<PAGE>
As filed with the Securities and Exchange Commission on March 5, 1999
Registration No. 333-
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
FORM S-3
REGISTRATION STATEMENT
Under
The Securities Act of 1933
--------------
LASALLE RE HOLDINGS LIMITED
(Exact name of registrant as specified in its charter)
Bermuda Not Applicable
(Jurisdiction of Organization) (I.R.S. Employer Identification No.)
25 Church Street CT Corporation System
P.O. Box HM 1502 1633 Broadway
Hamilton HM FX Bermuda New York, New York 10019
(441) 292-3339 (212) 664-1666
(Address, including zip code, and (Name, address, including zip code, and
telephone number, including area code, telephone number, including area code,
of registrant's principal executive of agent for service)
offices)
Copies to:
Richard Warren Shepro Alexander M. Dye
Mayer, Brown & Platt LeBoeuf, Lamb, Greene & MacRae, L.L.P.
190 South LaSalle Street 125 West 55th Street
Chicago, Illinois 60603-3441 New York, New York 10019-5389
(312) 782-0600 (212) 424-8000
--------------
Approximate date of commencement of the proposed sale to the public: As soon
as practicable after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
Proposed
Maximum Proposed
Aggregate Maximum
Amount Price Aggregate Amount of
to be Per Security Offering Registration
Title of Shares to be Registered Registered (1) Price (1) Fee
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<S> <C> <C> <C> <C>
Series C Preferred Shares, par value $1.00 per 2,000,000
share....................................... shares $25.00 $50,000,000 $13,900
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</TABLE>
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(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457.
--------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities and it is not soliciting an offer to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED MARCH 5, 1999
PROSPECTUS
2,000,000 Shares
LaSalle Re Holdings Limited
Series C Preferred Shares
--------
A brief description of the Series C Preferred Shares can be found under
"Prospectus Summary--Terms of the Offering" in this prospectus.
We plan to list the Series C Preferred Shares on the New York Stock Exchange
under the trading symbol . We expect that the Series C Preferred Shares
will begin trading on the New York Stock Exchange within 30 days after they are
first issued.
--------
We urge you to carefully read the "Risk Factors" section beginning on page
12, where we describe specific risks associated with this offering, along with
the rest of this prospectus before you make your investment decision.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
--------
<TABLE>
<CAPTION>
Per
Preferred
Share Total
--------- -----------
<S> <C> <C>
Public Offering Price (1)................................ $25.00 $50,000,000
Underwriting Discount.................................... $ $
Proceeds to the Company (before expenses)................ $ $
</TABLE>
- -----
(1) Plus accrued dividends, if any, from the date of original issuance.
We expect that the Series C Preferred Shares will be ready for delivery in
book-entry form only through The Depository Trust Company on or about March ,
1999.
--------
Salomon Smith Barney
Morgan Stanley Dean Witter
PaineWebber Incorporated
March , 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
No.
----
<S> <C>
ENFORCEMENT OF CIVIL LIABILITIES UNDER UNITED STATES FEDERAL SECURITIES
LAWS..................................................................... 1
WHERE YOU CAN FIND MORE INFORMATION....................................... 1
INCORPORATION BY REFERENCE................................................ 2
NOTE ON FORWARD-LOOKING STATEMENTS........................................ 2
PROSPECTUS SUMMARY........................................................ 4
RISK FACTORS.............................................................. 12
USE OF PROCEEDS........................................................... 19
CAPITALIZATION............................................................ 20
RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED SHARE DIVIDENDS. 20
BUSINESS.................................................................. 21
DESCRIPTION OF SERIES C PREFERRED SHARES.................................. 25
CERTAIN TAX CONSIDERATIONS................................................ 32
UNDERWRITING.............................................................. 43
LEGAL MATTERS............................................................. 44
EXPERTS................................................................... 44
GLOSSARY OF SELECTED INSURANCE AND REINSURANCE TERMS...................... 45
</TABLE>
------------
You should rely only on the information incorporated by reference or set
forth in this prospectus. Neither we nor the Underwriters have authorized
anyone else to provide you with different information. We are offering these
securities only in states where the offer is permitted. You should not assume
that the information in this prospectus is accurate as of any date other than
the date on the front cover. Our business, financial condition, results of
operations and prospects may have changed since that date.
i
<PAGE>
Certain persons participating in this offering may engage in transactions
that stabilize, maintain, or otherwise affect the price of the Series C
Preferred Shares offered hereby, including overallotment, stabilizing bids,
syndicate short covering transactions, and penalty bids. For a description of
these activities, see "Underwriting."
For North Carolina investors: These securities have not been approved or
disapproved by the Commissioner of Insurance for the State of North Carolina,
nor has the Commissioner of Insurance ruled upon the accuracy or the adequacy
of this document. The buyer in North Carolina understands that neither LaSalle
Re Holdings Limited nor its subsidiaries are licensed in North Carolina
pursuant to Chapter 58 of the North Carolina General Statutes, nor could they
meet the basic admission requirements imposed by such chapter at the present
time.
Consent under the Exchange Control Act 1972 (and regulations thereunder) has
been obtained from the Bermuda Monetary Authority for the issue of the Series C
Preferred Shares to persons not resident in Bermuda for exchange control
purposes. In addition, a copy of this document has been delivered to the
Registrar of Companies in Bermuda for filing pursuant to the Companies Act 1981
of Bermuda. In giving such consent and in accepting this prospectus for filing,
the Bermuda Monetary Authority and the Registrar of Companies in Bermuda accept
no responsibility for the financial soundness of any proposal or for the
correctness of any of the statements made or opinions expressed herein.
These securities may not be offered or sold to persons in the United Kingdom
except to persons whose ordinary activities involve them in acquiring, holding,
managing or disposing of investments (as principal or agent) for the purposes
of their businesses, or otherwise in circumstances which do not constitute an
offer to the public in the United Kingdom within the meaning of the Public
Offers of Securities Regulations 1995. All applicable provisions of the
Financial Services Act 1986 of the United Kingdom must be complied with in
relation to anything done in relation to these securities in, from or otherwise
involving the United Kingdom. This document may not be issued or passed on to
any person in the United Kingdom unless that person is of a kind described in
Article 11(3) of the Financial Services Act 1986 (Investment Advertisements)
(Exemptions) Order 1996 or is a person to whom this document may otherwise
lawfully be issued or passed on.
------------
In this prospectus, references to "dollar" and "$" are to United States
currency.
ii
<PAGE>
ENFORCEMENT OF CIVIL LIABILITIES UNDER
UNITED STATES FEDERAL SECURITIES LAWS
We are a Bermuda company. In addition, certain of our directors and
officers, as well as certain of the experts named in this prospectus, reside
outside the United States, and all or a substantial portion of our assets and
their assets are or may be located in jurisdictions outside the United States.
Therefore, it may be difficult for investors to effect service of process
within the United States upon those persons or to recover against us or those
persons on judgments of courts in the United States, including judgments based
on the civil liability provisions of the United States federal securities laws.
However, we may be served with process in the United States with respect to
actions against us arising out of or in connection with violations of United
States federal securities laws relating to offers and sales of Series C
Preferred Shares by serving CT Corporation System, 1633 Broadway, New York, New
York 10019, our United States agent irrevocably appointed for that purpose.
We have been advised by Conyers Dill & Pearman, our Bermuda counsel, that
there is doubt as to whether the courts of Bermuda would enforce (1) judgments
of United States courts based on the civil liability provisions of the United
States federal securities laws obtained in actions against us or our directors
and officers, as well as the experts named in this prospectus, who reside
outside the United States or (2) original actions brought in Bermuda against us
or those persons based solely upon United States federal securities laws. We
also have been advised by Conyers Dill & Pearman that there is no treaty in
effect between the United States and Bermuda providing for such enforcement,
and there are grounds upon which Bermuda courts may not enforce judgments of
United States courts. Certain remedies available under the laws of United
States jurisdictions, including certain remedies available under the United
States federal securities laws, would not be allowed in Bermuda courts as
contrary to that nation's public policy.
WHERE YOU CAN FIND MORE INFORMATION
The registration statement that contains this prospectus (including the
exhibits to the registration statement) sets forth additional information about
our company and the securities offered under this prospectus. In addition, we
file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission (the "SEC").
This registration statement and our SEC filings are available to the public
on the Internet at the SEC's web site at http://www.sec.gov. You may also read
and copy any document we file with the SEC at its Public Reference Rooms at 450
Fifth Street, N.W., Washington, D.C. 20549; Seven World Trade Center, 13th
Floor, New York, New York 10048; and Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60601. You may also obtain copies of the
documents at prescribed rates by writing to the Public Reference Section of the
SEC at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330 for further information on the operation of its Public Reference
Rooms and its copy charges. You may also inspect the information we file with
the SEC at the New York Stock Exchange's ("NYSE") office at 20 Broad Street,
New York, New York 10005. Finally, you may obtain additional information about
our company by accessing our web site at http://www.lasallere.com.
Although we are incorporated in Bermuda, we are treated as a domestic
corporation for purposes of certain requirements of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), including the proxy rules. We
currently do not fit the definition of a "foreign private issuer" within the
meaning of Rule 3b-4 under the Exchange Act because U.S. residents own a
majority of our outstanding voting securities and because a majority of our
officers and directors live in the United States. However, it is possible that
we could become a "foreign private issuer" in the future, in which case we
would be exempted from the proxy and short-swing profit rules under Sections 14
and 16 of the Exchange Act and, for reporting purposes under the Exchange Act,
would be subject to rules applicable to "foreign private issuers."
1
<PAGE>
INCORPORATION BY REFERENCE
The SEC allows us to "incorporate by reference" into this prospectus the
information we file with the SEC. This means that we can disclose important
information to you by referring you to those documents. The information
incorporated by reference is an important part of this prospectus and
information that we file subsequently with the SEC will automatically update
this prospectus.
We incorporate by reference the documents listed below and any filings we
make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act
after the initial filing of the registration statement that contains this
prospectus and prior to the time that we sell all the securities offered by
this prospectus:
. Annual Report on Form 10-K for the fiscal year ended September 30, 1998;
and
. Quarterly Report on Form 10-Q for the fiscal quarter ended December 31,
1998.
You may request a copy of these filings (excluding exhibits) at no cost by
writing to us at the following address: LaSalle Re Holdings Limited, Attention:
Investor Relations, P.O. Box HM 1502, Hamilton HM FX, Bermuda, or by
telephoning us at (441) 292-3339.
NOTE ON FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements. Forward-looking
statements are statements other than historical information or statements of
current condition. Such statements are identified by the use of forward-looking
words or phrases including, but not limited to, "believes," "anticipates,"
"intends," "may," "estimates," and "expects." We based these forward-looking
statements on our current plans and objectives for future operations, including
our policy concerning dividends. Forward-looking statements are subject to
risks and uncertainties and actual results may vary materially from those
included within the forward-looking statements. Many factors could cause our
actual results to differ materially from those in the forward-looking
statements, including the following:
. The occurrence of catastrophic events with a frequency or severity
exceeding our estimates;
. The occurrence of a single catastrophic event affecting multiple
geographic zones;
. Actual loss expenses exceeding our loss reserves, which are necessarily
based on actuarial and statistical projections of ultimate loss
expenses;
. A decrease in the level of demand for property catastrophe reinsurance;
. An increase in the supply of property catastrophe reinsurance as a
result of additional capital provided by recent or future market
entrants or by existing property catastrophe reinsurers;
. Increased competitive pressure from current reinsurers, including
reinsurers that have increased their capacity as a result of recent
consolidations, or future market entrants;
. A competitive disadvantage resulting from certain of our principal
competitors having higher financial ratings than we do, any future
decline in or loss of our financial ratings or our non-admitted status
in United States jurisdictions;
. A major decrease in the cession of business from CNA Financial
Corporation (together with its affiliates, "CNA") to us;
. Changing rates of inflation and other economic conditions, which could
have an adverse impact on loss payments, investment returns and
premiums;
. Losses due to fluctuations in foreign currency exchange rates or the
failure of a counterparty to perform under any of our foreign exchange
contracts or swap agreements;
. The passage of federal or state legislation that would subject us to
supervision or regulation in the United States;
2
<PAGE>
. Challenges by insurance regulators in the United States or the United
Kingdom to our claim of exemption from insurance regulation under the
current laws of such jurisdictions;
. A contention by the United States Internal Revenue Service (the "IRS")
that we or our insurance subsidiary, LaSalle Re Limited ("LaSalle Re"),
conduct a trade or business within the U.S.; and
. Any failure of our computer systems or the computer systems of third
parties that are material to our operations (such as the computer
systems of service providers, suppliers and brokers) to process
correctly information relating to dates in and after the year 2000.
The foregoing review of important factors is not exhaustive and should be
read in conjunction with other cautionary statements that are included in this
prospectus. We undertake no obligation to release publicly the results of any
future revisions we may make to forward-looking statements to reflect events or
circumstances after the date of this prospectus or to reflect the occurrence of
unanticipated events.
3
<PAGE>
PROSPECTUS SUMMARY
This summary may not contain all the information that may be important to
you. You should read the entire prospectus, including the financial data and
related notes, before investing in the Series C Preferred Shares. Unless
otherwise indicated, all financial information presented in this prospectus has
been prepared in accordance with U.S. generally accepted accounting principles
("GAAP"). Certain terms used in this prospectus are defined in "Glossary of
Selected Insurance and Reinsurance Terms." Unless the context otherwise
requires, references in this prospectus to the "Company," "we," "our" and "us"
include LaSalle Re Holdings Limited ("Holdings"), the issuer of the Series C
Preferred Shares offered by this prospectus; LaSalle Re, the Company's
insurance subsidiary; LaSalle Re (Services) Limited ("LaSalle Re Services"),
the Company's London representative office; and LaSalle Re Corporate Capital
Ltd. ("LaSalle Re Capital"), the Company's subsidiary, which is a corporate
member of Lloyd's ("Lloyd's").
The Company
Overview
Our principal focus is to write property catastrophe reinsurance on a
worldwide basis through our subsidiary, LaSalle Re. Property catastrophe
reinsurance contracts cover unpredictable events such as hurricanes,
windstorms, hailstorms, earthquakes, fires, industrial explosions, freezes,
riots, floods and other man-made or natural disasters. Therefore, our results
from fiscal quarter to quarter and fiscal year to year can vary significantly.
We also seek to diversify our book of business and take advantage of pricing
opportunities by offering other lines of reinsurance as appropriate. These
lines currently include property risk excess, property pro rata treaty,
casualty, marine, crop hail, aviation, satellite and political risk. In
addition, through LaSalle Re Capital, we provide capital support to selected
Lloyd's syndicates that individually write the following lines of business:
direct insurance and facultative reinsurance; marine insurance and reinsurance;
and professional indemnity, directors' and officers' insurance and bankers'
blanket bond business.
We have succeeded in attaining a selective and geographically diverse
portfolio of property catastrophe reinsurance risks. In the year ended
September 30, 1998, 48.0% of our gross premiums written, excluding gross
premiums written relating to LaSalle Re Capital, represented U.S.-based risks,
10.7% represented continental Europe-based risks, 8.7% represented U.K.-based
risks and 32.6% represented risks located in a variety of geographic zones
elsewhere in the world. We have developed a strong base of regional business in
discrete zones within the U.S. This business assists us in diversifying our
U.S.-based risks and makes more efficient use of our capital by limiting
exposures that span multiple geographic regions. In the year ended September
30, 1998, this business, which we classify as regional and super-regional,
accounted for 43.5% of our U.S.-based gross premiums written.
As of December 31, 1998, our total assets equaled $710.8 million, and our
total shareholders' equity and minority interest (together, "Combined Equity")
equaled $524.5 million. Our principal executive offices are located at 25
Church Street, Hamilton HM FX Bermuda, and our phone number is (441) 292-3339.
Capital Management Strategy
We have always pursued a capital management strategy focused on balancing
capital levels with aggregate exposures while seeking strong returns on
shareholders' equity. Consistent with this strategy, we have maintained a
dividend policy of distributing to holders of our common shares, par value
$1.00 per share (the "Common Shares"), and to holders of exchangeable non-
voting shares of LaSalle Re (the "Exchangeable Non-Voting Shares") in each
fiscal year 50% to 60% of the excess of our net income (before minority
interest) from the prior fiscal year over dividends payable on all series of
our preferred shares in the current fiscal year.
4
<PAGE>
In order to reduce our earnings volatility and protect our capital base, we
have a multi-year excess of loss reinsurance program in place. The program,
originally entered into on January 1, 1997, provides $100 million of coverage,
in excess of $100 million, for each of three individual loss events up to an
aggregate coverage of $300 million. The current program was renewed effective
January 1, 1999 and terminates on December 31, 2002. The reinsurance is
provided by a company that holds a claims-paying rating of "AA" (Excellent)
from Standard & Poor's Ratings Services ("S&P").
Effective July 1, 1997, we entered into a $100 million multi-year
Catastrophe Equity Put ("CatEPut") option program. The CatEPut option will
enable us to put up to $100 million of equity to certain capital providers
through the issue of convertible preferred shares (the "Series B Preferred
Shares") at pre-negotiated terms, in the event of a major catastrophe or series
of large catastrophes that cause us substantial losses. In the event the Series
B Preferred Shares are issued pursuant to the CatEPut, we will pay dividends on
the Series B Preferred Shares at a rate per annum equal to the then-current
LIBOR rate plus an additional 2.0% to 4.0%, depending on our then-current
credit rating. The dividend rate, at the time the Series B Preferred Shares are
issued, may also be subject to a modest decrease depending on the level and
quality of our reinsurance coverage. After the first anniversary of the
issuance of any Series B Preferred Shares (or earlier in certain limited
circumstances), we may, at our option, redeem any or all of the outstanding
Series B Preferred Shares at a redemption price per share equal to the
aggregate of (1) the liquidation preference of $25.00 per share, (2) an early
redemption premium of $0.25 per share if such shares are redeemed on or after
the second anniversary but before the third anniversary of their issuance or
$0.50 per share if such shares are redeemed prior to the second anniversary of
their issuance, and (3) any accrued but unpaid dividends on such shares. In
addition, after the third anniversary of the issuance of the Series B Preferred
Shares (or earlier in certain limited circumstances), any holder of Series B
Preferred Shares may, at such holder's option, cause us to convert such
holder's Series B Preferred Shares into Common Shares, subject to certain
restrictions.
Operating Strategies
We pursue the following operating strategies which, in conjunction with our
capital management strategy, are intended to maximize return on shareholders'
equity:
Focus on Property Catastrophe Reinsurance. We concentrate on writing
property catastrophe reinsurance of risks located throughout the world. For the
year ended September 30, 1998, we derived 67.2% of our gross premiums written
from property catastrophe reinsurance compared to 84.5% of our gross premiums
for the year ended September 30, 1997. The high level of severity and frequency
of property catastrophe losses from 1987 through 1992 precipitated a general
increase in rates and attachment points in this line of reinsurance. Although
rates have declined from their highs in 1993 and 1994, we believe that property
catastrophe reinsurance can still be significantly profitable for a reinsurer,
such as the Company, that has the financial strength, flexibility and
responsiveness needed to attract quality business and the high level of
technical underwriting judgment and skill necessary to price risks
appropriately.
Selectively Write Other Lines of Business. While property catastrophe
reinsurance is our primary focus, we also seek to take advantage of pricing
opportunities that may occur in other lines of reinsurance. These lines
generally are characterized by a relatively short period between the collection
of premium and the notification of loss. These lines currently include property
risk excess and pro rata treaty insurance, which constituted 6.7% of our gross
premiums written in the year ended September 30, 1998 and 5.2% of our gross
premiums in the year ended September 30, 1997. We also write casualty, marine,
crop hail, aviation, satellite reinsurance, and political risk coverages. We
believe that writing these types of reinsurance enhances our use of capital
because they generally create little additional aggregate exposure for the
Company. In addition, we formed LaSalle Re Capital to provide capital support
to selected Lloyd's syndicates. As a corporate member of Lloyd's, LaSalle
5
<PAGE>
Re Capital now participates in three Lloyd's syndicates. One of these
syndicates writes direct insurance and facultative reinsurance, one writes
marine insurance and reinsurance, and one writes professional indemnity,
directors' and officers' insurance and bankers' blanket bond business. For the
year ended September 30, 1998, LaSalle Re Capital provided 13.5% of our gross
premiums and for the year ended September 30, 1997, LaSalle Re Capital provided
8.2% of our gross premiums. LaSalle Re Capital provides capital support to the
syndicates through letters of credit.
Utilize a Disciplined Underwriting Approach. We make underwriting decisions
following analysis of each reinsurance contract based on the expected
incremental return on equity in relation to our overall portfolio of
reinsurance contracts. To assess our property catastrophe risks, we use a
variety of underwriting techniques, including simulation models, exposure
ratings and experience ratings. We have developed a proprietary L-CAM(TM)
catastrophe analysis model to assess our risks in the U.S. property catastrophe
market. We control and monitor our aggregate exposures on a real-time basis
using computer-based rating and control systems. We are highly selective in
accepting risks, extending coverage on slightly less than half of the contract
submissions we received in the year ended September 30, 1998.
Maintain and Develop Long-Term Relationships with Clients and Brokers. We
seek to maintain and develop long-term relationships with our clients and
brokers by providing a high level of service. We promptly respond to
underwriting submissions, design customized programs, offer lead terms when
circumstances warrant and pay valid claims within an average of five days. We
retain a substantial portion of our clients from year to year. Retaining
clients permits us to use our experience regarding a client's underwriting
practices and risk management systems to underwrite our own business with
greater precision. In addition, our relationships with brokers permit us to
obtain business and monitor developments in various lines of reinsurance in
order to increase our writings when market conditions in those lines are
favorable.
6
<PAGE>
Terms of the Offering
The description of the terms of the Series C Preferred Shares in this
section is a summary of the terms of such Shares. You should refer to the terms
and provisions of the Certificate of Designation relating to the Series C
Preferred Shares (the "Certificate of Designation") and the bye-laws of
Holdings (the "Bye-Laws") for a complete description of such terms. See
"Description of Series C Preferred Shares."
Securities Offered........ 2,000,000 Series C Preferred Shares.
Dividends................. Holders will be entitled to receive, when, as and
if declared out of funds legally available,
dividends quarterly in arrears on the day of
, , and of
each year (or, if such date is not a business day,
on the business day immediately before such date),
commencing , 1999, in an amount per share
equal to % of the liquidation preference per
annum (equivalent to $ per share). These
dividends will accrue from the date the Company
originally issues the Series C Preferred Shares.
See "Description of Series C Preferred Shares--
Dividends."
Liquidation Preference.... Upon liquidation, holders of the Series C Preferred
Shares will be entitled to receive out of assets of
the Company legally available for distribution to
shareholders $25.00 per share, plus accrued and
unpaid dividends, if any, to the date of
liquidation. This liquidation preference is payable
out of any surplus assets and equals the
liquidation preference for our Series A Preferred
Shares, par value $1.00 per share (the "Series A
Preferred Shares"), and, if issued, the Series B
Preferred Shares. See "Description of Series C
Preferred Shares--Liquidation Rights."
Conversion................ The Series C Preferred Shares are not convertible
into or exchangeable for any other securities of
the Company.
Redemption................ On and after , 2004, we have the right to
redeem the Series C Preferred Shares, in whole or
in part, at any time, at a redemption price of
$25.00 per share, plus accrued and unpaid
dividends, if any, to the date of redemption. Prior
to , 2004, we may also redeem the Series C
Preferred Shares if we submit to holders of Common
Shares a proposal for any matter that requires an
affirmative vote of the holders of the Series C
Preferred Shares at a redemption price of $26.00
per share, plus accrued and unpaid dividends, if
any, to the date of redemption. In either
situation, we would have to give holders of the
Series C Preferred Shares 30 to 90 days' notice of
redemption. The Series C Preferred Shares have no
stated maturity and will not be subject to any
sinking fund or mandatory redemption. See
"Description of Series C Preferred Shares--
Redemption."
Special Representation
and Voting Rights .......
Generally, the holders of Series C Preferred Shares
will not have any voting rights. If we fail to pay
dividends on the Series C Preferred Shares or any
class or series of capital shares ranking equal
with the
7
<PAGE>
Series C Preferred Shares with respect to the
payment of dividends and amounts upon liquidation,
dissolution or winding up ("Parity Shares") for six
full dividend periods (whether or not consecutive),
holders of the Series C Preferred Shares (voting
together as a class with the holders of Parity
Shares) will have the right to elect two special
representatives to Holdings' Board of Directors
(the "Board"). These special representatives will
be entitled to receive notice of and to take part
in Board meetings, with the privilege of voice but
not vote, until we pay all outstanding dividends.
At all times when the holders of the Series C
Preferred Shares and any Parity Shares have the
right to be represented by special representatives
at the Holdings Board level, Holdings must elect,
to the extent permitted under Bermuda law, two
additional directors of LaSalle Re designated by
the special representatives. These rights will
allow the holders of Series C Preferred Shares and
any Parity Shares to exercise, in effect, voting
rights through board members at the LaSalle Re
board level under such circumstances. In addition,
certain changes that would vary the rights of
holders of Series C Preferred Shares cannot be made
without the approval of the holders of 75% of the
Series C Preferred Shares. See "Description of
Series C Preferred Shares--Special Representation
and Voting Rights; Relationship to Preferred Shares
of LaSalle Re."
Ranking................... The Series C Preferred Shares will rank senior to
the Common Shares and equal to the Series A
Preferred Shares and, if issued, the Series B
Preferred Shares with respect to payment of
dividends and amounts upon liquidation, dissolution
or winding up. See "Description of Series C
Preferred Shares--Dividends" and "Description of
Series C Preferred Shares--Liquidation Rights." The
Company is a holding company with no operations or
significant assets other than its ownership of a
majority of the capital stock of LaSalle Re. Our
right to receive dividends from LaSalle Re is
subject to claims of LaSalle Re's creditors and
regulatory requirements. See "Risk Factors."
Limitations on Transfer
and Ownership ...........
No person may own more than 9.9% of the outstanding
Series C Preferred Shares. We will repurchase any
shares owned by a person in excess of this 9.9%
limitation within 20 days after becoming aware of
such excess ownership. The Board may exempt from
the foregoing requirement any person who has
provided evidence that such ownership will not
cause adverse tax, legal or regulatory consequences
to the Company, any of its subsidiaries or any of
its shareholders. The Bye-Laws provide for
additional limitations on transfer and ownership of
capital stock of the Company. See "Description of
Series C Preferred Shares--Limitations on Transfer
and Ownership" and "Certain Tax Considerations--
Taxation of Shareholders."
8
<PAGE>
NYSE Listing.............. We intend to list the Series C Preferred Shares on
the NYSE. If our application is approved, trading
in the Series C Preferred Shares is expected to
commence within 30 days after the initial delivery
of the Series C Preferred Shares. See
"Underwriting."
Ratings................... S&P rated the Series C Preferred Shares [ ] and
Moody's Investors Service, Inc. ("Moody's") rated
the Series C Preferred Shares [ ]. S&P and Moody's
issued these rating with the understanding that
they will continue to monitor the credit rating of
the Company and will make future adjustments to the
extent warranted. A rating reflects only the views
of S&P or Moody's, as the case may be, and is not a
recommendation to buy, sell or hold the Series C
Preferred Shares. These ratings may be lowered or
withdrawn at any time by S&P or Moody's if such
rating agency determines the circumstances so
warrant.
Use of Proceeds........... All of the net proceeds from the sale of Series C
Preferred Shares will be contributed to the capital
of LaSalle Re, which will provide further support
for our underwriting.
9
<PAGE>
Selected Consolidated Financial Data
(Dollars in thousands, except share and per share data)
The historical consolidated financial data presented below as of and for the
periods ended September 30, 1998, 1997 and 1996 were derived from and should be
read in conjunction with our audited consolidated financial statements and
related notes incorporated by reference in this prospectus. The historical
consolidated financial data presented below as of and for the periods ended
December 31, 1998 and 1997, except as indicated below, were derived from and
should be read in conjunction with our unaudited consolidated financial
statements, which we believe incorporate all of the adjustments necessary for
the fair presentation of the financial condition and results of operations for
such periods.
<TABLE>
<CAPTION>
Three Months Ended
December 31, Year Ended September 30,
------------------------ -------------------------------------
1998 1997 1998 1997 1996
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Statement of Income Data
Net premiums written.. $ 10,828 $ 11,084 $ 147,501 $ 163,693 $ 190,151
Net premiums earned... 35,130 37,919 154,620 163,933 195,141
Net investment income
(including realized
gains/losses)........ 10,146 8,856 39,863 33,664 26,428
Losses and loss
expenses incurred.... 30,586 8,698 95,539 31,199 51,477
Underwriting expenses. 5,664 6,174 22,661 26,018 27,268
Operating expenses(1). 2,167 2,224 11,051 18,912 13,373
Income before minority
interest............. 6,859 29,679 65,232 121,468 129,451
Minority interest(2).. 1,155 5,901 13,426 24,391 47,966
Net income............ 5,704 23,778 51,806 97,077 81,485
Earnings per Common
Share--assuming
dilution(3).......... 0.25 1.34 2.80 5.14 5.40
Weighted average
shares
outstanding(4)....... 20,859,905 20,862,357 20,919,405 22,998,936 23,967,870
Dividend per Common
Share(5)............. $ 0.375 $ 0.75 $ 3.00 $ 2.84 $ 0.75
Balance Sheet Data (at
end of period)
Total investments and
cash................. $ 580,126 $ 568,521 $ 606,757 $ 553,043 $ 537,504
Reinsurance balances
receivable........... 66,977 54,492 86,779 80,041 70,625
Total assets.......... 710,757 675,352 757,290 686,088 634,374
Reserve for losses and
loss expenses........ 100,534 45,186 97,942 45,491 49,875
Reserve for unearned
premiums............. 57,134 59,161 83,119 88,490 82,894
Combined Equity....... 524,522 534,163 535,622 518,581 486,918
Book value per
share(6)............. 22.19 23.96 23.44 23.23 21.42
Other Data
Loss and loss expense
ratio(7)............. 87.1% 22.9% 61.8% 19.0% 26.4%
Expense ratio(7)...... 23.1% 21.8% 20.4% 23.6% 19.6%
Combined ratio(7)..... 110.2% 44.7% 82.2% 42.6% 46.0%
Return on average
Combined Equity(8)... 4.6% 24.8% 13.0% 25.4% 29.2%
Total statutory
capital and
surplus(9)........... $ 495,323 $ 507,801 $ 506,028 $ 490,165 $ 475,580
</TABLE>
10
<PAGE>
- --------
(1) Includes operating expenses, corporate expenses, interest payable, foreign
exchange gains and losses and other income.
