 $49.500 52 week High 15.750 39.000 29.750 20.750 70.375 53.000 % of Year High 96.8% 92.3% 84.5% 98.2% 96.6% 93.4% % of 52 week spectrum 93.9% 79.7% 47.1% 83.3% 89.5% 79.1% Number of shares Outstanding MM 18.2 17.6 8.7 50.0 22.9 6.5 Equity Value $277.0 $632.3 $219.2 $1,018.8 $1,560.1 $321.3 ====== ====== ====== ======== ======== ====== - ------------------------------------------------------------------------------------------------------------------------------------ Market Value of Equity to: Adjusted P/E 20.1 x 16.4 x 5.1 x 16.5 x 13.1 x 11.9 x 1995 E 16.6 14.7 5.2 15.7 13.2 13.1 1996 E 15.7 12.6 5.0 11.3 11.3 11.8 - ------------------------------------------------------------------------------------------------------------------------------------ Projected 5 year EPS Growth Rate NA 16.0 % 15.0 % NA 15.0 % 14.0 % Dividend Yield 1.3% 0.4% 2.4% 0.6% 0.6% 2.3% ROAE 5.5% 12.1% 25.0% 2.9% 14.5% 13.2% Adjusted ROAE 5.3% 10.2% 25.3% 2.5% 14.5% 13.2% - ------------------------------------------------------------------------------------------------------------------------------------ Market/Book Value 1.0 x 1.6 x 1.1 x 1.2 x 1.7 x 1.5 x Market/Adjusted Book Value 0.8 1.1 1.0 0.9 1.4 1.2 Market/Statutory Surplus 1.1 1.5 1.0 1.6 2.6 1.3 - ------------------------------------------------------------------------------------------------------------------------------------ Direct Companies ----------------------------------------------- American Re General Re National Re ---------------- ------------- ------------- Current Price as of 11/01/95 $38.375 $146.375 $33.625 52 week High 43.125 153.250 35.375 % of Year High 89.0% 95.5% 95.1% % of 52 week spectrum 73.4% 84.9% 86.7% Number of shares Outstanding MM 47.1 82.0 16.9 Equity Value $1,805.5 $12,006.9 $567.1 ======== ========= ====== - ---------------------------------------------------------------------------------------------- Market Value of Equity to: Adjusted P/E 14.8 x 16.3 x 14.5 x 1995 E 12.8 15.8 12.0 1996 E 10.7 14.1 10.7 - ---------------------------------------------------------------------------------------------- Projected 5 year EPS Growth Rate 15.0 % 14.0 % 13.0 % Dividend Yield 1.0% 1.3% 0.5% ROAE 14.2% 15.1% 7.9% Adjusted ROAE 14.0% 14.2% 12.2% - ---------------------------------------------------------------------------------------------- Market/Book Value 1.9 x 2.1 x 1.6 x Market/Adjusted Book Value 1.1 1.6 1.3 Market/Statutory Surplus 1.6 3.2 1.5 - ----------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ Dillon, Read & Co. Inc. SCOR U.S. Corporation Analysis of Comparable Companies - ------------------------------------------------------------------------------------------------------------------------------------ Comparative Analysis (Dollars in millions) Broker Companies -------------------------------------------------------------------------------- SCOR U.S. NAC Re PXRE Corp. Prudential Re Transatlantic Trenwick ----------- ----------- --------------- --------------- --------------- ------------- Size: Total Assets $1,187.6 $2,138.8 $183.6 $4,363.6 $3,674.9 $796.7 Book Value of Common 272.7 405.8 192.4 877.4 894.1 218.8 LTM Total Revenues 282.1 544.3 126.1 1,035.8 1,101.5 192.7 - ------------------------------------------------------------------------------------------------------------------------------------ Performance: LTM Pretax Return on Average Equity 6.6% 14.6% 36.5% 2.8% 17.4% 16.4% LTM Pretax Margin 6.0% 10.1% 49.6% 6.6% 12.9% 17.3% Net Revenues 3 Year C.A.G.R. 4.0% 21.3% 53.9% -0.8% 28.6% 21.3% Pretax Income 3 Year C.A.G.R. NM 242.5% NM -67.5% 18.7% -47.8% Direct Companies ------------------------------------------------- American Re General Re National Re ----------------- -------------- ------------- Size: Total Assets $7,071.4 $34,810.0 $1,641.6 Book Value of Common 953.1 5,708.0 346.0 LTM Total Revenues 1,809.2 5,067.0 340.0 - ---------------------------------------------------------------------------------------- Performance: LTM Pretax Return on Average 18.2% 18.5% 10.9% LTM Pretax Margin 8.8% 19.0% 10.3% Net Revenues 3 Year C.A.G.R. NA 6.4% 4.8% Pretax Income 3 Year C.A.G.R. NA 4.9% -18.4%
Credit Analysis (Dollars in millions) SCOR U.S. NAC Re PXRE Corp. Prudential Re Transatlantic Trenwick ----------- ----------- --------------- --------------- --------------- ------------ Total Assets $1,187.6 $2,138.8 $183.6 $4,363.6 $3,674.9 $796.7 LT Debt 101.0 200.0 69.7 19.3 0.0 103.5 Preferred Stock 0.0 0.0 0.0 0.0 0.0 0.0 Common Equity 272.7 405.8 192.4 877.4 894.1 218.8 ----- ----- ----- ----- ----- ----- Total capitalization $373.7 $605.8 $262.1 $896.7 $894.1 $322.3 ====== ====== ====== ====== ====== ====== LT Debt/Total capitalization 27.0% 33.0% 26.6% 2.2% 0.0% 32.1% - ------------------------------------------------------------------------------------------------------------------------------------ Net premiums/Statutory surplus 1.0 x 1.1 x 0.5 x 1.4 x 1.6 x 0.7 x Total assets/Common equity 4.4 x 5.3 x 1.0 x 5.0 x 4.1 x 3.6 x Total assets/Statutory surplus 4.9 4.9 0.9 6.8 6.2 3.3 - ------------------------------------------------------------------------------------------------------------------------------------ American Re General Re National Re ----------------- -------------- ------------- Total Assets $7,071.4 $34,810.0 $1,641.6 LT Debt 600.0 156.0 100.0 Preferred Stock 0.0 1.0 0.0 Common Equity 953.1 5,708.0 346.0 ----- ------- ----- Total capitalization $1,553.1 $5,865.0 $446.0 ======== ======== ====== LT Debt/Total capitalization 38.6% 2.7% 22.4% - ---------------------------------------------------------------------------------------- Net premiums/Statutory surplus 1.5 x 1.1 x 0.8 x Total assets/Common equity 7.4 x 6.1 x 4.7 x Total assets/Statutory surplus 6.3 9.2 4.2 - ----------------------------------------------------------------------------------------
Confidential
