Rule 424(b)(1)
File No. 33-97878
[NAC RE CORP. LOGO]
1,500,000 SHARES
NAC RE CORP.
COMMON STOCK
The 1,500,000 shares of common stock, par value $.10 per share (the "Common
Stock"), offered hereby are being offered by NAC Re Corp. (the "Company"). The
Common Stock is listed on the New York Stock Exchange under the symbol "NRC."
On November 20, 1995, the last reported sale price of the Common Stock on
the New York Stock Exchange was $33.25 per share. See "Price Range of Common
Stock and Dividend Policy."
Concurrently (or substantially concurrently), by a separate prospectus, $100
million aggregate principal amount of the Company's 7.15% Notes due 2005 are
being offered by the Company to the public.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
`
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UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS* COMPANY+
Per Share.......... $33.25 $1.53 $31.72
Total++............ $49,875,000 $2,295,000 $47,580,000
* The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
+ Before deducting expenses payable by the Company estimated to be
$150,000.
++ The Company has granted to the Underwriters a 30-day option to purchase
up to 225,000 additional shares of Common Stock on the same terms per
share solely to cover over-allotments, if any. If such option is
exercised in full, the total price to public will be $57,356,250, the
total underwriting discounts and commissions will be $2,639,250 and the
total proceeds to the Company will be $54,717,000. See "Underwriting."
-------------------
The Common Stock is being offered by the Underwriters as set forth under
"Underwriting" herein. It is expected that the delivery of certificates therefor
will be made at the office of Dillon, Read & Co. Inc., New York, New York, on or
about November 24, 1995 against payment therefor in New York funds. The
Underwriters include:
DILLON, READ & CO. INC. OPPENHEIMER & CO., INC.
The date of this Prospectus is November 20, 1995.
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OFFERED HEREBY OR THE NOTES OF THE COMPANY AT A LEVEL ABOVE THOSE WHICH MIGHT
OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
FOR NORTH CAROLINA RESIDENTS: THE COMMISSIONER OF INSURANCE OF THE STATE OF
NORTH CAROLINA HAS NOT APPROVED OR DISAPPROVED THIS OFFERING NOR HAS THE
COMMISSIONER PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and, in accordance therewith,
files reports, proxy statements and other information with the Securities and
Exchange Commission (the "Commission"). Such reports, proxy statements and other
information filed by the Company with the Commission may be inspected and copied
at the public reference facilities maintained by the Commission at Room 1024,
450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's regional
offices at 7 World Trade Center, 13th Floor, New York, New York 10048; and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511. Copies of such material may be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. In addition, material filed by the Company can be inspected at
the offices of the New York Stock Exchange ("NYSE"), 20 Broad Street, New York,
New York 10005, on which the Company's Common Stock is listed.
The Company has filed with the Commission a Registration Statement on Form
S-3 (together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act of 1933, as amended (the "Act"), with
respect to the Common Stock offered hereby. This Prospectus does not contain all
of the information set forth in the Registration Statement, certain parts of
which are omitted in accordance with the rules and regulations of the
Commission. For further information, reference is made to the Registration
Statement, copies of which may be obtained from the Public Reference Section of
the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, upon payment of
the fees prescribed by the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, filed by the Company with the Commission, are
incorporated by reference in this Prospectus:
Annual Report on Form 10-K for the fiscal year ended December 31, 1994
(the "1994 10-K");
Quarterly Report on Form 10-Q for the fiscal quarter ended March 31,
1995;
Quarterly Report on Form 10-Q for the fiscal quarter ended June 30,
1995; and
Quarterly Report on Form 10-Q for the fiscal quarter ended September 30,
1995 (the "September 1995 10-Q").
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 and
15(d) of the 1934 Act subsequent to the date of this Prospectus and prior to the
termination of the offering of the Common Stock hereunder shall be deemed to be
incorporated by reference in this Prospectus, and to be a part hereof from the
date of filing of such documents. Any statement contained in a document
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
statement modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, upon the written or oral request of such person, a
copy of any document incorporated by reference in this Prospectus (other than
exhibits to such documents, unless such exhibits are specifically incorporated
by reference to such documents). Requests for such copies should be directed to
Martha G. Bannerman, Vice President and General Counsel, NAC Re Corp., One
Greenwich Plaza, P.O. Box 2568, Greenwich, CT 06836-2568, telephone (203)
622-5248.
2
<PAGE>
THE COMPANY
GENERAL
The Company, through its wholly-owned subsidiary, NAC Reinsurance
Corporation ("NAC"), is principally engaged in providing treaty and facultative
reinsurance to primary insurers of casualty risks (principally general
liability, automobile and workers' compensation) and commercial and personal
property risks. In consideration for reinsuring risks, NAC receives a share of
the premiums written by the primary insurer. NAC reinsures parts of its risks
with other reinsurers and pays to such reinsurers a portion of the premiums that
NAC receives from the primary insurer.
NAC is licensed to write reinsurance in all fifty states, the District of
Columbia, Puerto Rico and all provinces of Canada. NAC has an "A" (Excellent)
rating from A. M. Best Company, an independent insurance industry rating
organization. NAC also has an "AA-" claims-paying rating from Standard & Poor's
("S&P"), which is S&P's fourth highest rating. Based on industry data at
December 31, 1994 published by the Reinsurance Association of America (RAA), NAC
is the tenth largest reinsurance company in the United States, ranked by
statutory surplus.
The Company has experienced steady premium growth in recent years due to
several factors, including external market influences and internal initiatives.
Consolidated net premiums written increased 20.1% for the first nine months of
1995, 30.1% for 1994 and 25.7% for 1993, with growth from increases in
participations from existing clients, increases in the amount of underlying
premium written by ceding company clients and business from new clients. The
Company has also benefited from changes in buying patterns for both property and
casualty business as purchasers of reinsurance have favored the financially
secure reinsurers, and have begun to reduce the number of reinsurers with which
they reinsure risks. These changes in the market have produced increased
opportunities which have contributed to the Company's premium growth.
While the majority of the Company's premium continues to be generated by its
casualty treaty business, the Company's focus on certain specialty lines of
business, particularly fidelity/surety, aviation, and ocean marine, has also
generated growth. In addition, due to the maturing of the Company's facultative
infrastructure, an expanded focus on more complex lines of casualty facultative
business, and the successful marketing of casualty and property facultative
automatics, facultative premium increases have contributed to the Company's
growth. Further, the Company's most significant investment in recent years to
expand its business has been the establishment of a fully licensed wholly-owned
international reinsurance subsidiary in London. NAC Reinsurance International
Limited currently writes business in Europe, Japan and Australasia, and
contributed approximately 10% of the Company's net premiums written for the nine
months ended September 30, 1995.
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The Company's total assets were approximately $2.2 billion at September 30,
1995. Cash and invested assets were approximately $1.6 billion at September 30,
1995, an increase of 13.0% over the approximately $1.4 billion of cash and
invested assets at December 31, 1994. As a result of the continued increase in
invested assets coupled with a moderate increase in pretax yields, net
investment income for the first nine months of 1995 increased 13.3% over the
comparable 1994 period. Net investment income increased 5.1% in 1994 compared to
16.8% in 1993 and 11.7% in 1992. The increase in each year was the result of
growth in invested assets due to the investment of cash flow from
operations and in 1993, and to a lesser extent in 1992, the investment of the
net proceeds from the Company's 1992 debt offerings. The Company's pretax
investment yield was 6.0% for the nine month period ended September 30, 1995,
6.0% in 1994, 6.4% in 1993 and 6.6% in 1992. On an after-tax basis, the
investment yield was 4.7% during the nine month period ended September 30, 1995,
4.5% in 1994, 4.9% in 1993 and 5.3% in 1992.
