July 19, 1996
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Gentlemen:
Pursuant to the requirements of the Securities and Exchange Act of 1934, we
are transmitting herewith the attached Form 8-K, dated July 1, 1996.
Very truly yours,
Charles F. Barr
Vice President,
General Counsel and Secretary
07/19/96 9:10 AM
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8 - K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
July 1, 1996
__________________________
(Date of earliest event reported)
GENERAL RE CORPORATION
________________________________________________________
(Exact name of Registrant as specified in its charter)
Delaware 1-8026 06-1026471
___________________ __________________ ________________
(State of (Commission File No.) (IRS Employer
Incorporation) Identification No.)
Financial Centre, P.O. Box 10350.
Stamford, Connecticut 06904-2350
_____________________________________________________________________
(Address of principal executive offices, including zip code)
(203) 328-5000
________________________________________________________________
(Registrant's telephone number, including area code)
Not applicable
_____________________________________________________________________
(Former name or former address, if changed since last report)
ITEM 5. OTHER EVENTS.
On July 1, 1996, General Re Corporation (the "Corporation") entered
into an Agreement and Plan of Merger (the "Merger Agreement") with
National Re Corporation ("National Re") and N Acquisition Corporation
("Sub"), a wholly owned subsidiary of the Corporation, pursuant to which
National Re will merge with and into Sub, with Sub surviving as a wholly
owned subsidiary of the Corporation (the "Merger"). A copy of the Merger
Agreement is filed as Exhibit 99.1 and is incorporated herein by reference to
Exhibit #1 of the Statement on Schedule 13D dated July 11, 1996 filed by the
Corporation and Sub (the "Schedule 13D").
Pursuant to the Merger Agreement, each share of Common Stock, no par
value, of National Re (the "National Re Common Stock") outstanding
immediately prior to the effective time of the Merger (the "Effective Time")
shall (except for shares of National Re Common Stock held by National Re
as treasury stock or owned by the Corporation or any subsidiary of the
Corporation immediately prior to the Merger Date and as otherwise provided
for in the Merger Agreement and as to which dissenters rights have been
exercised in accordance with and subject to the provisions of Delaware law)
be converted into the right to receive, at the election of the holder and
subject to the limitations set forth in the MergerAgreement either: (i) a
fraction of a share of the Corporation's common stock, par value $.50 per share
(the "General Re Common Stock"), together with the attached Preferred Stock
Purchase Rights, determined by dividing $53 by the average of the closing
prices per share of General Re Common Stock on the New York Stock
Exchange ("NYSE") as reported by the NYSE Composite Tape for the
ten consecutive NYSE trading days ending on the second NYSE trading
day immediately preceding the closing date of the Merger, but not more
than .39259 shares of General Re Common Stock or less than .32121 shares
of General Re Common Stock, or (ii) $53 in cash, without any interest thereon.
The Merger Agreement provides for a minimum stock component of 50%.
There is no minimum cash component. The Merger is expected to qualify as a
tax-free transaction to the Corporation, National Re and Sub and, except to
the extent they receive cash in the Merger, the stockholders of National Re.
The Merger is subject to a number of conditions, including, among other things,
(i) approval of the Merger by National Re's stockholders, (ii) receipt of all
required governmental approvals, (iii) absence of any statute or injunction
which would have an adverse effect on the consummation of the Merger, (iv)
declaration of effectiveness of the registration statement relating to the
shares of General Re Common Stock issuable in the Merger, (v) absence of any
change that would have a material adverse effect on any of the Corporation,
National Re or Sub, (vi) receipt by each of the Corporation and National Re of
tax opinions of their respective tax counsel, and (vii) approval for listing
on the NYSE of the shares of General Re Common Stock issuable in the Merger.
In addition, on July 1, 1996, the Corporation and Sub entered into Stockholder
Agreements (each, a "Stockholders Agreement") with certain major stockholders
of National Re, who own in the aggregate approximately 22.58% of National Re
Common Stock, pursuant to which such stockholders agreed, among other things,
to (i) vote all of their National Re Common Stock in favor of the Merger and
the Merger Agreement and (ii) not sell or transfer any of their shares of
National Re Common Stock prior to the earlier of the Effective Time or the
termination of the Merger Agreement in accordance with its terms. Copies of
the Stockholders Agreements are filed herewith as Exhibits 99.2 through 99.7
and are incorporated herein by reference to Exhibits #2-7 of the Schedule 13D.