PREMIUMS PAID IN SELECTED U.S. REINSURANCE TRANSACTIONS ($ in millions) Announcement Aggregate Date Acquiree/Acquiror Deal Description Value - ------------ ---------------------------- --------------------------------- --------- 08/07/95 Piedmont Management Company/ Chartwell announced it was $85.4 Chartwell Re Corp. acquiring RECO for $85.4MM from Piedmont after Piedmont completed its spin-off of Lexington, an asset-manager. 01/06/95 Re Capital/ Zurich Centre Re acquired 131.6 Zurich Centre Re publicly-traded Re Capital in a public auction. (John Deere owned a 40% stake) 12/21/94 Constitutional Re/ Xerox Corp. sold its reinsurance 400.0 Exor America Inc. unit, Constitution Re., to Exor American Inc. (an affiliate of IFI) 10/25/93 American Skandia Life Hartford Life acquired the life 19.1 Reinsurance/Hartford Life reinsurance business of Skandia (ITT Corporation) (Sweden), which specializes in risk analysis and financial reinsurance . 09/09/93 American Royal Reinsurance Australian insurer QBE Ins. 59.0 Co. Group acquired Royal (Sub. of Royal Insurance)/QBE Insurance's U.S. reinsurance Insurance subsidiary. American Royal Rewrites property (50%), casualty (30%), and accident and health (20%) through intermediaries on a treaty and facultative basis. Price Paid as a Multiple of Acquiree -------------------------------------------- GAAP/Statutory --------------------------------- Announcement Net Book Net Market ROAE of Date Income Value Premiums Value Acquiree - ------------ -------- ------- ---------- -------- --------- 08/07/95 24.6x 1.1x 0.6x 1.3x N.A. 01/06/95 18.0 1.0 1.7 1.4 6.8% 12/21/94 N.A. 1.35 N.A. N.A. N.A. 10/25/93 N.A. N.A. N.A. N.A. N.M. N.M. 1.2 0.7 09/09/93 N.A. N.A. N.A. N.A. N.A. N.M. 1.09 142.6
- ------------------------- (1) Actual purchase is $201 MM for a 93% interest. Value is grossed up for multiple purposes. Dillon, Read & Co. Inc. 2 - 1 SCOR U.S. Corporation Confidential
PREMIUMS PAID IN SELECTED U.S. REINSURANCE TRANSACTIONS ($ in millions) Announcement Aggregate Date Acquiree/Acquiror Deal Description Value - ------------ ---------------------------- --------------------------------- --------- 07/29/93 Underwriters Reinsurance Co. Allegheny Corporation purchased 216.1(1) (Sub. of Underwriters Re the remaining 93% of Holding)/ Alleghany Corp. Underwriters Re, which had been in registration. Underwriters was owned by a consortium led by Goldman Sachs and Continental Corporation, and wrote multi- line insurance and specialized coverages. 03/22/93 Kemper Re/Lumbermens Mutual Kemper swapped Kemper Re and its 610.2 50% interest in a risk management company to Lumbermens in exchange for Lumbermens 35% stake in Kemper. 06/09/92 American Re-Insurance Corp. A KKR Fund purchased American 1,429.5(2) (Sub. of Aetna) Re, the third largest P&C American Re Corp. (Formed by Reinsurance Company in the U.S., KKR.) a direct writer, from Aetna. 05/14/93 Skandia America Reinsurance Centre Reinsurance Holdings, N.A. Corp/ Bermudan subsidiary of Zurich Zurich Versicherungs- Versicherungs-Gesellschaft, has Gesellschaft acquired the reinsurance business of Skandia America Reinsurance (SARC) of the US from Skandia. Terms were not disclosed. SARC conducts non life reinsurance business in the US, Canada and Bermuda. Price Paid as a Multiple of Acquiree -------------------------------------------- GAAP/Statutory --------------------------------- Announcement Net Book Net Market ROAE of Date Income Value Premiums Value Acquiree - ------------ -------- ------- ---------- -------- --------- 07/29/93 N.A. 1.41 N.A. N.A. 19.04 6.4x 1.20 153.2 03/22/93 N.M. 1.8 N.A. N.A. N.M. N.M. 1.4 N.A. 06/09/92 9.6 1.2 142.3 N.A. 17.15 9.1 1.9 169.6 05/14/93 N.A. N.A. N.A. N.A. N.A.
- -------------------------------- (2) GAAP financial data for multiples is as of 12/31/91. Dillon, Read & Co. Inc. 2 - 2 SCOR U.S. Corporation Confidential
PREMIUMS PAID IN SELECTED U.S. REINSURANCE TRANSACTIONS ($ in millions) Announcement Aggregate Date Acquiree/Acquiror Deal Description Value - ------------ ---------------------------- --------------------------------- --------- 03/20/92 Belvedere Corp./ Norwegian Unistorebrand 37.4(3) Christiana General Insurance purchased US treaty property & (Sub. of UNI Storebrand AS>) casualty reinsurer Belvedere Corp. 02/18/92 Global Insurance Company/ Lawrence acquired this reinsurer 8.9 Lawrence Insurance Group of small/medium sized insurance companies, which additionally has small primary operations. 01/10/92 Chartwell Re Corp. Chartwell, a property casualty 71.0 (Sub. of NWNL Companies)/ reinsurance subsidiary of NWNL, Wand Partners/Michigan Mutual was sold to an investor group led by Wand Partners, an SG Warburg affiliate, and Michigan Mutual. 09/17/91 Mony Re Inc./ Folksamgruppen has acquired Mony 21.0 Folksamgruppen Re, a US life reinsurer, from Mutual of NY. 05/17/90 Metropolitan Reinsurance Skandia, via its US subsidiary, 65.0 Company/ acquired the Reinsurance Skandia AB Business Unit from Metropolitan Reinsurance Company, subsidiary of Metropolitan Life Insurance. 08/29/89 National Reinsurance Corp./ National Re, a multi-line P&C 395.1 Robert M. Bass & Acadia treaty reinsurer, was sold to a management and Bass Acadia Fund partnership. National Re had been owned by Lincoln National. 08/03/88 General Reinsurance/Insurance General Re sold its life 300.0 Investment Associates reinsurance subsidiary to an investment group. Price Paid as a Multiple of Acquiree -------------------------------------------- GAAP/Statutory --------------------------------- Announcement Net Book Net Market ROAE of Date Income Value Premiums Value Acquiree - ------------ -------- ------- ---------- -------- --------- 03/20/92 18.1 0.79 136.2 1.58x 4.50 19.4 1.12 N.A. 02/18/92 N.A. 0.80 N.A. N.A. N.A. 9.6 0.67 39.8 01/10/92 8.9 1.08 N.A. N.A. N.A. 7.7 1.31 389.3 09/17/91 N.A. N.A. N.A. N.A. N.A. 05/17/90 N.A. N.A. N.A. N.A. N.A. 08/29/89 10.4 1.41 N.A. N.A. 13.4 11.7 1.98 140.6 16.9 08/03/88 11.0 0.9 N.A. N.A. 8.7 9.4 2.0 20.3 - -------------------------------- (3) Actual purchase is $16.9MM for remaining 45.2% interest. Value is grossed up for multiple purposes.