The Company and NAC are subject to regulation under the insurance statutes,
including holding company statutes, of various states, Canada and the United
Kingdom. These regulations vary among jurisdictions, but generally require
insurance holding companies and insurers that are subsidiaries of holding
companies to register and file certain reports. These reports include
information concerning their capital structure, ownership, financial condition
and general business operations, and require prior regulatory agency approval of
changes in control of an insurer and of intercorporate transfers of assets
within the holding company structure.
The Company's principal executive offices are located at One Greenwich
Plaza, Greenwich, Connecticut 06836-2568 and its telephone number is (203)
622-5200.
4
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SUMMARY FINANCIAL INFORMATION
The following table provides summarized financial information of the
Company, including its consolidated subsidiaries, at and for the nine months
ended September 30, 1995 and 1994 and each of the three years ended December 31,
1994, 1993 and 1992. The financial data have been derived from the September
1995 10-Q, the Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 1994 and the 1994 10-K and are qualified in their entirety by such
reports. See "Incorporation of Certain Documents by Reference."
<TABLE>
<CAPTION>
(UNAUDITED)
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
----------------------- ------------------------------------
1995 1994 1994 1993 1992(1)
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND RATIOS)
<S> <C> <C> <C> <C> <C>
Summary Performance Data:
Gross premiums written............. $503,671 $420,251 $575,037 $431,582 $366,292
Net premiums written............... 382,689 318,722 438,201 336,941 268,023
Premiums earned.................... 358,376 280,933 395,731 306,379 250,533
Net investment income.............. 66,907 59,031 80,504 76,632 65,590
Net investment gains............... 16,077 3,033 2,155 19,095 9,081
Total revenues..................... 441,360 342,997 478,390 402,106 325,204
Net income......................... 43,568 26,228 35,612 42,351 22,443
Per Share Data:
Primary:
Average shares outstanding..... 17,942 17,938 17,895 18,420 18,313
Net income..................... $2.43 $1.46 $1.99 $2.30 $1.23
Fully Diluted:
Average shares outstanding..... 20,023 19,970 20,053 20,445 18,536
Net income..................... $2.31 $1.44 $1.95 $2.24 $1.21
Cash dividends per share........... .14 .12 .16 .16 .16
Balance Sheet Data:
Cash and investments(2)............ $1,598,583 $1,385,135 $1,414,527 $1,412,624 $1,258,016
Total assets(2)(3)................. 2,189,024 1,881,112 1,916,768 1,778,868 1,596,209
Claims and claims expenses,
gross(3)......................... 1,214,226 1,043,012 1,086,170 909,061 808,489
Claims and claims expenses, net of
reinsurance recoverables......... 919,387 771,738 808,433 697,221 626,090
Stockholders' equity(2)............ 429,650 339,058 319,085 375,540 309,221
Stockholders' equity per
share(2)......................... 24.39 19.30 18.23 21.13 17.35
Domestic Statutory Data:
Statutory composite ratio.......... 103.4% 106.0% 105.7% 110.9% 126.9%
Statutory surplus.................. $452,788 $408,190 $407,024 $406,163 $384,032
</Tab1le>
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(1) In 1992, the Company adopted Statement of Financial Accounting Standards
("SFAS") No. 109, "Accounting for Income Taxes." The cumulative effect from
prior years increased net income by $12,057,000 or $.66 per share on a
primary basis and $.65 per share on a fully diluted basis. See Note 4 of
Notes to Consolidated Financial Statements incorporated by reference to
Exhibit 13 to the 1994 10-K.
(2) At December 31, 1993, the Company adopted SFAS No. 115, "Accounting for
Certain Investments in Debt and Equity Securities." Retroactive application
to prior periods is prohibited. See Note 1 of Notes to Consolidated
Financial Statements incorporated by reference to Exhibit 13 to the 1994
10-K.
(3) Reflects the adoption of SFAS No. 113, "Accounting and Reporting of
Reinsurance of Short-Duration and Long-Duration Contracts," in 1993, which
requires the classification of reinsurance recoverables on claims and claims
expenses (including incurred but not reported) and unearned premium to be
reported as assets. Years prior to 1993 have been reclassified to reflect
the adoption of SFAS No. 113.
5
<PAGE>
CONCURRENT OFFERING
Concurrently (or substantially concurrently), by a separate prospectus, $100
million aggregate principal amount of the Company's 7.15% Notes due 2005 (the
"Notes") are being offered by the Company to the public.
USE OF PROCEEDS
The Company anticipates that substantially all of the net proceeds to the
Company from the sale of the Common Stock and from the offering of the Notes
will be contributed to NAC to increase its statutory capital base and will be
invested in accordance with the Company's investment guidelines for all of its
invested assets.
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<PAGE>
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
The Common Stock has been traded on the NYSE since May 1, 1995, under the
symbol "NRC." Prior thereto, the Common Stock was traded on the NASDAQ Stock
Market under the symbol "NREC." The following table sets forth, for the calendar
periods indicated, the high and low sales price per share of Common Stock (i) on
the consolidated transaction reporting system, as reported by the Dow Jones
Historical Stock Quote Reporter Service with respect to periods on and after May
1, 1995 and (ii) on the NASDAQ national market reporting system for periods
prior to May 1, 1995.
SALES PRICE
----------------
HIGH LOW
------ ------
1993
First Quarter........................................... $44.75 $37.75
Second Quarter.......................................... 43.25 33.25
Third Quarter........................................... 38.25 33.38
Fourth Quarter.......................................... 36.50 28.00
1994
First Quarter........................................... $32.00 $26.00
Second Quarter.......................................... 31.75 24.00
Third Quarter........................................... 29.75 24.38
Fourth Quarter.......................................... 34.00 24.25
1995
First Quarter........................................... $34.00 $28.25
Second Quarter.......................................... 35.25 28.50
Third Quarter........................................... 39.00 30.63
Fourth Quarter (through November 20, 1995).............. 38.38 31.75
On November 20, 1995, the last reported sale price of Common Stock on the
NYSE was $33.25 per share. There were 299 holders of record of shares of Common
Stock as of November 20, 1995. Cede & Company held over 95% of the shares of
Common Stock outstanding as of such date as nominee for an unknown number of
beneficial stockholders.
The Company has declared its regular quarterly cash dividend of $.04 per
share during each of the two most recent fiscal years and for the first quarter
of 1995. The regular quarterly cash dividend was increased to $.05 per share in
June 1995 and, accordingly, the Company has declared a quarterly cash dividend
of $.05 per share for the second and third quarters of 1995. While there is
presently no intention to increase or decrease the cash dividend on Common
Stock in the foreseeable future, future dividends will be dependent upon,
among other factors, the earnings of the Company, its financial condition, its
capital requirements, general business conditions and the ability of NAC to
pay dividends to the Company. The payment of dividends by NAC is subject to
restrictions imposed by New York insurance law. NAC may pay cash dividends
only out of its statutory earned surplus, which was approximately $85.8
million at December 31, 1994. Additionally, the maximum amount of dividends
that may be paid in any twelve month period without the prior approval of the
Insurance Department of the State of New York is the lesser of net investment
income or 10% of statutory surplus, as such terms are defined in the New York
insurance law. The maximum amount of cash dividends that NAC could pay as of
September 30, 1995 without regulatory approval was approximately $40.7 million.