On July 1, 1996, the Corporation issued a press release announcing, among
other matters, the execution of the Merger Agreement. A copy of such press
release is filed as Exhibit 99.8 hereto and is incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL
INFORMATION AND EXHIBITS.
(a) Financial Statements of the Businesses Acquired.
Not Applicable
(b) Pro Forma Financial Information.
The following unaudited, pro forma consolidated statements of income for the
year ended December 31, 1995 and for the quarter ended March 31, 1996 present
the results for the Corporation as if the Merger had occurred on January 1,
1995. The accompanying unaudited pro forma consolidated balance sheet as of
March 31, 1996 gives effect to the Merger as of that date (see the notes to
the pro forma consolidated statements of income and balance sheet for more
information). These pro forma consolidated statements of income and balance
sheet neither purport to represent what the Corporation's results of operations
actually would have been had the Merger and related transactions in fact
occurred on the assumed dates, nor to project the Corporation's results of
operations and financial position for any future period. The pro forma
adjustments are based upon preliminary estimates, information currently
available and certain assumptions that management believes are reasonable in
the circumstances.
The pro forma consolidated statements of income and balance sheet should be
read in conjunction with the historical financial statements of the Corporation
and National Re, including the notes thereto.
The pro forma adjustments and pro forma consolidated information are provided
for informational purposes only. The Corporation's actual financial statements
will reflect the effects of the Merger on the closing date rather than the
dates Indicated above. The pro forma adjustments applied in the pro forma
financial statements record the Merger as a purchase. Under purchase
accounting, the total purchase cost of the assets acquired will be allocated
to the National Re assets and liabilities based on fair values as of the
closing date with the excess over fair value recorded as goodwill. Allocations
included in the pro forma statements are based on analysis which is not yet
completed. Accordingly, the final allocations of purchase price will be
different from the amounts included in the pro forma statements.
Subsequent to the closing of the Merger, management anticipates there will be
annual cost savings and synergies from the integration of the Corporation's and
National Re's operations. These cost savings and synergies are expected to
result from a reduction in overhead expenses, increased investment income,
reduced investment management fees, and adjustments to National Re's
retrocessional program. Consequently, the transaction is expected to be
non-dilutive to the Corporation's 1997 results from operations. There can
be no assurance that the Corporation will achieve these projected savings
and actual savings could be materially different than those currently
projected. Anticipated future cost savings and other synergies are not
included in the pro forma financial statements.
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General Re Corporation
Unaudited Pro Forma Consolidated Statement of Income
Year ended December 31, 1995
(in millions, except per share information)
<CAPTION>
General Re National Re Pro Forma Pro Forma
Historical (1) Historical (2) Adjustments (3) Consolidated
<S> <C> <C> <C> <C>
Premiums and other revenues
Net premiums earned
Property/casualty $5,141 $314 $5,455
Life/health 696 696
Total net premiums earned 5,837 314 6,151
Net investment income 1,017 76 $(33)(A) 1,060
Other revenues 292 292
Net realized gains on investments 64 1 65
Total revenues 7,210 391 (33) 7,568
Expenses
Claims and claim expenses 3,680 201 3,881
Life/health benefits 505 505
Acquisition costs 1,345 103 1,448
Other operating costs and expenses 563 25 6 (B) 594
Total expenses 6,093 329 6 6,428
Income before taxes and
minority interest 1,117 62 (39) 1,140
Income tax expense 247 14 (9) (C) 252
Income before minority interest 870 48 (30) 888
Minority interest 45 45
Net income $825 $48 ($30) $843
Share data:
Net income per common share $9.92 $9.75
Average shares outstanding 82.1 3.2 (D) 85.3
See the accompanying notes to the pro forma consolidated statement of income.
General Re Corporation
Unaudited Pro Forma Consolidated Statement of Income
Quarter ended March 31, 1996
(in millions, except per share information)
General Re National Re Pro Forma Pro Forma
Historical (1) Historical (2) Adjustments (3) Consolidated
Premiums and other revenues
Net premiums earned
Property/casualty $1,294 $93 $1,387
Life/health 245 245
Total net premiums earned 1,539 93 1,632
Net investment income 285 20 $(8) (A) 297
Other revenues 68 68
Net realized gains on investments 50 4 54
Total revenues 1,942 117 (8) 2,051
Expenses
Claims and claim expenses 908 61 969
Life/health benefits 180 180
Acquisition costs 355 28 383
Other operating costs and expenses 152 7 2 (B) 161
Total expenses 1,595 96 2 1,693
Income before taxes and
minority interest 347 21 (10) 358
Income tax expense 87 6 (2) (C) 91
Income before minority
interest 260 15 (8) 267
Minority interest 23 23
Net income $237 $15 ($8) $244
Share data:
Net income per common share $2.87 $2.86
Average shares outstanding 81.5 3.2 (D) 84.7
See the accompanying notes to the pro forma consolidated statement of income.