Dillon, Read & Co. Inc. 2 - 3 SCOR U.S. Corporation Confidential
SUMMARY OF SELECTED EUROPEAN REINSURANCE TRANSACTIONS (LCL/$MILLIONS, EXCEPT LIT BILLIONS (1)) Implied Announcement % Price for Net Net Book Date Acquiree/Acquiror Deal Description Deal Size Acquired 100% Premiums Income Value - ------------ ------------------- ------------------------------- --------- -------- --------- -------- ------ ----- 09/23/94 Cologne Re/General General Re and Colonia formed a DM 902 50.1% 1,800.0 $4,073 $131 $695 Re new company that acquired 75% of the common and 30% of the preferred shares (66% economic interest) in Cologne Re. General Re contributed $884MM for the class of shares of the new company while Colonia contributed the Cologne Re shares in exchange for the Class A shares. 09/02/93 Francaise SCOR has acquired a 20% stake FF 370.0 20.0% 1,850.0 665.6 143.0 1,798.3 d'Assurance pour in COFACE from UAP and Caisse USD 67.0 335.0 le Commerce des Depots et Consignations, Exterieur SA who hold 5% and 15%, (COFACE)/ respectively. Under the terms Societe of the deal, the sellers Commerciale de exchanged 3 of their shares for Reassurance (SCOR) every 31 SCOR shares, which were valued at FF 600. COFACE insures certain risks for the French Government including political, catastrophic and monetary risks, certain organized commercial risks, political risks in connection with overseas investment by exporters, and exchange guarantees. The company has an international spread. 25/11/91 Lincoln European Mapfre of Spain has agreed to USD 11.0 96.6% 11.4 17.1 (1.8) 14.0 Reinsurance buy 96.6% of Lincoln European BFR 359.1 371.8 611.0 (66.0) 499.0 Company/ Reinsurance Company, the Mapfre SA Brussels-based arm of Lincoln National Corporation of the US. The company underwrites property and casualty lines, the majority of which is proportional reinsurance. 16/11/91 Nederlandse ING has bid for the remaining DF 1,113 41.0% 276 1,085.0 27.8 353 Reassurantie Groep 41% of shares in NRG (leading ($62) ($150) ($592) (NRG)/ Dutch reinsurer) which it does Internationale not already own. ING will pay Nederlanden Groep DFl 113MM to minority (ING) shareholders and make a capital contribution to NRG of DFl 500MM. Price/ --------------------------- Announcement Net Net Book Date Premiums Income Value - ------------ -------- ------ ----- 09/23/94 0.4x 13.7x 2.6x 09/02/93 2.8 12.9 1.0 25/11/91 0.7 N.M. 0.8 16/11/91 0.25x 9.93x 0.78x
_________ (1) $ Values converted at historic exchange rate existing at time of transaction. Dillon, Read & Co. Inc. 2 - 4 SCOR U.S. Corporation Confidential
SUMMARY OF SELECTED EUROPEAN REINSURANCE TRANSACTIONS (LCL/$MILLIONS, EXCEPT LIT BILLIONS (1)) Implied Announcement % Price for Net Net Book Date Acquiree/Acquiror Deal Description Deal Size Acquired 100% Premiums Income Value - ------------ ------------------- ------------------------------- --------- -------- --------- -------- ------ ----- 17/09/91 Pinnacle CE Health has sold Pinnacle USD 63.7 100.0% 63.7 -- 8.0 53.7 Reinsurance Co. reinsurance to Centre STG 36.8 36.8 -- 4.6 31.0 Ltd/ Reinsurance, subsidiary of Zurich Zurich Insurance. To allow Versicherungs- Centre Re to buy Pinnacle's Gesellschaft business and not the whole company, Pinnacle was first sold to Vertex and then transferred to Centre Re. 16/05/91 Societe Anonyme AGF Re is to merge with SAFR, FF 463 100.0% 463 N.A. N.A. 629 Francaise de which is 27% controlled by AGR ($78) ($107) Reassurance/ Group, to form the second AGF Re largest reinsurance company in France. As the merger will not give AGF a majority stake in SAFR's capital, it will remain independent. The deal is to be carried out via a capital raising operation on the part of SAFR, which then absorbed AGF Re through a share swap. 17/01/91 Hamburger Hannover Ruckversicherungs, DM N.A. N.A. N.A. N.A. N.A. N.A. Internationale/ subsidiary of HDI, acquired the Haftlichtverbrand reinsurance business of der Deutschen Hamburger Internationale Industrie VAG Rucksversicherung, from Wolksfursoge Holding AG. Terms were not disclosed. 10/07/90 Legal & General Legal and General sold Victory GBP 122 100.0% 122 173.7 N.A. N.A. (Victory Re)/NRG/ Reinsurance to Netherlands USD ($227) ($227) Nationale Reinsurance Group (NRG) for Nederlanden B.P.122MM. The deal made NRG the 11th biggest reinsurer. This transaction comprises proceeds in cash of GBP 122MM for NGR and the release of GBP 18MM of further capital resources held within L&G subsidiary companies. Price/ --------------------------- Announcement Net Net Book Date Premiums Income Value - ------------ -------- ------ ----- 17/09/91 -- 8.0 1.2 16/05/91 N.A. N.A. .74 17/01/91 N.A. N.A. N.A. 10/07/90 0.70x N.A. N.A.