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CAPITALIZATION
The following table sets forth the capitalization of the Company and its
consolidated subsidiaries as of September 30, 1995 and as adjusted to reflect
the sale of the Common Stock offered hereby and the $100 million aggregate
principal amount of Notes also being offered by the Company. The information
contained in the table assumes the over-allotment option with respect to the
Common Stock is not exercised. This table should be read in conjunction with the
Company's September 1995 10-Q and 1994 10-K. See "Incorporation of Certain
Documents by Reference."
</TABLE>
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30,
1995
-----------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS)
<S> <C> <C>
Long-term Debt(1):
Senior Debt:
Revolving Credit and Term Loan(2)............................ $ 17,762 $ 17,762
8% Notes due 1999............................................ 100,000 100,000
7.15% Notes due 2005......................................... -- 100,000
-------- -----------
Total Senior Debt........................................ 117,762 217,762
5.25% Convertible Subordinated Debentures due 2002............. 100,000 100,000
-------- -----------
Total Long-term Debt..................................... 217,762 317,762
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Stockholders' Equity(3):
Preferred stock, $1.00 par value:
1,000 shares authorized, none issued (includes 90 shares of
Series A Junior Participating Preferred Stock)............. -- --
Common stock, $.10 par value:
25,000 shares authorized, 19,753 shares issued; 21,253 as
adjusted................................................... 1,975 2,125
Additional paid-in capital..................................... 196,845 244,125
Unrealized appreciation of investments, net of tax............. 19,738 19,738
Currency translation adjustments, net of tax................... 2,283 2,283
Retained earnings.............................................. 251,363 251,363
Less treasury stock, at cost (2,136 shares).................... (42,554) (42,554)
-------- -----------
Total Stockholders' Equity............................... 429,650 477,080
-------- -----------
Total Long-term Debt and Stockholders' Equity............ $647,412 $ 794,842
-------- -----------
-------- -----------
</TABLE>
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(1) For information with respect to interest rates, maturities, priorities and
restrictions related to outstanding long-term debt, see Note 7 of Notes to
Consolidated Financial Statements incorporated by reference to Exhibit 13 to
the 1994 10-K.
(2) The Revolving Credit and Term Loan is a component of "Other liabilities" on
the Company's Consolidated Balance Sheet included in the Consolidated
Financial Statements incorporated by reference to Exhibit 13 to the 1994
10-K.
(3) For information with respect to stock options, see Note 8 of Notes to
Consolidated Financial Statements incorporated by reference to Exhibit 13 to
the 1994 10-K.
8
<PAGE>
DESCRIPTION OF CAPITAL STOCK
GENERAL
The authorized capital stock of the Company presently consists of 25,000,000
shares of Common Stock, and 1,000,000 shares of Preferred Stock, $1.00 par value
(the "Preferred Stock"). At November 20, 1995, there were 17,642,562 shares of
Common Stock, and no shares of Preferred Stock, outstanding.
The following are summaries of the terms of the Common Stock and the
Preferred Stock. Such summaries do not purport to be complete and are subject in
all respects to the Certificate of Incorporation and By-laws of the Company.
COMMON STOCK
The holders of Common Stock are entitled to receive dividends when and as
declared by the Board of Directors of the Company out of funds legally available
therefor, subject to the terms of any Preferred Stock of the Company then
outstanding.
The holders of Common Stock are entitled to one vote for each share on all
matters voted upon by stockholders, including the election of directors. Shares
of Common Stock do not have cumulative voting rights, which means that the
holders of more than 50% of such shares voting for the election of directors can
elect 100% of the directors if they choose to do so and, in such event, the
holders of the remaining shares so voting will not be able to elect any
directors. Pursuant to the Company's Restated Certificate of Incorporation, the
Company's Board of Directors is divided into three classes of Directors serving
staggered three year terms. The division of the Board into separate classes may
operate as an anti-takeover device, and will make any takeover of the Company
more difficult to achieve than if all Directors were members of a single class.
Holders of Common Stock do not have any conversion, redemption or preemptive
rights. In the event of the dissolution, liquidation or winding up of the
Company, holders of Common Stock will be entitled to share ratably in any assets
remaining after the satisfaction in full of the prior rights of creditors,
including holders of Company indebtedness, and the liquidation preference of any
preferred shares then outstanding.
The Common Stock is listed on the NYSE.
PREFERRED STOCK
Under Delaware law, the Company's Board of Directors has authority to issue,
without further action by stockholders, one or more series of Preferred Stock,
and to determine at the time of issuance of each such series the rights and
preferences thereof (including dividend rate, liquidation priority, and
conversation and voting rights, if any). The issuance of Preferred Stock, while
providing flexibility in connection with possible acquisitions and other
corporate purposes, could, among other things, adversely affect the voting power
or other rights of the holders of Common Stock.
The holders of the Preferred Stock are entitled to receive dividends, as
specifically provided with respect to each series, prior to the payment or
declaration of any dividends for the Common Stock.
PREFERRED STOCK PURCHASE RIGHTS PLAN
On June 9, 1988, the Board of Directors of the Company declared a dividend
distribution of one Preferred Stock Purchase Right (a "Right") for each
outstanding share of Common Stock of the Company. The distribution was payable
as of June 21, 1988 to stockholders of record on that date. Each Right entitled
the registered holder to purchase from the Company one one-hundredth (1/100) of
a share of preferred stock of the Company, designated as Series A Junior
Participating Preferred Stock (the "Series A Preferred Stock") at a price of $85
per one one-hundredth (1/100) of a share, or $8,500 per
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<PAGE>
share ("Purchase Price"), subject to adjustment. As a result of stock splits of
the Company's Common Stock declared June 8, 1989 and July 29, 1991, each Right
now entitles the registered holder to purchase from the Company one-two hundred
and twenty-fifth (1/225) of a share of Series A Preferred Stock, at a price of
$37.78 per one-two hundred and twenty-fifth (1/225) of a share, or $8,500, per
share, subject to adjustment. The description and terms of the Rights are set
forth in a Rights Agreement, as amended (the "Rights Agreement"), between the
Company and American Stock Transfer & Trust Company, as Rights Agent (the
"Rights Agent").
As discussed below, initially the Rights will not be exercisable,
certificates will not be sent to stockholders and the Rights will automatically
trade with the Common Stock.