(2) Minority interest represents shares of LaSalle Re that are held as
Exchangeable Non-Voting Shares. These shares currently constitute
approximately 22% of the capital stock of LaSalle Re. Exchangeable Non-
Voting Shares are held by Aon Corporation and CNA. The Exchangeable Non-
Voting Shares are exchangeable at the option of the holder, for Common
Shares on a one-for-one-basis, unless the Board determines that such
exchange may cause actual or potential adverse tax consequences to the
Company or any shareholder. See "Certain Tax Considerations."
(3) Earnings per Common Share are calculated by dividing net income available
to common shareholders before minority interest by the weighted average
shares outstanding.
(4) Weighted average shares outstanding include Common Shares, Exchangeable
Non-Voting Shares and the dilutive potential Common Shares outstanding
during the period of calculation.
(5) Dividend per Common Share is based on outstanding Common Shares of
15,780,483 and 15,133,915 as at December 31, 1998 and 1997, respectively,
and 15,178,791, 15,073,914 and 14,397,720, as at September 30, 1998, 1997
and 1996, respectively.
(6) Book value per share is calculated based on Combined Equity (less preferred
equity) divided by the total of Common Shares and Exchangeable Non-Voting
Shares of 20,253,129 and 19,152,061 at December 31, 1998 and 1997,
respectively, and 19,651,437, 19,092,060 and 22,727,010 as at September 30,
1998, 1997 and 1996, respectively.
(7) The loss and loss expense ratio is calculated by dividing the losses and
loss expenses incurred by net premiums earned. The expense ratio is
calculated by dividing underwriting expenses and certain operational
expenses by net premiums earned. The combined ratio is the sum of the loss
and loss expense ratio and the expense ratio.
(8) Return on average Combined Equity is calculated by dividing net income
available to common shareholders before minority interest by the average of
the opening and closing common shareholders' equity and minority interest.
The adjustment in respect of minority interest reflects the exchangeable
nature of the Exchangeable Non-Voting Shares. Closing shareholders' equity
and minority interest reflects any dividends declared or paid during such
periods, with the average not adjusted to reflect the timing of dividends
declared or paid.
(9) Total statutory capital and surplus of LaSalle Re is calculated in
accordance with the provisions of The Insurance Act 1978 of Bermuda,
amendments thereto and related regulations.
Ratio of Earnings to Combined Fixed Charges and Preferred Share Dividends
The following table sets forth the ratio of earnings to combined fixed
charges and preferred share dividends for the Company on a consolidated basis
for the years ended September 30, 1998, 1997 and 1996 and for the three months
ended December 31, 1998. The Company had no debt or preferred shares
outstanding prior to 1996.
The ratio of earnings to fixed charges and preferred share dividends is
calculated by dividing the amount of net income before minority interest and
interest expense by the total amount of interest expense and preferred share
dividends.
<TABLE>
<CAPTION>
Year Ended
September 30,
Three Months Ended ---------------
December 31, 1998 1998 1997 1996
------------------ ---- ---- -----
<S> <C> <C> <C> <C>
Ratio of earnings to fixed charges.... 3.5 7.9 24.5 584.1
</TABLE>
11
<PAGE>
RISK FACTORS
An investment in the Series C Preferred Shares involves a high degree of
risk. You should carefully consider the following factors, in addition to the
other information set forth in the prospectus, before you buy any Series C
Preferred Shares.
. We may experience substantial volatility in our financial results for any
fiscal period.
We primarily underwrite property catastrophe reinsurance, which covers
unpredictable events such as hurricanes, windstorms, hailstorms, earthquakes,
fires, industrial explosions, freezes, riots, floods and other man-made or
natural disasters. Because we have large aggregate exposures to these
disasters, we expect our claims experience to be characterized by relatively
low frequency and high severity. The occurrence of claims from catastrophic
events will likely cause substantial volatility in our financial results for
any fiscal quarter or year, which could adversely affect our ability to pay
dividends on the Series C Preferred Shares. We try to manage our exposures to
catastrophic events by limiting the amount of our exposure in each geographic
zone worldwide and by requiring that our property catastrophe contracts provide
for aggregate limits and attachment points. Nonetheless, a single catastrophic
event could affect multiple geographic zones, and the frequency and/or severity
of catastrophic events could exceed our estimates. These events could have a
material adverse effect on our financial condition and results of operations
and our ability to write new business and to pay dividends. Historically,
catastrophic events of significant magnitude have occurred relatively
infrequently. We believe that the property catastrophe reinsurance market
experienced a high level of worldwide catastrophic losses in terms of both
frequency and severity from the late 1980s to the early 1990s as compared with
prior years. We expect that increases in the values and concentrations of
insured property and the effects of inflation will increase the severity of
such occurrences per year in the future.
. We are subject to rate pressures affecting the market, which may affect our
profitability.
Based on our marketing efforts, reinsurance contract submissions and
publicly available information, we believe that property catastrophe rates have
decreased in recent years. In particular, rates have declined significantly in
areas, such as Japan and Europe, where there have been relatively few
catastrophic losses, while in the U.S. market, where the level of property
catastrophe losses has generally been higher than in international markets in
recent years, rates have decreased to a lesser degree. Based on the 1999
contract renewals that have occurred to date, we estimate that we have
experienced modest overall global rate decreases compared to 1998. Although it
is possible that rates will continue to decrease, we expect the declining
movement of rates to decelerate and rates to stabilize through the rest of the
1999 underwriting year. As a result of the decline in rates, we expect net
premiums written from property catastrophe reinsurance to decline in 1999. The
present level of supply of reinsurance could increase as a result of capital
provided by recent or future market entrants or existing property catastrophe
reinsurers and capital market alternatives such as catastrophe bonds and other
financial instruments. We have expanded into other lines of business that we
believe present attractive pricing opportunities. We cannot assure you that
these pricing opportunities will continue.
. We are dependent on dividends and payments from our subsidiary, LaSalle Re,
to fund preferred share dividends and other expenses.
As a holding company with no direct operations, our primary asset is our
majority interest in the capital stock of LaSalle Re. We rely on cash dividends
and other permitted payments from LaSalle Re to pay expenses, to make principal
and interest payments on our debt, and to pay dividends to our shareholders.
Bermuda law and regulations, including The Insurance Act 1978 (together with
amendments thereto and related regulations, the "Insurance Act") limits LaSalle
Re's payment of dividends to us. The Insurance Act prohibits LaSalle Re from
paying dividends during any financial year of more than 25% of its total
statutory capital and surplus, as shown on its statutory balance sheet in
relation to the previous financial year, unless LaSalle Re first
12
<PAGE>
files with the Bermuda Registrar of Companies an affidavit stating that it will
continue to meet the required solvency margin and minimum liquidity ratio
requirements. The Insurance Act also prohibits LaSalle Re from declaring or
paying any dividends without the approval of the Minister of Finance if it
failed to meet its required margins on the last day of the previous financial
year. The Insurance Act also requires LaSalle Re to maintain a minimum solvency
margin and minimum liquidity ratio and prohibits dividends which would result
in a breach of these requirements. In addition, the Insurance Act prohibits
LaSalle Re from reducing its total statutory capital, as shown on its statutory
balance sheet in relation to the previous financial year, by 15% or more
without the approval of the Minister of Finance. Based on these regulations,
LaSalle Re could pay $ million in dividends in the current fiscal year
without receiving such approval. Because of our holding company structure, our
right, and the right of our creditors and shareholders, to participate in any
distribution of assets of any subsidiary, including LaSalle Re, upon our
liquidation, reorganization or otherwise, is necessarily subject to the prior
claims of creditors of such subsidiary, except that our claims as a creditor of
such subsidiary may be recognized. We cannot assure you that we will have
sufficient funds to pay dividends to holders of the Series C Preferred Shares.
Further, we can only pay dividends and make other distributions out of funds
legally available for such purposes.
. Our credit facility and our available capital affect our ability to pay
dividends.
Our credit facility currently restricts dividends to a maximum of 50% of net
income from the prior fiscal year less amounts paid on the Series A Preferred
Shares. In order to pay dividends in excess of that amount, we would have to
renegotiate certain terms of our credit facility. Since the Board may authorize
the issuance of additional classes or series of preferred shares, we could
incur obligations in the future to pay additional preferred dividends. Paying
dividends will make less capital available to sustain catastrophic losses than
would otherwise be the case. If we were to experience substantial losses, our
ability to pay dividends could be adversely affected.
. A sudden loss of the business ceded to us by CNA could impair our geographic
diversity of risk, which in turn could affect our profitability.
During each year of our operations, CNA has ceded to us a portion of its
book of property catastrophe reinsurance business. This ceded business
represented 10.8% of our gross premiums written in the fiscal year ended
September 30, 1998, 12.5% of our gross premiums written in the fiscal year
ended September 30, 1997 and 12.7% of our gross premiums written in the fiscal
year ended September 30, 1996. These cessions helped us to diversify our
exposure geographically, which might have been difficult for a newly organized
reinsurer to establish on its own. Excluding the business ceded by CNA and the
business written by LaSalle Re Capital, for the fiscal year ended September 30,
1998, 54.9% of our premiums written represented U.S.-based risks and the
remaining 45.1% represented risks based in other territories around the world.
Although we expect the level of such cessions to continue to decrease, if CNA
suddenly stopped ceding business to us, the geographical diversity of our
portfolio of property catastrophe risks and our results of operations could be
materially adversely affected.
. Conflicts of interest may arise as a result of transactions with our
affiliates.
Effective on October 1, 1998, we assumed direct responsibility for our
underwriting and hired all of the personnel formerly assigned by CNA (Bermuda)
Services Limited ("CNA Bermuda") to provide contract underwriting services to
us. In connection with these changes, we entered into an underwriting support
services agreement (the "Underwriting Support Services Agreement") with CNA Re
Services Company ("CRSC") and CNA Bermuda. Under the Underwriting Support
Services Agreement, which expires on September 30, 2001, CRSC and CNA Bermuda
provide us, on a daily or hourly fee basis, various support services upon
request. We pay CNA Bermuda a $333,333 annual retainer, which CRSC credits
against its daily or hourly fees and associated travel expenses. In recognition
of the contribution made by CNA Bermuda to the development of our business, we
have agreed, subject to certain conditions, to pay CNA Bermuda an underwriting
profit
13
<PAGE>
commission of 1.67% of the aggregate net underwriting profits of LaSalle Re for
each fiscal year during the term of the Underwriting Support Services Agreement
for which our loss ratio is 70% or less. For business written prior to October
1, 1998, the Underwriting Support Services Agreement requires that we pay CNA
Bermuda the service fee and underwriting profit commission, subject to certain
modifications, that would have been due under the prior agreement with CNA,
which was terminated effective on October 1, 1998.
The Underwriting Support Services Agreement may give rise to potential
conflicts of interest between CNA and us. However, as provided under Bermuda
law, directors who have an interest in any matter are permitted under Holdings'
Bye-Laws and LaSalle Re's bye-laws to vote with respect to such matters as long
as they have disclosed their interest. Any of our directors who are directly or
indirectly interested in a proposed contract or other matter with such company
must declare the nature of such interest to the Board. Similarly, a director of
LaSalle Re would have to disclose such an interest to the Board of Directors of
LaSalle Re. The Board approved the Underwriting Support Services Agreement by
both a unanimous vote of the directors present and a unanimous vote of all of
the directors present who were not affiliated with CNA. Conflicts of interest
could also arise from the fact that CNA competes with us for property
catastrophe and other lines of reinsurance underwritten by us. In addition,
CNA, Aon Corporation (together with its affiliates, "Aon"), Corporate Partners,
L.P. (together with its related parties, "Corporate Partners") and certain
other investors (collectively with CNA, Aon and Corporate Partners, the
"Founding Shareholders") have sponsored, and may in the future sponsor or
otherwise participate in, insurance ventures with other entities that compete,
and may in the future compete, with us. Conflicts of interest could also arise
with respect to business opportunities that could be advantageous to CNA, Aon
or other Founding Shareholders, on the one hand, and us, on the other hand. CNA
and Aon also have entered into agreements and maintain relationships with
numerous companies that may compete with us. We do not have any agreement or
understanding with CNA, Aon or any other Founding Shareholder on how to resolve
any of these potential conflicts of interest.
. Our financial information includes estimates from our Lloyd's operations,
which may differ from the final results of those operations.
Through our subsidiary, LaSalle Re Capital, we provide capital support to
selected Lloyd's syndicates. We provided capital support to three syndicates
for the 1997 year of account of approximately $27.4 million ((Pounds)16.3
million) and for the 1998 year of account of approximately $28.2 million
((Pounds)16.8 million). Through this support, as at September 30, 1998, we
wrote gross premiums of approximately $17.2 million for the 1997 year of
account and approximately $18.0 million for the 1998 year of account. We are
committed to provide capital support for the 1999 year of account to the same
syndicates that we supported in 1998. We do not expect our level of support to
change materially from the level we provided in 1998. The three-year system for
declaring profits and losses operated by Lloyd's necessitates our using
estimates and assumptions in producing financial results for a 12-month period.
In consolidating LaSalle Re Capital's results, these estimates and assumptions
affect the disclosed amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the period. Actual results
could be significantly different from those estimates. The estimates most
susceptible to significant change are those used in determining the liability
for unpaid losses and loss expenses and the amount of ultimate premiums
written.
. Our actual losses could vary from our loss reserves.
We establish loss reserves for the ultimate settlement costs of all loss and
loss expenses incurred with respect to business we write. Loss reserves are
estimates derived from actuarial and statistical projections of our
expectations of ultimate loss and loss expenses for incurred losses at a given
time. Under GAAP, we are not permitted to establish loss reserves with respect
to our property catastrophe reinsurance until an event occurs that may give
rise to a claim. As a result, we may set aside loss reserves applicable only to
losses incurred up
14
<PAGE>
to the reporting date, with no allowance for a contingency reserve to account
for expected future losses. Reserve estimates by relatively young property
catastrophe reinsurers like us may be inherently less reliable than the reserve
estimates of reinsurers with stable volumes of business and an established
claims history. Actual losses and loss expenses paid may deviate, perhaps
substantially, from the reserve estimates reflected in our financial
statements. If our final loss settlements significantly exceed our loss
reserves, our financial condition and results of operations in a particular
period could suffer materially.
. We operate in a very competitive environment.
The property catastrophe reinsurance industry is highly competitive.
Competition in the types of reinsurance that we underwrite is based on many
factors, including rates and other terms and conditions offered, services
provided, ratings assigned by independent rating agencies, speed of claims
payment, perceived financial strength of the reinsurer and reputation and
experience of the reinsurer in the line of reinsurance to be written. We
compete with major U.S. and non-U.S. insurers and property catastrophe
reinsurers, including other Bermuda-based property catastrophe reinsurers and
CNA. Some of our competitors have greater financial and organizational
resources than we do. Moreover, several recent consolidations in the
reinsurance industry have increased the capacity of certain of our competitors.
The property catastrophe industry now also uses capital markets in structuring
reinsurance agreements with catastrophe bonds and other financial instruments.
This means that we now face competition from other financial institutions
besides traditional reinsurers. In addition, Lloyd's began to allow capital
from corporate investors in 1994. We may not be aware of other companies that
may be planning to enter the property catastrophe reinsurance market or of
existing property catastrophe reinsurers that may be planning to raise
additional capital.
. Some of our competitors have higher claims-paying ratings.
With regard to its claims-paying ability, A.M. Best Company, Inc. ("A.M.
Best") currently rates LaSalle Re as "A" (Excellent) and S&P rates LaSalle Re
as "A" (Good). These companies base their ratings on factors of concern to
cedents and brokers, rather than investors. Brokers and cedents, however, use
insurance ratings to assess the financial strength and quality of reinsurers.
These claims-paying ratings do not assess our securities and do not constitute
recommendations to buy, hold or sell our securities. While we believe that our
ratings will not be a major competitive advantage or disadvantage, some of our
principal competitors have higher ratings than we do. In addition, the lack of
a rating of its reinsurer may adversely affect a cedent's own rating.
Therefore, a cedent may elect to reinsure with one of our competitors that has
a higher insurance rating. Similarly, the lowering or loss of a rating in the
future could adversely affect our ability to compete.
. We are only licensed or admitted as an insurer in Bermuda.
Other than being a corporate member of selected Lloyd's syndicates, we are
licensed and/or admitted as an insurer only in Bermuda and have no plans to
become licensed or admitted in any other jurisdiction. Because jurisdictions in
the United States do not permit cedents to take credit for reinsurance obtained
from unlicensed or non-admitted reinsurers on their statutory financial
statements unless security is posted, our reinsurance contracts with United
States cedents generally require us to post a letter of credit or provide other
security for outstanding claims and/or unearned premiums. In order to post
these letters of credit, issuing banks generally require us to provide
collateral equal to 115% of such amounts. As a result of the size of our
capitalization, we do not believe that our non-admitted status in any
jurisdiction has, or should have, a material adverse effect on our ability to
compete or obtain business in the property catastrophe reinsurance market in
which we operate, principally because many of our competitors are not admitted
or licensed in United States jurisdictions. However, it is possible that
increased competitive pressure from current reinsurers and future market
entrants or our non-admitted status could adversely affect us.
. Bermuda regulations impose some restrictions on our business.
LaSalle Re is registered as an insurer and is subject to regulation and
supervision in Bermuda under the Insurance Act. The Insurance Act generally is
designed to protect insureds and ceding insurance companies
15
<PAGE>
rather than shareholders. Among other things, the Insurance Act requires
LaSalle Re to maintain minimum levels of capital and surplus, prescribes
solvency margins that must be maintained and requires periodic examinations of
LaSalle Re and its financial condition. These provisions may, in effect,
restrict the ability of LaSalle Re to write new business or distribute funds to
Holdings. As a holding company, Holdings depends on such distributions as its
principal source of funds. Other relevant Bermuda statutes and regulations may
also limit transfers of ownership of LaSalle Re's capital stock and may impede
Holdings' ability to effect a business combination involving a substantial
change in the ownership or control of LaSalle Re or Holdings.
. Regulatory challenges in the United States or elsewhere could adversely
affect our business.
LaSalle Re is registered and/or licensed as an insurance company only in
Bermuda. For the fiscal year ended September 30, 1998, 48.0% of our net
premiums written represented U.S.-based risks. The insurance laws of each state
of the United States do not directly regulate the sale of reinsurance to
insurance companies domiciled or licensed therein by alien reinsurers, like the
Company. Nevertheless, the sale of reinsurance by alien reinsurers to insurance
companies domiciled or licensed in United States jurisdictions is indirectly
regulated by state "credit for reinsurance" laws that operate to deny financial
statement credit to ceding insurers unless the non-admitted alien reinsurer
posts acceptable security for ceded liabilities and agrees to certain contract
provisions (e.g., insolvency and intermediary clauses). Although the insurance
laws of United States jurisdictions generally exempt the business of
reinsurance from "doing business" laws, we conduct our business at our
principal offices in Bermuda and do not maintain an office in the United
States. Our personnel do not solicit, advertise, settle claims or conduct other
insurance activities in the United States. We issue and deliver policies and
premiums outside the United States. We do not believe that we are subject to
the insurance laws of any state in the United States. Nevertheless, we could
face inquiries or challenges to our insurance activities in the future.
. Legislative or regulatory initiatives in the United States or elsewhere could
adversely affect our business.
From time to time, lawmakers and regulators in the United States have
considered initiatives involving further supervision and regulation of the
insurance industry, including proposals to supervise and regulate alien
reinsurers. While federal and state authorities have not adopted any of these
proposals to date, we cannot assure you that existing laws and regulations will
remain the same. The U.S. Congress or a state legislature could enact
legislation subjecting us to supervision and regulation in the United States,
which could have a material adverse effect on us. In addition, we cannot assure
you that if we were to become subject to any laws of the United States or any
state thereof or of any other country at any time in the future, we would be in
compliance with such laws.
. UK regulation could affect our operations in the future.
LaSalle Re Services maintains an office in London in order to introduce
prospective customers to the Company. LaSalle Re Services is not registered as
an insurer in England or in any other jurisdiction. Although we believe that
LaSalle Re Services is not required to be so registered and also believe that
the impact of other U.K. regulation on our business is minimal, U.K. regulation
could materially affect its operations in the future.
. Changes in Lloyd's regulation could affect LaSalle Re Capital in the future.
As a corporate member of Lloyd's, LaSalle Re Capital is subject to Lloyd's
regulation. LaSalle Re Capital's ability to continue to underwrite as such in
future years may be affected by changes in such regulation. The volume of
business that can be written from one year of account to the next depends on
the level of funds we make available to support such underwriting. Based on its
corporate membership in Lloyd's, LaSalle Re Capital is also registered in
Bermuda under the Insurance Act as a "member of a recognized association of
underwriters" and, as such, may in the future be affected by changes to the
conditions of such registration.
16
<PAGE>
. We could be subject to U.S. corporate income tax.
We intend to operate the business of Holdings and LaSalle Re in a manner
that will cause them not to be engaged in the conduct of a trade or business
within the U.S. Accordingly, neither Holdings nor LaSalle Re will be required
to pay U.S. corporate income tax, other than withholding tax on certain U.S.
source income. However, if the Internal Revenue Service (the "IRS")
successfully contended that Holdings or LaSalle Re is engaged in such a trade
or business, Holdings and LaSalle Re would be subject to U.S. corporate income
tax on that portion of their net income treated as effectively connected with a
U.S. trade or business, as well as the U.S. branch profits tax. Even if the IRS
successfully contended that LaSalle Re was engaged in a U.S. trade or business,
if LaSalle Re were entitled to benefits under the U.S.-Bermuda income tax
treaty (the "Bermuda Treaty"), the Bermuda Treaty would preclude the IRS from
taxing LaSalle Re on its business income except to the extent that such income
were attributable to a permanent establishment maintained by LaSalle Re in the
U.S. We do not believe that LaSalle Re has a permanent establishment in the
U.S. However, if the IRS successfully contended that LaSalle Re has such an
establishment, LaSalle Re would be subject to U.S. taxation to such extent. If
Holdings and/or LaSalle Re become subject to U.S. income tax and branch profits
tax, our net income would be materially adversely affected. LaSalle Re Capital
is a corporate member of Lloyd's. Pursuant to a Closing Agreement between
Lloyd's and the IRS, LaSalle Re Capital will be treated as engaged in business
in the U.S. and is subject to U.S. corporate income tax on its net income from
U.S. sources.
. Our shareholders could be subject to U.S. taxes.
Generally, U.S. shareholders of Holdings will not be subject to any U.S. tax
until they receive a distribution from Holdings or dispose of their Common
Shares, Series A Preferred Shares or Series C Preferred Shares. However,
special provisions of the U.S. Internal Revenue Code of 1986 (the "Code") may
apply to U.S. taxpayers who directly, indirectly or by attribution own 10% or
more of the total combined voting power of all classes of capital stock of
Holdings, LaSalle Re and/or LaSalle Re Capital. Under these provisions, such
taxpayers will be required to include in their income their pro rata share of
our income as earned (other than LaSalle Re Capital's income subject to U.S.
corporate income tax), even if not distributed. We have attempted to avoid
being subject to these provisions by including in our Bye-Laws provisions that
limit the ownership of any type of shares to levels that will not subject
shareholders to U.S. taxes. Based on these Bye-Laws, we have been advised by
our United States counsel that our shareholders should not be subject to these
U.S. taxes.
In addition, special provisions of the Code could apply to U.S. taxpayers
who directly, indirectly or by attribution own any shares of LaSalle Re if 25%
or more of the value or voting power of the capital stock of LaSalle Re is
owned directly, indirectly or by attribution by U.S. taxpayers; 20% or more of
either the voting power or the value of the capital stock of LaSalle Re is
owned directly or indirectly by U.S. taxpayers insured or reinsured by LaSalle
Re or by persons related to them and LaSalle Re has gross related person
insurance income ("RPII") equal to 20% or more of its gross insurance income.
Similar considerations apply to U.S. taxpayers who indirectly through their
ownership of Common Shares or preferred shares own shares of LaSalle Re
Capital. RPII is investment income and premium income from the direct or
indirect insurance or reinsurance of the risk of any U.S. taxpayer who directly
or indirectly through foreign entities owns Common Shares, Series A Preferred
Shares or Series C Preferred Share, or of any person related to such a U.S.
taxpayer. We currently anticipate that less than 20% of the gross insurance
income of each of LaSalle Re and LaSalle Re Capital for any taxable year will
constitute RPII. However, if 20% or more of LaSalle Re's or LaSalle Re
Capital's gross insurance income is RPII, our U.S. shareholders may be required
to include in their income their pro rata share of our RPII income as earned,
even if not distributed.
. Gains resulting from the sale of our shares by U.S. shareholders could be
taxed in the U.S. as dividends.
Generally, a U.S. shareholder will realize capital gain or loss on the sale
or exchange of Common Shares, Series A Preferred Shares or Series C Preferred
Shares. However, the IRS could contend that special provisions of the Code
apply and that the amount of any gain equal to our allocable untaxed earnings
and profits should
17
<PAGE>
be taxed as a dividend. If the IRS successfully contended that such provisions
apply to us, individuals would be taxed on such amount at the rates applicable
to ordinary income rather than the lower rates applicable to long-term capital
gains. We have been advised by our United States counsel that these provisions
of the Code should not apply to the disposition of any Common Shares, Series A
Preferred Shares and Series C Preferred Shares by a U.S. shareholder who holds
less than 10% of such Shares.
. U.S. taxes could increase and new taxes could be imposed.
Our customers will be subject to an excise tax on reinsurance and insurance
premiums paid to us with respect to risks located in the United States. In
addition, withholding tax can be imposed on certain investment income from
United States sources. These taxes could increase and other taxes could be
imposed, which could have a material adverse effect on our business.
. The Organization for Economic Cooperation and Development and the European
Union are considering measures that might increase our taxes.
The Organization for Economic Cooperation and Development and the European
Union are considering measures to limit harmful tax competition. These measures
are largely directed at counteracting the effects of tax havens and
preferential tax regimes in countries around the world. If these measures are
adopted by a substantial number of member countries and if Bermuda is
considered to be engaged in harmful tax competition, we might be subject to
additional taxes.
. We could be subject to Bermuda tax.
Holdings, LaSalle Re and LaSalle Re Capital currently are not subject to
income or capital gains taxes in Bermuda. We have received assurances from the
Bermuda Minister of Finance under The Exempted Undertakings Tax Protection Act
1966 of Bermuda to the effect that if there is enacted in Bermuda any
legislation imposing tax computed on profits or income, or computed on any
capital asset, gain or appreciation, or any tax in the nature of estate duty or
inheritance tax, then the imposition of any such tax shall not be applicable to
Holdings, LaSalle Re or LaSalle Re Capital to any of their operations or the
shares, debentures or other obligations of Holdings, LaSalle Re or LaSalle Re
Capital until March 28, 2016. Holdings, LaSalle Re or LaSalle Re Capital could
be subject to taxes in Bermuda after such date.
. We could be subject to United Kingdom tax.
LaSalle Re Services is subject to U.K. corporation tax on its income.
However, we believe that the taxable income of LaSalle Re Services is modest,
and that its tax liability is and will continue to be small. As a corporate
member of Lloyd's, LaSalle Re Capital is subject to U.K. corporation tax on any
profits and gains, net of deductible expenditures, derived from its
participation in any Lloyd's syndicates. As a participant in such syndicate,
LaSalle Re Capital is also required to charge and account to the U.K. Inland
Revenue for value added tax on chargeable supplies of services and to charge
and account to the tax authorities of the U.K. and other member states of the
European Union for insurance premium taxes on the direct insurance of certain
risks within their respective jurisdictions. We believe that the activities of
LaSalle Re Services and LaSalle Re Capital will not cause LaSalle Re or the
Company to be subject to U.K. tax on any portion of their net income.
. Investors may have difficulties in serving process or enforcing judgments in
the United States.
We are organized pursuant to the laws of Bermuda. In addition, certain of
our officers and directors are residents of various jurisdictions outside the
United States. A large portion or all of our assets and the assets of our
officers and directors, at any one time, are or may be located in jurisdictions
outside the United States. We have appointed an agent in New York, New York to
receive service of process with respect to actions in any federal or state
court in the United States against us arising out of violations of the United
States federal
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securities laws relating to the transactions covered by this prospectus.
Nevertheless, investors may have difficulty effecting service of process within
the United States on our directors and officers who reside outside the United
States or to enforce against us or such directors and officers judgments of
United States courts based on civil liability provisions of the United States
federal securities laws.
. We may be affected by Year 2000 issues.
Many existing computer systems are unable to process dates in and after
the year 2000 because they use only two digits to identify a year in the date
field. These systems, if not corrected, could fail or create erroneous results
when transitioning to the year 2000. This "Year 2000" issue is believed to
affect virtually all companies and organizations, including the Company. We
have engaged International Business Machines Corporation to prepare an
assessment and strategy report outlining the steps needed to make our computer
systems Year 2000 compliant and to assist in implementing the procedures
outlined in the report. The report identified certain of our systems,
applications and business interfaces with Year 2000 problems. Our Year 2000
project includes assessment and strategy, detailed analysis and planning and
implementation. We have set a target date of March 31, 1999 for the completion
of the phases necessary to correct these problems in our material systems,
applications and business interfaces. We do not anticipate that the costs of
achieving Year 2000 readiness of our own systems will have a material impact on
our results of operations. However, we will be exposed to the risk that our
service providers, brokers and cedents may have Year 2000 problems that will
affect our business. We have distributed a questionnaire to our service
providers, brokers and cedents with whom we interface directly to determine
their state of readiness. We have received assurances from Aon and our material
brokers and cedents that their computer systems are expected to be Year 2000
compliant on a timely basis. If some of our service providers, brokers and
cedents fail to respond to our questionnaire or we determine that there is a
risk that they will not be Year 2000 compliant on a timely basis, our
contingency plan is to try to replace those service providers, brokers and
cedents. We cannot assure you that our operations will not experience material
disruptions due to the failure of our service providers, brokers or cedents to
become fully Year 2000 compliant in a timely manner or that such failure will
not otherwise have a material adverse effect on our financial condition and
results of operations. In addition, we may be exposed to liabilities under our
property catastrophe and other reinsurance policies for losses incurred in
connection with Year 2000 issues. We cannot assure you that such liabilities
would not be material.