_________ (1) $ Values converted at historic exchange rate existing at time of transaction. Dillon, Read & Co. Inc. 2 - 5 SCOR U.S. Corporation Confidential
SUMMARY OF SELECTED EUROPEAN REINSURANCE TRANSACTIONS (LCL/$MILLIONS, EXCEPT LIT BILLIONS (1)) Implied Announcement % Price for Net Net Book Date Acquiree/Acquiror Deal Description Deal Size Acquired 100% Premiums Income Value - ------------ ------------------- ------------------------------- --------- -------- --------- -------- ------ ----- 22/01/90 Atersforsakerings/ Wasa AB has acquired SEK 34.0 100.0% 34.0 -- -- -- Wasa Forsakring AB Aterforsakrings AB, Swedish USD 5.6 5.6 reinsurance company, from Skandia, Trygg-Hansa and Folksam. 28/07/89 Societe SCOR is to merge with UAP FF -- 100.0% -- 5,857.4 238.1 2,761.5 Commerciale de Reassurance. The merger will Reassurance/ be executed through a paper bid Union des for SCOR & UAP Re from Assurances de Compagnie Generales de Paris Voitures, a shell listed company in which UAP and Assurances Generales de France each own 40%. 01/05/89 Deutsche Continental Corporation of the DEM -- 100.0% -- 198.8 2.6 63.5 Continental US has sold its German USD 111.7 1.5 35.7 Ruecksversi- subsidiary for an undisclosed cherung/ amount. Societe Commerciale de Reassurance 24/09/88 Copenhagen Re/ The acquisition was made by FFR 560.0 85.0% 658.8 85.5 (0.6) 100.4 Groupama creating a reinsurance holding USD 83.1 97.8 12.4 (0.1) 14.6 co in which Groupama has an 85% stake. The holding co will have capital of USD 100MM of which Copenhagen Re (parent company) will contribute USD 15MM. 26/06/88 Imperial Chemicals ICI has agreed to sell its STG 10.0 100.0% 10.0 12.0 2.0 -- Reinsurance/ reinsurance subsidiary to QBE. USD 17.3 17.3 20.8 3.4 -- QBE Insurance Group Price/ --------------------------- Announcement Net Net Book Date Premiums Income Value - ------------ -------- ------ ----- 22/01/90 -- -- -- 28/07/89 -- -- -- 01/05/89 -- -- -- 24/09/88 7.7 N.M. 6.6 26/06/88 0.8 5.1 --
_________ (1) $ Values converted at historic exchange rate existing at time of transaction. Dillon, Read & Co. Inc. 2 - 6 SCOR U.S. Corporation Confidential
SUMMARY OF SELECTED EUROPEAN REINSURANCE TRANSACTIONS (LCL/$MILLIONS, EXCEPT LIT BILLIONS (1)) Implied Announcement % Price for Net Net Book Date Acquiree/Acquiror Deal Description Deal Size Acquired 100% Premiums Income Value - ------------ ------------------- ------------------------------- --------- -------- --------- -------- ------ ----- 08/05/88 Skandia Skandia acquired the SEK3,600.0 54.0% 6,666.7 7,609.0 438.0 2,342.0 International outstanding shares of Skandia USD 556.8 1,031.1 Holding AB/ International Holding Skandia AB reinsurance concern spun off 3 years ago. The offer to Skandia International shareholders is SEK 60 in cash and 1 Skandia Insurance share. The new shares issued will represent 22.4% of its expanded equity of 77.3MM shares. 04/01/88 Vittoria SCOR acquired practically the USD 121.2 100.0% 121.2 117.2 1.4 17.3 Riassicurazioni/ only large Italian reinsurer. Societe Through the sale the divestor Commerciale de Toro Assicurazioni recentered Reassurance its activities on direct insurance. 02/10/87 Baltica Nordisk- Baltica, a Danish insurance DKR 1,200 100.0% 1,200 $109 754 Re/ group, sold Baltica-Nordiske, ($173) ($173) ($109) N.A. ($109) Employers Re its reinsurance business, to Employers Re, a subsidiary of General Electric Company, based in Kansas. The acquisition does not include Baltica-Skandinavia (UK). Price/ --------------------------- Announcement Net Net Book Date Premiums Income Value - ------------ -------- ------ ----- 08/05/88 0.9 15.2 2.8 04/01/88 1.0 N.M. N.M. 02/10/87 108 N.A. 1.59
_________ (1) $ Values converted at historic exchange rate existing at time of transaction. Dillon, Read & Co. Inc. 2 - 7 SCOR U.S. Corporation
- ------------------------------------------------------------------------------------------------------------------------------ Dillon, Read & Co., Inc. SCOR U.S CORP. Selected Minority Close Out Transactions - ------------------------------------------------------------------------------------------------------------------------------ Value Common % Owned Price of Shares % of After Date Per Deal Aquired Shares Trans- Announced Target Name Acquiror Name Share ($mil) (mil) Acq. action - --------- -------------------------- -------------------------- -------- ------- ------- ------ ------- 12/28/94 Fleet Mortgage Group Inc Fleet Financial Group Inc $20.00 $188.1 9.4 19.0 % 100 % 09/08/94 Contel Cellular Inc GTE Corp 25.50 254.3 10.0 10.0 100 08/24/94 Castle & Cooke Home Inc Dole Food Co Inc 15.75 81.5 5.6 17.0 100 07/28/94 Chemical Waste Management Inc WMX Technologies Inc 8.85 397.4 44.9 21.4 100 06/06/94 Ogden Projects Inc Ogden Corp 18.38 110.3 6.0 15.8 100 03/01/94 FoxMeyer Corp National Intergroup Inc 14.46 79.7 5.5 19.5 100 06/17/93 Hadson Energy Resources Corp Apache Corp 15.00 39.3 2.6 33.5 100 04/26/93 Southeastern Public Service Co DWG Corp 25.60 86.1 3.4 29.0 100 11/13/92 Brand Cos Inc Rust International Inc 18.75 185.0 9.9 44.0 100 08/17/92 PHLCORP Inc Leucadia National Corp 25.78 139.9 5.4 36.9 100 03/02/92 Grace Energy Corp WR Grace & Co 19.00 77.3 4.1 16.6 100 02/06/92 Spelling Entertainment Inc Charter Co(American