Until the close of business on the tenth day following the earlier to occur
of (i) a public announcement that a person or group of affiliated or associated
persons has acquired beneficial ownership of 15% or more of the Company's voting
stock ("Acquiring Person"), or (ii) the commencement of, or public announcement
of an intention to make, a tender or exchange offer (other than a tender or
exchange offer by the Company, any subsidiary of the Company, or any employee
benefit plan of the Company or of any subsidiary of the Company) whose
consummation would result in the ownership of 30% or more of the outstanding
shares of Common Stock of the Company, even if no purchases actually occur
pursuant to such offer (the tenth day (or such later date as may be determined
by action of the Board of Directors) after the earlier of such dates being
called the "Distribution Date"), the Rights will be evidenced, with respect to
any of the Common Stock certificates outstanding as of June 21, 1988, by such
Common Stock certificate with a copy of a summary of Rights attached thereto. An
Acquiring Person shall not include (A) the Company, (B) any subsidiary of the
Company, (C) any employee benefit plan or employee stock plan of the Company or
of any subsidiary of the Company, (D) the Equitable Life Assurance Society of
the United States (the "Equitable"), provided, further, however, that the
Equitable (together with any of its affiliates or associates) shall not be the
beneficial owner of more than 28.5% of the shares of voting stock of the
Company, (E) any person whose ownership of 15% or more of the shares of voting
stock of the Company then outstanding results from a transaction or transactions
approved by the Continuing Directors (as defined in the Rights Agreement) and
effected before such person acquires such 15% beneficial ownership (provided
that such person shall become an Acquiring Person upon his acquisition of any of
the Company's voting stock), (F) any person whose beneficial ownership of shares
of voting stock of the Company is increased to 15% or more of the shares of
voting stock of the Company then outstanding solely by reason of a reduction in
the number of issued and outstanding shares of voting stock of the Company
pursuant to a transaction or transactions approved by the Continuing Directors
of the Company (provided that such person shall become an Acquiring Person upon
his acquisition of any of the Company's voting stock) or (G) any person whose
ownership of 15% or more of the shares of voting stock of the Company then
outstanding results from any action or transaction deemed by a resolution of the
Continuing Directors of the Company not to cause such person to become an
Acquiring Person which resolution is passed prior to such person otherwise
becoming an Acquiring Person; provided that in the event a person does not
become an Acquiring Person by reason of clause (E), (F) or (G), such person
shall become an Acquiring Person upon his acquisition of an additional 1% of the
Company's voting stock (unless such person would not become an Acquiring Person
by reason of any provision of the Rights Agreement, including those referred to
in clauses (E), (F) and (G)).
The Rights Agreement provides that, until the Distribution Date, the Rights
will be represented by and transferred with, and only with, the Common Stock.
Until the Distribution Date (or earlier redemption or expiration of the Rights),
new Common Stock certificates issued after June 21, 1988 will contain a legend
incorporating the Rights Agreement by reference. Until the Distribution Date (or
earlier redemption or expiration of the Rights), the surrender for transfer of
any of the Common Stock certificates outstanding as of June 21, 1988, with or
without a copy of a summary of Rights attached thereto, will also constitute the
transfer of the Rights associated with the Common Stock represented by such
certificate. As soon as practicable following the Distribution Date, separate
certificates evidencing
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<PAGE>
the Rights ("Right Certificates") will be mailed to holders of record of the
Common Stock as of the close of business on the Distribution Date and such
separate certificates alone will evidence the Rights from and after the
Distribution Date. Following the Distribution Date, Rights may be transferred
separately from any transfer of Common Stock by the transfer of the respective
Rights Certificate.
The Rights are not exercisable until the Distribution Date. The Rights will
expire at the close of business on June 21, 1998, unless earlier redeemed by the
Company as described below.
The Series A Preferred Stock is nonredeemable and, unless otherwise provided
in connection with the creation of a subsequent series of preferred stock,
subordinate to any other series of the Company's preferred stock. Series A
Preferred Stock may not be issued except upon exercise of Rights. Each share of
Series A Preferred Stock will be entitled to receive when, as and if declared, a
quarterly dividend in an amount equal to the greater of $37.78 per share or 225
times the cash dividends declared on the Company's Common Stock. In addition,
the Series A Preferred Stock is entitled to 225 times any non-cash dividends
(other than dividends payable in equity securities) declared on the Common
Stock, in like kind. In the event of the liquidation of the Company, the holders
of the Series A Preferred Stock will be entitled to receive a liquidation
payment in an amount equal to the greater of $37.78 per one-two hundred and
twenty-fifth (1/225) share or 225 times the payment made per share of Common
Stock. Each share of Series A Preferred Stock will have 225 votes, voting
together with the Common Stock. In the event of any merger, consolidation or
other transaction in which common shares are exchanged, each share of Series A
Preferred Stock will be entitled to receive 225 times the amount received per
share of Common Stock. The rights of the Series A Preferred Stock as to
dividends, liquidation and voting are protected by antidilution provisions.
The number of shares of Series A Preferred Stock issuable upon exercise of
the Rights is subject to certain adjustments from time to time in the event of a
stock dividend on, or a subdivision or combination of, the Common Stock. The
Purchase Price is subject to adjustment in the event of extraordinary
distributions of cash or other property to holders of Common Stock.
Unless the Rights are earlier redeemed or the transaction is approved by the
Continuing Directors, in the event that, after the Rights have become
exercisable, the Company were to be acquired in a merger or other business
combination (in which any shares of the Common Stock are changed into or
exchanged for other securities or assets) or more than 50% of the assets or
earning power of the Company and its subsidiaries (taken as a whole) were to be
sold or transferred in one or a series of related transactions, the Rights
Agreement provides that proper provision will be made so that each holder of
record of a Right will from and after such date have the right to receive, upon
payment of the Purchase Price, that number of shares of common stock of the
acquiring company having a market value at the time of such transaction equal to
two times the Purchase Price.
Fractions of shares of Series A Preferred Stock may, at the election of the
Company, be evidenced by depositary receipts. The Company may also issue cash in
lieu of fractional shares which are not integral multiples of one-two hundred
and twenty-fifth (1/225) of a share.
At any time on or prior to the close of business on the tenth day after a
public announcement that a person has become an Acquiring Person (or such later
date as a majority of the Continuing Directors may determine), the Company may
redeem the Rights in whole, but not in part, at a price of $.0222 per Right (the
"Redemption Price"). Immediately upon the action of the Board of Directors of
the Company authorizing redemption of the Rights, the right to exercise the
Rights will terminate and the only right of the holders of Rights will be to
receive the Redemption Price.
Until a Right is exercised, the holder, as such, will have no rights as a
stockholder of the Company, including, without limitation, the right to vote or
to receive dividends.
11
<PAGE>
This summary description of the Rights does not purport to be complete and
is qualified in its entirety by reference to the Rights Agreement which is
incorporated in this summary description herein by reference.
Certain Potential "Anti-Takeover" Effects. The exercise of the Rights by the
holders thereof upon the acquisition by a person or group of 15% or more of the
outstanding Common Stock or upon a merger or other acquisition transaction
involving the Company could cause substantial dilution to the value and voting
power of the Common Stock held by the acquiring person or group, whose Rights
would be null and void. Accordingly, the Rights may have the effect of making
more difficult or discouraging, absent the support of the Company's Board of
Directors, certain tender offers and other transactions that are viewed
favorably by stockholders that could give holders of Common Stock the
opportunity to realize a premium over the then-prevailing market price for their
shares of Common Stock. This feature of the Rights also could assist management
in retaining their positions with the Company.
The Company's Board of Directors believes the Rights increase the Board's
ability to effectively represent the collective interests of stockholders. The
Rights Agreement is designed to encourage persons interested in acquiring the
Company to consult and negotiate with the Board, which, in its view, is in a
more advantageous position than stockholders to negotiate effectively with
potential acquirors. The Rights are also intended to provide the Board with the
time to appropriately evaluate acquisition proposals and alternative means to
maximize stockholder values.
The Company is not aware of any proposals or efforts by any person or group
to acquire the Company.