USE OF PROCEEDS
All of the net proceeds from the sale of the Series C Preferred Shares will
be contributed to the capital of LaSalle Re, which will provide further support
for our underwriting.
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<PAGE>
CAPITALIZATION
The following table sets forth, as of December 31, 1998, (1) the actual
capitalization of the Company and (2) the pro forma capitalization of the
Company after giving effect to the offering of the Series C Preferred Shares.
You should read the table in conjunction with the Company's Consolidated
Financial Statements and related notes incorporated by reference in this
prospectus.
<TABLE>
<CAPTION>
As Adjusted
Actual for Offering
-------- ------------
(in thousands)
<S> <C> <C>
Minority interest(1)................................ $ 99,955 $ 99,955
Shareholders' equity
Common Share capital.............................. 15,780 15,780
Preferred Share capital........................... 3,000 5,000
Additional paid-in capital........................ 297,135 345,135
Retained earnings................................. 100,816 100,816
Accumulated other comprehensive income............ 7,836 7,836
-------- --------
Total shareholders' equity...................... 424,567 474,567
-------- --------
Total capitalization............................ $524,522 $574,522
======== ========
</TABLE>
- --------
(1) Minority interest represents those shares of LaSalle Re that are held as
Exchangeable Non-Voting Shares. These shares constitute approximately 22%
of the capital stock of LaSalle Re. Exchangeable Non-Voting shares are held
by certain Founding Shareholders and are exchangeable, at the option of the
holder, for Common Shares of Holdings on a one-for-one basis, unless the
Board determines that such exchange may cause actual or potential adverse
tax consequences to the Company or any shareholder. See "Certain Tax
Considerations."
RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED SHARE DIVIDENDS
The following table sets forth the ratio of earnings to combined fixed
charges and preferred share dividends for the Company on a consolidated basis
for the years ended September 30, 1998, 1997 and 1996 and for the three months
ended December 31, 1998. The Company had no debt or preferred shares
outstanding prior to 1996.
The ratio of earnings to fixed charges and preferred share dividends is
calculated by dividing the amount of net income before minority interest and
interest expense by the total amount of interest expense and preferred share
dividends.
<TABLE>
<CAPTION>
Year Ended
September 30,
Three Months Ended ---------------
December 31, 1998 1998 1997 1996
------------------ ---- ---- -----
<S> <C> <C> <C> <C>
Ratio of earnings to fixed charges.... 3.5 7.9 24.5 584.1
</TABLE>
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BUSINESS
Overview
Our principal focus is to write property catastrophe reinsurance on a
worldwide basis through our subsidiary, LaSalle Re. Property catastrophe
reinsurance contracts cover unpredictable events such as hurricanes,
windstorms, hailstorms, earthquakes, fires, industrial explosions, freezes,
riots, floods and other man-made or natural disasters. Therefore, our results
from fiscal quarter to quarter and fiscal year to year can vary significantly.
We also seek to diversify our book of business and take advantage of pricing
opportunities by offering other lines of reinsurance as appropriate. These
lines currently include property risk excess, property pro rata treaty,
casualty, marine, crop hail, aviation, satellite and political risk. In
addition, through LaSalle Re Capital, we provide capital support to selected
Lloyd's syndicates that individually write the following lines of business:
direct insurance and facultative reinsurance; marine insurance and reinsurance;
and professional indemnity, directors' and officers' insurance and bankers'
blanket bond business.
We have succeeded in attaining a selective and geographically diverse
portfolio of property catastrophe reinsurance risks. In the year ended
September 30, 1998, 48.0% of our gross premiums written, excluding gross
premiums written relating to LaSalle Re Capital, represented U.S.-based risks,
10.7% represented continental Europe-based risks, 8.7% represented U.K.-based
risks and 32.6% represented risks located in a variety of geographic zones
elsewhere in the world. We have developed a strong base of regional business in
discrete zones within the U.S. This business assists us in diversifying our
U.S.-based risks and makes more efficient use of our capital by limiting
exposures that span multiple geographic regions. In the year ended September
30, 1998, this business, which we classify as regional and super-regional,
accounted for 43.5% of our U.S.-based gross premiums written.
At December 31, 1998, Holdings had Combined Equity of $524.5 million
compared to $534.2 million at December 31, 1997. For the year ended September
30, 1998, Holdings achieved annualized returns on average Combined Equity of
13.0% and combined ratios of 82.2%. This compares with annualized returns on
average Combined Equity of 25.4% and combined ratios of 42.6% for the year
ended September 30, 1997. This decline in profitability in 1998 was due
primarily to increased catastrophe losses. In addition, our loss and loss
expense ratios were 61.8% and 19.0% for the same periods. We wrote net premiums
of $147.5 million for the year ended September 30, 1998 compared to net
premiums of $163.7 million for the year ended September 30, 1997. During the
three months ended December 31, 1998, we wrote net premiums of $10.8 million
compared to $11.1 million for the same period in 1997. Of course, results in
the future may be different.
Development of the Business
In October 1993, the Founding Shareholders formed LaSalle Re in Bermuda to
take advantage of the supply and demand imbalance that they believed existed in
the property catastrophe reinsurance market. Until recently, affiliates of Aon
and CNA provided certain underwriting and administrative services to the
Company pursuant to service agreements. Currently, Aon provides certain
investment management services.
In September 1995, Holdings was incorporated in Bermuda as a holding company
in connection with the Company's recapitalization and initial public offering.
Holdings owns 100% of the outstanding voting stock of LaSalle Re and, since
November 1995, has owned a majority of its outstanding capital stock. LaSalle
Re's remaining outstanding capital stock is held by certain Founding
Shareholders in the form of Exchangeable Non-Voting Shares of LaSalle Re.
Exchangeable Non-Voting Shares are exchangeable, at the option of the holder,
on a one-for-one basis for Common Shares of Holdings unless Holdings' Board
determines that such exchange may cause actual or potential adverse tax
consequences to Holdings or any shareholder. Certain holders of Common Shares
have the right to demand that Holdings register such Shares under the
Securities Act of 1933, as amended (the "Securities Act") in an underwritten or
at the market offering.
Capital Management Strategy
We have always pursued a capital management strategy focused on balancing
capital levels with aggregate exposures while seeking strong returns on
shareholders' equity. Consistent with this strategy, we have
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<PAGE>
maintained a dividend policy of distributing to holders of Common Shares and
Exchangeable Non-Voting Shares in each fiscal year 50% to 60% of the excess of
our net income (before minority interest) from the prior fiscal year over
dividends payable on all series of our preferred shares in the current fiscal
year.
We completed a secondary offering of 3,910,000 Common Shares in December
1996 (the "Secondary Offering"). The Secondary Offering increased the number of
Common Shares owned by the public (i.e. persons not affiliated with the
Founding Shareholders) from 4,312,500 to 8,222,500 and reduced the percentage
of Common Shares owned by Founding Shareholders to approximately 50%. In
addition, as a result of the exchange of certain Exchangeable Non-Voting Shares
in connection with the Secondary Offering, Holdings increased its ownership of
the outstanding capital stock of LaSalle Re from 63% to 73%.
In March 1997, we issued 3,000,000 Series A Preferred Shares in a public
offering (the "Series A Preferred Offering"). The Series A Preferred Shares
carry a liquidation preference of $25.00 per share, plus accrued and unpaid
dividends, if any, to the date of liquidation. Dividends on the Series A
Preferred Shares are payable in an amount per share equal to 8.75% of the
liquidation preference per annum (equal to $2.1875 per share). The Company
received net proceeds from the Series A Preferred Offering after underwriting
discounts and commissions of $72.6 million.
In May 1997, we completed a $100 million tender offer (the "Tender Offer")
whereby we purchased for cancellation our Common Shares at a price of $27.00
per share. The Tender Offer was made to all holders of Common Shares and Common
Shares equivalents, which included Exchangeable Non-Voting Shares and options
to purchase Common Shares and Exchangeable Non-Voting Shares. Pursuant to the
Tender Offer, 2,163,538 Exchangeable Non-Voting Shares were exchanged for
Common Shares and 95,679 options for Exchangeable Non-Voting Shares were
exercised and exchanged for Common Shares. As a result of these exchanges,
Holdings increased its ownership in LaSalle Re from 73% to 79%. Furthermore, in
August 1998 and October 1998, Holdings agreed to purchase an aggregate of
approximately 115,000 shares of its capital stock on the open market for
approximately $2,900,000. Holdings currently owns approximately 78% of the
outstanding capital stock of LaSalle Re and continues to own 100% of the
outstanding voting stock of LaSalle Re.
In order to reduce our earnings volatility and protect our capital base, we
have a multi-year excess of loss reinsurance program in place. The program,
originally entered into on January 1, 1997, provides $100 million of coverage,
in excess of $100 million, for each of three individual loss events up to an
aggregate coverage of $300 million. The current program was renewed effective
January 1, 1999 and terminates on December 31, 2002. The reinsurance is
provided by a company that holds a claims-paying rating of "AA" (Excellent)
from S&P.
Effective July 1, 1997, we entered into a $100 million multi-year CatEPut
option program. The CatEPut option will enable us to put up to $100 million of
equity to certain capital providers through the issue of convertible preferred
shares at pre-negotiated terms, in the event of a major catastrophe or series
of large catastrophes that cause us substantial losses. In the event the Series
B Preferred Shares are issued pursuant to the CatEPut, we will pay dividends on
Series B Preferred Shares at a rate per annum equal to the then-current LIBOR
rate plus an additional 2.0% to 4.0% depending on our then-current credit
rating. The dividend rate, at the time the Series B Preferred Shares are
issued, may also be subject to a modest decrease depending on the level and
quality of our reinsurance coverage. After the first anniversary of the
issuance of any Series B Preferred Share (or earlier in certain limited
circumstances), we may, at our option, redeem any or all of the outstanding
Series B Preferred Shares at a redemption price per share equal to the
aggregate of (1) the liquidation preference of $25.00 per share, (2) an early
redemption premium of $0.25 per share if such shares are redeemed on or after
the second anniversary but before the third anniversary of their issuance or
$0.50 per share if such shares are redeemed prior to the second anniversary of
their issuance, and (3) any accrued but unpaid dividends on such shares. In
addition, after the third anniversary of the issuance of the Series B Preferred
Shares (or earlier in certain limited circumstances), any holder of Series B
Preferred Shares may, at
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<PAGE>
such holder's option, cause us to convert such holder's Series B Preferred
Shares into Common Shares, subject to certain restrictions.
We believe that our capital management strategy is consistent with our
policy to actively manage our capital and our goal to increase shareholder
value. We believe that our cash, short-term investments and borrowing capacity,
together with anticipated cash flows from operations, will be adequate for our
needs in the foreseeable future. However, our actual experience may differ from
the expectations set forth in the preceding sentence, due to future events that
might reduce our available cash balances (such as operating losses following
catastrophes or other adverse events) or that might reduce or eliminate our
access to financial resources. For a discussion of some of the factors that
could cause our actual experience to differ from expectations, you should refer
to "Risk Factors" and "Note on Forward-Looking Statements." The Board, in its
discretion, may change our capital management strategy. Our ability to
implement our capital management strategy will depend on various factors, some
of which are beyond our control.
Operating Strategies
We pursue the following operating strategies which, in conjunction with our
capital management strategy, are intended to maximize return on shareholders'
equity:
Focus on Property Catastrophe Reinsurance. We concentrate on writing
property catastrophe reinsurance of risks located throughout the world. For the
year ended September 30, 1998, we derived 67.2% of our gross premiums written
from property catastrophe reinsurance compared to 84.5% of our gross premiums
for the year ended September 30, 1997. The high level of severity and frequency
of property catastrophe losses from 1987 through 1992 precipitated a general
increase in rates and attachment points in this line of reinsurance. Although
rates have declined from their highs in 1993 and 1994, we believe that property
catastrophe reinsurance can still be significantly profitable for a reinsurer,
such as the Company, that has the financial strength, flexibility and
responsiveness needed to attract quality business and the high level of
technical underwriting judgment and skill necessary to price risks
appropriately.
Selectively Write Other Lines of Business. While property catastrophe
reinsurance is our primary focus, we also seek to take advantage of pricing
opportunities that may occur in other lines of reinsurance. These lines
generally are characterized by a relatively short period between the collection
of premium and the notification of loss. These lines currently include property
risk excess and pro rata treaty insurance, which constituted 6.7% of our gross
premiums written in the year ended September 30, 1998 and 5.2% of our gross
premiums in the year ended September 30, 1997. We also write casualty, marine,
crop hail, aviation, satellite reinsurance, and political risk coverages. We
believe that writing these types of reinsurance enhances our use of capital
because they generally create little additional aggregate exposure for the
Company. In addition, we formed LaSalle Re Capital to provide capital support
to selected Lloyd's syndicates. As a corporate member of Lloyd's, LaSalle Re
Capital now participates in three Lloyd's syndicates. One of these syndicates
writes direct insurance and facultative reinsurance, one writes marine
insurance and reinsurance, and one writes professional indemnity and directors'
and officers' insurance and bankers' blanket bond business. For the year ended
September 30, 1998, LaSalle Re Capital provided 13.5% of our gross premiums and
for the year ended September 30, 1997, LaSalle Re Capital provided 8.2% of our
gross premiums. LaSalle Re Capital provides capital support to the syndicates
through letters of credit.
Utilize a Disciplined Underwriting Approach. We make underwriting decisions
following analysis of each reinsurance contract based on the expected
incremental return on equity in relation to our overall portfolio of
reinsurance contracts. To assess our property catastrophe risks, we use a
variety of underwriting techniques, including simulation models, exposure
ratings and experience ratings. We have developed a proprietary L-CAM(TM)
catastrophe analysis model to assess our risks in the U.S. property catastrophe
market. We control and monitor our aggregate exposures on a real-time basis
using computer-based rating and control systems. We are highly selective in
accepting risks, extending coverage on slightly less than half of the contract
submissions we received in the year ended September 30, 1998.
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<PAGE>
Maintain and Develop Long-Term Relationships with Clients and Brokers. We
seek to maintain and develop long-term relationships with our clients and
brokers by providing a high level of service. We promptly respond to
underwriting submissions, design customized programs, offer lead terms when
circumstances warrant and pay valid claims within an average of five days. We
retain a substantial portion of our clients from year to year. Retaining
clients permits us to use our experience regarding a client's underwriting
practices and risk management systems to underwrite our own business with
greater precision. In addition, our relationships with brokers permit us to
obtain business and monitor developments in various lines of reinsurance in
order to increase our writings when market conditions in those lines are
favorable.
Industry Trends
We believe that an imbalance between the supply of and demand for property
catastrophe reinsurance existed in 1993 and caused an increase in premiums from
pre-1993 levels. As a result of the increased property catastrophe reinsurance
capacity since 1993, we believe that supply and demand in the property
catastrophe reinsurance market became more stable in 1994 and have remained
relatively stable in succeeding years. We believe that property catastrophe
reinsurance capacity has increased further since 1994. Based on our marketing
efforts, reinsurance contract submissions and publicly available information,
we believe that property catastrophe rates generally remained at the
substantially increased 1993 levels in 1994 and decreased somewhat in 1995.
Rates continued to decrease in 1996, 1997 and 1998. In particular, rates have
declined significantly in areas such as Japan and Europe where there has been
favorable loss experience, while in the U.S. market, where the level of
property catastrophe losses has generally been higher than in international
markets in recent years, rates have decreased to a lesser degree. Based on the
1999 contract renewals that have occurred to date, we estimate that we have
experienced modest overall global rate decreases compared to 1998. Although it
is possible that rates will continue to decrease, we expect the declining
movement of rates to decelerate and rates to stabilize through the rest of the
1999 underwriting year. See "Risk Factors."
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<PAGE>
DESCRIPTION OF SERIES C PREFERRED SHARES
The following is a summary of the terms and provisions of the Series C
Preferred Shares. Because it is a summary, it may not contain all of the
information that may be important to you. For a complete description of the
terms and provisions of the Series C Preferred Shares, you should refer to the
Certificate of Designation and the Bye-Laws, both of which are incorporated by
reference herein. Copies of the Certificate of Designation and the Bye-Laws are
filed as an exhibit to the registration statement of which this prospectus is a
part.
General
The authorized share capital of Holdings consists of 100,000,000 shares,
including (i) Common Shares of which 15,783,275 were outstanding as of March 4,
1999, (ii) Series A Preferred Shares of which 3,000,000 were outstanding as of
March 4, 1999 and (iii) Series B Preferred Shares of which no shares were
outstanding as of March 4, 1999. The Bye-Laws and Bermuda law permit the Board
by resolution to issue preferred shares in series without the approval of the
shareholders of Holdings. In connection with any such issuance, the Board may
establish the number of preferred shares to be included in each series and may
fix the designation, powers, preferences and rights of the preferred shares of
each series, including but not limited to such matters as dividends, voting
rights, redemption, conversion and liquidation rights. On February 15, 1999,
the Board authorized the issuance of 2,000,000 Series C Preferred Shares in
connection with the offering.
When issued and paid for pursuant to the offering, the Series C Preferred
Shares will be duly authorized, validly issued, fully paid and nonassessable.
The holders of the Series C Preferred Shares will have no preemptive rights
with respect to any shares of the capital stock of the Company or any other
securities of the Company convertible into or carrying rights or options to
purchase any such shares. The Series C Preferred Shares will not be subject to
any sinking fund or other obligation of the Company to redeem or retire the
Series C Preferred Shares. Unless redeemed by the Company, the Series C
Preferred Shares will have a perpetual term, with no maturity.
The transfer agent, registrar and dividend disbursing agent for the Series C
Preferred Shares will be First Chicago Trust Company of New York.
Dividends
Holders of the Series C Preferred Shares shall be entitled to receive, when,
as and if declared by the Board, out of funds legally available for the payment
of dividends, cumulative preferential cash dividends in an amount per share
equal to % of the liquidation preference per annum (equivalent to $
per share). Such dividends shall begin to accrue and shall be cumulative from
the date of original issuance and shall be payable quarterly, when, as and if
declared by the Board, in arrears on the day of , ,
and of each year or, if such date is not a business day,
on the business day immediately before such date (each, a "Dividend Payment
Date"). The first dividend, which will be payable on , 1999, will
represent the period from the original issue date until the Dividend Payment
Date of , 1999. The dividend for such partial dividend period and any
other dividend payable on the Series C Preferred Shares for any other partial
dividend period will be computed on the basis of a 360-day year consisting of
twelve 30-day months. Dividends will be payable to holders of record as they
appear in the Register of Members of the Company at the close of business on
the applicable record date, which shall be on such date designated by the Board
for the payment of dividends that is not more than 60 nor less than 30 days
prior to such Dividend Payment Date (each, a "Dividend Record Date").
No dividends on Series C Preferred Shares shall be declared by the Board or
paid or set apart for payment by the Company at such time as the terms and
provisions of any agreement of the Company, including any agreement relating to
its indebtedness, prohibits such declaration, payment or setting apart for
payment or provides that such declaration, payment or setting apart for payment
would constitute a breach thereof or a default thereunder, or if such
declaration, payment or setting apart for payment shall be restricted or
prohibited
25
<PAGE>
by law. Notwithstanding the foregoing, dividends on the Series C Preferred
Shares will accrue whether or not there are funds legally available for the
payment of such dividends and whether or not such dividends are declared.
Holders of the Series C Preferred Shares will not be entitled to any dividends
in excess of full cumulative dividends as described above. No interest, or sum
of money in lieu of interest, shall be payable in respect of any dividend
payment or payments on the Series C Preferred Shares which may be in arrears.
If there shall be any change in the law, regulation or official directive
(whether or not having the force of law) or in the interpretation by any
Bermuda Government authority or court of competent jurisdiction which imposes
on the Company any condition with respect to the Series C Preferred Shares as a
result of which any dividend payment is reduced, the Company shall give notice
to the holders of Series C Preferred Shares of such event and all such
reductions shall be borne in full by the holders of Series C Preferred Shares
(but only to the extent permitted by law).
If any Series C Preferred Shares are outstanding, no dividends or other
distributions shall be declared or paid or set apart for payment on any class
or series of Parity Shares for any period unless either (1) full cumulative
dividends have been or contemporaneously are declared and paid or declared and
a sum sufficient for the payment thereof set apart for such payments on the
Series C Preferred Shares for all dividend periods terminating on or prior to
the dividend payment date on such Parity Shares, or (2) all dividends declared
upon the Series C Preferred Shares and any class or series of Parity Shares are
declared pro rata so that the amount of dividends declared per share on the
Series C Preferred Shares and any class or series of Parity Shares shall in all
cases bear to each other the same ratio that accrued and unpaid dividends per
share on the Series C Preferred Shares and such class or series of Parity
Shares bear to each other. The Series A Preferred Shares and, if issued, the
Series B Preferred Shares are Parity Shares for any and all purposes.
If any Series C Preferred Shares are outstanding, unless full cumulative
dividends on the Series C Preferred Shares and any Parity Shares have been or
contemporaneously are declared and paid or declared and a sum sufficient for
the payment thereof set apart for payment for all past dividend periods and the
then current dividend period, no dividends (other than those paid in Common
Shares or other capital shares ranking junior to the Series C Preferred Shares
as to dividends and as to the distribution of assets upon any liquidation,
dissolution or winding up (together with the Common Shares, "Fully Junior
Shares")) shall be declared or paid or set apart for payment and no other
distribution shall be declared or paid or set apart for payment upon the Common
Shares or any other capital shares ranking junior to the Series C Preferred
Shares as to dividends or as to the distribution of assets upon any
liquidation, dissolution or winding up (together with the Common Shares,
"Junior Shares"), nor shall any Common Shares or any other Junior Shares be
redeemed, purchased or otherwise acquired (other than a redemption, purchase or
other acquisition of Common Shares made for purposes of an employee incentive
or benefit plan of the Company or any subsidiary) for any consideration (or any
moneys be paid to or made available for a sinking fund for the redemption of
any Common Shares or any other Junior Shares) by the Company (except by
conversion into or exchange for Fully Junior Shares).
Any dividend payment made on Series C Preferred Shares shall first be
credited against the earliest accrued but unpaid dividend due with respect to
Series C Preferred Shares that remains payable.
Liquidation Rights
Upon any voluntary or involuntary liquidation, dissolution or winding up of
the affairs of the Company, then, before any dividend payment or distribution
shall be made or set apart for payment to the holders of any Common Shares or
any other class or series of Junior Shares, the holders of Series C Preferred
Shares shall be entitled to receive out of assets of the Company legally
available for distribution to shareholders liquidating distributions in the
amount of the liquidation preference ($25.00 per share), plus an amount equal
to all dividends accrued and unpaid thereon. After payment of the full amount
of the liquidating distributions to which they are entitled, the holders of
Series C Preferred Shares will have no right or claim to any of the remaining
assets of the Company. In the event that, upon any such voluntary or
involuntary liquidation,
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dissolution or winding up, the available assets of the Company are insufficient
to pay the amount of the liquidating distributions on all outstanding Series C
Preferred Shares and the corresponding amounts payable on all classes or series
of Parity Shares, then the holders of the Series C Preferred Shares and all
such classes or series of Parity Shares shall share ratably in any such
distribution of assets in proportion to the full liquidating distributions to
which they would otherwise be respectively entitled.
If liquidating distributions shall have been made in full to all holders of
Series C Preferred Shares and all classes or series of Parity Shares, the
remaining assets of the Company shall be distributed among the holders of
Common Shares or any other classes or series of Junior Shares, according to
their respective rights and preferences and in each case according to their
respective number of shares. For such purposes, the consolidation, amalgamation
or merger of the Company with or into any other entity, the sale, lease or
conveyance of all or substantially all of the shares of capital stock or the
property or business of the Company or a statutory share exchange shall not be
deemed to constitute a liquidation, dissolution or winding up of the Company.
Redemption
Except under certain special circumstances as described below, the Series C
Preferred Shares are not redeemable prior to , 2004. On and after
such date, the Company, at its option upon not less than 30 nor more than 90
days' written notice, may redeem the Series C Preferred Shares, in whole at any
time or from time to time in part, for cash at a redemption price of $25.00 per
share, plus all accrued and unpaid dividends, if any, thereon to the date fixed
for redemption, without interest. Holders of Series C Preferred Shares to be
redeemed shall surrender certificates for such Series C Preferred Shares at the
place designated in such notice and shall be entitled to the redemption price
and any accrued and unpaid dividends payable upon such redemption following
such surrender.
If fewer than all of the outstanding Series C Preferred Shares are to be
redeemed, the number of shares to be redeemed will be determined by the Company
and such shares may be redeemed pro rata from the holders of record of such
shares in proportion to the number of such shares held by such holders (with
adjustments to avoid redemption of fractional shares), by lot or by any other
method determined by the Company in its sole discretion to be equitable.
Unless full cumulative dividends on all Series C Preferred Shares and all
Parity Shares shall have been declared and paid or declared and a sum
sufficient for the payment thereof set apart for payment for all past dividend
periods and the then current dividend period, no Series C Preferred Shares or
any Parity Shares shall be redeemed, purchased or otherwise acquired by the
Company unless all outstanding Series C Preferred Shares and any Parity Shares
are redeemed; provided, however, that the foregoing shall not prevent the
purchase or acquisition by the Company of fewer than all of the outstanding
Series C Preferred Shares or Parity Shares pursuant to a purchase or exchange
offer made on the same terms to holders of all outstanding Series C Preferred
Shares and Parity Shares or pursuant to a repurchase of Excess Preferred Shares
as described below.
At any time prior to , 2004, if the Company shall have submitted
to the holders of its Common Shares a proposal for amalgamation, consolidation,
merger or statutory share exchange, or any proposal for any other matter that
requires for its validation or effectuation an affirmative vote of the holders
of the Series C Preferred Shares at the time outstanding, acting as a single
class, the Company, at its option upon not less than 30 nor more than 90 days
written notice, may redeem all of the outstanding Series C Preferred Shares at
a redemption price of $26.00 per share, plus accrued and unpaid dividends, if
any, to the date of redemption, without interest.
Notice of any redemption will be mailed at least 30 days but not more than
90 days before the redemption date to each holder of record of Series C
Preferred Shares to be redeemed at the address shown in the Register of Members
of the Company. Each notice shall state, as appropriate: (1) the redemption
date; (2) the number of Series C Preferred Shares to be redeemed; (3) the
redemption price; (4) the place or places where certificates
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for Series C Preferred Shares are to be surrendered for payment of the
redemption price; and (5) that, where applicable, dividends on the Series C
Preferred Shares to be redeemed will cease to accrue on such redemption date.
If fewer than all Series C Preferred Shares are to be redeemed, the notice
mailed to each such holder thereof shall also specify the number of Series C
Preferred Shares to be redeemed from such holder. If notice of redemption of
any Series C Preferred Shares has been given and if the funds necessary for
such redemption have been set apart by the Company in trust for the benefit of
the holders of Series C Preferred Shares so called for redemption, then from
and after the redemption date, dividends will cease to accrue on the Series C
Preferred Shares being redeemed, such Series C Preferred Shares shall no longer
be deemed to be outstanding and all rights of the holders of such shares will
terminate, except the right to receive the redemption price.
The holders of Series C Preferred Shares at the close of business on a
Dividend Record Date will be entitled to receive the dividend payable with
respect to such Series C Preferred Shares on the corresponding Dividend Payment
Date notwithstanding the redemption thereof between such Dividend Record Date
and the corresponding Dividend Payment Date or the Company's default in the
payment of the dividend due. Except as provided above, the Company will make no
payment or allowance for unpaid dividends, whether or not in arrears, on Series
C Preferred Shares that have been called for redemption.
Special Representation and Voting Rights; Relationship to Preferred Shares of
LaSalle Re
Except as indicated below, or except as otherwise from time to time required
by applicable law, the holders of Series C Preferred Shares will have no voting
rights.
Whenever dividends payable on Series C Preferred Shares or any class or
series of Parity Shares shall be in arrears (whether or not such dividends have
been earned or declared) in an amount equivalent to dividends for six full
dividend periods (whether or not consecutive), then, immediately upon the
happening of such event, the holders of Series C Preferred Shares, together
with the holders of shares of every other class or series of Parity Shares (all
such other classes or series, the "Voting Preferred Shares"), voting as a
single class regardless of class or series, shall have the right to elect two
special representatives (the "Special Representatives") to the Board of
Holdings. The Special Representatives shall not be directors or officers of
Holdings but shall be entitled to receive notice of all Board meetings and to
take part in such Board meetings, with the privilege of voice but not vote. In
addition, at all times when the holders of the Series C Preferred Shares and
the Voting Preferred Shares have the right to be represented by such Special
Representatives at the Holdings Board level, Holdings shall be obligated to
cause, to the extent permitted under Bermuda law, the election of two
additional directors to the LaSalle Re board (which currently includes nine
members) who shall be designated by the Special Representatives (the
"Subsidiary Voting Right"). The Subsidiary Voting Right will allow the holders
of Holdings' Series C Preferred Shares and the Voting Preferred Shares to have
the right to exercise, in effect, voting rights through board members at the
LaSalle Re board level under such circumstances. Whenever all arrearages in
dividends on the Series C Preferred Shares and the Voting Preferred Shares then
outstanding shall have been paid and dividends thereon for the current
quarterly dividend period shall have been paid or declared and set apart for
payment, then the right of holders of the Series C Preferred Shares and the
Voting Preferred Shares to be represented by Special Representatives and the
Subsidiary Voting Right shall cease (but subject always to the same provision
for the vesting of such rights in the case of any future arrearages in an
amount equivalent to dividends for six full dividend periods), and the
positions of the Special Representatives and the additional directors elected
at the LaSalle Re board level shall forthwith terminate.
Contemporaneously with the issuance of the 2,000,000 Series C Preferred
Shares by Holdings pursuant to the offering, LaSalle Re will issue an
equivalent number of its own Series C Preferred Shares, par value $1.00 per
share (the "Subsidiary Preferred Shares"). All of the Subsidiary Preferred
Shares will be owned by Holdings. The Subsidiary Preferred Shares will have
identical dividend rights and liquidation rights to the Series C Preferred
Shares, but will be redeemable at any time at the option of LaSalle Re,
provided that Holdings shall make alternative arrangements to provide a means
for it to continue to have adequate resources to meet its dividend obligations
to the holders of its Series C Preferred Shares.