General Re Corporation
Notes to the Unaudited Pro Forma Consolidated Statements of Income
The pro forma income statements present the results of the Corporation as if
the Merger had occurred on January 1, 1995. It is not appropriate to assume
the results presented would have been the actual amounts reported by the
Corporation if the transaction had occurred on January 1, 1995. The pro forma
consolidated income statements assume the consideration to purchase National
Re was in the form of 50 percent General Re Common Stock and 50 percent cash.
(1) The first column presents the historical results from operations reported
by the Corporation in its annual report on Form 10-K for the year ended
December 31, 1995 and on Form 10-Q for the quarter ended March 31, 1996.
(2) The second column presents National Re's historical results
from operations for the year ended December 31, 1995 and quarter
ended March 31, 1996.
(3) The third column includes purchase accounting and pro forma
adjustments to the Corporation's and National Re's historical results from
operations which are described below.
Increase (decrease)
in income
(in millions)
1995 1996
(A) It was assumed that the Corporation would have paid
in cash on January 1, 1995, $465 million for 50 percent
of the total purchase consideration. These funds
were assumed to have earned annual pretax investment
income at 7.13 percent based on the historical United
States portfolio yield. $(33) $(8)
(B) The amortization of the excess of purchase price
over the fair value of net assets acquired was assumed
to occur over 40 years. $(15) $(4)
National Re's amortization for future value of treaties,
which was included in its historical results, would have
been reversed under purchase accounting. 8 2
National Re's amortization for goodwill related to prior
transactions and deferred financing costs would also have
been reversed under purchase accounting. 1 -
$(6) $(2)
(C) An adjustment would have been made to record the tax
effect of items A and B, excluding goodwill, using a 35
percent statutory tax rate. $9 $2
(D) It was assumed that the Corporation would have issued
General Re Common Stock for aggregate value of $465 million
for 50 percent of the total purchase consideration. Using
the then current common stock price, the Corporation would
have issued 3.2 million shares.
GENERAL RE CORPORATION
Unaudited Pro Forma Consolidated Balance Sheet
March 31, 1996
(in millions)
General Re National Re Pro Forma Pro Forma
Historical (1) Historical (2) Adjustments (3) Consolidated
Assets
Investments:
Fixed maturities:
Available-for-sale $15,402 $1,116 $(442) (A) $16,076
Trading 2,607 2,607
Equity securities 3,813 177 3,990
Short-term investments 1,760 8 1,768
Other invested assets 841 841
Total investments 24,423 1,301 (442) 25,282
Cash 323 323
Accrued investment income 329 17 346
Accounts receivable 2,104 222 2,326
Funds held by reinsured companies 2,161 2,161
Reinsurance recoverable 2,864 83 2,947
Deferred acquisition costs 401 35 (9) (B) 427
Sec. purchased under agreements
to resell 110 110
Trading account assets 2,336 2,336
Other assets 1,489 92 550 (C) 2,131
Total assets $36,540 $1,750 $99 $38,389
Liabilities
Claims and claim expenses $14,306 $1,016 $15,322
Policy benefits for life/health
0contracts 2,340 2,340
Unearned premiums 1,812 115 1,927
Other reinsurance balances 3,060 3,060
Notes payable and commercial paper 155 211 $ 9 (D) 375
Income taxes 651 (29) (F) 622
Sec. sold under agreements to
repurchase 2,283 2,283
Sec. sold but not yet purchased 329 329
Trading account liabilities 2,577 2,577
Other liabilities 1,341 35 27 (E) 1,403
Minority interest 1,218 1,218
Total liabilities 30,072 1,377 7 31,456
Cumulative convertible
preferred stock 147 147
Loan to ESSOP (146) (146)
1 1
Common stockholders' equity
Common stock 51 51
Paid-in capital 650 218 72 (G) 940
Unrealized appreciation of
investments 1,418 12 (12) (H) 1,418
Currency translation adjustments (23) (23)
Retained earnings 6,179 156 (156) (H) 6,179
Less common stock in treasury (1,808) (13) 188 (I) (1,633)
Total common stockholders'
equity 6,467 373 92 6,932
Total liabilities, cum.
convertible preferred
stock and common equity $36,540 $1,750 $99 $38,389
See the accompanying notes to the pro forma consolidated balance sheet.