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
Generally, Section 203 of the Delaware General Corporation Law prohibits a
publicly-held Delaware corporation from engaging in a "business combination"
with an "interested stockholder" for a period of three years after the date of
the transaction in which the person became an interested stockholder, unless (i)
prior to the date on which the person became an interested stockholder, the
board of directors of the corporation approved the business combination or the
transaction resulting in such person becoming an interested stockholder, or (ii)
upon consummation of the transaction which resulted in the stockholder becoming
an interested stockholder, the interested stockholder owns at least 85% of the
outstanding voting stock (excluding certain shares of voting stock), or (iii) on
or after such date on which the person became an interested stockholder, the
business combination is approved by the board of directors and by the
affirmative vote of holders of at least 66 2/3% of the outstanding voting stock
which is not owned by the interested stockholder. A "business combination"
includes, among other transactions, mergers and asset sales resulting in a
financial benefit to the stockholder. An "interested stockholder" is a person
who, individually or together with affiliates and associates, owns (or within
three years, did own) 15% or more of the corporation's voting stock.
CERTAIN BY-LAW PROVISIONS
The Company's By-laws provide additional notice requirements for stockholder
nominations of candidates for election to the Board of Directors and proposals
for other business that may be properly brought before a meeting by
stockholders. At annual meetings, stockholders will be entitled to submit
nominations for directors and proposals for such other business only upon
advance written notice to the Secretary of the Company within the time period
specified in the Company's By-laws. At special meetings held for the election of
directors, stockholders will be entitled to submit nominations for directors
only upon advance written notice to the Secretary of the Company made by the
tenth day following the notice to stockholders of the special meeting.
12
<PAGE>
TRANSFER AGENT AND REGISTRAR
American Stock Transfer and Trust Company, 40 Wall Street, New York, New
York 10005, is the transfer agent and registrar for the Common Stock.
UNDERWRITING
The names of the Underwriters of the Common Stock offered hereby and the
aggregate number of shares of Common Stock which each has severally agreed to
purchase from the Company, subject to the terms and conditions specified in the
Underwriting Agreement, dated November 20, 1995, are as follows:
NUMBER OF
SHARES
UNDERWRITER OF COMMON STOCK
----------- ---------------
Dillon, Read & Co. Inc................................. 487,500
Oppenheimer & Co., Inc................................. 487,500
Bear, Stearns & Co. Inc................................ 50,000
Alex. Brown & Sons Incorporated........................ 50,000
CS First Boston Corporation............................ 50,000
First Manhattan Co. ................................... 25,000
Fox-Pitt, Kelton, Inc.................................. 25,000
Furman Selz Incorporated............................... 25,000
Goldman, Sachs & Co.................................... 50,000
Lehman Brothers Inc.................................... 50,000
Merrill Lynch, Pierce, Fenner & Smith Incorporated..... 50,000
Moors & Cabot, Inc..................................... 25,000
Morgan Stanley & Co. Incorporated...................... 50,000
Northington Partners, Inc.............................. 25,000
Salomon Brothers Inc................................... 50,000
------------
Total...................................... 1,500,000
------------
------------
Dillon, Read & Co. Inc. ("Dillon Read") is the Managing Underwriter.
Oppenheimer & Co., Inc. ("Oppenheimer") is co-manager. If any shares of Common
Stock offered hereby are purchased by the Underwriters, all of such shares will
be so purchased. The Underwriting Agreement contains provisions whereby, if any
Underwriter defaults in its obligation to purchase Common Stock, and if the
aggregate obligations of the Underwriters so defaulting do not exceed 10% of the
Common Stock offered hereby, the remaining Underwriters, or some of them, must
assume such obligations.
The Common Stock is being initially offered severally by the Underwriters at
the price set forth on the cover page hereof, or at such price less a concession
not to exceed $.91 per share on sales to certain dealers. The Underwriters
may allow, and such dealers may re-allow, a concession not in excess of
$.10 per share on sales to certain dealers. The offering of Common Stock is
made for delivery when, as and if accepted by the Underwriters and subject to
prior sale and withdrawal, cancellation or modification of the offer without
notice. The Underwriters reserve the right to reject any offer for the purchase
of Common Stock. After the Common Stock is released for sale to the public, the
public offering price and other selling terms may be changed by the
Underwriters.
The Company has granted the Underwriters an option to purchase an additional
225,000 shares of Common Stock on the same terms per share. If the Underwriters
exercise such option, each of the Underwriters will have a firm commitment,
subject to certain conditions, to purchase approximately the same proportion of
the aggregate shares of Common Stock so purchased as the number of shares of
Common Stock to be purchased by it shown in the above table bears to 1,500,000.
The Underwriters
13
<PAGE>
may exercise such option on or before the thirtieth day from the date of the
initial public offering of the Common Stock offered hereby and only to cover
over-allotments made of the Common Stock in connection with this offering.
The Company has agreed that until 90 days after the date of this Prospectus,
without the prior written consent of Dillon Read, it will not offer, sell,
contract to sell or otherwise dispose of any securities of the Company which
are, or which are convertible into or exchangeable or exercisable for securities
which are, substantially similar to the Common Stock other than (i) the Common
Stock issuable upon conversion of the Company's 5 1/4% Convertible Subordinated
Debentures due 2002 and (ii) securities issuable pursuant to existing options or
under the Company's existing employee benefit plans or similar plans.
The Company has agreed in the Underwriting Agreement to indemnify the
Underwriters against certain liabilities, including liabilities under the Act or
to contribute to payments that the Underwriters may be required to make in
respect thereof.
John P. Birkelund, a Director of the Company, is Chairman of Dillon Read.
Stephen Robert, a Director of the Company, is Chairman of Oppenheimer. During
1994, Dillon Read and Oppenheimer were retained to provide general financial
advisory services to the Company in 1994 and 1995 for a fee of $100,000 per
firm. Further, Oppenheimer provides investment advisory services with respect to
the Company's pension funds and a small portion of the Company's investment
portfolio. In addition, Dillon Read and Oppenheimer are acting as co-lead
underwriters in connection with the offering of the Notes.
LEGAL MATTERS
Certain legal matters in connection with the Common Stock offered hereby
will be passed upon for the Company by Martha G. Bannerman, Vice President and
General Counsel of the Company, and for the Underwriters by Morgan, Lewis &
Bockius LLP, New York, New York. Ms. Bannerman beneficially owns 68,402 shares
of Common Stock of the Company, including 51,645 shares issuable pursuant to
exercisable options.
EXPERTS
The consolidated financial statements of the Company incorporated by
reference in the Company's Annual Report on Form 10-K for the year ended
December 31, 1994, have been audited by Ernst & Young LLP, independent auditors,
as set forth in their report thereon included therein and incorporated herein by
reference. Such consolidated financial statements are incorporated herein by
reference in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
With respect to the unaudited consolidated interim financial information for
the nine month periods ended September 30, 1995 and 1994 incorporated by
reference herein, Ernst & Young LLP have reported that they have applied limited
procedures in accordance with professional standards for a review of such
information. However, their separate reports, included in the Company's
quarterly reports on Form 10-Q for the quarters ended September 30, 1995, June
30, 1995 and March 31, 1995 and incorporated herein by reference, state that
they did not audit and they do not express an opinion on that interim financial
information. Accordingly, the degree of reliance on their report on such
information should be restricted in light of the limited nature of the review
procedures applied. The independent auditors are not subject to the liability
provisions of Section 11 of the Act for their report on the unaudited interim
financial information because such report is not a "report" or a "part" of the
Registration Statement prepared or certified by the auditors within the meaning
of Sections 7 and 11 of the Act.
