<PAGE> 1
File No. 70-08905
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form U-1
APPLICATION-DECLARATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
AMENDMENT NO. 1
THE COLUMBIA GAS SYSTEM, INC.
12355 Sunrise Valley Drive, Suite 300
Reston, Virginia 20191-3420
- --------------------------------------------------------------------------------
(Names of company or companies filing this statement
and addresses of principal executive offices)
T. S. Bindra, Associate General Counsel and Assistant Secretary
The Columbia Gas System, Inc.
12355 Sunrise Valley Drive, Suite 300
Reston, VA 20191-3420
- --------------------------------------------------------------------------------
(Name and address of agent for service)
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PAGE 2
The Application-Declaration filed under File No. 70-08905 is hereby
amended as follows:
Item 1.(a) On pages 4 and 5 of the Application-Declaration, it is stated
that the Captive will entertain underwriting at some future time, such areas
as workers' compensation, director and officer liability, legal malpractice
for employee attorneys, performance bonds, as well as various warranty
programs planned to be offered to consumers. These additional programs would
only be undertaken by the Captive pursuant to further approval by the SEC
under the Act.
The first full sentence under the Operations section on Page 6 of the
Application-Declaration is amended and restated as follows:
The Captive would assume the risk of the more predictable loss layer from the
commercial insurers, for losses between zero and $2,000,000 per event for
automobile and general liability losses and between zero and $750,000 per event
for "all-risk" property losses. (2)
Footnote 3 on page 6 of the Application-Declaration is deleted.
The Certificates of Notification section on page 10 of the
Application-Declaration is deleted and replaced by the following:
The Captive will report to the Commission with respect to the transactions
contemplated hereunder, in semi-annual Rule 24 Certificates, the following:
1. A general description (summary fashion by type of claim by subsidiary or
associate company) of loss exposure/experience for automobile, "all-risk"
property, and general liability insurance coverage,
2. A semi-annual analysis by subsidiary or associate company of auto
liability, general liability and property losses and
_____________________
2 The projections attached hereto are based on assumed minimum
deductibles of $200,000 for automobile and general liability and $100,000 for
all-risk property losses.
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PAGE 3
expenses incurred during the six month period as compared to premiums paid.
This analysis shall contain lead in and end-of-period insurance reserve
balances.
3. A semi-annual analysis by associate company of claims paid by the Captive
on behalf of that associate company to include lead-in reserve available to
Captive and end-of-period reserve balance.
4. A listing of increases and decreases to premiums for each subsidiary or
associate company as a result of the operations of the Captive and loss
experience of each subsidiary or associate company. This analysis shall be done
once a year but reported on a semi-annual basis for comparative purposes.
5. For the first three years, a statement of actual annual savings achieved
by the Columbia System from commercial insurer insurance premiums as a result
of operations of the Captive insurance program. This statement shall include
how the savings was spread amongst the subsidiary or associate companies of
the Columbia System. This analysis shall be one once a year but reported on a
semi-annual basis for comparative purposes.
6. Every six months on a calendar year basis, a copy of Captive's income
statement and balance sheet, to include any notes thereto.
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PAGE 4
Item 2. (a) Columbia Gas System Service Corporation and others have provided
certain services in connection with the preparation of this filing as follows:
<TABLE>
<S> <C>
Securities and Exchange Commission Filing Fee ....... $ 2,000
Services of Columbia Gas System Service Corporation
in connection with the preparation of the
Application-Declaration.............................. $ 10,000
Services of LeBoeuf, Lamb, Leiby & MacRae............ $ 5,000
Services of Alexander & Alexander.................... $ 50,000
Total........................................... $ 67,000
</TABLE>
Item 3. The first and last sentences of the first paragraph to the answer to
item 3 are deleted.
Item 6.(a)F Opinion of Counsel is attached.
K Hypothetical examples of premium allocation
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THE COLUMBIA GAS SYSTEM, INC.
ILLUSTRATION
EFFECT OF GREATER THAN EXPECTED LOSSES ON FUTURE YEAR'S PREMIUMS
CASE: 1996 ACTUAL LOSSES FOR SUBSIDIARY FARE 25% GREATER THAN EXPECTED;
LOSSES FOR ALL OTHER SUBSIDIARIES/YEARS EQUAL 100% OF EXPECTED LOSSES
<TABLE>
<CAPTION>
1996
ACTUAL
FIRST YEAR LOSSES
CAPTIVE AS % OF
COLUMBIA PREMIUM EXPECTED
SUBSIDIARY 1996 LOSSES 1997 1998 1999 2000 2001
<S> <C> <C> <C> <C> <C> <C> <C>
A 238,466 100% 238,466 238,466 238,466 238,466 238,466
B 57,236 100% 57,235 57,235 57,235 57,235 57,235
C 2,194,717 100% 2,194,717 2,194,717 2,194,717 2,194,717 2,194,717
D 691,879 100% 691,879 691,879 691,879 691,879 691,879
E 298,921 100% 298,921 298,921 298,921 298,921 298,921
F 3,386,224 125% 3,555,536 3,555,535 3,555,535 3,555,535 3,555,535
G 2,236,012 100% 2,236,012 2,236,012 2,236,012 2,236,012 2,236,012
H 364,321 100% 364,321 364,321 364,321 364,321 364,321
I 603,587 100% 603,587 603,587 603,587 603,587 603,587
J 7,691 100% 7,691 7,691 7,691 7,691 7,691
K 89,521 100% 89,521 89,521 89,521 89,521 89,521
L 0 100% 0 0 0 0 0
M 295,624 100% 295,624 295,624 295,624 295,624 295,624
N 151,839 100% 151,839 151,839 151,839 151,839 151,839
O 40,333 100% 40,333 40,333 40,333 40,333 40,333
P 13,770 100% 13,770 13,770 13,770 13,770 13,770
Q 99,622 100% 99,622 99,622 99,622 99,622 99,622
R 5,813 100% 5,813 5,813 5,813 5,813 5,813
Total 10,775,575 10,944,886 10,944,886 10,944,886 10,944,886 10,944,886
</TABLE>
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THE COLUMBIA GAS SYSTEM, INC.