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Whenever dividends payable on Subsidiary Preferred Shares or shares ranking
equal with such shares shall be in arrears (whether or not such dividends have
been earned or declared) in an amount equivalent to dividends for six full
dividend periods (whether or not consecutive), then, immediately upon the
happening of such event, Holdings as holder of the Subsidiary Preferred Shares
(along with the holders of any Parity Shares) shall acquire the right (the
"Subsidiary Preferred Voting Right") to elect two additional members of the
board of directors of LaSalle Re. The Subsidiary Preferred Voting Right shall
correlate to the Subsidiary Voting Right described above such that there shall
be no more than a total of two additional directors elected to the board of
LaSalle Re at any time pursuant to such rights. Holdings shall be obligated
under such circumstances to exercise the Subsidiary Preferred Voting Right for
the election of such additional directors in such manner as the Special
Representatives elected at the Holdings Board level as described above shall
direct. The Subsidiary Preferred Voting Right will allow the holders of
Holdings' Series C Preferred Shares and the Voting Preferred Shares to have the
right to exercise, in effect, voting rights through board members at the
LaSalle Re board level under such circumstances. Whenever all arrearages in
dividends on the Subsidiary Preferred Shares and any parity shares shall have
been paid and dividends thereon for the current quarterly dividend period shall
have been paid or declared and set apart for payment, then the Subsidiary
Preferred Voting Right shall cease (but subject always to the same provision
for the vesting of such rights in the case of any future arrearages in an
amount equivalent to dividends for six full dividend periods), and the terms of
office of all persons elected pursuant to the Subsidiary Preferred Voting Right
as additional members of the board of directors of LaSalle Re shall forthwith
terminate.
As to the payment of dividends and the distribution of assets upon
liquidation, dissolution or winding up of the Company, the Subsidiary Preferred
Shares shall rank junior to the preferred stock of LaSalle Re authorized in
connection with the Company's credit facility but currently unissued.
So long as any Series C Preferred Shares are outstanding, in addition to any
other vote or consent of shareholders required by law or by the Bye-Laws, the
approval of the holders of at least 75% of the Series C Preferred Shares at the
time outstanding, acting as a single class, given in person or by proxy, either
in writing without a meeting or by vote at any meeting called for the purpose,
shall be necessary for effecting or validating (1) any amendment, alteration or
repeal of any of the provisions of Holdings' Memorandum of Association, Bye-
Laws or the Certificate of Designation that would vary the rights, preferences
or voting powers of the holders of the Series C Preferred Shares; (2) any
amalgamation, consolidation, merger or statutory share exchange that affects
the Series C Preferred Shares, unless in each such case each Series C Preferred
Share shall remain outstanding with no variation in its rights, preferences or
voting powers or shall be converted into or exchanged for preferred shares of
the surviving entity having rights, preferences and voting powers identical to
that of a Series C Preferred Share; (3) the authorization, creation or any
increase in the authorized amount of, any shares of any class or series or any
security convertible into shares of any class or series ranking prior to the
Series C Preferred Shares in the payment of dividends or the distribution of
assets on any liquidation, dissolution or winding up of the Company; or (4) any
other transaction or action that would amount to a variation of the rights,
preferences or voting powers of the holders of the Series C Preferred Shares.
However, no such vote of the holders of Series C Preferred Shares is required
if, prior to the time when any of the foregoing actions is to take effect, all
Series C Preferred Shares at the time outstanding shall have been redeemed. See
"--Redemption." The Company may also create and issue additional classes or
series of Parity Shares and Fully Junior Shares without the consent of any
holder of Series C Preferred Shares. The holders of Series C Preferred Shares
are not entitled to vote on any sale of all or substantially all of the assets
of the Company.
Conversion
The Series C Preferred Shares are not convertible into or exchangeable for
any other securities of the Company.
Limitations on Transfer and Ownership
The Certificate of Designation provides that no person may acquire ownership
of more than 9.9% of the outstanding Series C Preferred Shares. Any Series C
Preferred Shares owned by a person in excess of such
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9.9% shall be deemed "Excess Preferred Shares." Within 10 days of becoming
aware of the existence of Excess Preferred Shares (whether by notice on
Schedule 13D or otherwise), the Company shall initiate the repurchase of any
and all Excess Preferred Shares by giving notice of repurchase to the holder or
holders thereof. The repurchase shall be completed on a closing date not more
than 10 days after the date on which the Company mails the repurchase notice.
The Company will be entitled to assign its repurchase right to a third party or
parties, who may be other shareholders of the Company, with the consent of any
such assignee. The repurchase price of each Excess Preferred Share called for
repurchase shall be the average daily per share closing price of the Series C
Preferred Shares, if the Series C Preferred Shares are listed on a national
securities exchange or are reported on the Nasdaq National Market System, and
if the Series C Preferred Shares are not so listed or reported, shall be the
mean between the average per share closing bid prices and the average per share
closing asked prices of the Series C Preferred Shares, in each case during the
30-day period ending on the business day prior to the mailing date of the
repurchase notice, or if there have been no sales on a national securities
exchange or the Nasdaq National Market System and no published bid quotations
and no published asked quotations with respect to Series C Preferred Shares
during such 30-day period, the repurchase price shall be the price determined
by the Board in good faith. The foregoing limitation on ownership shall not
apply to the acquisition of Series C Preferred Shares by an underwriter in a
public offering of Series C Preferred Shares. The Board, in its sole and
absolute discretion, may exempt from the 9.9% ownership limitation certain
designated Series C Preferred Shares owned by a person who has provided the
Board with evidence and assurances acceptable to the Board that ownership of
such shares will cause no adverse tax, legal or regulatory consequences to the
Company, any of its subsidiaries or any of its shareholders.
Under the Bye-Laws, any transfer of Series C Preferred Shares that results
in a shareholder (other than a registered investment company (an "Investment
Company") under the U.S. Investment Company Act of 1940, as amended)
beneficially owning more than 5.0% of the outstanding capital stock of Holdings
or any shareholder holding Controlled Shares in excess of 9.9% of the
outstanding capital stock of Holdings, in each case without the Board's prior
approval, shall not be registered in the share register of Holdings and shall
be void and of no effect. The Bye-Laws also provide that if the Board in its
absolute discretion determines that share ownership by any shareholder may
result in adverse tax, regulatory or legal consequences to Holdings, any of its
subsidiaries or any other shareholder, then Holdings will have the option, but
not the obligation, to repurchase all or part of the shares held by such
shareholder to the extent the Board determines it is necessary to avoid such
adverse or potential adverse consequences. The price to be paid for such shares
will be the fair market value of such shares.
Differences in Corporate Law
The Companies Act 1981 of Bermuda (the "Act"), which applies to the Company,
differs in certain material respects from laws generally applicable to United
States corporations and their shareholders. Set forth below is a summary of
certain significant provisions of the Act (including modifications adopted
pursuant to the Bye-Laws) applicable to the Company, which differ in certain
respects from provisions of Delaware corporate law. The following statements
are summaries. Because the following statements are summaries, they do not
purport to deal with all aspects of Bermuda law that may be relevant to the
Company and its shareholders.
Interested Directors. Bermuda law and the Bye-Laws provide that any
transaction entered into by the Company in which a director has an interest is
not voidable by the Company nor can such director be liable to the Company for
any profit realized pursuant to such transaction provided the nature of the
interest is disclosed at the first opportunity at a meeting of directors or in
writing to the directors. Under Delaware law, such transaction would not be
voidable if (1) the material facts as to such interested director's
relationship or interests are disclosed or are known to the board of directors
and the board in good faith authorizes the transaction by the affirmative vote
of a majority of the disinterested directors, (2) such material facts are
disclosed or are known to the stockholders entitled to vote on such transaction
and the transaction is specifically approved in good faith by vote of the
majority of shares entitled to vote thereon or (3) the
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transaction is fair as to the corporation as of the time it is authorized,
approved or ratified. Under Delaware law, such interested director could be
held liable for a transaction in which such director derived an improper
personal benefit.
Mergers and Similar Arrangements. The Company may acquire the business of
another Bermuda exempted company or a company incorporated outside Bermuda and
carry on such business when it is within the objects of its Memorandum of
Association. The Company may, with the approval of a majority of votes cast at
a general meeting of the shareholders at which a quorum is present, amalgamate
with another Bermuda company or with a body incorporated outside Bermuda. In
the case of an amalgamation, a shareholder may apply to a Bermuda court for a
proper valuation of such shareholder's shares if such shareholder is not
satisfied that fair value has been paid for such shares. The court ordinarily
would not set aside the transaction on that ground absent evidence of fraud or
bad faith. Under Delaware law, with certain exceptions, a merger, consolidation
or sale of all or substantially all the assets of a corporation must be
approved by the board of directors and a majority of the outstanding shares
entitled to vote thereon. Under Delaware law, a stockholder of a corporation
participating in certain major corporate transactions may, under varying
circumstances, be entitled to appraisal rights pursuant to which such
stockholder may receive cash in the amount of the fair value of the shares held
by such stockholder (as determined by a court or by agreement of the
corporation and the stockholder) in lieu of the consideration such stockholder
would otherwise receive in the transaction.
Takeovers. Bermuda law provides that where an offer is made for shares of
another company and, within four months of the offer, the holders of not less
than 90% of the shares which are the subject of the offer accept, the offeror
may by notice require the nontendering shareholders to transfer their shares on
the terms of the offer. Dissenting shareholders may apply to the court within
one month of the notice objecting to the transfer. The burden is on the
dissenting shareholders to show that the court should exercise its discretion
to enjoin the required transfer, which the court will be unlikely to do unless
there is evidence of fraud or bad faith or collusion between the offeror and
the holders of the shares who have accepted the offer as a means of unfairly
forcing out minority shareholders. Delaware law provides that a parent
corporation, by resolution of its board of directors and without any
shareholder vote, may merge with any 90% or more owned subsidiary. Upon any
such merger, dissenting stockholders of the subsidiary would have appraisal
rights.
Shareholder's Suit. The rights of shareholders under Bermuda law are not as
extensive as the rights of shareholders under legislation or judicial precedent
in many United States jurisdictions. Class actions and derivative actions are
generally not available to shareholders under the laws of Bermuda. However, the
Bermuda courts ordinarily would be expected to follow English case law
precedent, which would permit a shareholder to commence an action in the name
of the Company to remedy a wrong done to the Company where the act complained
of is alleged to be beyond the corporate power of the Company or is illegal or
would result in the violation of its Memorandum of Association or the Bye-Laws.
Furthermore, consideration would be given by the court to acts that are alleged
to constitute a fraud against the minority shareholders or where an act
requires the approval of a greater percentage of the Company's shareholders
than actually approved it. The winning party in such an action generally would
be able to recover a portion of attorneys' fees incurred in connection with
such action. Class actions and derivative actions generally are available to
stockholders under Delaware law for, among other things, breach of fiduciary
duty, corporate waste and actions not taken in accordance with applicable law.
In such actions, the court has discretion to permit the winning party to
recover attorneys' fees incurred in connection with such action.
Indemnification of Directors. The Company may indemnify its directors or
officers in their capacity as such in respect of any loss arising or liability
attaching to them by virtue of any rule of law in respect of any negligence,
default, breach of duty or breach of trust of which a director or officer may
be guilty in relation to the Company other than in respect of his own fraud or
dishonesty. Under Delaware law, a corporation may adopt a provision eliminating
or limiting the personal liability of a director to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for breaches of the director's duty of loyalty, for acts or omissions
not in good faith or which involve intentional misconduct or
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knowing violations of law, for improper payment of dividends or for any
transaction from which the director derived an improper personal benefit. Under
Delaware law, a corporation may indemnify a director or officer of the
corporation against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred in defense of an
action, suit or proceeding by reason of such position if (1) such director or
officer acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the corporation and (2) with respect to
any criminal action or proceeding, such director or officer had no reasonable
cause to believe his conduct was unlawful.
Inspection of Corporate Records. Members of the general public have the
right to inspect the public documents of the Company available at the office of
the Registrar of Companies in Bermuda, which will include the Memorandum of
Association (including its objects and powers) and any alteration to the
Memorandum of Association and documents relating to any increase or reduction
of authorized capital. The shareholders have the additional right to inspect
the Bye-Laws, minutes of general meetings and audited financial statements of
the Company, which must be presented to the annual general meeting of
shareholders. The register of shareholders of the Company is also open to
inspection by shareholders without charge and to members of the public for a
fee. The Company is required to maintain its share register in Bermuda but may
establish a branch register outside Bermuda. The Company is required to keep at
its registered office a register of its directors and officers which is open
for inspection by members of the public without charge. Bermuda law does not,
however, provide a general right for shareholders to inspect or obtain copies
of any other corporate records. Delaware law permits any shareholder to inspect
or obtain copies of a corporation's shareholder list and its other books and
records for any purpose reasonably related to such person's interest as a
shareholder. Delaware law does not permit inspection by the public of the
register of shareholders.
CERTAIN TAX CONSIDERATIONS
The following summary of taxation of Holdings, LaSalle Re, LaSalle Re
Services and LaSalle Re Capital and the taxation of shareholders of the Company
is based upon current law. The following discussion is a summary of the
principal Bermuda, United Kingdom and U.S. federal income tax consequences of
the ownership and disposition of Holdings' Series C Preferred Shares. The
summary does not purport to be a complete analysis of all of the tax
considerations that may be applicable to a decision to acquire Series C
Preferred Shares of Holdings and, unless explicitly noted to the contrary,
deals only with investors who are U.S. Persons (as defined below) who will hold
the Series C Preferred Shares as "capital assets" within the meaning of Section
1221 of the Code; provided, however, that except as explicitly provided below,
the summary does not apply to a U.S. 10% shareholder (as defined below) of
Holdings, LaSalle Re, LaSalle Re Services or LaSalle Re Capital. The tax
treatment of any particular shareholder may vary depending on such
shareholder's particular tax situation or status. Consequently, each
prospective shareholder is urged to consult his or its own tax advisors as to
the particular tax consequences of the Offering to such shareholder, including
the effect and applicability of federal, state, local and foreign income and
other tax laws. Legislative, judicial or administrative changes may be
forthcoming that could affect this summary.
As used herein, the term "U.S. Person" means a citizen or resident of the
United States; a corporation, partnership, or other entity created or organized
in the United States or under the laws of the United States or of any political
subdivision thereof; an estate whose income is includible in gross income for
United States Federal income tax purposes regardless of its source; or a
"United States Trust." A United States Trust is any trust if, and only if, (1)
a court within the United States is able to exercise primary supervision over
the administration of the trust and (2) one or more U.S. trustees have the
authority to control all substantial decisions of the trust. A U.S. Person who
holds Common Shares, Series A Preferred Shares, Series C Preferred Shares or
shares of LaSalle Re as "capital assets" within the meaning of section 1221 of
the Code will be referred to herein as a "U.S. Holder."
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Statements made below as to Bermuda tax law are based on the opinion of
Conyers Dill & Pearman, Bermuda counsel to the Company as to such tax laws
(subject to the qualifications and assumptions set forth in such opinion).
Statements below as to the United Kingdom tax law are based on the opinion of
Clyde & Co., U.K. counsel to the Company as to such tax laws (subject to the
qualifications and assumptions set forth in such opinion). Statements made
below as to United States federal income tax law are based upon the opinion of
Mayer, Brown & Platt, United States counsel to the Company as to such tax laws
(subject to the qualifications and assumptions set forth in such statements).
The statements as to the Company's beliefs and conclusions as to the
application of such tax laws to the Company represent the views of the
Company's management as to the application of such laws and do not represent
legal opinions of the Company or its counsel.
Taxation of the Company and its Subsidiaries
Bermuda
Under current Bermuda law, there is no income tax or capital gains tax
payable by Holdings, LaSalle Re or LaSalle Re Capital. Holdings, LaSalle Re and
LaSalle Re Capital have received from the Bermuda Minister of Finance an
assurance under The Exempted Undertakings Tax Protection Act, 1966 of Bermuda,
to the effect that in the event of there being enacted in Bermuda any
legislation imposing tax computed on profits or income, or computed on any
capital asset, gain or appreciation, or any tax in the nature of estate duty or
inheritance tax, then the imposition of any such tax shall not be applicable to
Holdings, to LaSalle Re, to LaSalle Re Capital, or to any of their operations
or their shares, debentures or other obligations, until March 28, 2016. This
assurance is subject to the proviso that it is not construed so as to prevent
the application of any tax or duty to such persons as are ordinarily resident
in Bermuda (Holdings, LaSalle Re and LaSalle Re Capital are not so currently
affected) or to prevent the application of any tax payable in accordance with
the provisions of The Land Tax Act 1967 of Bermuda or otherwise payable in
relation to any property leased to Holdings, LaSalle Re and LaSalle Re Capital.
Holdings, LaSalle Re and LaSalle Re Capital, under current rates, each pay
annual Bermuda government fees of BD$15,900, BD$15,900 and BD$1,695,
respectively, and each of LaSalle Re and LaSalle Re Capital currently pays
annual insurance fees of BD$15,000 and BD$1,155, respectively. In addition, all
entities employing individuals in Bermuda are required to pay a payroll tax to
the Bermuda government.
United Kingdom
LaSalle Re Services is subject to tax in the United Kingdom on its income
and is also required to charge and account to the U.K. Inland Revenue for value
added tax on chargeable supplies of services. However, the Company believes
that the taxable income of LaSalle Re Services will be modest, and that its tax
liability is and will continue to be small. LaSalle Re Capital is a corporate
member of Lloyd's and is subject to U.K. corporation tax on any profits and
gains, net of deductible expenditure, deriving from its participation in any
Lloyd's syndicates. The Company believes that the activities of LaSalle Re
Services and LaSalle Re Capital will not cause LaSalle Re or Holdings to be
subject to United Kingdom tax on any portion of their net income.
United States
In general, under current U.S. tax rules and regulations, a foreign
corporation is subject to U.S. federal income tax on its taxable income that is
treated as effectively connected to its conduct of a trade or business within
the U.S. and to the U.S. branch profits tax on its effectively connected
earnings and profits (with certain adjustments) deemed repatriated out of the
United States. However, pursuant to most U.S. income tax treaties, a foreign
corporation is subject to the U.S. federal income tax on its business profits
only if it is engaged in the conduct of a trade or business in the U.S. through
a permanent establishment located therein. The U.S. and Bermuda have entered
into the Bermuda Treaty relating to the taxation of insurance enterprises.
Pursuant to the Bermuda Treaty business profits earned by an insurance company
that is a resident of Bermuda may be taxed in the United States only if such
profits are attributable to the conduct of a trade or business carried on
through a permanent establishment in the United States. However, an insurance
enterprise resident in Bermuda will be
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entitled to the benefits of the Bermuda Treaty only if (1) 50% or more of its
equity is beneficially owned, directly or indirectly, by Bermuda residents or
U.S. citizens or residents and (2) its income is not used in substantial part,
directly or indirectly, to make disproportionate distributions to, or to meet
certain liabilities to, persons who are not Bermuda residents or U.S. citizens
or residents (the "Bermuda Treaty Benefits Test"). For purposes of the Bermuda
Treaty, a permanent establishment generally is defined to include a branch,
office or other fixed place of business through which the business of the
enterprise is carried on, or an agent (other than an agent of independent
status acting in the ordinary course of its business) that has, and habitually
exercises in the U.S., authority to conclude contracts in the name of the
corporation.
We believe, based on the activities of Holdings and LaSalle Re with respect
to the United States, that Holdings and LaSalle Re should not be subject to
U.S. federal net income tax imposed on their business income. It is anticipated
that Holdings and LaSalle Re will operate in the future so as not to be engaged
in the conduct of a trade or business in the U.S. However, as there are no
definitive standards provided by the Code, regulations or court decisions as to
those activities that constitute being engaged in the conduct of a trade or
business within the United States, and as the determination is essentially
factual in nature, there can be no assurance that the IRS will not contend
successfully that Holdings and/or LaSalle Re is engaged in a trade or business
in the United States. If Holdings and/or LaSalle Re were deemed to be so
engaged, that entity would be subject to U.S. income tax, as well as the branch
profits tax, on its income which is treated as effectively connected with the
conduct of that trade or business unless the entity is entitled to relief under
the permanent establishment provision of the Bermuda Treaty, as discussed
below.
It is uncertain whether LaSalle Re will be entitled to relief under the
permanent establishment provisions of the Bermuda Treaty upon completion of the
Offering or at any time thereafter as it cannot be predicted whether LaSalle Re
would satisfy the Bermuda Treaty Benefits Test. No regulations interpreting the
Bermuda Treaty have been issued. However, as stated above, while there can be
no assurances, the Company believes that LaSalle Re will not be engaged in the
conduct of a U.S. trade or business and, in any event, the Company does not
believe that LaSalle Re will have a permanent establishment in the United
States.
If Holdings or LaSalle Re is subject to U.S. federal income tax, that entity
would be taxed at regular corporate rates on all of its income that is
effectively connected with the conduct of its U.S. business (or, in the case of
LaSalle Re, all of its income attributable to its U.S. permanent establishment
if LaSalle Re is entitled to the benefits of the Bermuda Treaty). In addition,
the Company or LaSalle Re would be subject to the branch profits tax. Such
income tax, if imposed, would be based on effectively connected income computed
in a manner generally analogous to that applied to the income of a domestic
corporation, except that a foreign corporation can anticipate an allowance of
deductions and credits only if it files a United States income tax return.
Penalties may be assessed for failure to file tax returns. Holdings and LaSalle
Re have filed and intend to continue to file protective U.S. income tax returns
on a timely basis in order to preserve their right to claim tax deductions and
credits if either company subsequently is determined to be subject to U.S. tax
on a net basis. The highest marginal federal income tax rates currently are 35%
for a corporation's effectively connected income and 30% for the "branch
profits" tax. If LaSalle Re were deemed to be engaged in business in the United
States but did not have a permanent establishment in the United States within
the meaning of the Bermuda Treaty and LaSalle Re qualified for Bermuda Treaty
benefits, there is an argument that premium income of LaSalle Re would be
exempt from U.S. tax but that its investment income effectively connected with
its U.S. business would be subject to U.S. tax on a net basis, and that the
branch profits tax may be applicable to that investment income.
LaSalle Re Capital is a corporate member of Lloyd's. Pursuant to a Closing
Agreement between Lloyd's and the IRS, LaSalle Re Capital will be treated as
engaged in business in the U.S. and is subject to U.S. corporate income tax on
its net income from U.S. sources.
Foreign corporations not engaged in a trade or business in the United
States, as well as foreign corporations engaged in the conduct of a U.S. trade
or business but only with respect to their income that is not effectively
connected with such trade or business, are nonetheless subject to U.S. income
tax on certain "fixed or determinable annual or periodical gains, profits and
income" (such as dividends and certain interest on
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investments) derived from sources within the United States. Such tax generally
is imposed at a rate of 30% on the gross income subject to the tax, but the
rate may be reduced by applicable treaties, with the exception of the Bermuda
Treaty which does not provide such reduced rate, and the tax is eliminated with
respect to certain types of U.S. source income, such as portfolio interest.
The United States also imposes an excise tax on insurance and reinsurance
premiums paid to foreign insurers or reinsurers with respect to risks located
in the United States. The rates of tax applicable to premiums paid to LaSalle
Re are 4% for casualty insurance premiums and 1% for reinsurance premiums.
Taxation of Shareholders
Bermuda Taxation
Currently, there is no Bermuda withholding tax on dividends paid by the
Company.
United States Taxation of U.S. and Non-U.S. Shareholders
Taxation of Dividends. Subject to the discussion below relating to the
potential application of the "controlled foreign corporation" and "passive
foreign investment company" rules, cash distributions made with respect to
Series C Preferred Shares will constitute dividends for U.S. federal income tax
purposes to the extent paid out of current or accumulated earnings and profits
of Holdings. U.S. Holders generally will be subject to U.S. federal income tax
on the receipt of such dividends. Generally, such dividends will not be
eligible for the dividends received deduction. To the extent that a
distribution exceeds earnings and profits, it will be treated first as a return
of the U.S. Holder's basis to the extent thereof, and then as gain from the
sale of a capital asset.
Possible Classification of the Company as a Controlled Foreign
Corporation. Under section 951(a) of the Code, each "U.S. 10% shareholder" (as
defined below) that, on the last day of the foreign corporation's taxable year,
owns, directly or indirectly through a foreign entity, shares of a foreign
corporation that is a "controlled foreign corporation" ("CFC") for an
uninterrupted period of 30 days or more during any taxable year must include in
its gross income for United States federal income tax purposes its pro rata
share of the CFC's "Subpart F income" for such year, even if the Subpart F
income is not distributed. In addition, the U.S. 10% shareholders of a CFC may
be deemed to receive taxable distributions to the extent the CFC increases the
amount of its earnings that are invested in certain specified types of U.S.
property. All of Holdings', LaSalle Re's, and LaSalle Re Capital's income is
expected to be Subpart F income, except to the extent that LaSalle Re Capital's
income qualifies for an exception from the Subpart F rules as described below.
"Subpart F income" includes, inter alia, (1) "foreign personal holding company
income," such as interest, dividends, and other types of passive investment
income and (2) "insurance income," which is defined to include any income
(including underwriting and investment income) that is attributable to the
issuing (or reinsuring) of any insurance or annuity contract and which (subject
to certain modifications) would be taxed under the insurance company provisions
of the Code if such income were the income of a domestic insurance company
("Subpart F Insurance Income"). However, Subpart F income does not include (1)
any income from sources within the U.S. which is effectively connected with the
conduct of a trade or business within the U.S. and not exempted or subject to a
reduced rate of tax by applicable treaty, (2) certain income subject to high
foreign taxes and (3) certain "exempt insurance income" derived by a
"qualifying insurance company" as defined in Section 953(e) of the Code, prior
to January 1, 2000.
Under Code section 951(b), any U.S. Person who owns, directly or indirectly
through foreign entities, or is considered to own (by application of the rules
of constructive ownership set forth in Code section 958(b), generally applying
to family members, partnerships, estates, trusts or 10% controlled
corporations) 10% or more of the total combined voting power of all classes of
stock of a foreign corporation will be considered to be a "U.S. 10%
shareholder." In general, a foreign corporation is treated as a CFC only if its
U.S. 10% shareholders collectively own more than 50% of the total combined
voting power or total value of the
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corporation's stock on any day (the "50% Test"). However, for purposes only of
taking into account Subpart F Insurance Income, a foreign corporation will be
treated as a CFC if more than 25% of the total combined voting power or total
value of its stock is owned by U.S. 10% shareholders. It is anticipated for
both LaSalle Re and LaSalle Re Capital the 25% Test, rather than the 50% Test,
will be applicable with respect to the Subpart F Insurance Income of both
LaSalle Re and LaSalle Re Capital.
In determining the U.S. 10% shareholders of LaSalle Re and LaSalle Re
Capital, capital stock of LaSalle Re and LaSalle Re Capital that is held
indirectly by U.S. Persons through Holdings or any other non-U.S. entity is
treated as held by U.S. Persons. A holder of Series C Preferred Shares will be
treated as owning indirectly a proportion of the capital stock of LaSalle Re
and LaSalle Re Capital corresponding to the ratio that the Series C Preferred
Shares owned by such person bears to the value of all the capital stock of
Holdings. The Certificate of Designation provides that no person may acquire
ownership of more than 9.9% of the outstanding Series C Preferred Shares, and
that the Company shall repurchase any shares owned by a person in excess of
such 9.9% within 20 days of becoming aware of such excess ownership. The Board
may exempt from the foregoing requirement any person who has provided evidence
that such ownership will cause no adverse tax, legal or regulatory consequences
to the Company, any of its subsidiaries or any of its shareholders. In
addition, the Bye-Laws require prior Board approval for any transfer of shares
that results in any shareholder (other than an Investment Company) beneficially
owning more than 5.0% of the outstanding capital stock of Holdings or any
shareholder holding actually, indirectly through foreign entities or
constructively more than 9.9% of the outstanding capital stock of Holdings. The
Bye-Laws also provide that if the Board in its absolute discretion determines
that share ownership by any shareholder may result in adverse tax, regulatory
or legal consequences to Holdings, any of its subsidiaries or any other
shareholder, then Holdings will have the option, but not the obligation, to
repurchase all or part of the shares held by such shareholder to the extent the
Board determines it is necessary to avoid such adverse or potential adverse
consequences. The price to be paid for such shares will be the fair market
value of such shares. See "Description of Series C Preferred Shares--
Limitations on Transfer and Ownership." Because of the foregoing provisions,
the Company believes that neither Holdings, LaSalle Re nor LaSalle Re Capital
is a CFC under the general rules described above. However, there can be no
assurance that Holdings, LaSalle Re or LaSalle Re Capital will not at some time
become a CFC. Each prospective investor should consult its own tax advisor to
determine whether its ownership interest in Holdings would cause it to become a
U.S. 10% shareholder of Holdings, LaSalle Re, LaSalle Re Capital or of any
subsidiary which may be created by Holdings or LaSalle Re and to determine the
impact of such a classification of such investor.
RPII Companies. A different definition of "controlled foreign corporation"
is applicable in the case of a foreign corporation which earns related person
insurance income ("RPII"). RPII is defined in Code section 953(c)(2) as any
"insurance income" (as defined above) attributable to policies of insurance or
reinsurance with respect to which the person (directly or indirectly) insured
is a "RPII shareholder" (as defined below) of the foreign corporation or a
"related person" to such a shareholder. For purposes only of taking into
account RPII, and subject to the exceptions described below, LaSalle Re or
LaSalle Re Capital will be treated as a CFC if its "RPII shareholders"
collectively own, directly, indirectly, or by attribution under Code Section
958(b), 25% or more of the total combined voting power or value of such
corporation's stock on any day during a taxable year. If LaSalle Re or LaSalle
Re Capital is a CFC for an uninterrupted period of at least 30 days during any
taxable year under the special RPII rules, a U.S. Person who owns, directly or
indirectly through foreign entities, shares of LaSalle Re or LaSalle Re Capital
on the last day of any such taxable year must include in its gross income for
United States Federal income tax purposes its allocable share of RPII income of
such corporation for the entire taxable year, subject to certain modifications.