14
<PAGE>
======================================= =======================================
NO PERSON IS AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NAC RE CORP.
OTHER THAN THOSE CONTAINED OR INCORPORATED
BY REFERENCE IN THIS PROSPECTUS, AND, IF
GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL OR A -------------------
SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES OTHER THAN THE COMMON STOCK
DESCRIBED IN THIS PROSPECTUS. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY
SUCH COMMON STOCK IN ANY CIRCUMSTANCES
IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER 1,500,000 SHARES
SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS BEEN NO COMMON STOCK
CHANGE IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED OR INCORPORATED
BY REFERENCE HEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO THE DATE OF SUCH
INFORMATION.
-------------------
TABLE OF CONTENTS
PROSPECTUS
PAGE
----
Available Information................. 2
Incorporation of Certain Documents by
Reference........................... 2 November 20, 1995
The Company........................... 3
Summary Financial Information......... 5
Concurrent Offering................... 6
Use of Proceeds....................... 6 -------------------
Price Range of Common Stock and
Dividend Policy..................... 7
Capitalization........................ 8
Description of Capital Stock.......... 9
Underwriting.......................... 13 DILLON, READ & CO. INC.
Legal Matters......................... 14
Experts............................... 14 OPPENHEIMER & CO., INC.
======================================= =======================================
<PAGE>
Rule 424(b)(1)
[NAC RE CORP. LOGO] File No. 33-97878
$100,000,000
NAC RE CORP.
7.15% NOTES DUE NOVEMBER 15, 2005
(INTEREST PAYABLE MAY 15 AND NOVEMBER 15)
Interest on the Notes is payable semi-annually on May 15 and November 15,
commencing May 15, 1996. The Notes will bear interest at the rate of 7.15% per
annum and will mature on November 15, 2005. The Notes are not redeemable prior
to maturity and do not have the benefit of a sinking fund. The Notes will
constitute unsecured and unsubordinated indebtedness of NAC Re Corp. (the
"Company") and will rank on a parity with the Company's other unsecured and
unsubordinated indebtedness which, at September 30, 1995, was $117,762,000. The
Company is a holding company and, accordingly, the Notes will be effectively
subordinate to all existing and future indebtedness of the operating
subsidiaries of the Company.
The Notes offered hereby will be issued only in registered form in
denominations of $1,000 and integral multiples thereof. The Notes will be
represented by one or more global notes ("Global Notes") registered in the name
of a nominee of The Depository Trust Company (the "Depositary"). Beneficial
interests in the Global Notes will be shown on, and transfers thereof will be
effected only through, records maintained by the Depositary and its
participants. Except as described herein, Notes in certificated form will not be
issued in exchange for Global Notes. See "Description of the Notes." The Notes
will not be listed on any securities exchange, and there can be no assurance
that there will be a secondary market for the Notes. From time to time the
Underwriters as set forth under "Underwriting" herein may make a market in the
Notes. However, at this time, no determination has been made as to whether or
not the Underwriters will make a market in the Notes.
Concurrently (or substantially concurrently), by a separate prospectus,
1,500,000 shares of the Company's Common Stock are being offered by the Company
to the public.
-------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
-------------------
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC* COMMISSIONS+ COMPANY++
Per Note.................. 99.926% .650% 99.276%
Total..................... $99,926,000 $650,000 $ 99,276,000
* Plus accrued interest, if any, from November 24, 1995.
+ The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
++ Before deducting expenses payable by the Company estimated at $150,000.
-------------------
The Notes are being offered by the Underwriters as set forth under
"Underwriting" herein. It is expected that the Notes will be ready for delivery
at the office of Dillon, Read & Co. Inc., New York, New York, or through the
facilities of the Depositary on or about November 24, 1995 against payment
therefor in New York funds. The Underwriters are:
DILLON, READ & CO. INC. OPPENHEIMER & CO., INC.
The date of this Prospectus is November 20, 1995.
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES OFFERED
HEREBY OR THE COMMON STOCK OF THE COMPANY AT A LEVEL ABOVE THOSE WHICH MIGHT
OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
FOR NORTH CAROLINA RESIDENTS: THE COMMISSIONER OF INSURANCE OF THE STATE OF
NORTH CAROLINA HAS NOT APPROVED OR DISAPPROVED THIS OFFERING NOR HAS THE
COMMISSIONER PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and, in accordance therewith,
files reports, proxy statements and other information with the Securities and
Exchange Commission (the "Commission"). Such reports, proxy statements and other
information filed by the Company with the Commission may be inspected and copied
at the public reference facilities maintained by the Commission at Room 1024,
450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's regional
offices at 7 World Trade Center, 13th Floor, New York, New York 10048; and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511. Copies of such material may be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. In addition, material filed by the Company can be inspected at
the offices of the New York Stock Exchange, 20 Broad Street, New York, New York
10005, on which the Company's Common Stock, $.10 par value (the "Common Stock"),
is listed.
The Company has filed with the Commission a Registration Statement on Form
S-3 (together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act of 1933, as amended (the "Act"), with
respect to the Notes offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the Commission. For
further information, reference is made to the Registration Statement, copies of
which may be obtained from the Public Reference Section of the Commission, 450
Fifth Street, N.W., Washington, D.C. 20549, upon payment of the fees prescribed
by the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, filed by the Company with the Commission, are
incorporated by reference in this Prospectus:
Annual Report on Form 10-K for the fiscal year ended December 31, 1994
(the "1994 10-K");
Quarterly Report on Form 10-Q for the fiscal quarter ended March 31,
1995;
Quarterly Report on Form 10-Q for the fiscal quarter ended June 30,
1995; and
Quarterly Report on Form 10-Q for the fiscal quarter ended September 30,
1995 (the "September 1995 10-Q").
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 and
15(d) of the 1934 Act subsequent to the date of this Prospectus and prior to the
termination of the offering of the Notes hereunder shall be deemed to be
incorporated by reference in this Prospectus, and to be a part hereof from the
date of filing of such documents. Any statement contained in a document
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
statement modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, upon the written or oral request of such person, a
copy of any document incorporated by reference in this Prospectus (other than
exhibits to such documents, unless such exhibits are specifically incorporated
by reference to such documents). Requests for such copies should be directed to
Martha G. Bannerman, Vice President and General Counsel, NAC Re Corp., One
Greenwich Plaza, P.O. Box 2568, Greenwich, CT 06836-2568, telephone (203)
622-5248.
2
<PAGE>
THE COMPANY
GENERAL
The Company, through its wholly-owned subsidiary, NAC Reinsurance
Corporation ("NAC"), is principally engaged in providing treaty and facultative
reinsurance to primary insurers of casualty risks (principally general
liability, automobile and workers' compensation) and commercial and personal
property risks. In consideration for reinsuring risks, NAC receives a share of
the premiums written by the primary insurer. NAC reinsures parts of its risks
with other reinsurers and pays to such reinsurers a portion of the premiums that
NAC receives from the primary insurer.
NAC is licensed to write reinsurance in all fifty states, the District of
Columbia, Puerto Rico and all provinces of Canada. NAC has an "A" (Excellent)
rating from A. M. Best Company, an independent insurance industry rating
organization. NAC also has an "AA-" claims-paying rating from Standard & Poor's
("S&P"), which is S&P's fourth highest rating. Based on industry data at
December 31, 1994 published by the Reinsurance Association of America (RAA), NAC
is the tenth largest reinsurance company in the United States, ranked by
statutory surplus.