General Re Corporation
Notes to the Unaudited Pro Forma Consolidated Statements of Income
The pro forma balance sheet presents the results of the Corporation as if the
Merger had occurred on March 31, 1996. It is not appropriate to assume the
results presented would have been the actual amounts reported by the
Corporation if the transaction had occurred on March 31, 1996. The pro forma
consolidated balance sheet assumes the consideration to purchase National
Re was in the form of 50 percent General Re Common Stock and 50 percent cash.
(1) The first column of each pro forma income statement presents the
historical balance sheet reported by the Corporation in its quarterly report
on Form 10-Q for the quarter ended March 31, 1996, respectively.
(2) The second column presents National Re's historical balance sheet as
of March 31, 1996.
(3) The third column includes purchase accounting adjustments and pro
forma adjustments to the Corporation's and National Re's historical balance
sheets, respectively.
Increase (decrease)
in net assets
(in millions)
(A) It was assumed that the Corporation would have paid
cash on March 31, 1996 for 50 percent of the purchase
consideration. $(465)
It was assumed that all outstanding National Re stock
options (801,800 shares) would have been exercised prior
to the purchase. 23
$(442)
(B) Deferred acquisition costs would have been reduced
for deferred costs other than commissions to conform to
the Corporation's accounting. $(9)
(C) The excess of purchase price paid over the fair value
of net assets acquired would have been recorded. $593
Intangible assets included in National Re's historical
balance sheet would have been reduced for the following
items not carried forward under purchase accounting:
- Future value of treaties (34)
- Goodwill (6)
- Deferred financing costs (3)
$550
(D) The carrying value of National Re's senior notes
would have been adjusted to fair value using current
market quotations. $(9)
(E) A liability for estimated severance and closing
costs would have been accrued. $(27)
General Re Corporation
Notes to the Unaudited Pro Forma Consolidated Balance Sheet
Increase (decrease)
in net assets
(in millions)
(F) The tax effect of items A through E, excluding
goodwill, would have been recorded using a 35 percent
statutory tax rate. $29
(G) The issuance of General Re common stock would have
increased paid in capital. $290
National Re's paid in capital would have been eliminated. (218)
$72
(H) National Re's unrealized appreciation in investments
and retained earnings would have been eliminated.
(I) The issuance of General Re common stock would have
increased treasury stock by $55 per share issued. $175
National Re's treasury stock would have been eliminated. 13
$188
(c) Exhibits:
Ex. No. Description
99.1 Agreement and Plan of Merger, dated as of July 1, 1996, by and
among General Re Corporation, N Acquisition Corporation and National
Re Corporation (incorporated by reference to Exhibit 1 of the Schedule 13D).
99.2 Stockholders Agreement, dated as of July 1, 1996, by and among
General Re Corporation, N Acquisition Corporation and Acadia Partners,
L.P. (incorporated by reference to Exhibit 2 of the Schedule 13D).
99.3 Stockholders Agreement, dated as of July 1, 1996, by and among
General Re Corporation, N Acquisition Corporation and Keystone, Inc.
(incorporated by reference to Exhibit 3 of the Schedule 13D).
99.4 Stockholders Agreement, dated as of July 1, 1996, by and among
General Re Corporation, N Acquisition Corporation and Robert W. Eager, Jr.
(incorporated by reference to Exhibit 4 of the Schedule 13D).
99.5 Stockholders Agreement, dated as of July 1, 1996, by and among
General Re Corporation, N Acquisition Corporation and Peter A. Cheney
(incorporated by reference to Exhibit 5 of the Schedule 13D).
99.6 Stockholders Agreement, dated as of July 1, 1996, by and among
General Re Corporation, N Acquisition Corporation and William D. Warren
(incorporated by reference to Exhibit 6 of the Schedule 13D).
99.7 Stockholders Agreement, dated as of July 1, 1996, by and among
General Re Corporation, N Acquisition Corporation and Timothy T.
McCaffrey (incorporated by reference to Exhibit 7 of the Schedule 13D).
99.8 Text of Press Release issued by General Re Corporation on July 1, 1996.
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of
1934, the Company has duly caused this report to be signed on behalf of the
undersigned hereunto duly authorized.
Dated: July 19, 1996
GENERAL RE CORPORATION
Registrant
By:
Charles F. Barr
Vice President,
General Counsel and Secretary
13
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