Financial) 7.25 43.0 5.8 18.0 100 09/18/91 Arkla Exploration Co Arkla Inc 15.44 92.6 6.0 18.0 100 08/02/91 Envirosafe Services Inc EnviroSource Inc 11.69 16.8 1.4 37.4 100 07/25/91 Country Lake Food Inc Land O' Lakes Inc 15.30 22.6 1.6 34.5 100 06/13/91 Weigh-Tronix Staveley Industries PLC 22.00 25.3 1.2 44.3 98 03/01/91 Metcalf & Eddy Cos Inc Air & Water Technologies Corp 19.25 51.0 2.7 18.0 100 01/25/91 Medical Management of America Investor Group 8.25 12.9 1.6 23.7 100 01/03/91 Ocean Drilling & Exploration Murphy Oil Corp 19.39 391.8 20.1 39.0 100 11/11/90 US WEST NewVector Group Inc US West Inc 45.03 437.5 9.7 19.0 100 10/23/90 ERC Environmental and Energy Ogden Corp 15.13 33.6 2.2 38.8 100 07/31/90 Freeport-McMoRan Oil and Gas Freeport McMoRan Inc 10.88 46.2 4.3 18.5 100 07/19/90 Caesars New Jersey Inc Caesars World Inc 22.58 48.4 2.2 13.4 100 07/12/90 TVX Broadcast Group Inc Paramount Communications 9.50 61.4 6.5 21.0 100 07/06/90 Mack Trucks Inc Renault Vehicules Industriels 6.25 103.7 16.6 40.0 100 05/17/90 DST Systems Inc Kansas City Southern Inds Inc 15.85 39.1 2.2 11.5 99 05/08/90 ISS International Service Sys ISS International Service A/S 12.00 15.4 1.3 34.0 100 03/02/90 Shearson Lehman Brothers Hldgs American Express Co 12.90 360.0 27.9 39.0 100 01/24/90 Copperweld Corp Imetal SA 17.00 78.0 4.6 44.4 100
Premium Premium Premium 1 Day 1 Week 4 Weeks Date Prior Prior Prior Announced to Deal to Deal to Deal - --------- -------- ------- ------- 12/28/94 19.4% 18.5% 18.5% 09/28/94 43.7% 37.8% 36.0% 08/24/94 35.4% 41.5% 55.5% 07/28/94 10.6% 8.9% 1.1% 06/06/94 5.8% 17.6% 20.5% 03/01/94 7.1% 9.1% 11.2% 06/17/93 26.3% 27.7% 25.0% 04/26/93 65.2% 63.8% 86.2% 11/13/92 4.9% 13.6% 4.9% 08/17/92 12.1% 15.2% 28.9% 03/02/92 24.6% 21.6% 7.8% 02/06/92 52.6% 45.0% 45.0% 09/18/91 8.4% 28.7% 30.0% 08/02/91 16.9% 11.3% -2.6% 07/25/91 39.1% 45.7% 53.0% 06/13/91 41.9% 41.9% 44.3% 03/01/91 22.2% 16.7% 24.2% 01/25/91 65.0% 65.0% 65.0% 01/03/91 14.1% 24.1% 9.2% 11/11/90 47.6% 58.0% 83.8% 10/23/90 37.5% 44.1% 44.1% 07/31/90 36.0% 42.6% 47.4% 07/19/90 40.0% 49.2% 44.5% 07/12/90 26.7% 90.0% 85.2% 07/06/90 19.0% 19.0% 21.8% 05/17/90 24.3% 40.9% 51.0% 05/08/90 54.8% 60.0% 60.0% 03/02/90 -0.8% 18.6% 7.5% 01/24/90 47.8% 41.7% 33.3% - ------------------------------------------------------- All Close Outs: Average 29.2% 35.1% 35.9% Median 26.3% 37.8% 33.3% High 65.2% 90.0% 86.2% Low -0.8% 8.9% -2.6% - ------------------------------------------------------- - ------------------------------------------------------- Purchase 15-25% Average 27.8% 35.6% 38.1% Median 24.6% 28.7% 30.0% High 65.0% 90.0% 85.2% Low 5.8% 8.9% 1.1% - -------------------------------------------------------
DILLON, READ & CO. INC. 11/02/95 - --------------------------------------------------------------------------------------------------------------------- Preliminary & Confidential SCOR U.S. CORPORATION Discounted Cash Flow Analysis (Dollars in millions) - --------------------------------------------------------------------------------------------------------------------- Actual Company Projections ------ ------------------- INCOME PROJECTIONS 1992 1993 1994 1995 1996 1997 -------- -------- ------- -------- ------- ------- Revenues: Net Premiums Earned $192.1 $236.1 $228.2 $259.3 $279.5 $329.2 Net Investment Income 42.9 42.0 41.0 42.4 44.8 47.2 Net Investment Gains/(Losses) 15.0 12.9 1.0 0.7 -- -- -------- -------- ------- -------- ------- ------- Net Revenues 250.0 291.0 270.2 302.4 324.3 376.4 Losses and Expenses: Losses and Expenses, net 160.5 156.3 191.3 174.4 187.7 216.8 Commissions, net 56.0 61.3 59.4 69.1 74.1 89.5 Other Operating Expenses 23.9 26.4 26.0 29.0 29.0 30.0 Other 4.3 4.1 4.0 0.6 (0.2) (1.6) Interest Expense 4.6 8.0 8.9 -- -- -- -------- -------- ------- -------- ------- ------- Pretax Income 1995-2004 0.6 34.9 (19.5) 29.3 33.7 41.7 Income Taxes 20.0% (3.8) 7.0 (11.3) 5.9 6.7 8.3 -------- -------- ------- -------- ------- ------- Net Income from Continuing Ops. $4.4 $27.9 ($8.2) $23.4 $27.0 $33.4 ======== ======== ======= ======== ======= ======= Extraordinary Items -- -- 0.4 -- -- -- Cum. Effect of Accting Change 2.8 (2.6) -- -- -- -- -------- -------- ------- -------- ------- ------- Net Income $7.2 $25.3 ($7.8) $23.4 $27.0 $33.4 ======== ======== ======= ======== ======= ======= Annual Growth -87.5% 249.4% -131.0% -398.8% 15.1% 23.6% Less: Preferred Dividends -- -- -- -- -- -- Net Income to Common $7.2 $25.3 ($7.8) $23.4 $27.0 $33.4 ======== ======== ======= ======== ======= ======= - --------------------------------------------------------------------------------------------------------------------- Growth in Net Premiums Earned 22.91% -3.31% 13.61% 7.79% 17.77% Growth in Investment Income -1.95% -2.51% 3.51% 5.66% 5.35% Loss Ratio 83.6% 66.2% 83.8% 67.3% 67.2% 65.9% Commission Ratio 29.1% 26.0% 26.0% 26.7% 26.5% 27.2% Expense Ratio 14.7% 12.9% 13.2% 11.4% 10.3% 8.6% Combined Ratio 127.5% 105.1% 123.0% 105.3% 104.0% 101.7% Return on Average Equity 9.6% 11.1% 13.4% - --------------------------------------------------------------------------------------------------------------------- Dividends ($24.3) ($24.3) ($24.5) Dividend Payout Ratio 103.9% 89.9% 73.5% Retained Earnings ($0.9) $2.7 $8.8 Surplus: Beginning Statutory