ILLUSTRATION
EFFECT OF GREATER THAN EXPECTED LOSSES ON FUTURE YEAR'S PREMIUMS
CASE: 1996 ACTUAL LOSSES FOR SUBSIDIARY FARE 50% GREATER THAN EXPECTED;
LOSSES FOR ALL OTHER SUBSIDIARIES/YEARS EQUAL 100% OF EXPECTED LOSSES
<TABLE>
<CAPTION>
1996
ACTUAL
FIRST YEAR LOSSES
CAPTIVE AS % OF
COLUMBIA PREMIUM EXPECTED
SUBSIDIARY 1996 LOSSES 1997 1998 1999 2000 2001
<S> <C> <C> <C> <C> <C> <C> <C>
A 238,466 100% 238,466 238,466 238,466 238,466 238,466
B 57,235 100% 57,235 57,235 57,235 57,235 57,235
C 2,194,717 100% 2,194,717 2,194,717 2,194,717 2,194,717 2,194,717
D 691,879 100% 691,879 691,879 691,879 691,879 691,879
E 298,921 100% 298,921 298,921 298,921 298,921 298,921
F 3,386,224 150% 3,724,846 3,724,846 3,724,846 3,724,846 3,724,846
G 2,236,012 100% 2,236,012 2,236,012 2,236,012 2,236,012 2,236,012
H 364,321 100% 364,321 364,321 364,321 364,321 364,321
I 603,587 100% 603,587 603,587 603,587 603,587 603,587
J 7,691 100% 7,691 7,691 7,691 7,691 7,691
K 89,521 100% 89,521 89,521 89,521 89,521 89,521
L 0 100% 0 0 0 0 0
M 295,624 100% 295,624 295,624 295,624 295,624 295,624
N 151,839 100% 151,839 151,839 151,839 151,839 151,839
O 40,333 100% 40,333 40,333 40,333 40,333 40,333
P 13,770 100% 13,770 13,770 13,770 13,770 13,770
Q 99,622 100% 99,622 99,622 99,622 99,622 99,622
R 5,813 100% 5,813 5,813 5,813 5,813 5,813
Total 10,775,575 11,114,197 11,114,197 11,114,197 11,114,197 11,114,197
</TABLE>
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SIGNATURE
Pursuant to the requirements of the Public Utility Holding Company Act of
1935, each of the undersigned company has duly caused this
Application-Declaration to be signed on its behalf by the undersigned
thereunto duly authorized.
THE COLUMBIA GAS SYSTEM, INC.
Date: October 24, 1996 By: /s/ T. S. BINDRA
----------------------------------
T. S. Bindra
Associate General Counsel and
Assistant Secretary
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October 18, 1996
U.S. Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549
Gentlemen:
Re: The Columbia Gas System, Inc., et al.
File No. 70-7168
I have acted as Counsel for The Columbia Gas System, Inc. ("Columbia"),
a Delaware corporation and holding company registered under the Public Utility
Holding Company Act of 1935 (the "Act"), in connection with the Application-
Declaration on Form U-1 (File No. 70-08905), as amended by Amendment 1
(hereinafter referred to collectively as the "Application-Declaration"), of
Columbia in connection with the proposal to establish and fund a direct
subsidiary to engage in the business of reinsuring certain levels of predictable
risks for Columbia and its affiliates.
The aforementioned transactions, as more fully described in the
Application-Declaration, are hereinafter referred to as the "Proposed
Transactions."
In connection with this opinion, I have examined:
(i) the Application-Declaration;
(ii) copies of the Restated Certificate of Incorporation of Columbia;
(iii) such other documents, records and matters of law as I deemed
necessary to enable me to render this opinion.
The aforementioned transactions, as more fully described in the
Application-Declaration, are hereinafter referred to as the "Proposed
Transaction."
(a) all state laws applicable to the Proposed Transaction will have
been complied with;
(b) (i) the direct subsidiary, which is to be the issuer of common
stock to be acquired by Columbia, will be a validly organized
and duly existing corporation under the laws of Bermuda, the
stock to be issued will be validly issued, fully paid and
nonassessable; and Columbia, as the holder thereof, will be
entitled to the rights and privileges appertaining thereto set
forth in the charter of the subsidiary;
(ii) any letters of credit issued by Columbia to or for the
benefit of the direct subsidiary will be valid and binding
obligations of Columbia in accordance with their terms;
(c) Columbia will have legally acquired the common stock to be
issued by the direct subsidiary; and
(d) the consummation of the Proposed Transactions will not violate
the legal rights of the holders of any securities issued by
Columbia or any associate company thereof.
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I hereby consent to the filing of this Opinion together with the
Certificate of the corporation filed pursuant to Rule 24.
Very truly yours,
/s/ T.S. Bindra
T.S. Bindra
Associate General Counsel
and Assistant Secretary
Columbia Gas System
Service Corporation
TSB/ksb