For purposes of inclusion of LaSalle Re's or LaSalle Re Capital's RPII in the
income of U.S. Persons who own Series C Preferred Shares or shares of LaSalle
Re, unless an exception applies, the term "RPII shareholder" includes all U.S.
Persons who own, directly or indirectly through foreign entities, any amount
(rather than 10% or more) of the Series C Preferred Shares or shares of LaSalle
Re or shares of LaSalle Re Capital. Generally, the term "related person" for
purposes of the RPII rules means someone who controls or is controlled by the
RPII shareholder or someone who is controlled by the same person or persons
which control the RPII shareholder. Control is
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measured by either more than 50% in value or more than 50% in voting power of
stock applying constructive ownership principles similar to the rules of
section 958 of the Code.
RPII Exceptions. The special RPII rules do not apply if direct and indirect
insureds and persons related to such insureds, whether or not U.S. Persons, are
treated at all times during the taxable year as owning, directly or indirectly
through foreign entities, less than 20% of the voting power and less than 20%
of the value of the stock of LaSalle Re and LaSalle Re Capital (the "RPII 20%
Ownership Exception"), or the RPII of each of LaSalle Re Capital, determined on
a gross basis, is less than 20% of such corporation's gross insurance income
for such taxable year (the "RPII 20% Gross Income Exception"), or if certain
other exceptions apply. Where no exception applies, each RPII shareholder of
LaSalle Re and LaSalle Re Capital on the last day of such corporation's taxable
year will be required to include in its gross income for United States federal
income tax purposes its share of the RPII for the entire taxable year,
determined as if all such RPII were distributed proportionately only to such
RPII shareholders at that date, but limited by such corporation's current-year
earnings and profits and reduced by the RPII shareholder's share, if any, of
prior-year deficits in earnings and profits.
LaSalle Re reinsures, and expects to continue reinsuring, the risks of an
insurance company that is related to CNA, a RPII shareholder of LaSalle Re, and
thus expects to generate RPII. In addition, LaSalle Re may be considered to
reinsure directly or indirectly the risks of other RPII shareholders of LaSalle
Re or parties related thereto, thus generating RPII. LaSalle Re has in the past
and intends in the future to monitor the reinsurance of related persons to
limit the gross RPII from such reinsurance to less than 20% of LaSalle Re's
gross insurance income. For LaSalle Re's most recent taxable year ended
September 30, 1998, the Company believes gross RPII of LaSalle Re was less than
20% of LaSalle Re's gross insurance income for the year and, although no
assurances can be given, the Company will endeavor to take such steps as it
determines to be reasonable to cause LaSalle Re's gross RPII to remain below
such level. The Company believes gross RPII of LaSalle Re Capital will be less
than 20% of LaSalle Re Capital's gross insurance income for each taxable year
and will endeavor to take such steps as it determines to be reasonable to cause
LaSalle Re Capital's gross RPII to remain below such level.
Computation of RPII. In order to determine how much RPII LaSalle Re and
LaSalle Re Capital have earned in each taxable year, the Company intends to
obtain and rely upon information from its insureds to determine whether any of
the insureds or persons related to such insureds own shares of Holdings or
LaSalle Re and are U.S. Persons. The Company may not be able to determine
whether any of the underlying insureds of the insurance companies to which
LaSalle Re and LaSalle Re Capital provide reinsurance are RPII shareholders or
related persons to such shareholders. Consequently, Holdings may not be able to
determine accurately the gross amount of RPII earned by LaSalle Re and LaSalle
Re Capital in a given taxable year. LaSalle Re and LaSalle Re Capital will take
reasonable steps to secure such additional information relevant to determine
the amount of each corporation's insurance income that is RPII as they believe
advisable, but there can be no assurance that such information will be
sufficient to enable LaSalle Re and LaSalle Re Capital to establish clearly
such amount. For any year in which the Company has determined that gross RPII
is 20% or more of LaSalle Re's or LaSalle Re Capital's gross insurance income,
the Company may also seek information from its shareholders as to whether
direct or indirect owners of Series A Preferred Shares, Series C Preferred
Shares, Common Shares or shares of LaSalle Re at the end of the year are U.S.
Persons so that the RPII may be determined and apportioned among such persons.
In any such year, the Company will inform all shareholders of RPII per share
and RPII shareholders are obligated to file a return reporting such amounts. To
the extent the Company is unable to determine whether a direct or indirect
owner of shares is a U.S. Person the Company may assume that such owner is not
a U.S. Person for the purpose of allocating RPII, thereby increasing the per
share RPII amount for all RPII shareholders.
Apportionment of RPII to RPII Shareholders. The amount of RPII includible in
the income of a RPII shareholder is based upon the net RPII income for the year
after deducting related expenses such as losses, loss reserves and operating
expenses. Every RPII Shareholder who owns, directly or indirectly through
foreign
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entities, Series A Preferred Shares, Series C Preferred Shares, Common Shares
or shares of LaSalle Re on the last day of any taxable year of LaSalle Re or
LaSalle Re Capital, in which LaSalle Re or LaSalle Re Capital does not meet
either the RPII 20% Ownership Exception or the RPII 20% Gross Income Exception
should expect that for such year it will be required to include in gross income
its share of such corporation's RPII for the entire year, whether or not
distributed, even though it may not have owned the shares for the entire year.
A RPII Shareholder who owns Series A Preferred Shares, Series C Preferred
Shares, Common Shares or shares of LaSalle Re during such taxable year but not
on the last day of the taxable year, which would normally be September 30, is
not required to include in gross income any part of LaSalle Re's or LaSalle Re
Capital's RPII. The aggregate amount of RPII allocable to RPII Shareholders of
Series A Preferred Shares, Series C Preferred Shares, Common Shares or shares
of LaSalle Re who are required to include RPII of LaSalle Re or LaSalle Re
Capital in income for a given taxable year normally is the amount of RPII which
bears the same ratio to the total RPII of such corporation for that taxable
year as the amount of earnings and profits which would be distributed
indirectly through Holdings with respect to the Series A Preferred Shares,
Series C Preferred Shares, Common Shares or shares of LaSalle Re if all
earnings and profits of such corporation were distributed on the last day of
that taxable year bears to the total earnings and profits of such corporation
for that taxable year which would be distributed with respect to all shares of
such corporation owned, directly or indirectly through Holdings, by RPII
Shareholders. If LaSalle Re or LaSalle Re Capital has RPII and Holdings makes a
distribution of such RPII to a RPII Shareholder with respect to the Series C
Preferred Shares, such dividends will not be taxable to the extent of any RPII
that has been included in the gross income of such holders for the taxable year
in which the distribution was paid or for any prior year.
Basis Adjustments. A RPII shareholder's tax basis in its Series A Preferred
Shares, Series C Preferred Shares, Common Shares or shares of LaSalle Re will
be increased by the amount of any RPII that the shareholder includes in income.
The RPII Shareholder may exclude from income the amount of any distribution by
the Company to the extent of the RPII included in income for the year in which
the distribution was paid or for any prior year. The RPII shareholder's tax
basis in its Series A Preferred Shares, Series C Preferred Shares, Common
Shares or shares of LaSalle Re will be reduced by the amount of such
distributions that are excluded from income. In general, a RPII shareholder
will not be able to exclude from income distributions with respect to RPII that
a prior shareholder included in income.
Information Reporting. Every U.S. Person who "controls" a foreign
corporation by owning directly or by attribution more than 50% of the total
combined voting power of all classes of stock entitled to vote, or more than
50% of the total value of shares of all classes of stock, of such corporation,
for an uninterrupted period of 30 days or more during a taxable year of that
foreign corporation, must file a Form 5471 with its U.S. income tax return.
However, the IRS has the authority to, and does require, any U.S. Person
treated as a U.S. 10% shareholder or RPII shareholder of a CFC that owns shares
directly or indirectly through a foreign entity to file a Form 5471. Thus, if
LaSalle Re's or LaSalle Re Capital's gross RPII for a taxable year constitutes
20% or more of such corporation's gross insurance income for such period, any
U.S. Person treated as owning shares of LaSalle Re or LaSalle Re Capital
directly or indirectly on the last day of such taxable year is considered a
RPII shareholder for purposes of the RPII rules and will be required to file a
Form 5471. In addition, U.S. Persons who own more than 10% in vote or value of
the outstanding stock of Holdings or LaSalle Re at any time during a taxable
year are required in certain circumstances to file Form 5471 even if neither
corporation is a CFC. For any taxable year in which the Company determines that
LaSalle Re's or LaSalle Re Capital's gross RPII constitutes 20% or more of such
corporation's gross insurance income, the Company intends to mail to all
shareholders of record, and will make available at the transfer agent with
respect to the Series A Preferred Shares, Series C Preferred Shares, Common
Shares and shares of LaSalle Re, Form 5471 (completed with Company information)
for attachment to the returns of shareholders. However, the Company's
determination of the amount of LaSalle Re's or LaSalle Re Capital's gross RPII
for a given taxable year may not be accurate because of the Company's inability
to gather the information necessary to make such determination. See "Certain
Tax Considerations--Taxation of Shareholders--United States Taxation of U.S.
and Non-U.S. Shareholders--Computation of RPII." A tax-exempt organization that
is treated as a U.S. 10% shareholder or a RPII shareholder for any purpose
under Subpart F will be required to file a Form 5471 in the circumstances
described above. Failure to file Form 5471 may result in penalties.
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Tax-Exempt Shareholders. Code section 512(b)(17) requires a tax-exempt
entity owning, directly or indirectly through a foreign entity or
constructively under Code section 958(b) shares of Holdings, LaSalle Re or
LaSalle Re Capital, to treat as unrelated business taxable income ("UBTI")
within the meaning of Code section 512 the portion of any deemed distribution
to such shareholder of Subpart F income under Code section 951(a) that is
attributable to insurance income which, if derived directly by such
shareholder, would be treated as UBTI. Exceptions are provided for income
attributable to a policy of insurance or reinsurance with respect to which the
person (directly or indirectly) insured is--(i) the tax-exempt shareholder,
(ii) an affiliate of the tax-exempt shareholder which itself is exempt from tax
under Code section 501(a), or (iii) a director or officer of, or an individual
who (directly or indirectly) performs services for, the tax-exempt shareholder
or an exempt affiliate but only if the insurance covers primarily risks
associated with the performance of services in connection with the tax-exempt
shareholder or exempt affiliate.
Dispositions of Series C Preferred Shares. Subject to the discussion
elsewhere relating to the potential application of the "controlled foreign
corporation" and "passive foreign investment company" rules, capital gain or
loss realized by a U.S. Holder on the sale, exchange or other disposition of
Series C Preferred Shares will be includible in gross income as capital gain or
loss in an amount equal to the difference between such holder's basis in Series
C Preferred Shares and the amount realized on the sale, exchange or other
disposition. If a U.S. Holder's holding period for the Series C Preferred
Shares is more than one year, any gain will be subject to the U.S. federal
income tax at a current maximum marginal rate of 20% for individuals and 35%
for corporations.
A redemption or sale of Series C Preferred Shares in exchange for cash will
constitute a taxable event.
A redemption of Preferred Shares for cash will generally be treated as a
sale or exchange if a U.S. Holder does not own, actually or constructively
within the meaning of Section 318 of the Code, any shares of the Company other
than Preferred Shares. If the U.S. Holder does own, actually or constructively,
such other shares (including shares redeemed), a redemption of Preferred Shares
may be treated as a dividend to the extent of the Company's current and
accumulated earnings and profits (as determined for Federal income tax
purposes). Such dividend treatment would not be applied if the redemption is
"substantially disproportionate" with respect to the U.S. Holder under Section
302(b)(2) of the Code or is "not essentially equivalent to a dividend" with
respect to the U.S. Holder under Section 302(b)(1) of the Code. A distribution
to the U.S. Holder will be "not essentially equivalent to a dividend" if it
results in a "meaningful reduction" in the U.S. Holder's share interest in the
Company. For these purposes, a redemption of Preferred Shares for cash that
results in a reduction in the proportionate interest in the Company (taking
into account any constructive ownership) of the U.S. Holder whose relative
share interest in the Company is minimal and who exercises no control over
corporate affairs should be regarded as a meaningful reduction in the U.S.
Holder's share interest in the Company.
If the redemption of Series C Preferred Shares for cash is not treated as a
distribution taxable as a dividend or if Series C Preferred Shares are sold,
the redemption or sale would result in capital gain or loss equal to the
difference between the amount of cash and the fair market value of other
proceeds received in such sale or redemption and the U.S. Holder's adjusted tax
basis in Series C Preferred Shares sold or redeemed subject to the discussion
elsewhere relating to the potential application of the "controlled foreign
corporation" and "passive foreign investment Company" rules.
If a redemption of Series C Preferred Shares is treated as a distribution
that is taxable as a dividend, the amount of the distribution will be measured
by the amount of cash received by the U.S. Holder. The U.S. Holder's adjusted
tax basis in the redeemed Series C Preferred Shares will be transferred to any
remaining holdings in the Company. If the U.S. Holder does not retain any share
ownership in the Company, the U.S. Holder may lose such basis entirely.
Code section 1248 provides that if a U.S. Person owns directly, indirectly
through foreign entities or constructively under Code section 958(b), 10% or
more of the voting shares of a corporation that is a CFC, any gain from the
sale or exchange of the shares may be treated as ordinary income to the extent
of the CFC's
39
<PAGE>
earnings and profits during the period that the shareholder held the shares
(with certain adjustments). Code section 953(c)(7) generally provides that
section 1248 also will apply to the sale or exchange of shares by a RPII
shareholder in a foreign corporation that earns RPII and is characterized as a
CFC under the RPII rules if the foreign corporation would be taxed as an
insurance company if it were a domestic corporation, regardless of whether the
shareholder is a U.S. 10% shareholder or whether such corporation meets either
the RPII 20% Ownership Exception or the RPII 20% Gross Income Exception.
Existing Treasury Department regulations do not address whether Code section
1248 would apply when a foreign corporation (such as Holdings) is not a CFC but
the foreign corporation has an insurance company subsidiary that is a CFC (such
as LaSalle Re or LaSalle Re Capital) for purposes of requiring U.S.
shareholders to take into account RPII.
It is the opinion of the Company's United States counsel that Code section
1248 should not apply to dispositions of Series C Preferred Shares because
Holdings will not have any U.S. 10% shareholders and Holdings is not directly
engaged in the insurance business. There can be no assurance, however, that the
IRS will interpret proposed regulations under Code section 953 in this manner
or that the Treasury Department will not amend the proposed regulations under
Code section 953 or other regulations to provide that Code section 1248 will
apply to dispositions of shares in a corporation such as Holdings which is
engaged in the insurance business indirectly through its subsidiaries. If the
IRS or Treasury Department were to take such action, the Company would notify
shareholders that Code section 1248 will apply to dispositions of Series C
Preferred Shares.
Uncertainty as to Application of RPII. The RPII provisions of the Code have
never been interpreted by the courts. Regulations interpreting the RPII
provisions of the Code exist only in proposed form, having been proposed on
April 16, 1991. It is not certain whether these regulations will be adopted in
their proposed form or what changes or clarifications might ultimately be made
thereto or whether any such changes, as well as any interpretation or
application of RPII by the IRS, the courts or otherwise, might have retroactive
effect. Accordingly, the meaning of the RPII provisions and the application
thereof to Holdings, LaSalle Re and LaSalle Re Capital is uncertain. These
provisions include the grant of authority to the U.S. Treasury Department to
prescribe "such regulations as may be necessary to carry out the purpose of
this subsection including . . . regulations preventing the avoidance of this
subsection through cross insurance arrangements or otherwise." In addition,
there can be no assurance that any amounts of RPII inclusions reported by the
Company to RPII shareholders will not be subject to adjustment based upon
subsequent IRS examination. Each U.S. person who is considering an investment
in Series C Preferred Shares should consult his tax advisor as to the effects
of these uncertainties.
Foreign Tax Credit. Because it is anticipated that U.S. Persons will own a
majority of Holdings' shares after the Offering and because a substantial part
of LaSalle Re's business includes the insurance of U.S. risks, only a portion
of the RPII and dividends paid by Holdings (including any gain from the sale of
Series C Preferred Shares that is treated as a dividend under Code section
1248) will be treated as foreign source income for purposes of computing a
shareholder's U.S. foreign tax credit limitation. It is likely that
substantially all of the RPII and dividends that are foreign source income will
constitute either "passive" or "financial services" income for foreign tax
credit limitation purposes. Thus, it may not be possible for certain U.S.
Holders to utilize excess foreign tax credits to reduce U.S. tax on such
income.
Passive Foreign Investment Companies. Code sections 1291 through 1298
contain special rules applicable with respect to foreign corporations that are
"passive foreign investment companies" ("PFICs"). In general, a foreign
corporation will be a PFIC if 75% or more of its gross income constitutes
"passive income" (the "75% Income Test") or 50% or more of its assets produce,
or are held for the production of, passive income (the "50% Asset Test"). For
the above purposes, "passive income" is defined to include income of a kind
that would be characterized as foreign personal holding company income under
Code section 954(c), and generally includes interest, dividends, annuities and
other investment income. The PFIC statutory provisions contain an express
exception for income "derived in the active conduct of an insurance business by
a corporation which is predominantly engaged in an insurance business . . ."
(the "Insurance Company
40
<PAGE>
Exception"). This exception is intended to ensure that income derived by a bona
fide insurance company is not treated as passive income. Thus, to the extent
such income is attributable to financial reserves in excess of the reasonable
needs of the insurance business, it may be treated as passive income for
purposes of the PFIC rules. The PFIC statutory provisions also contain a look-
through rule that states that, for purposes of determining whether a foreign
corporation is a PFIC, such foreign corporation shall be treated as if it
"received directly its proportionate share of the income . . ." and as if it
"held its proportionate share of the assets . . ." of any other corporation in
which it owns at least 25% of the value of the stock. It is anticipated that
both LaSalle Re and LaSalle Re Capital should be entitled to the Insurance
Company Exception and that neither corporation will have financial reserves in
excess of the reasonable needs of its insurance business, and therefore that
none of LaSalle Re's or LaSalle Re Capital's income or assets will be
considered to be passive. Under the look-through rule Holdings would be deemed
to own its proportionate share of the assets and to have received its
proportionate share of the income of LaSalle Re and LaSalle Re Capital for
purposes of the 75% Income and 50% Asset Tests, and therefore Holdings should
not be considered a PFIC.
If the Company were to be characterized as a PFIC, its U.S. shareholders
would have to make an election (a "QEF Election") to be currently taxable on
their pro-rata share of earnings of the Company whether or not such earnings
were distributed or they would be subject to a special tax and an interest
charge at the time of the sale of, or receipt of an "excess distribution" with
respect to, their shares, and a portion of any gain may be recharacterized as
ordinary income. Alternatively, a U.S. Person who holds shares in a PFIC that
is treated as "marketable stock" may make a mark to market election. An
electing U.S. shareholder will not be subject to the PFIC rules described
above. Instead, in general, an electing U.S. shareholder will include in each
year as ordinary income the excess, if any, of the fair market value of the
shares at the end of the taxable year over its adjusted basis and will be
permitted an ordinary loss in respect of the excess, if any, of the adjusted
basis of the shares over its fair market value at the end of the taxable year
(but only to the extent of the net amount previously included in income as a
result of the mark to market election). The electing U.S. shareholder's basis
in the shares will be adjusted to reflect any such income or loss amounts. The
mark to market election is only available with respect to stock traded on
certain United States exchanges and other exchanges designated by the United
States Treasury. It is anticipated that such election will be available to U.S.
Person who holds Series C Preferred Shares.
If the Company is treated as a PFIC, it intends to notify U.S. shareholders
and to provide to U.S. shareholders such information as may be required to make
such QEF election effective. A U.S. shareholder that makes a QEF election will
be currently taxable on its pro rata share of the Company's ordinary earnings
and net capital gain (at ordinary income and capital gains rates, respectively)
for each taxable year of the Company, regardless of whether or not
distributions were received. The U.S. shareholder's basis in the Series C
Preferred Shares will be increased to reflect taxes but undistributed income.
Distributions of income that had previously been taxed will result in a
corresponding reduction of basis in the Series C Preferred Shares and will not
be taxed again as a distribution to the U.S. shareholder.
In general, a shareholder receives an "excess distribution" if the amount of
the distribution is more than 125% of the average distribution with respect to
the stock during the three preceding taxable years (or shorter period during
which the taxpayer held the stock). In general, the special tax and interest
charges are based on the value of the tax deferral of the taxes that are deemed
due during the period the U.S. shareholder owned the shares, computed by
assuming that the excess distribution or gain (in the case of a sale) with
respect to the shares was taxed in equal portions throughout the holder's
period of ownership at the highest marginal tax rate. The interest charge is
computed using the applicable rate imposed on underpayments of U.S. Federal
income tax for such period. In general, if a U.S. Person owns stock in a
foreign corporation during any taxable year in which such corporation is a PFIC
and such shareholder does not make a QEF Election, the stock will be treated as
stock in a PFIC for all subsequent years.
However, no final regulations interpreting the substantive PFIC provisions
have yet been issued. Therefore, substantial uncertainty exists with respect to
their application or their possible retroactivity. Each U.S. person who is
considering an investment in Series C Preferred Shares should consult his tax
advisor as to the effects of these rules.
41
<PAGE>
Other. Dividends paid by Holdings to U.S. corporate shareholders will not be
eligible for the dividends received deduction provided by Code section 243.
Except as discussed below with respect to backup withholding, dividends paid
by Holdings will not be subject to a U.S. withholding tax.
Information reporting to the IRS by paying agents and custodians located in
the U.S. will be required with respect to payments of dividends (if any) on the
Series C Preferred Shares to holders of Series C Preferred Shares or to paying
agents or custodians located in the United States. In addition, a holder of
Series C Preferred Shares may be subject to backup withholding at the rate of
31% with respect to dividends paid by such persons, unless such holder (a) is a
corporation or comes within certain other exempt categories and, when required,
demonstrates this fact; or (b) provides a taxpayer identification number,
certifies as to no loss of exemption from backup withholding and otherwise
complies with applicable requirements of the backup withholding rules. The
backup withholding tax is not an additional tax and may be credited against a
holder's regular Federal income tax liability.
Sales of Series C Preferred Shares through brokers by certain U.S. Persons
also may be subject to back-up withholding. Sales by corporations, certain tax-
exempt entities, individual retirement plans, REITs, certain financial
institutions, and other "exempt recipients" as defined in applicable Treasury
regulations currently are not subject to back-up withholding. Holders of Series
C Preferred Shares should consult their own tax advisors regarding the possible
applicability of the back-up withholding provisions to sales of their Series C
Preferred Shares.
If a non-U.S. holder sells Series C Preferred Shares through a U.S. office
of a U.S. or foreign broker, the broker is required to file an information
return and is required to withhold 31% of the sale proceeds unless the non-U.S.
holder is an exempt recipient or has provided the broker with the information
and statements, under penalties of perjury, necessary to establish an exemption
from backup withholding. If payment of the proceeds of the sale of a share by a
non-U.S. holder is made to or through the foreign office of a broker, that
broker will not be required to backup withhold or, except as provided in the
next sentence, to file information returns. In the case of proceeds from a sale
of a share by a non-U.S. holder paid to or through the foreign office of a U.S.
broker or a foreign office of a foreign broker that is (i) a controlled foreign
corporation for U.S. tax purposes or (ii) a person 50% or more of whose gross
income for the three-year period ending with the close of the taxable year
preceding the year of payment (or for the part of that period that the broker
has been in existence) is effectively connected with the conduct of a trade or
business within the United States (a "Foreign U.S. Connected Broker"),
information reporting is required unless the broker has documentary evidence in
its files that the payee is not a U.S. person and certain other conditions are
met, or the payee otherwise establishes an exemption. In addition, the Treasury
Department has indicated that it is studying the possible application of backup
withholding in the case of such foreign offices of U.S. and Foreign U.S.
Connected Brokers.
The foregoing discussion (including and subject to the matters and
qualifications set forth in such summary) is based upon current law and is for
general information only. The tax treatment of a holder of Series C Preferred
Shares, or of a person treated as a holder of Series C Preferred Shares for
United States Federal income, state, local or non-U.S. tax purposes, may vary
depending on the holder's particular tax situation. Legislative, judicial or
administrative changes or interpretations may be forthcoming that could be
retroactive and could affect the tax consequences to holders of Series C
Preferred Shares. You are urged to consult your own tax advisors concerning the
federal, state, local and non-U.S. tax consequences to you of owning the Series
C Preferred Shares.
42
<PAGE>
UNDERWRITING
Under the terms and subject to the conditions of the Underwriting Agreement
dated March , 1999 (the "Underwriting Agreement"), each Underwriter named
below (the "Underwriters"), for whom Salomon Smith Barney Inc., Morgan Stanley
& Co. Incorporated and PaineWebber Incorporated are acting as the
Representatives (the "Representatives"), has severally agreed to purchase from
the Company, and the Company has agreed to sell to such Underwriter, the number
of Series C Preferred Shares set forth opposite the name of such Underwriter
below.
<TABLE>
<CAPTION>
Number of
Underwriters Shares
------------ ---------
<S> <C>
Salomon Smith Barney Inc. .........................................
Morgan Stanley & Co. Incorporated..................................
PaineWebber Incorporated...........................................
---------
Total............................................................ 2,000,000
=========
</TABLE>
The Underwriters are obligated to take and pay for all Series C Preferred
Shares offered hereby if any such Series C Preferred Shares are taken. In the
event of default by any Underwriter, the Underwriting Agreement provides that,
in certain circumstances, purchase commitments of the non-defaulting
Underwriters may be increased or the Underwriting Agreement may be terminated.
The Underwriting Agreement provides that the Company will indemnify the
several Underwriters against certain liabilities, including liabilities under
the Securities Act and to make certain contributions in respect thereof.
The Underwriters propose to offer the Series C Preferred Shares, in part,
directly to the public at the public offering price set forth on the cover page
of this prospectus, and to certain dealers at such price less a concession of
$ per Series C Preferred Share. The Underwriters may allow, and such
dealers may reallow, a concession not in excess of $ per Series C
Preferred Share to certain brokers and dealers. After the Series C Preferred
Shares are released for sale to the public, the offering price and other
selling terms may from time to time be varied by the Representatives of the
Underwriters.
Application for listing the Series C Preferred Shares on the NYSE has been
made. If the Series C Preferred Shares are approved for listing, trading of the
Series C Preferred Shares on the NYSE is expected to commence within a 30-day
period after the initial delivery of the Series C Preferred Shares.
In order to facilitate the offering of the Series C Preferred Shares, the
Underwriters may engage in transactions that stabilize, maintain or otherwise
affect the price of the Series C Preferred Shares. Specifically, the
Underwriters may overallot in connection with the offering, creating a short
position in the Series C Preferred Shares for their own account. In addition,
to cover overallotments or to stabilize the price of the Series C Preferred
Shares, the Underwriters may bid for, and purchase, the Series C Preferred
Shares in the open market. Finally, the underwriting syndicate may reclaim
selling concessions allowed to an underwriter or a dealer for distributing the
Series C Preferred Shares in the offering, if the syndicate repurchases
previously distributed Series C Preferred Shares in transactions to cover
syndicate short positions, in stabilization transactions or otherwise. Any of
these activities may stabilize or maintain the market price of the Series C
Preferred Shares above independent market levels. The Underwriters are not
required to engage in any of these activities and any such activities, if
commenced, may be discontinued at any time.
Certain of the Underwriters and their affiliates have in the past provided,
and may in the future provide, investment and/or commercial banking services to
the Company and certain of the Founding Shareholders in the ordinary course of
business.
43
<PAGE>
LEGAL MATTERS
The validity of the Series C Preferred Shares under Bermuda law will be
passed upon for the Company by Conyers Dill & Pearman, Hamilton, Bermuda.
Certain legal matters in connection with the offering will be passed upon for
the Company by Mayer, Brown & Platt, Chicago, Illinois, and for the
Underwriters by LeBoeuf, Lamb, Greene & MacRae, L.L.P., a limited liability
partnership including professional corporations, New York, New York, in each
case in reliance on the opinion of Conyers Dill & Pearman with respect to
Bermuda law.
EXPERTS
The consolidated financial statements and schedules of Holdings as of
September 30, 1998 and 1997 and for each of the years in the three-year period
ended September 30, 1998 have been incorporated by reference herein and in the
registration statement in reliance upon the reports of KPMG Peat Marwick,
independent auditors, incorporated by reference herein and in the registration
statement of which this prospectus is a part, and upon the authority of said
firm as experts in accounting and auditing.
44
<PAGE>
GLOSSARY OF SELECTED INSURANCE AND REINSURANCE TERMS
Acquisition costs. Brokerage, commissions, the portion of administrative,
general and other expenses attributable to underwriting operations and excise
taxes.
Alien reinsurer. A reinsurance company that is organized under the laws of a
non-U.S. jurisdiction.
Attachment point. The amount of losses above which excess of loss
reinsurance becomes operative.
Broker. A person or firm that negotiates contracts of reinsurance between a
ceding company and a reinsurer on behalf of the ceding company and receives a
brokerage commission for placement of the reinsurance contract as well as other
services rendered.
Casualty insurance and/or reinsurance. Insurance and/or reinsurance that is
concerned primarily with the legal liability of the insured for injuries or
damage to the person or property of third persons (persons other than the
policyholder).
Cede; ceding company; cedent; cession. When an insurance or reinsurance
company transfers all or a portion of a risk it has underwritten to a
reinsurance company, it "cedes" such risk and is referred to as the "ceding
company" or the "cedent." Such transfer of risk is referred to as a "cession."
Combined ratio. The sum of the loss and loss expense ratio and the expense
ratio. A combined ratio below 100% generally indicates profitable underwriting
prior to the consideration of investment income. A combined ratio over 100%
generally indicated unprofitable underwriting prior to the consideration of
investment income.
Excess of loss reinsurance. The generic term describing reinsurance that
indemnifies the ceding company against all or a specified portion, the "limit,"
of losses on underlying insurance policies or reinsurance contracts in excess
of a specified dollar amount, called "attachment point" or "retention." The
combination of a limit and an attachment point constitutes a layer.
Expense ratio. The ratio of (i) acquisition costs and operational expenses
minus net gains on foreign exchange to (ii) earned premiums, determined in
accordance with GAAP.
Gross premiums written. Total premiums for insurance and reinsurance assumed
during a given period.