Surplus $243.4 $242.5 $245.2 Plus: Retained Earnings (0.9) 2.7 8.8 Other -- -- -- -------- ------- ------- Ending Statutory Surplus $242.5 $245.2 $254.1 ======== ======= ======= Average Surplus $243.0 $243.9 $249.7 10% of Beginning Surplus 24.3 24.3 24.5 Minimum EOY Surplus (Multiple of Net Premiums) 1.7 x $152.5 $164.4 $193.6 Total Dividends Allowable 105.1 85.0 Net Premiums/End of Year Surplus 1.1 x 1.3 x Projected --------- INCOME PROJECTIONS 1998 1999 2000 2001 2002 2003 2004 ------- ------- ------- --------- ------- ------- ------- Revenues: Net Premiums Earned $352.2 $376.9 $403.3 $431.5 $461.7 $494.0 $528.6 Net Investment Income 51.0 55.1 59.5 64.3 69.4 74.9 80.9 Net Investment Gains/(Losses) -- -- -- -- -- -- -- ------- ------- ------- --------- ------- ------- ------- Net Revenues 403.2 432.0 462.8 495.7 531.1 569.0 609.5 Losses and Expenses: Losses and Expenses, net 232.0 248.2 265.6 284.2 304.0 325.3 348.1 Commissions, net 95.8 102.5 109.7 117.3 125.5 134.3 143.7 Other Operating Expenses 30.4 32.6 34.8 37.3 39.9 42.7 45.7 Other (1.7) (1.8) (1.9) (2.1) (2.2) (2.4) (2.5) Interest Expense -- -- -- -- -- -- -- ------- ------- ------- --------- ------- ------- ------- Pretax Income 1995-2004 46.8 50.5 54.6 59.1 63.8 69.0 74.6 Income Taxes 20.0% 9.4 10.1 10.9 11.8 12.8 13.8 14.9 ------- ------- ------- --------- ------- ------- ------- Net Income from Continuing Ops. $37.4 $40.4 $43.7 $47.2 $51.1 $55.2 $59.7 ======= ======= ======= ========= ======= ======= ======= Extraordinary Items -- -- -- -- -- -- -- Cum. Effect of Accting Change -- -- -- -- -- -- -- ------- ------- ------- --------- ------- ------- ------- Net Income $37.4 $40.4 $43.7 $47.2 $51.1 $55.2 $59.7 ======= ======= ======= ========= ======= ======= ======= Annual Growth 12.2% 8.1% 8.1% 8.1% 8.1% 8.1% 8.1% Less: Preferred Dividends -- -- -- -- -- -- -- Net Income to Common $37.4 $40.4 $43.7 $47.2 $51.1 $55.2 $59.7 ======= ======= ======= ========= ======= ======= ======= - ---------------------------------------------------------------------------------------------------------------------------------- Growth in Net Premiums Earned 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% Growth in Investment Income 8.0% 8.0% 8.0% 8.0% 8.0% 8.0% 8.0% Loss Ratio 65.9% 65.9% 65.9% 65.9% 65.9% 65.9% 65.9% Commission Ratio 27.2% 27.2% 27.2% 27.2% 27.2% 27.2% 27.2% Expense Ratio 8.6% 8.6% 8.6% 8.6% 8.6% 8.6% 8.6% Combined Ratio 101.7% 101.7% 101.7% 101.7% 101.7% 101.7% 101.7% Return on Average Equity 14.4% 14.8% 15.2% 15.5% 15.8% 16.0% 16.3% - ---------------------------------------------------------------------------------------------------------------------------------- Dividends ($25.4) ($26.6) ($28.0) ($29.6) ($31.3) ($33.3) ($35.5) Dividend Payout Ratio 67.9% 65.8% 64.0% 62.6% 61.4% 60.3% 59.5% Retained Earnings $12.0 $13.8 $15.7 $17.7 $19.7 $21.9 $24.2 Surplus: Beginning Statutory Surplus $254.1 $266.1 $279.9 $295.6 $313.3 $333.0 $354.9 Plus: Retained Earnings 12.0 13.8 15.7 17.7 19.7 21.9 24.2 Other -- -- -- -- -- -- -- ------- ------- ------- --------- ------- ------- ------- Ending Statutory Surplus $266.1 $279.9 $295.6 $313.3 $333.0 $354.9 $379.1 ======= ======= ======= ========= ======= ======= ======= Average Surplus $260.1 $273.0 $287.8 $304.5 $323.2 $344.0 $367.0 10% of Beginning Surplus 25.4 26.6 28.0 29.6 31.3 33.3 35.5 Minimum EOY Surplus (Multiple of Net Premiums) $207.2 $221.7 $237.2 $253.8 $271.6 $290.6 $310.9 Total Dividends Allowable 84.3 84.8 86.4 89.1 92.8 97.6 103.7 Net Premiums/End of Year Surplus 1.3 x 1.3 x 1.4 x 1.4 x 1.4 x 1.4 x 1.4 x - ----------------------------------------------------------------------------------------------------------------------------------
DILLON, READ & CO. INC. - ----------------------------------------------------------------------------------------------------------------------------------- Preliminary & Confidential SCOR U.S. CORPORATION Discounted Cash Flow Analysis (Dollars in millions) - ----------------------------------------------------------------------------------------------------------------------------------- PRESENT VALUE OF DIVIDENDS - -------------------------- ------------------------------------------------------------ Discount 1996 1997 1998 1999 2000 NPV Value of Dividends Discounted to Rate ---------- ----------- --------- ---------- ------------ 1/1/96 at Equity Discount Rates of: -------- - ------------------------------------------ 11.0% $21.8 $19.9 $18.6 $17.5 $16.6 12.0% 21.7 19.6 18.1 16.9 15.9 13.0% 21.5 19.2 17.6 16.3 15.2 NPV Value of Cumulative Dividends Disc. 1/1/96 at Equity Discount Rates of: - ------------------------------------------ 11.0% $21.8 $41.8 $60.3 $77.9 $94.5 12.0% 21.7 41.2 59.3 76.2 92.1 13.0% 21.5 40.7 58.3 74.6 89.8 - ----------------------------------------------------------------------------------------------------------------------------------- NPV Value of Dividends and Equity Disc. Discount P/E 1996 1997 1998 1999 2000 to 1/1/96 at Equity Discount Rates of: Rate Multiple ---- ---- ---- ---- ---- - ------------------------------------------ --------- -------- 11.0% 10.5 x $305.1 $357.3 $379.2 $388.3 $396.8 11.0% 11.5 332.1 387.3 409.5 417.9 425.6 11.0% 12.5 359.1 417.4 439.9 447.5 454.4 UNLEVERED PRESENT VALUE 