The Company has experienced steady premium growth in recent years due to
several factors, including external market influences and internal initiatives.
Consolidated net premiums written increased 20.1% for the first nine months of
1995, 30.1% for 1994 and 25.7% for 1993, with growth from increases in
participations from existing clients, increases in the amount of underlying
premium written by ceding company clients and business from new clients. The
Company has also benefited from changes in buying patterns for both property and
casualty business as purchasers of reinsurance have favored the financially
secure reinsurers, and have begun to reduce the number of reinsurers with which
they reinsure risks. These changes in the market have produced increased
opportunities which have contributed to the Company's premium growth.
While the majority of the Company's premium continues to be generated by its
casualty treaty business, the Company's focus on certain specialty lines of
business, particularly fidelity/surety, aviation, and ocean marine, has also
generated growth. In addition, due to the maturing of the Company's facultative
infrastructure, an expanded focus on more complex lines of casualty facultative
business, and the successful marketing of casualty and property facultative
automatics, facultative premium increases have contributed to the Company's
growth. Further, the Company's most significant investment in recent years to
expand its business has been the establishment of a fully licensed wholly-owned
international reinsurance subsidiary in London. NAC Reinsurance International
Limited currently writes business in Europe, Japan and Australasia, and
contributed approximately 10% of the Company's net premiums written for the nine
months ended September 30, 1995.
The Company's total assets were approximately $2.2 billion at September 30,
1995. Cash and invested assets were approximately $1.6 billion at September 30,
1995, an increase of 13.0% over the approximately $1.4 billion of cash and
invested assets at December 31, 1994. As a result of the continued increase in
invested assets coupled with a moderate increase in pretax yields, net
investment income for the first nine months of 1995 increased 13.3% over the
comparable 1994 period. Net investment income increased 5.1% in 1994 compared to
16.8% in 1993 and 11.7% in 1992. The increase in each year was the result of
growth in invested assets due to the investment of cash flow from operations and
in 1993, and to a lesser extent in 1992, the investment of the net proceeds from
the Company's 1992 debt offerings. The Company's pretax investment yield was
6.0% for the nine month period ended September 30, 1995, 6.0% in 1994, 6.4% in
1993 and 6.6% in 1992. On an after-tax basis, the investment yield was 4.7%
during the nine month period ended September 30, 1995, 4.5% in 1994, 4.9% in
1993 and 5.3% in 1992.
The Company and NAC are subject to regulation under the insurance statutes,
including holding company statutes, of various states, Canada and the United
Kingdom. These regulations vary among
3
<PAGE>
jurisdictions, but generally require insurance holding companies and insurers
that are subsidiaries of holding companies to register and file certain reports.
These reports include information concerning their capital structure, ownership,
financial condition and general business operations, and require prior
regulatory agency approval of changes in control of an insurer and of
intercorporate transfers of assets within the holding company structure.
The Company's ability to make interest payments on the Notes will be
dependent upon the receipt of dividends from NAC. See "Use of Proceeds." The
payment of dividends is subject to restrictions imposed by New York insurance
law. NAC may pay cash dividends only out of its statutory earned surplus, which
was approximately $85.8 million at December 31, 1994. Additionally, the maximum
amount of dividends that may be paid in any twelve month period without the
prior approval of the Insurance Department of the State of New York is the
lesser of net investment income or 10% of statutory surplus, as such terms are
defined in the New York insurance law. The maximum amount of cash dividends that
NAC could pay as of September 30, 1995 without regulatory approval was
approximately $40.7 million.
The Company's principal executive offices are located at One Greenwich
Plaza, Greenwich, Connecticut 06836-2568 and its telephone number is (203)
622-5200.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges of the
Company for the periods indicated:
NINE MONTHS
ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------- ----------------------------------------
1995 1994 1994 1993 1992 1991 1990
---- ---- ---- ---- ---- ---- ----
5.5 x 3.8 x 3.7 x 4.3 x 1.6 x 10.2x 8.1 x
For purposes of computing the foregoing ratios, earnings consist of pretax
income and fixed charges. Fixed charges consist of interest expense, related
amortization of debt expense, and the assumed interest component of rent
expense.
4
<PAGE>
SUMMARY FINANCIAL INFORMATION
The following table provides summarized financial information of the
Company, including its consolidated subsidiaries, at and for the nine months
ended September 30, 1995 and 1994 and each of the three years ended December 31,
1994, 1993 and 1992. The financial data have been derived from the September
1995 10-Q, the Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 1994 and the 1994 10-K and are qualified in their entirety by such
reports. See "Incorporation of Certain Documents by Reference."
<TABLE>
<CAPTION>
(UNAUDITED)
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
----------------------- ------------------------------------
1995 1994 1994 1993 1992(1)
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND RATIOS)
<S> <C> <C> <C> <C> <C>
Summary Performance Data:
Gross premiums written............. $503,671 $420,251 $575,037 $431,582 $366,292
Net premiums written............... 382,689 318,722 438,201 336,941 268,023
Premiums earned.................... 358,376 280,933 395,731 306,379 250,533
Net investment income.............. 66,907 59,031 80,504 76,632 65,590
Net investment gains............... 16,077 3,033 2,155 19,095 9,081
Total revenues..................... 441,360 342,997 478,390 402,106 325,204
Net income......................... 43,568 26,228 35,612 42,351 22,443
Per Share Data:
Primary:
Average shares outstanding..... 17,942 17,938 17,895 18,420 18,313
Net income..................... $2.43 $1.46 $1.99 $2.30 $1.23
Fully Diluted:
Average shares outstanding..... 20,023 19,970 20,053 20,445 18,536
Net income..................... $2.31 $1.44 $1.95 $2.24 $1.21
Cash dividends per share........... .14 .12 .16 .16 .16
Balance Sheet Data:
Cash and investments(2)............ $1,598,583 $1,385,135 $1,414,527 $1,412,624 $1,258,016
Total assets(2)(3)................. 2,189,024 1,881,112 1,916,768 1,778,868 1,596,209
Claims and claims expenses,
gross(3)......................... 1,214,226 1,043,012 1,086,170 909,061 808,489
Claims and claims expenses, net of
reinsurance recoverables......... 919,387 771,738 808,433 697,221 626,090
Stockholders' equity(2)............ 429,650 339,058 319,085 375,540 309,221
Stockholders' equity per
share(2)......................... 24.39 19.30 18.23 21.13 17.35
Domestic Statutory Data:
Statutory composite ratio.......... 103.4% 106.0% 105.7% 110.9% 126.9%
Statutory surplus.................. $452,788 $408,190 $407,024 $406,163 $384,032
</TABLE>
- ------------
(1) In 1992, the Company adopted Statement of Financial Accounting Standards
("SFAS") No. 109, "Accounting for Income Taxes." The cumulative effect from
prior years increased net income by $12,057,000 or $.66 per share on a
primary basis and $.65 per share on a fully diluted basis. See Note 4 of
Notes to Consolidated Financial Statements incorporated by reference to
Exhibit 13 to the 1994 10-K.