Incurred but not reported ("IBNR") loss reserves. Reserves for losses that
have been incurred but not yet reported to the insurer or reinsurer and which
are often estimated using actuarial analysis.
Incurred losses. The total losses sustained by an insurer or reinsurer under
its policies or contracts, whether paid or unpaid. Incurred losses include a
provision for IBNR.
Layer. See "Excess of loss reinsurance."
Loss expenses. The expenses of adjusting, defending and settling claims,
including legal and other fees and the portion of general expenses allocated to
claim settlement costs.
Loss and loss expense ratio. The ratio of (i) incurred losses and loss
expenses to (ii) earned premiums, determined in accordance with GAAP.
Loss reserves. Liabilities established by insurers and reinsurers to reflect
the estimated cost of claims payments that the insurer or reinsurer ultimately
will be required to pay in respect of insurance or reinsurance it has written.
Reserves are established for losses and loss expenses, and consist of case
reserves and IBNR reserves.
45
<PAGE>
Net premiums earned. The portion of net premiums written that is recognized
for accounting purposes as income during a period.
Net premiums written. Gross premiums written for a given period less
premiums ceded to reinsurers during such period.
Program. A treaty or a combination of treaties that provide the cedent with
one or more layers of reinsurance protection.
Property catastrophe reinsurance. A form of excess of loss reinsurance that,
subject to a specified limit, indemnifies the ceding company for the amount of
loss in excess of a specified retention with respect to an accumulation of
losses resulting from a catastrophic event. The reinsurance contract is called
a "catastrophe cover."
Property insurance and/or reinsurance. Insurance and/or reinsurance that
indemnifies a person with an insurable interest in tangible property for its
loss, damage or loss of use.
Pro rata of reinsurance. A generic term describing forms of reinsurance in
which the reinsurer shares a proportional part of the original premiums and
losses of the ceding company. Pro rata reinsurance is also known as
proportional or quota share reinsurance.
Reinsurance. The practice whereby one party, called the reinsurer, in
consideration of a premium paid to it, agrees to indemnify another party,
called the reinsured, for part or all of the liability assumed by the reinsured
under a policy or policies of insurance that it has issued or contract(s) of
reinsurance it has written. The reinsured may be referred to as the ceding
company. The purchase of reinsurance does not legally discharge the ceding
company from its liability to its insureds or reinsureds.
Retention; retention layer. The amount or portion of risk that an insurer or
reinsurer retains for its own account. Losses in excess of the retention are
paid by that company's reinsurer or retrocessionaire. The retention can be
expressed as a dollar amount or a percentage of the amount at risk.
Retrocession; retrocessionaire. A transaction whereby a reinsurer cedes to
another reinsurer (the "retrocessionaire") all or part of the reinsurance it
has assumed. Retrocessions (as is the case with any reinsurance) do not legally
discharge the ceding reinsurer from its liability to its reinsured.
Treaty reinsurance; treaty. Reinsurance of a specified type or category of
risk defined in a reinsurance agreement (a "treaty") between a ceding company
and a reinsurer. Typically, in treaty reinsurance the ceding company is
obligated to offer and the reinsurer is obligated to accept a specified portion
of all such type or category of risks originally insured or reinsured by the
ceding company.
Underwriting. The process of reviewing applications submitted for insurance
or reinsurance coverage, deciding whether to accept all or part of the coverage
requested and determining the applicable premiums and coverage conditions.
Unearned premiums. Premiums written but not yet earned, as they are
attributable to the unexpired portion of the related contract term.
Unearned premium reserve. Liabilities established in respect of unearned
premiums.
46
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2,000,000 Shares
LaSalle Re Holdings Limited
Series C Preferred Shares
---------------------
PROSPECTUS
March , 1999
---------------------
Salomon Smith Barney
Morgan Stanley Dean Witter
PaineWebber Incorporated
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following is a statement of the expenses payable by the Company in
connection with the issuance and distribution of the securities being
registered hereby. All amounts shown are estimates, except the SEC registration
fee and the NYSE listing fee.
<TABLE>
<S> <C>
SEC registration fee............................................ $ 13,900
NYSE listing fee................................................ 66,300
Printing and engraving.......................................... 125,000
Legal fees and expenses......................................... 100,000
Accounting fees and expenses.................................... 65,000
Blue sky fees and expenses...................................... 4,000
Miscellaneous................................................... 5,800
--------
Total....................................................... $380,000
========
</TABLE>
Item 15. Indemnification of Directors and Officers.
Pursuant to the provisions of the Act, Holdings has adopted provisions in
its Bye-Laws which require it to indemnify its directors and officers in
certain circumstances and specifically to indemnify its directors and officers
against all amounts actually and reasonably incurred by Holdings or its
shareholders by reason of a breach of duty to the Company, provided that such
director or officer acted in good faith and in a manner reasonably believed to
be in or not opposed to the best interests of the Company and, with respect to
any criminal action, suit or proceeding, had no reasonable cause to believe
that the conduct was unlawful, and except for any claim, issue or matter as to
which such person shall have been finally adjudged to be liable for wilful
negligence, wilful default, fraud or dishonesty in the performance of the duty
to Holdings.
The Company also maintains insurance on its directors and officers, which
covers liabilities under the federal securities laws.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act.
Item 16. Exhibits and Financial Statement Schedules.
(a) Exhibits.
The following documents are filed with this registration statement.
<TABLE>
<CAPTION>
Exhibit
-------
<C> <S>
1.1 Form of Underwriting Agreement.
4.1 Memorandum of Association (Incorporated by reference to Exhibit
3.1 to Registration Statement on Form S-1 (No. 33-97304)).
4.2 Bye-Laws (Incorporated by reference to Exhibit 3.2 to Form 10-Q
for the quarterly period ended March 31, 1998 (File No. 1-12823)).
4.3* Form of Certificate of Designation, Preferences and Rights of
Series C Preferred Shares of LaSalle Re Holdings Limited.
5.1 Opinion of Conyers Dill & Pearman regarding the validity of the
Series C Preferred Shares.
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
Exhibit
-------
<C> <S>
8.1 Opinion of Conyers Dill & Pearman regarding certain Bermuda tax
matters (included in Exhibit 5.1).
8.2 Opinion of Mayer, Brown & Platt regarding certain U.S. tax
matters.
8.3 Opinion of Clyde & Co regarding certain U.K. tax matters.
12.1 Statement Re: Computation of Ratios.
23.1 Consent of Conyers Dill & Pearman (included in Exhibit 5.1).
23.2 Consent of Mayer, Brown & Platt (included in Exhibit 8.2).
23.3 Consent of Clyde & Co (included in Exhibit 8.3).
23.4 Consent of KPMG Peat Marwick.
24.1 Powers of Attorney (included in signature pages).
</TABLE>
- --------
*To be filed by amendment.
Item 17. Undertakings.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act of 1933 shall be deemed to be part
of this registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(3) For purposes of determining any liability under the Securities Act
of 1933, each filing of the Registrant's annual report pursuant to Section
13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in such Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in Hamilton, Bermuda on the 5th day of March, 1999.
LaSalle Re Holdings Limited
/s/ Guy D. Hengesbaugh
By: _________________________________
Guy D. Hengesbaugh
Executive Vice President and Chief
Operating Officer
Each person whose signature appears below constitutes and appoints Victor H.
Blake, Ivan P. Berk, Clare Moran and Guy D. Hengesbaugh, or any of them, such
person's true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities indicated and on the 5th day of March, 1999.
<TABLE>
<CAPTION>
Signature Position
--------- --------
<S> <C>
/s/ Victor H. Blake Chairman, President and Chief Executive
___________________________________________ Officer (Principal Executive Officer)
Victor H. Blake
/s/ Robert P. Cuthbert Senior Vice President and Chief Financial
___________________________________________ Officer
Robert P. Cuthbert (Principal Financial Officer)
/s/ Clare Moran Vice President--Finance (Principal
___________________________________________ Accounting Officer)
Clare Moran
/s/ William J. Adamson, Jr. Director
___________________________________________
William J. Adamson, Jr.
/s/ Ivan P. Berk Director
___________________________________________
Ivan P. Berk
/s/ Clement S. Dwyer, Jr. Director
___________________________________________
Clement S. Dwyer, Jr.
/s/ Donald P. Koziol, Jr. Director
___________________________________________
Donald P. Koziol, Jr.
/s/ Tim I. Madden Director
___________________________________________
Tim I. Madden
/s/ Lester Pollack Director
___________________________________________
Lester Pollack
/s/ Peter J. Rackley Director
___________________________________________
Peter J. Rackley
/s/ Paul J. Zepf Director
___________________________________________
Paul J. Zepf
</TABLE>
II-3
<PAGE>
AUTHORIZED REPRESENTATIVE
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed below by the undersigned as the duly
authorized representative of the Registrant in the United States.
/s/ William J. Adamson, Jr.
-------------------------------------
William J. Adamson, Jr.
Date: March 5, 1999
II-4
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
-------
<C> <S>
1.1 Form of Underwriting Agreement.
4.1 Memorandum of Association (Incorporated by reference to Exhibit 3.1 to
Registration Statement on Form S-1 (No. 33-97304)).
4.2 Bye-Laws (Incorporated by reference to Exhibit 3.1 to Form 10-Q for
the quarterly period ended December 31, 1995 (File No. 0-27216)).
4.3* Form of Certificate of Designation, Preferences and Rights of Series C
Preferred Shares of LaSalle Re Holdings Limited.
5.1 Opinion of Conyers Dill & Pearman regarding the validity of the Series
C Preferred Shares.
8.1 Opinion of Conyers Dill & Pearman regarding certain Bermuda tax
matters (included in Exhibit 5.1).
8.2 Opinion of Mayer, Brown & Platt regarding certain U.S. tax matters.
8.3 Opinion of Clyde & Co regarding certain U.K. tax matters.
12.1 Statement Re: Computation of Ratios.
23.1 Consent of Conyers Dill & Pearman (included in Exhibit 5.1).
23.2 Consent of Mayer, Brown & Platt (included in Exhibit 8.2).
23.3 Consent of Clyde & Co (included in Exhibit 8.3).
23.4 Consent of KPMG Peat Marwick.
24.1 Powers of Attorney (included in signature pages).
</TABLE>
- --------
*To be filed by amendment.
II-5
<PAGE>
2,000,000 Shares
LASALLE RE HOLDINGS LIMITED
Series C Preferred Shares
(Liquidation Preference $25.00 Per Share)
UNDERWRITING AGREEMENT
----------------------
__________________, 1999
Salomon Smith Barney Inc.
Morgan Stanley & Co. Incorporated
PaineWebber Incorporated
as Representatives of the several Underwriters
c/o Salomon Smith Barney Inc.
388 Greenwich Street
New York, New York 10013
Dear Sirs:
LaSalle Re Holdings Limited, a Bermuda corporation (the "Company"),
proposes to issue and sell 2,000,000 Series C Preferred Shares, par value $1.00
per share, liquidation preference $25.00 per share (the "Shares"), to the
several Underwriters named in Schedule I hereto (the "Underwriters") for whom
you are acting as representatives (the "Representatives"). References herein to
"LaSalle Re" are to LaSalle Re Limited, a Bermuda corporation and a subsidiary
of the Company.
The Company wishes to confirm as follows its agreements with the
several Underwriters in connection with the several purchases of the Shares by
the Underwriters.
1. Registration Statement and Prospectus. The Company has prepared and
filed with the Securities and Exchange Commission (the "Commission") in
accordance with the provisions of the Securities Act of 1933, as amended (the
"Act"), and the rules and regulations of the Commission thereunder, a
registration statement on Form S-3 under the Act (the "registration statement"),
including a prospectus subject to completion, relating to the Shares. The term
"Registration Statement" as used in this Agreement means the registration
statement (including all financial schedules and exhibits), as amended at the
time it becomes effective, and
<PAGE>
as thereafter amended by post-effective amendment. The term "Prospectus" as used
in this Agreement means the prospectus in the form included in the Registration
Statement, or, if the prospectus included in the Registration Statement omits
information in reliance on Rule 430A under the Act and such information is
included in a prospectus filed with the Commission pursuant to Rule 424(b) under
the Act, the term "Prospectus" as used in this Agreement means the prospectus in
the form included in the Registration Statement as supplemented by the addition
of the Rule 430A information contained in the prospectus filed with the
Commission pursuant to Rule 424(b). The term "Prepricing Prospectus" as used in
this Agreement means the prospectus subject to completion in the form included
in the registration statement at the time of the initial filing of the
registration statement with the Commission, and as such prospectus shall have
been amended from time to time prior to the date of the Prospectus. Any
reference in this Agreement to the registration statement, the Registration
Statement, any Prepricing Prospectus or the Prospectus shall be deemed to refer
to and include the documents incorporated by reference therein pursuant to Item
12 of Form S-3 under the Act, as of the date of the registration statement, the
Registration Statement, such Prepricing Prospectus or the Prospectus, as the
case may be, and any reference to any amendment or supplement to the
registration statement, the Registration Statement, any Prepricing Prospectus or
the Prospectus shall be deemed to refer to and include any documents filed after
such date under which, upon filing, are incorporated by reference therein, as
required by paragraph (b) of Item 12 of Form S-3. As used herein, the term
"Incorporated Documents" means the documents which at the time are incorporated
by reference in the registration statement, the Registration Statement, any
Prepricing Prospectus, the Prospectus, or any amendment or supplement thereto.
If the Company has filed an abbreviated registration statement to register
additional Shares pursuant to Rule 462(b) under the Act (the "Rule 462
Registration Statement"), then any reference herein to the term "Registration
Statement" shall be deemed to include such Rule 462 Registration Statement. For
purposes of this Agreement, "Rules and Regulations" means the rules and
regulations adopted by the Commission under either the Act or the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), as applicable.
2. Agreements to Sell and Purchase. Upon the basis of the
representations, warranties and agreements contained herein and subject to all
the terms and conditions set forth herein, the Company agrees to sell to each
Underwriter and each Underwriter agrees, severally and not jointly, to purchase
from the Company, at a purchase price of $___ per Share (the "purchase price per
share"), the number of Shares set forth opposite the name of such Underwriter in
Schedule I hereto (or such number of Shares increased as set forth in Section 10
hereof).
3. Terms of Public Offering. The Company has been advised by you that
the Underwriters propose to make a public offering of their respective portions
of the Shares as soon after the Registration Statement and this Agreement have
become effective as in your judgment is advisable and initially to offer the
Shares upon the terms set forth in the Prospectus.
4. Delivery of the Shares and Payment Therefor. Delivery to the
Underwriters of and payment for the Shares shall be made at the office of
LeBoeuf, Lamb, Greene & MacRae, L.L.P., 125 West 55th Street, New York, NY
10019, at 10:00 A.M., New York City time, on ________ __, 1999 (the "Closing
Date"). The place of closing for the Shares and the Closing Date may be varied
by agreement between you and the Company.
-2-
<PAGE>
Certificates for the Shares to be purchased hereunder shall be
registered in such names and in such denominations as you shall request by
written notice, it being understood that a facsimile transmission shall be
deemed written notice, prior to 9:30 A.M., New York City time, on the second
business day preceding the Closing Date. Such certificates shall be made
available to you in New York City for inspection and packaging not later than
9:30 A.M., New York City time, on the business day next preceding the Closing
Date. The certificates evidencing the Shares to be purchased hereunder shall be
delivered to you on the Closing Date against payment of the purchase price
therefor in immediately available funds.
5. Agreements of the Company. The Company agrees with the several
Underwriters as follows:
(a) If, at the time this Agreement is executed and delivered, it is
necessary for the Registration Statement or a post-effective amendment thereto
to be declared effective before the offering of the Shares may commence, the
Company will endeavor to cause the Registration Statement or such post-effective
amendment to become effective as soon as possible and will advise you promptly
and, if requested by you, will confirm such advice in writing, when the
Registration Statement or such post-effective amendment has become effective.
(b) The Company will advise you promptly and, if requested by you,
will confirm such advice in writing: (i) of any request by the Commission for
amendment of or a supplement to the Registration Statement, any Prepricing
Prospectus or the Prospectus or for additional information; (ii) of the issuance
by the Commission of any stop order suspending the effectiveness of the
Registration Statement or of the suspension of qualification of the Shares for
offering or sale in any jurisdiction or the initiation of any proceeding for
such purpose; and (iii) within the period of time referred to in paragraph (f)
below, of any change in the Company's condition (financial or other), business,
prospects, properties, net worth or results of operations, or of the happening
of any event, including the filing of any information, documents or reports
pursuant to the Exchange Act, that makes any statement of a material fact made
in the Registration Statement or the Prospectus (as then amended or
supplemented) untrue or which requires the making of any additions to or changes
in the Registration Statement or the Prospectus (as then amended or
supplemented) in order to state a material fact required by the Act or the Rules
and Regulations to be stated therein or necessary in order to make the
statements therein not misleading, or of the necessity to amend or supplement
the Prospectus (as then amended or supplemented) to comply with the Act or any
other law. If at any time the Commission shall issue any stop order suspending
the effectiveness of the Registration Statement, the Company will make every
reasonable effort to obtain the withdrawal of such order at the earliest
possible time.
(c) The Company will furnish to you without charge (i) four signed
copies of the registration statement as originally filed with the Commission and
of each amendment thereto, including financial statements and all exhibits to
the registration statement, (ii) such number of conformed copies of the
registration statement as originally filed and of each amendment thereto, but
without exhibits, as you may reasonably request, (iii) such number of copies of
the Incorporated Documents, without exhibits, as you may reasonably request, and
(iv) four copies of the exhibits to the Incorporated Documents.
-3-
<PAGE>
(d) The Company will not (i) file any amendment to the Registration
Statement or make any amendment or supplement to the Prospectus, of which you
shall not previously have been advised or to which you shall reasonably object
in writing after being so advised, or (ii) so long as, in the written opinion of
counsel for the Underwriters (a copy of which shall be delivered to the
Company), a Prospectus is required by the Act or the Rules and Regulations to be
delivered in connection with sales by any Underwriter or dealer, file any
information, document or report pursuant to the Exchange Act that upon filing
becomes an Incorporated Document, without delivering a copy of such information,
document or report to you, prior to or concurrently with such filing.
(e) Prior to the execution and delivery of this Agreement, the
Company has delivered or will deliver to you, without charge, in such quantities
as you have reasonably requested or may hereafter reasonably request, copies of
each form of the Prepricing Prospectus. The Company consents to the use, in
accordance with the provisions of the Act and the Rules and Regulations and with
the securities or Blue Sky laws of the jurisdictions in which the Shares are
offered by the several Underwriters and by dealers, prior to the date of the
Prospectus, of each Prepricing Prospectus so furnished by the Company.
(f) As soon after the execution and delivery of this Agreement as
possible and thereafter from time to time for such period as in the opinion of
counsel for the Underwriters a Prospectus is required by the Act or the Rules
and Regulations to be delivered in connection with sales by any Underwriter or
dealer, the Company will expeditiously deliver to each Underwriter and each
dealer, without charge, as many copies of the Prospectus (and of any amendment
or supplement thereto) as you may reasonably request. The Company consents to
the use of the Prospectus (and of any amendment or supplement thereto) in
accordance with the provisions of the Act and the Rules and Regulations and with
the securities or Blue Sky laws of the jurisdictions in which the Shares are
offered by the several Underwriters and by all dealers to whom Shares may be
sold, both in connection with the offering and sale of the Shares and for such
period of time thereafter as the Prospectus is required by the Act or the Rules
and Regulations to be delivered in connection with sales by any Underwriter or
dealer. If during such period of time any event shall occur that in the judgment
of the Company or in the written opinion of counsel for the Underwriters is
required to be set forth in the Prospectus (as then amended or supplemented) or
should be set forth therein in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading, or if it
is necessary to supplement or amend the Prospectus (or to file under the
Exchange Act any document which, upon filing, becomes an Incorporated Document)
in order to comply with the Act or any other law, the Company will forthwith
prepare and, subject to the provisions of paragraph (d) above, file with the
Commission an appropriate supplement or amendment thereto (or to such document),
and will expeditiously furnish to the Underwriters and dealers a reasonable
number of copies thereof. In the event that the Company and you agree that the
Prospectus should be amended or supplemented, the Company, if requested by you,
will promptly issue a press release announcing or disclosing the matters to be
covered by the proposed amendment or supplement.
(g) The Company will cooperate with you and with counsel for the
Underwriters in connection with the registration or qualification of the Shares
for offering and sale by the several Underwriters and by dealers under the
securities or Blue Sky laws of such
-4-
<PAGE>
jurisdictions as you may reasonably designate, and will maintain such
qualifications in effect for as long as may be required for the distribution of
the Shares, and will file such consents to service of process or other documents
necessary or appropriate in order to effect such registration or qualification;
provided that in no event shall the Company be obligated to qualify to do
business in any jurisdiction where it is not now so qualified or to take any
action that would subject it to service of process in suits, other than those
arising out of the offering or sale of the Shares, or subject it to general
taxation, in any jurisdiction where it is not now so subject.
(h) The Company will make generally available to its security holders
a consolidated earnings statement, which need not be audited, covering a twelve-
month period commencing after the effective date of the Registration Statement
and ending not later than 15 months thereafter, as soon as reasonably
practicable after the end of such period, which consolidated earnings statement
shall satisfy the provisions of Section 11(a) of the Act.
(i) During the period of three years hereafter, the Company will
furnish to you (i) as soon as available, a copy of each report of the Company
mailed to shareholders or filed with the Commission or the New York Stock
Exchange ("NYSE") and (ii) from time to time such other information concerning
the Company as you may reasonably request; provided that the Company shall not
be required to provide to you any such information that is not available to the
public.
(j) If this Agreement shall terminate or shall be terminated after
execution pursuant to any provisions hereof (otherwise than pursuant to the
second paragraph of Section 10 hereof or by notice given by you terminating this
Agreement pursuant to Section 10 or Section 12 hereof) or if this Agreement
shall be terminated by the Underwriters because of any failure or refusal on the
part of the Company to comply, in any material respect, with the terms or
fulfill, in any material respect, any of the conditions of this Agreement, the
Company agrees to reimburse the Underwriters for all reasonable out-of-pocket
expenses (including reasonable fees and expenses of counsel for the
Underwriters) incurred by you in connection herewith.
(k) If Rule 430A of the Act is employed, the Company will timely file
the Prospectus pursuant to Rule 424(b) under the Act and will advise you of the
time and manner of such filing.
(l) Except as stated in this Agreement and in the Prepricing
Prospectus and Prospectus, neither the Company nor any of its subsidiaries has
taken or will take, directly or indirectly, any action designed to or that might
reasonably be expected to cause or result in stabilization or manipulation of
the price of the Shares or any other security of the Company to facilitate the
sale or resale of the Shares pursuant to the distribution contemplated by this
Agreement.
(m) The Company will use its best efforts to have the Shares
registered under the Exchange Act concurrently with the effectiveness of the
registration statement, to have the Shares listed on the NYSE within 30 days
after the date hereof, and to maintain such listing and the registration of the
Shares under the Exchange Act.
-5-
<PAGE>
(n) The Company hereby validly and irrevocably submits to the
jurisdiction of any federal or state court sitting in The City of New York and
irrevocably waives, to the fullest extent permitted by law, any objection that
it may now or hereafter have to the laying of venue of any such suit, action or
proceeding brought in any such court based on or arising under this Agreement
and any claim that any such suit, action or proceeding brought in any such court
has been brought in an inconvenient forum.
(o) The Company will use all reasonable commercial efforts to satisfy
on or before the Closing Date all conditions contained in Section 8 hereof to
the Underwriters' obligations to purchase the Shares.
6. Representations and Warranties of the Company. The Company represents
and warrants to each Underwriter that:
(a) Each Prepricing Prospectus included as part of any registration
statement or as part of the Registration Statement or any amendment or
supplement thereto, or filed pursuant to Rule 424 under the Act, complied when
so filed in all material respects with the provisions of the Act and the Rules
and Regulations, and did not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading; except that this representation and warranty does not
apply to statements in or omissions from such Prepricing Prospectus (or any
amendment or supplement thereto) made in reliance upon and in conformity with
information relating to any Underwriter furnished to the Company in writing by
an Underwriter through the Representatives expressly for use therein.
(b) The Company and the transactions contemplated by this Agreement
meet the requirements for using Form S-3 under the Act. The Registration
Statement in the form in which it became or becomes effective and also in such
form as it may be when any post-effective amendment thereto shall become
effective and the Prospectus and any supplement or amendment thereto when filed
with the Commission under Rule 424(b) under the Act, complied or will comply in
all material respects with the provisions of the Act and the Rules and
Regulations and will not at any such times contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; except that this
representation and warranty does not apply to statements in or omissions from
the Registration Statement or the Prospectus (or any amendment or supplement
thereto) made in reliance upon and in conformity with information relating to
any Underwriter furnished to the Company in writing by or on behalf of any
Underwriter through the Representatives expressly for use therein.
(c) The Incorporated Documents heretofore filed, when they were filed
(or, if any amendment with respect to any such document was filed, when such
amendment was filed), complied in all material respects with the provisions of
the Exchange Act and the Rules and Regulations and any further Incorporated
Documents so filed will, when they are filed, comply in all material respects
with the provisions of the Exchange Act and the Rules and Regulations; no such
document at any such times contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein
-6-
<PAGE>
not misleading; and no such further document, when it is filed, will contain an
untrue statement of a material fact or will omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading.
(d) No order preventing or suspending the use of any Prepricing
Prospectus has been issued by the Commission and no proceedings for that purpose
shall have been instituted or, to the knowledge of the Company, threatened or
contemplated by the Commission.
(e) The consolidated financial statements of the Company (together
with related notes) included or incorporated by reference in the Registration
Statement and Prospectus comply as to form in all material respects with the
requirements of the Act and the Rules and Regulations and present fairly the
financial position of the Company as at the dates indicated and the results of
its operations for the periods specified; such financial statements have been
prepared in conformity with United States generally accepted accounting
principles applied on a consistent basis during the periods involved, except as
disclosed therein; and the supporting schedules included or incorporated by
reference in the Registration Statement present fairly the information required
to be stated therein. All statutory financial statements of the Company and its
subsidiaries where required or permitted to be prepared in accordance with the
insurance laws of each of the jurisdictions in which it conducts its business
and the rules and regulations promulgated thereunder, from which certain ratios
and other statistical data contained or incorporated by reference in the
Registration Statement and the Prospectus have been derived, and for each
relevant period have been prepared in conformity in all material respects with
the requirements of such insurance laws and such rules and regulations and
present fairly the information purported to be shown.
(f) Since the respective dates as of which information is given in the
Registration Statement and the Prospectus, except as otherwise stated therein,
(i) there has been no material adverse change in the condition, financial or
otherwise, earnings, business, prospects, or results of operations of the
Company and its subsidiaries considered as a whole, whether or not arising in
the ordinary course of business, (ii) there have been no material transactions
entered into by the Company or any of its subsidiaries other than those in the
ordinary course of business, (iii) neither the Company nor any of its
subsidiaries has incurred any liability or obligation, direct or contingent,
that is material to the Company and its subsidiaries considered as a whole, and
there has not been any change in the capital stock of the Company or any payment
of or declaration to pay any dividends or any other distributions with respect
to the Company's capital stock, except as set forth in the Prospectus, and (iv)
there has not been any material change in the shareholders' equity, statutory
surplus or reserves (including any such change in the loss and loss expense
reserves) of the Company or any of its subsidiaries.
-7-
<PAGE>
(g) The Company has been duly incorporated and organized and is
validly existing as a corporation and as an exempted company in good standing
under the laws of Bermuda with all requisite power and authority (corporate and
other) to own, lease and operate its properties and conduct its business as
described in the Registration Statement and Prospectus; and the Company is duly
qualified as a foreign corporation to transact business and is in good standing
in each jurisdiction in which it owns or leases property or in which the conduct
of its business requires such qualification, except to the extent that the
failure to be so qualified or be in good standing would not have a material
adverse effect on the condition, financial or otherwise, earnings, business,
prospects, or results of operations of the Company and its subsidiaries
considered as a whole.
(h) Each of the subsidiaries of the Company has been duly incorporated
and organized and is validly existing as a corporation and in the case of
LaSalle Re as an exempted company in good standing under the laws of the
jurisdiction of its incorporation, with all requisite power and authority
(corporate and other) to own, lease and operate its properties and conduct its
business as described in the Registration Statement and Prospectus; and each is
duly qualified as a foreign corporation to transact business and is in good
standing in each jurisdiction in which it owns or leases property or in which
the conduct of its business requires such qualification, except to the extent
that the failure to be so qualified or be in good standing would not have a
material adverse effect on the condition, financial or otherwise, earnings,
business, prospects, or results of operations of the Company and its
subsidiaries considered as a whole; all of the issued and outstanding capital
stock of each subsidiary of the Company has been duly authorized and validly
issued and is fully paid and non-assessable, and (except as otherwise described
in the Registration Statement and the Prospectus) as of the Closing Date all
such capital stock will be owned by the Company, directly or through one or more
of its subsidiaries, free and clear of any mortgage, pledge, lien, encumbrance,
security interest, adverse claim or equity.
(i) Neither the Company nor any of its subsidiaries is in violation of
its or any of their charters or bye-laws or other organizational documents or in
default in the performance or observance of any obligation, agreement, covenant
or condition contained in any material contract, indenture, mortgage, loan
agreement, note, lease or other agreement or instrument to which it or any of
them is a party or by which it or any of them or their properties may be bound;
no consent, approval, authorization, order, registration, filing, qualification
or other action of or with any court, regulatory body, arbitrator,
administrative body or other governmental authority or agency (including,
without limitation, any insurance regulatory agency or body) is required for the
issue and sale of the Shares or the consummation by the Company of the
transactions contemplated by this Agreement, except such as may be required and
have been obtained from the Bermuda Monetary Authority and under the Act, the
Exchange Act, the Rules and Regulations or as may be required under state
securities or Blue Sky laws (including state insurance securities laws) in
connection with the distribution of the Shares by the Underwriters; and the
issue and sale of the Shares and the terms thereof (including the payment of
dividends thereon), the execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated herein will not conflict
with or constitute a breach of, or default under, or result in the creation or
imposition of any lien, charge or encumbrance upon any property or assets of the
Company or any of its subsidiaries pursuant to, any contract, indenture,
mortgage, loan agreement, note, lease or other agreement or instrument to which
the Company or any of its
-8-
<PAGE>
subsidiaries is a party or by which it or any of them may be bound or to which
any of the property or assets of the Company or any of its subsidiaries is
subject, nor will any such action conflict with or result in a breach or
violation of the terms and provisions of or constitute a default under (i) the
memorandum of association or bye-laws or other organizational documents of the
Company or any of its subsidiaries or (ii) any statute, rule, regulation or
administrative or court decree or order of any governmental agency or body
(including, without limitation, any insurance regulatory agency or body) or any
court or arbitrator, which is applicable to the Company or any of its
subsidiaries or any of their respective properties.