12.0% 10.5 x $305.0 $353.9 $372.4 $378.4 $383.8 - ----------------------- 12.0% 11.5 331.9 383.7 402.3 407.2 411.5 12.0% 12.5 358.9 413.5 432.1 436.0 439.3 13.0% 10.5 x $304.8 $350.6 $365.9 $368.9 $371.3 13.0% 11.5 331.7 380.1 395.2 396.9 398.1 13.0% 12.5 358.7 409.6 424.5 424.9 424.9 ---------------------------------------------------- NPV per Share of Dividends and Equity Disc. Discount P/E 1996 1997 1998 1999 2000 to 1/1/96 at Equity Discount Rates of: Rate Multiple ---- ---- ---- ---- ---- - ------------------------------------------ --------- -------- Net Debt (9/30/95) $108.3 11.0% 10.5 x $196.9 $249.0 $270.9 $280.1 $288.5 11.0% 11.5 223.9 279.1 301.2 309.6 317.3 11.0% 12.5 250.8 309.1 331.6 339.2 346.1 PRESENT VALUE OF EQUITY 12.0% 10.5 x $196.7 $245.6 $264.2 $270.2 $275.5 - ----------------------- 12.0% 11.5 223.7 275.4 294.0 298.9 303.3 12.0% 12.5 250.6 305.2 323.8 327.7 331.0 13.0% 10.5 x $196.5 $242.3 $257.6 $260.6 $263.0 13.0% 11.5 223.5 271.9 286.9 288.6 289.8 13.0% 12.5 250.4 301.4 316.2 316.6 316.6 NPV per Share of Dividends and Equity Disc. Discount P/E 1996 1997 1998 1999 2000 to 1/1/96 at Equity Discount Rates of: Rate Multiple ---- ---- ---- ---- ---- - ------------------------------------------- -------- -------- Shares (MM) 18.2 11.0% 10.5 x $10.84 $13.71 $14.91 $15.42 $15.88 11.0% 11.5 12.32 15.36 16.58 17.05 17.47 11.0% 12.5 13.81 17.02 18.26 18.67 19.05 PV PER SHARE 12.0% 10.5 x $10.83 $13.52 $14.54 $14.87 $15.17 - -------------------------------- 12.0% 11.5 12.31 15.16 16.19 16.46 16.70 12.0% 12.5 13.80 16.80 17.83 18.04 18.22 13.0% 10.5 x $10.82 $13.34 $14.18 $14.35 $14.48 13.0% 11.5 12.30 14.97 15.80 15.89 15.95 13.0% 12.5 13.79 16.59 17.41 17.43 17.43 PRESENT VALUE OF DIVIDENDS As of Year - -------------------------- Discount 2001 2002 2003 2004 NPV Value of Dividends Discounted to Rate ------------ ------------- ------------- ------------ 1/1/96 at Equity Discount Rates of: -------- - ------------------------------------------ 11.0% $15.8 $15.1 $14.5 $13.9 12.0% 15.0 14.2 13.5 12.8 13.0% 14.2 13.3 12.5 11.8 NPV Value of Cumulative Dividends Disc. 1/1/96 at Equity Discount Rates of: - ------------------------------------------ 11.0% $110.3 $125.4 $139.8 $153.7 12.0% 107.1 121.2 134.7 147.5 13.0% 104.0 117.3 129.8 141.6 - ----------------------------------------------------------------------------------------------------------------------------------- Assuming Sale at the End of --------------------------- NPV Value of Dividends and Equity Disc. Discount P/E 2001 2002 2003 2004 to 1/1/96 at Equity Discount Rates of: Rate Multiple ---- ---- ---- ---- - ------------------------------------------ --------- -------- 11.0% 10.5 x $404.7 $412.0 $419.0 $425.5 11.0% 11.5 432.7 439.3 445.6 451.4 11.0% 12.5 460.7 466.6 472.1 477.3 UNLEVERED PRESENT VALUE 12.0% 10.5 x $388.5 $392.9 $396.8 $400.5 - ----------------------- 12.0% 11.5 415.4 418.8 421.8 424.6 12.0% 12.5 442.2 444.6 446.6 448.7 13.0% 10.5 x $373.2 $374.9 $376.2 $377.3 13.0% 11.5 398.9 399.4 399.6 399.7 13.0% 12.5 424.5 423.9 423.1 422.2 Assuming Sale at the End of NPV per Share of Dividends and Equity Disc. Discount P/E 2001 2002 2003 2004 to 1/1/96 at Equity Discount Rates of: Rate Multiple - ------------------------------------------ --------- -------- Net Debt (9/30/95) $108.3 11.0% 10.5 x $296.4 $303.8 $310.7 $317.2 11.0% 11.5 324.4 331.1 337.3 343.1 11.0% 12.5 352.5 358.4 363.9 369.0 PRESENT VALUE OF EQUITY 12.0% 10.5 x $280.3 $284.6 $288.6 $292.2 - ----------------------- 12.0% 11.5 307.1 310.5 313.5 316.3 12.0% 12.5 333.9 336.4 338.5 340.4 13.0% 10.5 x $265.0 $266.6 $267.9 $269.0 13.0% 11.5 290.6 291.1 291.4 291.5 13.0% 12.5 316.3 315.6 314.8 313.9 Assuming Sale at the End of --------------------------- NPV per Share of Dividends and Equity Disc. Discount P/E 2001 2002 2003 2004 to 1/1/96 at Equity Discount Rates of: Rate Multiple ---- ---- ---- ---- - ------------------------------------------- -------- -------- Shares (MM) 18.2 11.0% 10.5 x $16.32 $16.72 $17.10 $17.47 11.0% 11.5 17.86 18.23 18.57 18.89 11.0% 12.5 19.40 19.73 20.03 20.32 PV PER SHARE 12.0% 10.5 x $15.43 $15.67 $15.89 $16.09 - --------------------------------- 12.0% 11.5 16.91 17.09 17.26 17.41 12.0% 12.5 18.38 18.52 18.64 18.74 13.0% 10.5 x $14.59 $14.68 $14.75 $14.81 13.0% 11.5 16.00 16.03 16.04 16.05 13.0% 12.5 17.41 17.38 17.33 17.28
Preliminary & Confidential 10:56 AM 02-Nov-95 SCOR U.S. CORPORATION Weighted Average Cost of Capital (Dollars in millions) Dillon, Read & Co. Inc. Estimation of Unlevered Asset Beta Company Equity Total Market Debt/ Ticker Beta (a) Debt Equity Capitalization Capitalization - ------------- ---------- -------- --------- -------------- -------------- SCOR U.S. 0.49 $121.3 $277.0 $398.3 30.4% NAC Re 0.79 200.0 632.3 832.3 24.0% PXRE Corp 1.04 69.7 219.2 288.9 24.1% Transatlantic 0.74 0.0 1,560.1 1,560.1 0.0% Trenwick 0.65 103.5 321.3 424.8 24.4% American Re 1.05 600.0 1,805.5 2,405.5 24.9% General Re 0.83 157.0 12,006.9 12,163.9 1.3% National Re 0.82 100.0 567.1 667.1 15.0% Company Equity/ Unlevered Ticker Capitalization Beta(b) - ------------- -------------- --------- SCOR U.S. 69.6% 0.39 NAC Re 76.0% 0.64 PXRE Corp 75.9% 0.83 Transatlantic 100.0% 0.74 Trenwick 75.6% 0.53 American Re 75.1% 0.83 General Re 98.7% 0.82 National Re 85.0% 0.72 Average Unlevered Asset Beta 0.73 ===== - -------------------------------------------------------------------------------------------------------------------------- Weighted Average Cost of Capital under Hypothetical Capital Structures (D+P)/(ME+D+P) 4.8% 8.8% 12.8% 16.8% (D+P)/ME 5.0% 9.6% 14.6% 20.1% D/(ME+D+P) 4.8% 8.8% 12.8% 16.8% ME/(ME+D+P) 95.3% 91.3% 87.3% 83.3% Equity Beta (b) 0.76 0.79 0.81 0.84 Cost of Equity Over Bills (c) 11.8% 12.1% 12.3% 12.6% Cost of Equity Over Bonds (d) 11.6% 11.8% 12.0% 12.2% Average Cost of Equity 11.7% 11.9% 12.1% 12.4% (D+P)/(BV+D+P) (g) 7.3% 13.2% 18.8% 24.2% Cost of Debt 6.8% 7.0% 7.1% 7.3% After-tax Cost of Debt (e) 4.4% 4.6% 4.6% 4.7% Weighted Average Cost of Capital Based on Bills 11.5% 11.4% 11.3% 11.2% Based on Bonds 11.2% 11.1% 11.0% 10.9% -------------------------------------------------------------------------------------------------------------- Average 11.36% 11.27 11.17% 11.08% -------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------ Weighted Average Cost of Capital under Hypothetical Capital Structures (D+P)/(ME+D+P) 20.8% 24.7% 28.8% 32.8% 36.7% (D+P)/ME 26.2% 32.9% 40.4% 48.7% 58.1% D/(ME+D+P) 20.8% 24.7% 28.8% 32.8% 36.7% ME/(ME+D+P) 79.3% 75.3% 71.3% 67.3% 63.3% Equity Beta (b) 0.88 0.92 0.96 1.00 1.06 Cost of Equity Over Bills (c) 12.8% 13.2% 13.5% 13.9% 14.3% Cost of Equity Over Bonds (d) 12.4% 12.7% 13.0% 13.3% 13.7% Average Cost of Equity 12.6% 12.9% 13.2% 13.6% 14.0% (D+P)/(BV+D+P) (g) 29.4% 34.3% 39.1% 43.6% 48.0% Cost of Debt 7.5% 8.0% 9.0% 11.0% 13.0% After-tax Cost of Debt (e) 4.9% 5.2% 5.9% 7.2% 8.5% Weighted Average Cost of Capital Based on Bills 11.2% 11.2% 11.3% 11.7% 12.2% Based on Bonds 10.9% 10.8% 10.9% 11.3% 11.8% ------------------------------------------------------------------------------------------------------------ Average 11.02% 11.01% 11.11% 11.49% 11.96% ------------------------------------------------------------------------------------------------------------
- -------------------- Notes (a) Source Bloomberg 11/2/95 calculated daily over two years over the S&P 500. (b) Assumes a debt beta of 0.17 as given by Reilly and Joehnk in the Journal of Finance, December, 1976. Unlevered asset beta calculated as: [((D+P)/(ME+D+P)) Debt Beta + (ME/Me+D+P)*Equity Beta]. Equity Beta under the hypothetical capital structures calculated as: [Asset Beta +((D+P)/ME) *(Asset Beta - Debt Beta)] (c) Cost of equity over bills calculated as: (Equity Beta*8.40%+5.46%) The 8.40% figure is the estimated historical arithmetic mean, from 1926 to 1994, returns over bills demanded by investors to invest in equities according to Ibbotson Associates. The 5.46% figure our proxy for the risk free rate, is the average yield on 3-Month Treasury Bills on November 2, 1995. (d) Cost of equity over bonds calculated as (Equity Beta*7.00%+6.27%). The 7.00% figure is the estimated historical arithmetic mean, from 1926 to 1994, rate over bonds demanded by investor to invest in equities according to Ibbotson Associates. The 6.27% figure our proxy for the risk free rate, is the average yield on 30 year Treasury Bond on November 2, 1995 (e) Using a tax rate of 35% which approximates that average combined federal and state tax rates. (f) Liquidation Value (g) (D+P)/(BV+D+P)=[(D+P)/(ME+D+P)]*[{MBV*(1+[(D+P)/(ME])}/{1+(MBV*[(D+P)/ME])} ] where MBV=trading multiple of book value EX-10 9 Exhibit 10 November 8, 1995 SCOR U.S. Corporation Two World Trade Center New York, New York 10177 Dear Sirs: By this letter agreement, each of the undersigned hereby confirms that, notwithstanding the introductory language contained in Annex A to the Agreement and Plan of Merger, dated as of November 2, 1995 (the "Merger Agreement"), by and among SCOR U.S. Corporation, SCOR S.A. and SCOR Merger Sub Corporation, the Minimum Tender Condition shall be satisfied if there shall have been validly tendered and not withdrawn prior to the expiration date of the Offer a number of Shares that, together with any Shares currently beneficially owned directly or indirectly by Purchaser, constitutes at least 90% of the total Shares outstanding as of the date the Shares are accepted for payment pursuant to the Offer. Terms used but not defined in this letter agreement shall have the meanings given such terms in the Merger Agreement. Except as expressly set forth in this letter agreement, the Merger Agreement, as originally executed, shall remain in full force and effect. This letter agreement may be executed in any number of counterparts, each such counterpart being deemed to be an original instrument, and all such counterparts shall together constitute the same agreement. Please confirm your agreement to the provisions of this letter agreement by signing in the space provided below. Very truly yours, SCOR S.A. By:/s/ Jacques Blondeau -------------------------- Name : Jacques Blondeau Title: Chairman and Chief Executive Officer SCOR Merger Sub Corporation By:/s/ Jacques Blondeau --------------------- Name : Jacques Blondeau Title: President Agreed and confirmed: SCOR U.S. Corporation By: /s/ Jerome Karter -------------------------- Name : Jerome Karter Title: President and Chief Executive Officer -----END PRIVACY-ENHANCED MESSAGE-----