(j) Each of the Company and its subsidiaries possesses all necessary
consents, authorizations, approvals, orders, licenses, certificates, or permits
issued by any regulatory agencies or bodies (collectively, "Permits") which are
necessary to conduct the business now operated by it; each of the Company and
its subsidiaries has fulfilled and performed all obligations necessary to
maintain such Permits; all of such Permits are in full force and effect; there
is no pending, or to the knowledge of the Company or any of its subsidiaries,
contemplated or threatened action, suit, proceeding, investigation or event
against or involving the Company or any of its subsidiaries (and neither the
Company nor any of its subsidiaries know of any reasonable basis for any such
action, suit, proceeding, investigation or event) that could lead to the
revocation, modification, termination, suspension or any other material
impairment of the rights of the holder of any such Permit which, individually or
in the aggregate, if the subject of an unfavorable decision, ruling or finding,
would materially and adversely affect the condition, financial or otherwise,
earnings, business, prospects or results of operations of the Company and its
subsidiaries considered as a whole; neither the Company nor any of its
subsidiaries has received any notification from any insurance authority,
commission or other insurance regulatory body to the effect that any additional
Permit from such authority, commission or body is needed to be obtained by
either the Company or any of its subsidiaries; and no insurance regulatory
agency or body has issued any order or decree impairing, restricting or
prohibiting the payment of any dividends by the Company or any of its
subsidiaries or the continuation of the business of the Company or any
subsidiary of the Company as currently conducted.
(k) Except as set forth in the Prospectus, as amended or supplemented,
there is no (i) action, suit or proceeding before or by any court or
governmental agency or body, domestic or foreign, now pending, or, to the
knowledge of the Company or any of its subsidiaries, contemplated or threatened
against the Company or any of its subsidiaries, (ii) statute, rule, regulation
or order that has been enacted, adopted or issued by any governmental agency or
body, domestic or foreign, or (iii) injunction, restraining order or order of
any nature by a court of competent jurisdiction that has been issued, any of the
foregoing of which (a) might individually or in the aggregate result in any
material adverse change in the condition, financial or otherwise, earnings,
business, prospects or results of operations of the Company and its subsidiaries
considered as a whole, (b) might materially and adversely affect the properties
or assets thereof, (c) might interfere with or adversely affect the offering of
the Shares in the manner contemplated by the Prospectus, (d) is required to be
disclosed in the Registration Statement or the Prospectus and is not disclosed
or (e) in any manner seek to challenge the validity of this Agreement or the
Shares; and there are no material contracts or other documents which are
required to be described in the Registration Statement or the Prospectus (or any
amendment or supplement thereto) or filed
-9-
<PAGE>
as exhibits to the Registration Statement by the Act or by the Rules and
Regulations or to any Incorporated Document which have not been so described or
have not been so filed as required.
(l) Each of the Company and its subsidiaries has good and marketable
title to all personal property and assets owned by it, in each case free and
clear of all liens, encumbrances and defects except (i) such as are referred to
in the Prospectus or (ii) such as do not materially and adversely affect the
value of such property to the Company or such subsidiary, and do not materially
interfere with the use made and proposed to be made of such property by the
Company or such subsidiary; neither the Company nor any of its subsidiaries owns
any real property; and any real property and buildings held under lease by the
Company or any of its subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made by the Company or any of its
subsidiaries, and no default (other than any default by the lessor) related
thereto has occurred or is continuing.
(m) This Agreement has been duly authorized, executed and delivered by
the Company and is a valid and binding agreement of the Company, enforceable
against the Company in accordance with its terms.
(n) The Company and LaSalle Re have an authorized capitalization as
set forth or incorporated by reference in the Prospectus, and on the Closing
Date, all of the outstanding shares of capital stock of the Company and LaSalle
Re (including the Shares) will have been duly authorized and validly issued and
will be fully paid and non-assessable; such shares conform to the description
thereof contained or incorporated by reference in the Prospectus; the Shares are
not subject to pre-emptive or other similar rights; the form of certificates for
the Shares conforms to the requirements of the laws of Bermuda and the NYSE; the
Company has received clearance from the NYSE to file a listing application with
respect to the Shares and has no reason to believe that the Shares will not be
authorized for listing on the NYSE.
(o) There is no action, suit or proceeding before or by any court or
governmental agency or body, domestic or foreign, now pending, or to the
knowledge of the Company or its subsidiaries, contemplated or threatened against
the Company or any of its subsidiaries, or any injunction, restraining order or
order of any nature by a court of competent jurisdiction, arising out of or in
connection with the consummation of the transactions contemplated by this
Agreement.
(p) Consummation of the transactions contemplated by this Agreement,
including but not limited to any actions taken pursuant to the indemnification
and contribution provisions set forth herein, will not constitute unlawful
financial assistance by the Company or LaSalle Re under Bermuda law.
(q) Except as described in the Prospectus, there are no (i) contracts,
agreements or understandings between the Company or any of its subsidiaries and
any person granting such person the right to require the Company or such
subsidiary to file a registration statement under
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the Act with respect to any securities of the Company or such subsidiary owned
or to be owned by such person or to require the Company to include such
securities under the Registration Statement or with any securities being
registered pursuant to any other registration statement filed by the Company or
such subsidiary under the Act or (ii) outstanding options, warrants or other
rights with respect to the issuance of, and there are no commitments, plans or
arrangements to issue, any shares of capital stock of the Company or any
subsidiary or any security convertible or exchangeable into or exercisable for
such shares.
(r) Each of the Company and its subsidiaries has filed all reports,
information statements and other documents as required to be filed pursuant to
applicable insurance statutes, including the statutes relating to companies
which control insurance companies, and the rules, regulations and
interpretations of the insurance regulatory authorities thereunder (the
"Applicable Insurance Laws"), and has duly paid all taxes (including franchise
taxes and similar fees) it is required to have paid under the Applicable
Insurance Laws, except where the failure to file such reports, information
statements or other documents would not have a material adverse effect on the
condition, financial or otherwise, earnings, business, prospects or results of
operations of the Company and its subsidiaries considered as a whole; and each
of the Company and its subsidiaries maintains its books and records in
accordance with the Applicable Insurance Laws, except where the failure to so
maintain its books and records would not have a material adverse effect on the
condition, financial or otherwise, earnings, business, prospects, or results of
operations of the Company and its subsidiaries considered as a whole.
(s) LaSalle Re is duly registered as an insurer and is subject to
regulation and supervision in Bermuda. Each of the Company and its subsidiaries
is duly licensed or admitted as an insurer or an insurance holding company, as
applicable, in each jurisdiction where it is required to be so licensed or
admitted to conduct its business as described in the Prospectus.
(t) The Company and each of its subsidiaries are in compliance with
the applicable requirements of the Bermuda Insurance Act 1978, as amended, and
any applicable rules and regulations thereunder (collectively, the "Bermuda
Insurance Act"); and neither the Company nor any of its subsidiaries is subject
to the insurance laws of any other jurisdiction, except that LaSalle Re
Corporate Capital Ltd., a Bermuda corporation and a subsidiary of the Company
("LaSalle Re Capital"), has been admitted by Lloyd's of London ("Lloyd's") to
corporate membership, is an underwriting member of Lloyd's and is subject to
insurance laws and regulations applicable to members of Lloyd's.
(u) All liability, property and casualty, workers compensation,
directors' and officers' liability, surety bonds and other similar insurance
contracts that insure the business, properties, operations or affairs of the
Company and each of its subsidiaries or affect or relate to the ownership, use
or operation of the Company's or any of its subsidiaries' assets or properties
are in full force and effect and, to the knowledge of the Company and each of
its subsidiaries, are with financially sound and reputable insurers and in
accordance with normal industry practice and, to the knowledge of the Company
and each of its subsidiaries, in light of the respective businesses, properties,
operations and affairs of the Company and each of its subsidiaries, are in
amounts and provide coverage that is reasonable and customary for persons in
similar businesses or for similar property.
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(v) All reinsurance treaties, retrocessional agreements, contracts and
agreements to which the Company or any of its subsidiaries is a party are in
full force and effect and neither the Company nor any of its subsidiaries is in
violation of, or in default in the performance, observance or fulfillment of,
any obligation, agreement, covenant or condition contained therein, except where
any such violation or default would not have a material adverse effect on the
condition, financial or otherwise, earnings, business, prospects, or results of
operations of the Company and its subsidiaries taken as a whole; neither the
Company nor any of its subsidiaries has received any notice from any of the
other parties to such treaties, contracts or agreements that such other party
intends not to perform in any material respect such treaty, contract or
agreement, and the Company and its subsidiaries have no reason to believe that
any of the other parties to such treaties, contracts or agreements will be
unable to perform such treaty, contract, agreement or arrangement.
(w) To the knowledge of the Company and each of its subsidiaries, no
change in any insurance law or regulation is pending which could have,
individually or in the aggregate, a material adverse effect on the condition,
financial or otherwise, earnings, business, prospects or results of operations
of the Company or any of its subsidiaries.
(x) The Company, LaSalle Re and LaSalle Re Capital have received from
the Bermuda Minister of Finance an assurance under The Exempted Undertakings Tax
Protection Act, 1966 of Bermuda to the effect set forth in the Prospectus under
the caption "Certain Tax Considerations --Taxation of the Company and its
Subsidiaries--Bermuda."
(y) Other than as permitted by the Act or the Rules and Regulations,
the Company and its subsidiaries have not distributed and will not distribute,
prior to the later to occur of (i) the Closing Date and (ii) completion of the
distribution of the Shares, any prospectus or other offering material in
connection with the offering and sale of the Shares.
(z) No material labor dispute with the employees of the Company or any
of its subsidiaries exists or, to the knowledge of the Company and each of its
subsidiaries, is threatened.
(aa) Neither the Company nor any of its subsidiaries is an "investment
company" or a company "controlled" by an "investment company" within the meaning
of the Investment Company Act of 1940, as amended (the "Investment Company
Act").
(bb) Other than as set forth in this Agreement, there is no broker,
finder or other party that is entitled to receive from the Company or any of its
subsidiaries any brokerage commission, finder's fee or other like payment as a
result of any of the transactions contemplated by this Agreement.
(cc) Any certificate signed by an officer of the Company or any of its
subsidiaries in their capacities as such and delivered, pursuant to this
Agreement or in connection with the payment of the purchase price and delivery
of the certificates for the Shares, to the Underwriters or counsel for the
Underwriters shall be deemed a representation and warranty by the Company to the
Underwriters as to the matters covered thereby.
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(dd) To the knowledge of the Company and each of its subsidiaries,
neither the Company nor any of its subsidiaries has violated any foreign,
federal, state or local law or regulation relating to the protection of human
health and safety, the environment or hazardous or toxic substances or wastes,
pollutants or contaminants, or any law relating to discrimination in the hiring,
promotion or pay of employees or any applicable wages and hours laws.
(ee) KPMG Peat Marwick, who certified the financial statements and
supporting schedules included or incorporated by reference in the Registration
Statement, is the independent public accountant with respect to the Company as
required by the Act and the Rules and Regulations.
(ff) Each of the Company and its subsidiaries maintains a system of
internal accounting controls sufficient to provide reasonable assurances that
(i) transactions are executed in all material respects in accordance with
management's general or specific authorization; (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
United States generally accepted accounting principles and with statutory
accounting principles, as the case may be, and to maintain accountability for
assets; (iii) access to assets is permitted only in accordance with management's
general or specific authorization; and (iv) the recorded accountability for
assets is compared with existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
(gg) Any tax returns required to be filed by the Company or any of its
subsidiaries in any jurisdiction have been filed, and any material taxes,
including any withholding taxes, penalties and interest, assessments and fees
and other charges due or claimed to be due from such entities have been paid,
other than any of those being contested in good faith and for which adequate
reserves have been provided or any of those currently payable without penalty or
interest.
(hh) The Company and each of its subsidiaries owns or has valid and
adequate rights to use all patents, trademarks, trademark registration, service
marks, service mark registrations, trade names, copyrights, licenses,
inventions, trade secrets and rights owned by it or necessary for the conduct of
its respective business, free and clear of all liens, claims, security
interests, encumbrances and restrictions that may materially interfere with the
conduct of its business, and neither the Company nor any of its subsidiaries is
aware of any claim to the contrary or any challenge by any other person to the
rights of the Company or any of its subsidiaries with respect to the foregoing.
(ii) As of the Closing Date, LaSalle Re, LaSalle Re (Services) Limited
("LaSalle Services") and LaSalle Re Capital will be the only "subsidiaries" of
the Company within the meaning of Rule 405 under the Act, and each of them is
listed in an exhibit to the Company's Annual Report on Form 10-K which is
incorporated by reference into the Registration Statement.
(jj) There are no currency exchange control laws or withholding taxes
imposed in Bermuda or the United Kingdom that are applicable to the payment of
dividends (i) on the Shares by the Company or (ii) by any subsidiary of the
Company, except in the United Kingdom
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to the extent that dividends payable are subject to the payment at the same time
of Advance Corporation Tax under the laws of the United Kingdom.
(kk) Neither the Underwriters nor any subsequent purchasers of the
Shares is subject to any stamp duty, excise or similar tax imposed in Bermuda in
connection with the offering, sale or purchase of the Shares.
(ll) The Company and each of its subsidiaries have validly appointed
CT Corporation Systems as its authorized agent to receive service of process in
any suit, action or proceeding as contemplated in Section 5(n) above.
(mm) The Company and its subsidiaries are implementing a
comprehensive, detailed program to analyze and address the risk that the
computer hardware and software used by them may be unable to recognize and
properly execute date-sensitive functions involving certain dates prior to and
any dates after December 31, 1999 (the "Year 2000 Problem"), and reasonably
believe that such risk will be remedied on a timely basis without material
expense and will not have a material adverse effect upon the financial condition
and results of operations of the Company and its subsidiaries, taken as a whole;
and the Company and its subsidiaries have made due inquiry that each service
provider and broker of the Company or any of its subsidiaries and each cedent of
the Company or any of its subsidiaries with whom the Company directly interfaces
has remedied or will remedy on a timely basis its Year 2000 Problem, except to
the extent that a failure to remedy by any such service provider, broker or
cedent would not have a material adverse effect on the Company and its
subsidiaries, taken as a whole. The Company is in compliance in all material
respects with all of the Commission's interpretive releases, "frequently asked
questions" and other directives related to disclosure of the Year 2000 Problem.
(nn) There are no transfer taxes or other similar fees or charges
under Bermuda law, the laws of the United States, or the laws of any state, or
any political subdivision thereof, required to be paid in connection with the
execution and delivery of this Agreement or the issuance by the Company or sale
by the Company of the Shares.
(oo) No subsidiary of the Company is currently prohibited, directly or
indirectly, from paying any dividends to the Company, from making any other
distribution on such subsidiary's capital stock, from repaying to the Company
any loans or advances to such subsidiary from the Company or from transferring
any of such subsidiary's property or assets to the Company or any other
subsidiary of the Company, except as described in or contemplated by the
Prospectus.
(pp) Except as disclosed in the Registration Statement and the
Prospectus, the Company (i) does not have any material lending or other
relationship with any bank or lending affiliate of any of the Representatives
and (ii) does not intend to use any of the proceeds from the sale of the Shares
hereunder to repay any outstanding debt owed to any affiliate of any of the
Representatives.
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7. Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless each Underwriter
and each person, if any, who controls any Underwriter within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act from and against any
and all losses, claims, damages, liabilities and expenses (including reasonable
legal fees and expenses and reasonable costs of investigation) arising out of or
based upon any untrue statement or alleged untrue statement of a material fact
contained in any Prepricing Prospectus or in the Registration Statement or the
Prospectus or in any amendment or supplement thereto, or arising out of or based
upon any omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages, liabilities or expenses arise
out of or are based upon any untrue statement or omission or alleged untrue
statement or omission which has been made therein or omitted therefrom in
reliance upon and in conformity with the information relating to such
Underwriter furnished in writing to the Company by or on behalf of any
Underwriter through a Representative expressly for use in connection therewith;
provided, however, that the indemnification contained in this paragraph (a) with
respect to any Prepricing Prospectus or the Prospectus shall not inure to the
benefit of any Underwriter (or to the benefit of any person controlling such
Underwriter) on account of any such loss, claim, damage, liability or expense
arising from the sale of the Shares by such Underwriter to any person if a copy
of the Prepricing Prospectus or the Prospectus (as then amended or supplemented)
shall not have been delivered or sent to such person within the time required by
the Act and the Rules and Regulations, and the untrue statement or alleged
untrue statement or omission or alleged omission of a material fact contained in
such Prepricing Prospectus or the Prospectus was corrected in the Prepricing
Prospectus or the Prospectus (as then amended or supplemented), provided that
the Company has delivered the Prepricing Prospectus or the Prospectus (as then
amended or supplemented) to the several Underwriters in requisite quantity on a
timely basis to permit such delivery or sending.
(b) If any action, suit or proceeding shall be brought against any
Underwriter or any person controlling any Underwriter in respect of which
indemnity may be sought against the Company, such Underwriter or such
controlling person shall promptly notify the parties against whom
indemnification is being sought (the "indemnifying parties"), and such
indemnifying parties shall assume the defense thereof, including the employment
of counsel and payment of all fees and expenses; however, the omission to notify
the indemnifying party shall relieve the indemnifying party from liability only
to the extent prejudiced thereby. Such Underwriter or any such controlling
person shall have the right to employ separate counsel in any such action, suit
or proceeding and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Underwriter or such
controlling person unless (i) the indemnifying parties have agreed in writing to
pay such fees and expenses, (ii) the indemnifying parties have failed to assume
the defense and employ counsel within a reasonable period of time after being
notified of such action, suit or proceeding, or (iii) the named parties to any
such action, suit or proceeding (including any impleaded parties) include both
such Underwriter or such controlling person and the indemnifying parties and
such Underwriter or such controlling person shall have been advised by its
counsel in writing that representation of such indemnified party and any
indemnifying party by the same counsel would be inappropriate under applicable
standards of professional conduct (whether or not such representation by the
same counsel has been proposed)
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<PAGE>
due to actual or potential differing interests between them (in which case the
indemnifying party shall not have the right to assume the defense of such
action, suit or proceeding on behalf of such Underwriter or such controlling
person). It is understood, however, that the indemnifying parties shall, in
connection with any one such action, suit or proceeding or separate but
substantially similar or related actions, suits or proceedings in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the reasonable fees and expenses of only one separate firm of
attorneys (in addition to any local counsel) at any time for all such
Underwriters and controlling persons, which firm shall be designated in writing
by Salomon Smith Barney Inc., and that all such fees and expenses shall be
reimbursed as they are incurred. The indemnifying parties shall not be liable
for any settlement of any such action, suit or proceeding effected without their
written consent, but if settled with such written consent, or if there be a
final judgment for the plaintiff in any such action, suit or proceeding, the
indemnifying parties agree to indemnify and hold harmless any Underwriter, to
the extent provided in the preceding paragraph, and any such controlling person
from and against any loss, claim, damage, liability or expense by reason of such
settlement or judgment.
(c) Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Company, the directors and officers of the Company who
sign the Registration Statement and any person who controls the Company within
the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, to
the same extent as the foregoing indemnity from the Company to each Underwriter,
but only with respect to information relating to such Underwriter furnished in
writing by or on behalf of such Underwriter through you expressly for use in the
Registration Statement, the Prospectus or any Prepricing Prospectus, or any
amendment or supplement thereto. If any action, suit or proceeding shall be
brought against the Company, any of the Company's directors, any such officer or
any such controlling person based on the Registration Statement, the Prospectus
or any Prepricing Prospectus, or any amendment or supplement thereto, and in
respect of which indemnity may be sought against any Underwriter pursuant to
this paragraph (c), such Underwriter shall have the rights and duties given to
the Company by paragraph (b) above (except that if the Company shall have
assumed the defense thereof such Underwriter shall not be required to do so, but
may employ separate counsel therein and participate in the defense thereof, but
the fees and expenses of such counsel shall be at such Underwriter's expense),
and the Company, the Company's directors, any such officer and any such
controlling person shall have the rights and duties given to the Underwriters by
paragraph (b) above.
(d) If the indemnification provided for in this Section 7 is
unavailable to an indemnified party under paragraphs (a) or (c) hereof in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then an indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or expenses (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company on the one hand and the Underwriters on the other hand from the offering
of the Shares, or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of the Company on the one hand and the Underwriters on the other hand in
connection with the statements or omissions that resulted in such losses,
claims, damages, liabilities or expenses, as
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well as any other relevant equitable considerations. The relative benefits
received by the Company on the one hand and the Underwriters on the other hand
shall be deemed to be in the same proportion as the total net proceeds from the
offering (before deducting expenses) received by the Company bear to the total
underwriting discounts and commissions received by the Underwriters, in each
case as set forth in the table on the cover page of the Prospectus computed on
the basis of the respective amounts set forth in the notes to the table on the
cover page of the Prospectus. The relative fault of the Company on the one hand
and the Underwriters on the other hand shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Company on the one hand or by the Underwriters on
the other hand and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
(e) The Company and the Underwriters agree that it would not be just
and equitable if contribution pursuant to this Section 7 were determined by a
pro rata allocation (even if the Underwriters were treated as one entity for
such purpose) or by any other method of allocation that does not take account of
the equitable considerations referred to in paragraph (d) above. The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages, liabilities and expenses referred to in paragraph (d) above shall be
deemed to include, subject to the limitations set forth above, any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating any claim or defending any such action, suit or proceeding.
Notwithstanding the provisions of this Section 7, no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price of the Shares underwritten by it and distributed to the public exceeds the
amount of any damages which such Underwriter has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Underwriters'
obligations to contribute pursuant to this Section 7 are several in proportion
to the respective numbers of Shares set forth opposite their names in Schedule I
hereto (or such numbers of Shares increased as set forth in Section 10 hereof)
and not joint.
(f) No indemnifying party shall, without the prior written consent of
the indemnified party, effect any settlement of any pending or threatened
action, suit or proceeding in respect of which any indemnified party is or could
have been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release of
such indemnified party from all liability on claims that are the subject matter
of such action, suit or proceeding.
(g) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 7 shall be paid by the indemnifying party to the indemnified party as
such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 7 and the
representations and warranties of the Company set forth in this Agreement shall
remain operative and in full force and effect, regardless of (i) any
investigation made by or on behalf of any Underwriter or any person controlling
any Underwriter, the Company or the Company's
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directors or officers or any person controlling the Company, (ii) acceptance of
any Shares and payment therefor hereunder, and (iii) any termination of this
Agreement. A successor to any Underwriter or any person controlling any
Underwriter, or to the Company, the Company's directors or officers or any
person controlling the Company, shall be entitled to the benefits of the
indemnity, contribution and reimbursement agreements contained in this Section
7.
8. Conditions of Underwriters' Obligations. The several obligations of
the Underwriters to purchase the Shares hereunder are subject to the following
conditions:
(a) If, at the time this Agreement is executed and delivered, it is
necessary for the registration statement or a post-effective amendment thereto
to be declared effective before the offering of the Shares may commence, the
registration statement or such post-effective amendment shall have become
effective not later than 5:30 P.M., New York City time, on the date hereof, or
at such later date and time as shall be consented to in writing by you, and all
filings, if any, required by Rules 424 and 430A under the Act shall have been
timely made; no stop order suspending the effectiveness of the registration
statement shall have been issued and no proceeding for that purpose shall have
been instituted or, to the knowledge of the Company or any Underwriter,
threatened by the Commission, and any request of the Commission for additional
information (to be included in the Registration Statement or the Prospectus or
otherwise) shall have been complied with to your reasonable satisfaction.
(b) Subsequent to the effective date of this Agreement, there shall
not have occurred (i) any change, or any development involving a prospective
change, that would have a material adverse effect on the condition, financial or
otherwise, earnings, business, prospects, or results of operations of the
Company and its subsidiaries taken as a whole, not contemplated by the
Prospectus, which in your opinion would materially adversely affect the market
for the Shares, or (ii) any event or development relating to or involving the
Company or any officer or director of the Company which makes any statement made
in the Prospectus untrue or which, in the opinion of the Company and its counsel
or the Underwriters and their counsel, requires the making of any addition to or
change in the Prospectus in order to state a material fact required by the Act
or any other law to be stated therein or necessary in order to make the
statements therein not misleading, if amending or supplementing the Prospectus
to reflect such event or development would, in your opinion, materially
adversely affect the market for the Shares.
(c) You shall have received on the Closing Date an opinion of Mayer,
Brown & Platt, counsel for the Company and LaSalle Re, dated the Closing Date
and addressed to you to the effect that:
(i) This Agreement is a valid and binding agreement of the Company
(other than the indemnity and contribution provisions thereof, as to which such
counsel need not express an opinion), subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and other laws of general
applicability relating to or affecting creditors' rights and to general
principles of equity.
(ii) On the Closing Date, all of the outstanding shares of capital
stock of the Company and LaSalle Re (including the Shares) conformed in all
material respects to the
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descriptions thereof contained or incorporated by reference in the Prospectus;
to the knowledge of such counsel, the Shares are not subject to any contractual
pre-emptive or other similar rights; the form of certificates for the Shares
conforms to the requirements of the NYSE; and a filing has been made by the
Company on Form 8-A for registration of the Shares pursuant to Section 12(b)
under the Exchange Act.
(iii) To the knowledge of such counsel there is no legal or
governmental action, suit or proceeding before or by any court or governmental
agency or body, domestic or foreign, now pending, contemplated or threatened
against the Company or any of its subsidiaries or any injunction, restraining
order or order of any nature by a court of competent jurisdiction, arising out
of or in connection with the consummation of the transactions contemplated by
this Agreement.
(iv) The Registration Statement and each post-effective amendment, if
any, is effective under the Act and the Rules and Regulations and, to such
counsel's knowledge, no stop order suspending the effectiveness of the
Registration Statement or any part thereof or preventing or suspending the use
of any Prepricing Prospectus has been issued under the Act or the Rules and
Regulations or proceedings therefor initiated or threatened or are pending or
contemplated by the Commission, and any required filing of the Prospectus
pursuant to Rule 424(b) has been made in accordance with such rule.
(v) Statements set forth in the Prospectus under the headings "Risk
Factors", "Business", "Description of Series C Preferred Shares" and in the
Registration Statement under Item 15 of Part II of the Registration Statement,
insofar as such statements constitute a summary of the legal matters, documents
or proceedings or refer to statements of United States regulation, laws or legal
conclusions referred to therein fairly present the information called for with
respect to such legal matters, documents or proceedings and statements, and are
accurate in all material respects.
(vi) No consent, approval, authorization, order, filing, registration,
qualification or other action of or with any United States court, regulatory
body, arbitrator, administrative body or other governmental authority or agency
is required for the issue and sale of the Shares or the consummation of the
transactions contemplated by this Agreement, except such as may be required and
have been obtained under the Act, the Exchange Act and the Rules and
Regulations, or as may be required under state securities or Blue Sky laws
(including state insurance securities laws) in connection with the distribution
of the Shares by the Underwriters; and the issue and sale of the Shares, the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated herein will not conflict with or constitute a
breach of, or default under, or result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of the Company or any of
its subsidiaries pursuant to, any contract, indenture, mortgage, loan agreement,
note, lease or other instrument or agreement to which the Company or any of its
subsidiaries is a party or by which it or any of them may be bound or to which
any of the property or assets of the Company or any of its subsidiaries is
subject and which is listed on Exhibit A to such opinion, nor will any such
action conflict with or result in a breach or violation of the terms and
provisions of or constitute a default under any material statute, rule,
regulation or administrative or court decree or order of any governmental
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agency or body or any court or arbitrator, that is applicable to the Company or
any of its subsidiaries or any of their respective properties.
(vii) The Company and each of its subsidiaries have validly
appointed CT Corporation Systems as its authorized agent to receive service of
process in any suit, action or proceeding as contemplated in Section 5(n) above.
(viii) To the knowledge of such counsel, there is no (i) legal or
governmental action, suit or proceeding before or by any court or governmental
agency or body, domestic or foreign, now pending, contemplated or threatened
against the Company or any of its subsidiaries; (ii) statute, rule, regulation
or order that has been enacted, adopted or issued by any governmental agency or
body, domestic or foreign, or (iii) injunction, restraining order or order of
any nature by a court of competent jurisdiction that has been issued, any of the
foregoing of which (a) is required to be disclosed in the Registration Statement
or the Prospectus and is not so disclosed; or (b) in any manner seeks to
challenge the validity of this Agreement or the Shares; and, after due inquiry,
such counsel is not aware of any material contract or other document that is
required to be described in the Registration Statement or the Prospectus (or any
amendment or supplement thereto) or to be filed as an exhibit to the
Registration Statement or to any Incorporated Document that is not so described
or filed as required.
(ix) Neither the Company nor any of its subsidiaries is an
"investment company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act.
(x) Such counsel (1) is of the opinion that the Registration
Statement (including the Incorporated Documents), as of the date it became
effective, any amendment to the Registration Statement (including the
Incorporated Documents), as of its effective date, and the Prospectus, as of its
date (except for the financial statements and schedules included therein, as to
which no opinion need be expressed) complies as to form in all material respects
with the requirements of the Act and the Rules and Regulations, (2) is of the
opinion that each of the Incorporated Documents (except for the financial
statements and schedules included therein, as to which no opinion need be
expressed), as of the dates that they were filed, complies as to form in all
material respects with the Exchange Act and the Rules and Regulations, and (3)
shall also state that nothing has come to their attention that leads them to
believe that (except for the financial statements and schedules included
therein, as to which no belief need be expressed) the Registration Statement
(including the Incorporated Documents), (except for the financial statements and
schedules included therein, as to which no opinion need be expressed) as of the
date it became effective, or any amendment to the Registration Statement
(including the Incorporated Documents), as of its effective date, contained any
untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading and that the Prospectus (except for the financial statements and
schedules included therein, as to which no opinion need be expressed), as of its
date, as of the date of any amendments or supplements thereto, and as amended or
supplemented at the Closing Date, contained or contains any untrue statement of
a material fact or omitted or omits to state a material fact necessary in order
to make the statements therein, in the light of the circumstances under which
they were made, not misleading.
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<PAGE>
(xi) The discussion of tax matters set forth under the heading
"Certain Tax Considerations" in the Prospectus accurately reflects such
counsel's opinion as to such tax laws (subject to the qualifications and
assumptions set forth in such discussion).
Such opinion shall also state that such counsel has participated in
the preparation of the Registration Statement and the Prospectus and has
participated in conferences with officers and other representatives of the
Company and its subsidiaries, at which the contents of the Registration
Statement and Prospectus (including the contents of all Incorporated Documents)
were discussed. With respect to subparagraph (x) of paragraph (c) above, such
counsel may state they are not passing upon the adequacy or accuracy of the
financial or statistical data contained in the Registration Statement or
Prospectus or any Incorporated Document. Regarding matters relating to Bermuda
law, such counsel shall be entitled to rely on the opinion of Conyers Dill &
Pearman, Bermuda counsel to the Company.
(d) You shall have received a favorable opinion of Conyers Dill &
Pearman, Bermuda counsel for the Company, LaSalle Re and LaSalle Re Capital,
dated the Closing Date, to the effect that:
(i) Each of the Company, LaSalle Re and LaSalle Re Capital is
incorporated and validly existing as an exempted company, and has been duly
organized (meaning that the provisional directors meeting and the statutory
members meeting required by the Companies Act 1981 have been held), under the
laws of Bermuda and is in good standing under the laws of Bermuda (meaning that
it has not failed to make any required filing with any Bermuda government
authority or to pay any Bermuda government fee or tax, the failure of which
would make such company liable to be struck off the register of companies and
thereby cease to exist under the laws of Bermuda) with all requisite corporate
power and authority and has all necessary permits of Bermuda government
authorities (including regulatory authorities) which remain in full force and
effect, to carry on its business and to own, lease and operate its properties as
both are described in the Registration Statement and the Prospectus.
(ii) Based solely upon certified copies of the respective
members registers, the minutes, resolutions, memoranda of association and Bye-
laws of the Company, LaSalle Re and LaSalle Re Capital which such counsel has
examined and searches of the register of charges maintained by the Bermuda
Registrar of Companies: (a) all of the issued shares in the capital of such
companies, including the Shares to be sold by the Company, have been duly and
validly authorized and have been (or, in the case of the Shares to be sold by
the Company, when issued and paid for in accordance with this Agreement, will
be) duly and validly issued and are (or, in the case of the Shares to be sold by
the Company, will at such time be) fully paid and non-assessable (which term
when used in such opinion shall mean that no further sums are required to be
paid by the holders thereof in connection with the issue of such shares); and
(b) each of LaSalle Re and LaSalle Re Capital is a subsidiary of the Company.
The Shares are not subject to any statutory pre-emptive rights (or similar
statutory rights), and the form of share certificates relating thereto conforms
with the requirements of Bermuda law.
(iii) LaSalle Re is duly registered as an insurer under The
Insurance Act 1978 and the regulations promulgated thereunder (together, the
"Insurance Act") and as so
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registered, LaSalle Re may conduct the insurance business as described in the
Prospectus; and, based solely on Certificates of Compliance issued by the
Bermuda Registrar of Companies and without independent enquiry, LaSalle Re has
filed with the appropriate Bermuda governmental authority (including regulatory
authority) all reports, documents or other information required to be filed
under the Insurance Act.
(iv) The Company has taken all corporate action required to
authorize its due execution, delivery and performance of this Agreement. This
Agreement has been duly authorized and executed by the Company and when
delivered will constitute the valid and binding obligations thereof enforceable
in accordance with its terms.
(v) The execution and delivery by the Company of, and the
performance by the Company of its obligations under, this Agreement and the
consummation by the Company of the transactions contemplated by this Agreement
do not and will not: (a) violate any provision of the Memorandum of Association
or Bye-laws of the Company or LaSalle Re; (b) contravene any provision of any of
the laws, rules and regulations of Bermuda; (c) based solely upon a search of
the Cause Book maintained in the registry of the Bermuda Supreme Court, and
without further enquiry, contravene any judgment, order or decree by the Bermuda
Supreme Court against the Company or LaSalle Re; or (d) require any consent,
approval, authorization, qualification or order of, or filing or registration
with, any Bermuda Court or Bermuda governmental agency (including regulatory and
administrative), except such as have been obtained.
(vi) Based solely upon a search of the Cause Book maintained in
the registry of the Bermuda Supreme Court and without further enquiry, there is
no action, suit, proceeding, injunction, restraining order or other order now
pending before any Bermuda Court against the Company, LaSalle Re or LaSalle Re
Capital or any of their respective properties.
(vii) Based solely upon a search of the register of charges
maintained by the Bermuda Registrar of Companies, and without further enquiry,
there are no registered liens, encumbrances, equities or claims in such register
of charges in respect of those shares issued in the Company, LaSalle Re and
LaSalle Re Capital other than: (a) a Mortgage of Shares dated as of 1 December
1995 between the Company and Chemical Bank; and (b) a Deed dated as of 1
December 1995 between the Company and Chemical Bank.
(viii) All statements made in the Registration Statement and
Prospectus with respect to statutes, regulations, rules, treaties and other laws
of Bermuda fairly and accurately present the information set forth therein and
such counsel's opinion as to such matters.
(ix) Based upon an assumption that there are reasonable grounds
for believing that immediately before and after entering this Agreement the
Company (a) is able to pay its liabilities as they fall due and (b) has assets
with a realizable value equal to or greater than the sum of its respective
liabilities, issued share capital and share premium account, the consummation of
the transactions contemplated by this Agreement (including but not limited to
any actions taken pursuant to the indemnification and contribution provisions
contained herein) will not constitute unlawful financial assistance by the
Company under Bermuda law.
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<PAGE>
(x) Each of the Company, LaSalle Re and LaSalle Re Capital has
received from the Bermuda Minister of Finance an assurance pursuant to the
Exempted Undertakings Tax Protection Act 1966 to the effect set forth in the
Prospectus under the heading "Certain Tax Considerations--Taxation of the
Company and its Subsidiaries--Bermuda."
(xi) The Underwriters and subsequent purchasers of the Shares
purchased pursuant to this Agreement are not subject to any stamp duty, excise
or similar tax imposed in Bermuda in connection with the offering, sale or
purchase of such Shares, and there are no currency exchange control laws or
withholding taxes that are applicable to the payment of dividends by the
Company, LaSalle Re or LaSalle Re Capital.
(xii) There are no statutes or Bermuda government rules,
regulations or orders which seek to challenge the validity of this Agreement or
the Shares.
(xiii) The issue and sale of the Shares, the execution, delivery
and performance of this Agreement and the consummation of the transactions
contemplated herein will not conflict with or constitute a breach of, or default
under, or result in the creation or imposition of any lien, charge or
encumbrance upon any property of the Company, LaSalle Re or LaSalle Re Capital
pursuant to this Agreement or the Prospectus.
(xiv) The discussion of tax matters relating to Bermuda set
forth under the heading "Certain Tax Considerations" in the Prospectus
accurately reflects the opinion of such counsel as to such matters (subject to
the qualifications and assumptions set forth in such discussion).
(xv) Upon delivery of the share certificates duly executed in
favour of the Underwriters' designees in respect of the Shares, and the entry in
the Company's register of members of such designees, such designees will be the
registered owners of legal title to such Shares.
(e) You shall have received a favorable opinion of Clyde & Co.,
United Kingdom counsel for the Company and LaSalle Services, dated the Closing
Date, to the effect that:
(i) LaSalle Services has been duly incorporated and organized
and is validly existing as a corporation under the laws of the United Kingdom,
with all requisite power and authority (corporate and otherwise) to own, lease
and operate its properties and conduct its business as described in the
Registration Statement and the Prospectus; all of the issued and outstanding
capital stock of LaSalle Services has been duly authorized and validly issued
and is fully paid and non-assessable and, all of such capital stock (except as
otherwise described in the Registration Statement or the Prospectus) will be
owned by the Company, directly or through one or more of its subsidiaries and,
to the knowledge of such counsel, free and clear of any mortgage, pledge, lien,
encumbrance, security interest, adverse claim or equity.
(ii) There are no currency exchange control laws or withholding
taxes that are applicable to the payment of dividends by LaSalle Services,
except to the extent that
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<PAGE>
dividends payable are subject to the payment at the same time of Advance
Corporation Tax under the tax laws of the United Kingdom.
(iii) The discussion set forth under the heading "Certain Tax
Considerations--Taxation of the Company and its Subsidiaries--United Kingdom" in
the Prospectus is accurate (subject to the qualifications, limitations and
assumptions set forth in such discussion).
(iv) Neither the Company nor any of its subsidiaries is
required to be licensed or admitted as an insurer or an insurance holding
company, as applicable, under, or to otherwise comply with, the insurance laws
or regulations of any jurisdiction within the United Kingdom in order to conduct
their respective businesses as described in the Prospectus, provided that
LaSalle Re Capital is admitted by Lloyd's to corporate membership and is an
underwriting member of Lloyd's.
(f) You shall have received on the Closing Date an opinion of
LeBoeuf, Lamb, Greene & MacRae, L.L.P., counsel for the Underwriters, dated the
Closing Date, with respect to such matters as you may reasonably request.
Regarding matters relating to Bermuda law, such counsel shall be entitled to
rely on the opinion of Conyers Dill & Pearman, Bermuda counsel to the Company.
(g) You shall have received from the Chief Executive Officer and the
Chief Financial Officer of the Company a certificate, dated the Closing Date, in
which such officers, to the best of their knowledge and after reasonable
investigation, shall state that there has not been, since the respective dates
as of which information is given in the Registration Statement and the
Prospectus, (i) any material adverse change in the condition, financial or
otherwise, earnings, business, prospects, or results of operations of the
Company and its subsidiaries considered as a whole, whether or not arising in
the ordinary course of business, (ii) any material transaction entered into by
the Company or any of its subsidiaries other than those in the ordinary course
of business, or (iii) any material change in the capital stock of the Company or
any material increase in the short-term or long-term debt of the Company (other
than in the ordinary course of business), except in the case of clauses (i),
(ii) and (iii) as set forth in the Prospectus; the representations and
warranties of the Company contained in Section 6 are true and correct with the
same force and effect as though made on and as of the Closing Date and the
Company has complied with all agreements and satisfied all conditions on its
part to be performed or satisfied hereunder at or prior to the Closing Date; and
no stop order suspending the effectiveness of the Registration Statement has
been issued and no proceedings for that purpose have been initiated or
threatened or are contemplated by the Commission.
(h) You shall have received from KPMG Peat Marwick, independent
public accountants, two letters, the first dated the date of this Agreement and
the other dated the Closing Date, addressed to the Underwriters (with conformed
copies for each of the Underwriters), substantially in the forms heretofore
approved by you.
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<PAGE>
(i) The Company shall not have failed at or prior to the Closing Date
to have performed or complied with any of its agreements herein contained and
required to be performed or complied with by it hereunder at or prior to the
Closing Date.
(j) Prior to the Closing Date the Company shall have received
clearance from the NYSE to file a listing application with respect to the Shares
and shall have no reason to believe that the Shares will not be authorized for
listing on the NYSE.
(k) The Shares shall have a rating of at least (i) "BBB" from
Standard & Poor's Rating Services and (ii) "ba1" from Moody's Investors Service,
Inc., and the Company shall have delivered to the Representatives a letter from
each such rating agency (or other evidence satisfactory to the Representatives),
confirming that the Shares have such rating.
(l) On and after the date hereof, except as disclosed in the
Prospectus, (i) no downgrading shall have occurred in any rating (or preliminary
rating) of any active insurance subsidiary of the Company or any securities of
the Company by A.M. Best Company, Inc., Standard & Poor's Ratings Services or
Moody's Investors Service, Inc. (each, a "Rating Agency"), (ii) no such Rating
Agency shall have publicly announced that it has under surveillance or review,
without indicating an improvement, any such rating, and (iii) neither the
Company nor any of the Representatives shall have received any indication of any
such downgrading.
All such opinions, certificates, letters and other documents will be in
compliance with the provisions hereof only if they are reasonably satisfactory
in form and substance to you and your counsel.
Any certificate or document signed by any officer of the Company and
delivered to the Underwriters, or to counsel for the Underwriters, shall be
deemed a representation and warranty by the Company to each Underwriter as to
the statements made therein.
9. Expenses. The Company agrees to pay the following costs and expenses
and all other costs and expenses incident to the performance of the Company's
respective obligations hereunder: (i) the preparation, printing or
reproduction, and filing with the Commission of each registration statement and
the Registration Statement (including financial statements and exhibits
thereto), each Prepricing Prospectus, the Prospectus, and each amendment or
supplement to any of them; (ii) the printing (or reproduction) and delivery
(including postage, air freight charges and charges for counting and packaging)
of such copies of each registration statement, the Registration Statement, each
Prepricing Prospectus, the Prospectus, the Incorporated Documents, and all
amendments or supplements to any of them as may be reasonably requested for use
in connection with the offering and sale of the Shares; (iii) the preparation,
printing, authentication, issuance and delivery of certificates for the Shares,
including any stamp taxes in connection with the original issuance and sale of
the Shares; (iv) the printing (or reproduction) and delivery of this Agreement,
the preliminary and supplemental Blue Sky Memoranda and all other agreements or
documents printed (or reproduced) and delivered in connection with the original
issuance and sale of the Shares; (v) the registration of the Shares under the
Exchange Act and the listing of the Shares on the NYSE; (vi) the registration or
qualification of the Shares for offer and sale under the securities or Blue Sky
laws of the several states as provided in Section 5(g) hereof (including
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<PAGE>
the reasonable fees, expenses and disbursements of counsel for the Underwriters
relating to the preparation, printing or reproduction, and delivery of the
preliminary and supplemental Blue Sky Memoranda and such registration and
qualification); (vii) the fees and expenses of the Registrar and Transfer Agent
for the Shares and its counsel; (viii) the filing fees in connection with any
filings required to be made with the National Association of Securities Dealers,
Inc.; (ix) the fees and expenses of the Company's accountants and the fees and
expenses of counsel (including local and special counsel) for the Company; and
(x) any fees and expenses payable in connection with the rating of the Shares.
10. Effective Date of Agreement. This Agreement shall become effective:
(i) upon the execution and delivery hereof by the parties hereto; or (ii) if, at
the time this Agreement is executed and delivered, it is necessary for the
registration statement or a post-effective amendment thereto to be declared
effective before the offering of the Shares may commence, when notification of
the effectiveness of the registration statement or such post-effective amendment
has been released by the Commission. Until such time as this Agreement shall
have become effective, it may be terminated by the Company, by notifying you, or
by you, by notifying the Company.
11. Default by an Underwriter. If any one or more Underwriters shall fail
to purchase and pay for any of the Shares agreed to be purchased by such
Underwriter or Underwriters hereunder and such failure to purchase shall
constitute a default in the performance of its or their obligations under this
Agreement, the remaining Underwriters shall be obligated severally to take up
and pay for (in the respective proportions which the amount of Shares set forth
opposite their names in Schedule I hereto bears to the aggregate amount of
Shares set forth opposite the names of all the remaining Underwriters) the
Shares which the defaulting Underwriter or Underwriters agreed but failed to
purchase; provided, however, that in the event that the aggregate amount of
Shares which the defaulting Underwriter or Underwriters agreed but failed to
purchase shall exceed 10% of the aggregate amount of Shares set forth in
Schedule I hereto, the remaining Underwriters shall have the right to purchase
all, but shall not be under any obligation to purchase any, of the Shares, and
if such nondefaulting Underwriters do not purchase all the Shares, this
Agreement will terminate without liability to any nondefaulting Underwriter or
the Company. In the event of a default by any Underwriter as set forth in this
Section 11, the Closing Date shall be postponed for such period, not exceeding
five Business Days, as the Representatives shall determine in order that the
required changes in the Registration Statement and the Prospectus or in any
other documents or arrangements may be effected. Nothing contained in this
Agreement shall relieve any defaulting Underwriter of its liability, if any, to
the Company and any nondefaulting Underwriter for damages occasioned by its
default hereunder.
12. Termination. This Agreement shall be subject to termination in the
absolute discretion of the Representatives, by notice given to the Company prior
to delivery of and payment for the Shares, if at any time prior to such time (i)
trading in the Company's Common Stock shall have been suspended by the
Commission or the New York Stock Exchange or trading in securities generally on
the New York Stock Exchange shall have been suspended or limited or minimum
prices shall have been established on such Exchange, (ii) a banking moratorium
shall have been declared by Federal, New York State or Bermuda authorities or
(iii) there shall have occurred any outbreak or escalation of hostilities,
declaration by the United States of a national emergency or war, or other
calamity or crisis the effect of which on financial markets is such as
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<PAGE>
to make it, in the sole judgment of the Representatives, impractical or
inadvisable to proceed with the offering or delivery of the Securities as
contemplated by the Prospectus (exclusive of any supplement thereto).
13. Information Furnished by the Underwriters. The statements set forth in
the last paragraph on the cover page, the stabilization legend on page ii, the
first paragraph of text under the caption "Underwriting" concerning the terms of
the offering by the Underwriters and the table thereunder and the fourth and
sixth paragraphs in such Underwriting section in any Prepricing Prospectus and
in the Prospectus constitute the only information furnished by or on behalf of
the Underwriters as such information is referred to in Sections 6 and 7 hereof.
14. Representations and Indemnities to Survive. The respective
agreements, representations, warranties, indemnities and other statements of the
Company or its officers and of the Underwriters set forth in or made pursuant to
this Agreement will remain in full force and effect, regardless of any
investigation made by or on behalf of any Underwriter or the Company or any of
the officers, directors, employees, agents or controlling persons referred to in
Section 7 hereof, and will survive delivery of and payment for the Securities.
The provisions of Sections 5(j) and 7 hereof shall survive the termination or
cancellation of this Agreement.
15. Miscellaneous. All communications hereunder will be in writing and
effective only on receipt, and, if sent to the Representatives, will be mailed,
delivered or telefaxed to the Salomon Smith Barney Inc., General Counsel (fax
no.: (212) 816-7912) and confirmed to Salomon Smith Barney Inc., at 388
Greenwich Street, New York, New York 10013, Attention: General Counsel; or, if
sent to the Company, will be mailed, delivered or telefaxed to LaSalle Re
Holdings Limited, 441-292-2656 and confirmed to it at LaSalle Re Holdings
Limited, 25 Church Street, P.O. Box HM 1502, Hamilton HM FX Bermuda, Attention:
Victor H. Blake, Chairman.
This Agreement has been and is made solely for the benefit of the several
Underwriters, the Company, the Company's directors and officers, the other
controlling persons referred to in Section 7 hereof and their respective
successors and assigns, to the extent provided herein, and no other person shall
acquire or have any right under or by virtue of this Agreement. Neither the term
"successor" nor the term "successors and assigns" as used in this Agreement
shall include a purchaser from any Underwriter of any of the Shares in his
status as such purchaser.
16. Applicable Law; Counterparts. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts made and to be performed within the State of New York.
17. Headings. The section headings used herein are for convenience only
and shall not affect the construction hereof.
18. Counterparts. This Agreement may be signed in various counterparts
which together constitute one and the same instrument. If signed in
counterparts, this Agreement shall not become effective unless at least one
counterpart hereof shall have been executed and delivered on behalf of each
party hereto.
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<PAGE>
Please confirm that the foregoing correctly sets forth the agreement
between the Company and the several Underwriters.
Very truly yours,
LASALLE RE HOLDINGS LIMITED
By _____________________________
Victor H. Blake
President and Chief
Executive Officer
Confirmed as of the date first
above mentioned on behalf of
themselves and the other several
Underwriters named in Schedule I
hereto.
Salomon Smith Barney Inc.
Morgan Stanley & Co. Incorporated
PaineWebber Incorporated
By Salomon Smith Barney Inc.
By_______________________
Name:
Managing Director
For themselves and the other several
Underwriters named in Schedule I to
the foregoing Agreement
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<PAGE>
[Letterhead of Conyers Dill & Pearman]
CGG/sq/308774/doc.453515
March 5, 1999
LaSalle Re Holdings Limited
25 Church Street
Hamilton, Bermuda
Dear Sirs:
Re: LaSalle Re Holdings Limited (the "Company")
We have acted as special legal counsel in Bermuda to the Company in connection
with the preparation of a registration statement on Form S-3 (the "Registration
Statement") relating to the registration of an offering (the "Offering") of up
to 2,000,000 Series C Preferred Shares of the Company (the "Series C Preferred
Shares").
For the purposes of giving this opinion, we have examined the Registration
Statement, copies of minutes of the Company's board of directors and of its
shareholders, and such other documents and made such enquiries as to questions
of law as we have deemed necessary in order to render the opinions set forth
below.
We have assumed (a) the genuineness and authenticity of all signatures and the
conformity to the originals of all copies of documents (whether or not
certified), (b) the accuracy and completeness of all factual representations
made in the Registration Statement and other documents reviewed by us, (c) the
authority of all persons signing any documents reviewed by us, (d) that there is
no provision of the law of any jurisdiction, other than Bermuda, which would
have any implication in relation to the opinions expressed herein.
<PAGE>
-2-
We have made no investigation of and express no opinion in relation to the laws
of any jurisdiction other than Bermuda. This opinion is governed by and
construed in accordance with the laws of Bermuda and is limited to and is given
on the basis of the current law and practice in Bermuda.
On the basis of, and subject to, the foregoing, we are of the opinion that:
1. the Series C Preferred Shares to be offered pursuant to the Offering, when
issued by the Company and paid for in accordance with the terms of the
Offering, will be legally issued, fully paid and non-assessable;
2. the discussions set forth under the headings "Certain Tax Considerations -
Taxation of the Company and its Subsidiaries - Bermuda" and "Certain Tax
Considerations - Taxation of Shareholders - Bermuda Taxation" accurately
reflect our opinion with respect to the matters set forth therein.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and the reference to our firm under the sections entitled
"Certain Tax Considerations" and "Legal Matters" in the Registration Statement.
Yours faithfully,
Conyers Dill & Pearman
/s/ Conyers Dill & Pearman
<PAGE>
Exhibit 8.2
[LETTERHEAD OF MAYER, BROWN & PLATT]
March 5, 1999
LaSalle Re Limited
25 Church Street
P.O. Box HM 1502
Hamilton HM FX, Bermuda
Re: LaSalle Re Holdings Limited
---------------------------
Gentlemen:
We have acted as counsel to LaSalle Re Limited, a Bermuda corporation (the
"Company"), and to LaSalle Re Holdings Limited, a Bermuda corporation
("Holdings"), in connection with the corporate proceedings (the "Corporate
Proceedings") taken and to be taken relating to the public offerings of the
Series C Preferred Shares (the "Series C Preferred Shares") of Holdings. We have
also participated in the preparation and filing with the Securities and Exchange
Commission under the Securities Act of 1933, as amended, of a registration
statement on Form S-3 (the "Registration Statement") relating to the Series C
Preferred Shares. In this connection, we have examined such corporate and other
records, instruments, certificates and documents as we considered necessary to
enable us to express this opinion.
In rendering the opinion set forth in the paragraph below, we have relied
upon the Internal Revenue Code of 1986, as amended (the "Code"), legislative
history, Treasury regulations, judicial authorities, published positions of the
Internal Revenue Service (the "IRS") and such other authorities as we have
considered to be relevant. No tax rulings will be sought from the IRS with
respect to any of the matters discussed herein.
Based on the foregoing, we hereby confirm that, subject to the limitations
set forth therein, the discussion set forth under the captions "Risk Factors--We
could be subject to U.S. corporate income tax;" "Risk Factors--Our shareholders
could be subject to U.S. taxes;" "Risk Factors--Gains resulting from the sale of
our shares by U.S. shareholders could be taxed in the U.S. as dividends;" "Risk
Factors--U.S.taxes could increase and new taxes could be imposed;" "Risk
Factors--The Organization for Economic Cooperation and Development and the
European Union are considering measures that might increase our taxes;" and
"Certain Tax Considerations" accurately summarizes our opinion of the material
U.S. federal income tax consequences that could result from the purchase,
ownership and disposition of the Series C Preferred Shares by entities or
individuals who hold the Series C Preferred Shares as "capital assets" within
the meaning of section 1221 of the Code and are subject to U.S. federal income
taxation without regard to the source of their income, and the material federal
income tax consequences applicable to the operations of Holdings and its
subsidiaries, including the Company.
<PAGE>
March 5, 1999
Page 2
We consent to the filing of this opinion as an exhibit to the Registration
Statement and to the reference to us under the captions "Certain Tax
Considerations" and "Legal Matters."
We are admitted to practice law in the State of Illinois and we express no
opinions as to matters under or involving any laws other than the laws of the
State of Illinois and the federal law of the United States of America.
Very truly yours,
MAYER, BROWN & PLATT
By /s/ George W. Craven
---------------------------
George W. Craven
<PAGE>
Exhibit 8.3
[Letterhead of Clyde & Co]
LaSalle Re Holdings Limited
25 Church Street
Hamilton
Bermuda
March 5, 1999
Dear Sirs
Opinion
We have acted as legal advisers in England and Wales to LaSalle Re Limited, a
Bermudian corporation, ("LaSalle Re") and its subsidiaries, LaSalle Re
(Services) Limited, a United Kingdom company, ("Services") and LaSalle Re
Corporate Capital Ltd., a Bermudian corporation, ("LaSalle Re Capital"), in
connection with, inter alia:
(i) a Contract Services Agreement between LaSalle Re and Services; and
(ii) an application by LaSalle Re Capital, for corporate membership of Lloyd's.
We have also commented at your request, made on behalf of LaSalle Re Holdings
Limited ("the Company"), on the Registration Statement described below.
This Opinion is furnished to you solely for your benefit and is not to be relied
upon by any other person without our written consent.
1. In rendering this opinion we have considered the following documents:
(a) the Company's Registration Statement on Form S-3 and any amendments
thereto (the "Registration Statement");
<PAGE>
- 2 -
(b) a Contact Office Services Agreement date 1 September 1994;
(c) a letter dated 23 August 1994 from Verner Southey of Clyde
& Co to Alan Williams of the UK Department of Trade and
Industry (Insurance Division) (the "DTI Letter");
(d) a draft memorandum dated 4 May 1994 from Clyde & Co to CNA
International, London, agents for LaSalle Re, headed "LaSalle Re:
Proposed Contact Office in the UK" (the "First Memorandum");
(e) a memorandum dated 6 June 1994 from Clyde & Co to CNA International,
London headed "LaSalle Re: Management and Control Issues" (the
"Second Memorandum"); and
(f) the documents filed by Clyde & Co with Lloyd's in relation to the
application by LaSalle Re Capital for corporate membership of
Lloyd's.
2. In connection with this Opinion we have assumed:
(a) that the Company, LaSalle Re and Services carry on business in
conformity with the description in the Registration Statement;
(b) that Services carries on business in conformity with the description
in the DTI Letter and the recommendations made by Clyde & Co in the
First Memorandum;
(c) that LaSalle Re Capital will not carry on any business other than
that of an issuer accepting and reinsuring risks as a corporate
member of Lloyd's acting through managing agents at Lloyd's;
(d) that neither the Company nor LaSalle Re has any place of business
or carry on any business in the United Kingdom other than through
Services or LaSalle Re Capital;
(e) that Services does not have any place of business or carry out any
business function or activity in the United Kingdom save for those
governed by the Contact Office Services Agreement; and
<PAGE>
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(f) that the management and control of the Company and LaSalle Re are
exercised wholly outside the United Kingdom and in accordance with
the Second Memorandum.
We do not in our capacity as legal advisers to the Company in England and
Wales have any personal knowledge of any matter which is inconsistent
with the facts assumed above but we have not carried on any investigation
or verification of those facts.
Based upon and subject to the foregoing, we are of the opinion that;
(i) Services is subject to tax in the United Kingdom in respect of its own
income;
(ii) LaSalle Re Capital is subject to tax in the United Kingdom in respect of
its profits and gains as an underwriting member of Lloyd's but that;
(iii) the activities of Services and LaSalle Re Capital will not cause the
Company or LaSalle Re to be subject to United Kingdom tax on any portion
of their net income.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and the reference to our firm under the sections entitled
"Certain Tax Considerations" and "Legal Matters" in the Registration Statement.
Yours faithfully
/s/ Clyde & Co
Clyde & Co
<PAGE>
Exhibit 12.1
LaSalle Re Holdings Limited
STATEMENT RE COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED SHARE DIVIDENDS
(Expressed in thousands of United States Dollars
except for number of shares and earnings per share)
<TABLE>
<CAPTION>
Period ended Year ended Year ended Year ended
December 31, 1998 September 30, 1998 September 30, 1997 September 30, 1996
----------------- ------------------ ------------------ ------------------
<S> <C> <C> <C> <C> <C>
Earnings available for fixed charges
and preferred share dividends
Net income before minority interest 6,859 65,232 121,468 129,451
Interest expense 465 1,881 1,678 222
Preferred share dividends (1) 0 0 0 0
----------------- ------------------ ------------------ ------------------
Total earnings available for fixed
charges and preferred dividends 7,324 67,113 123,146 129,673
----------------- ------------------ ------------------ ------------------
Fixed charges and preferred share dividends
Interest expense 465 1,881 1,678 222
----------------- ------------------ ------------------ ------------------
Total fixed charges 465 1,881 1,678 222
----------------- ------------------ ------------------ ------------------
Preferred share dividends 1,641 6,563 3,354 0
----------------- ------------------ ------------------ ------------------
Combined fixed charges and
preferred dividends 2,106 8,444 5,032 222
================= ================== ================== ==================
Ratio of earnings to combined fixed
charges and preferred share dividends 3.5 7.9 24.5 584.1
================= ================== ================== ==================
</TABLE>
(1) Not deducted from net income before minority interest.
<PAGE>
Exhibit 23.4
Consent of Independent Chartered Accountants
The Board of Directors
LaSalle Re Holdings Limited
We consent to the use of our report incorporated by reference herein and to the
reference to our firm under the heading "Experts" in the prospectus.
KPMG Peat Marwick
Hamilton, Bermuda Chartered Accountants
March 5, 1999