(2) At December 31, 1993, the Company adopted SFAS No. 115, "Accounting for
Certain Investments in Debt and Equity Securities." Retroactive application
to prior periods is prohibited. See Note 1 of Notes to Consolidated
Financial Statements incorporated by reference to Exhibit 13 to the 1994
10-K.
(3) Reflects the adoption of SFAS No. 113, "Accounting and Reporting of
Reinsurance of Short-Duration and Long-Duration Contracts," in 1993, which
requires the classification of reinsurance recoverables on claims and claims
expenses (including incurred but not reported) and unearned premium to be
reported as assets. Years prior to 1993 have been reclassified to reflect
the adoption of SFAS No. 113.
5
<PAGE>
CONCURRENT OFFERING
Concurrently (or substantially concurrently), by a separate prospectus,
1,500,000 shares of the Company's Common Stock are being offered by the Company
to the public. The Company also has granted to the underwriters of that offering
a 30-day option to purchase up to 225,000 additional shares solely to cover
over-allotments, if any.
USE OF PROCEEDS
The Company anticipates that substantially all of the net proceeds to the
Company from the sale of the Notes and from the offering of Common Stock will be
contributed to NAC to increase its statutory capital base and will be invested
in accordance with the Company's investment guidelines for all of its invested
assets.
6
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company and its
consolidated subsidiaries as of September 30, 1995 and as adjusted to reflect
the sale of the Notes offered hereby and the 1,500,000 shares of Common Stock
also being offered by the Company. The information contained in the table
assumes the over-allotment option with respect to the Common Stock is not
exercised. This table should be read in conjunction with the Company's September
1995 10-Q and 1994 10-K. See "Incorporation of Certain Documents by Reference."
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1995
------------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS)
<S> <C> <C>
Long-term Debt(1):
Senior Debt:
Revolving Credit and Term Loan(2)............................... $ 17,762 $ 17,762
8% Notes due 1999............................................... 100,000 100,000
7.15% Notes due 2005............................................ -- 100,000
-------- -----------
Total Senior Debt........................................... 117,762 217,762
5.25% Convertible Subordinated Debentures due 2002................ 100,000 100,000
-------- -----------
Total Long-term Debt........................................ 217,762 317,762
-------- -----------
Stockholders' Equity(3):
Preferred stock, $1.00 par value:
1,000 shares authorized, none issued (includes 90 shares of
Series A Junior Participating Preferred Stock)................ -- --
Common stock, $.10 par value:
25,000 shares authorized, 19,753 shares issued; 21,253 as
adjusted...................................................... 1,975 2,125
Additional paid-in capital........................................ 196,845 244,125
Unrealized appreciation of investments, net of tax................ 19,738 19,738
Currency translation adjustments, net of tax...................... 2,283 2,283
Retained earnings................................................. 251,363 251,363
Less treasury stock, at cost (2,136 shares) ...................... (42,554) (42,554)
-------- -----------
Total Stockholders' Equity.................................. 429,650 477,080
-------- -----------
Total Long-term Debt and Stockholders' Equity............... $647,412 $ 794,842
-------- -----------
-------- -----------
</TABLE>
- ------------
(1)For information with respect to interest rates, maturities, priorities and
restrictions related to outstanding long-term debt, see Note 7 of Notes to
Consolidated Financial Statements incorporated by reference to Exhibit 13 to
the 1994 10-K.
(2) The Revolving Credit and Term Loan is a component of "Other liabilities" on
the Company's Consolidated Balance Sheet included in the Consolidated
Financial Statements incorporated by reference to Exhibit 13 to the 1994
10-K.
(3) For information with respect to stock options, see Note 8 of Notes to
Consolidated Financial Statements incorporated by reference to Exhibit 13 to
the 1994 10-K.
7
<PAGE>
DESCRIPTION OF THE NOTES
GENERAL
The Notes are to be issued under an indenture (the "Indenture"), to be
entered into by the Company and Shawmut Bank Connecticut, National Association,
as trustee (the "Trustee"). A copy of the form of the Indenture has been filed
as an exhibit to the Registration Statement of which this Prospectus is a part.
The following summary of certain provisions of the Indenture does not purport to
be complete and is subject to, and is qualified in its entirety by reference to,
all the provisions of the Indenture and the Notes, including the definitions
therein of terms not defined in this Prospectus. Wherever particular provisions
of the Indenture or terms defined therein are referred to, such provisions or
definitions are incorporated by reference as a part of the statements made.
The Notes will be unsecured obligations of the Company limited to
$100,000,000 aggregate principal amount and will be pari passu with all other
unsecured senior indebtedness of the Company which, at September 30, 1995, was
$117,762,000. The Notes will be issued in fully registered form, without
coupons, in denominations of $1,000 or integral multiples thereof and will bear
interest from November 24, 1995, at a rate of 7.15% per annum. The Notes will
mature on November 15, 2005.
Interest on the Notes will be payable semi-annually in arrears on
May 15 and November 15 of each year, commencing May 15, 1996, to
holders of record of the Notes at the close of business on the
May 1 or November 1 immediately preceding such May 15 or November 15.
Interest on the Notes will be computed on the basis of a 360-day
year of twelve 30-day months.
Principal and interest are payable at the office of the Paying Agent but, at
the option of the Company, interest may be paid by check mailed to the
registered holders at their registered addresses. The Notes (other than Global
Notes and beneficial interests therein) are transferable and exchangeable at the
office of the Registrar. The Company has initially appointed the Trustee as the
Paying Agent and the Registrar and Shawmut Trust Company as Co-Paying Agent and
Co-Registrar. The Trustee's current address is 777 Main Street, Hartford,
Connecticut 06115.
The Company does not intend to apply for listing of the Notes on any
securities exchange.
The Notes are not redeemable, and the Company has no sinking fund
obligations with respect to the Notes.
The Company primarily conducts its operations through its subsidiaries. The
rights of the Company and its creditors, including the holders of the Notes
offered hereby, to participate in the assets of any subsidiary upon the latter's
liquidation or reorganization will be subject to the prior claims of the
subsidiary's creditors except to the extent that the Company may itself be a
creditor with recognized claims against the subsidiary. As of September 30,
1995, the Company's consolidated subsidiary had total aggregate assets of $2.1
billion and total aggregate liabilities of $1.5 billion.
GLOBAL NOTES
Upon issuance, all Notes will be represented by one or more fully registered
Global Notes. Each such Global Note will be deposited with, or on behalf of, the
Depositary, and registered in the name of the Depositary or a nominee thereof.
Unless and until it is exchanged in whole or in part for Notes in definitive
form, no Global Note may be transferred except as a whole by the Depositary to a
nominee of such Depositary or by a nominee of such Depositary to such
Depositary.
The Depositary has advised the Company as follows: The Depositary is a
limited-purpose trust company organized under the Banking Laws of the State of
New York, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial
8
<PAGE>
Code, and a "clearing agency" registered pursuant to the provisions of Section
17A of the 1934 Act. The Depositary was created to hold securities of its
participants (defined below) and to facilitate clearance and settlement
transactions among its participants in such securities through electronic book-
entry changes in accounts of the participants, thereby eliminating the need for
physical movement of securities certificates. The Depositary's participants
include securities brokers and dealers (including the Underwriters), banks,
trust companies, clearing corporations, and certain other organizations, some of
whom (and/or their representatives) own the Depositary. Access to the Depositary
book-entry system is also available to others, such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship with
a participant, either directly or indirectly.
Ownership of beneficial interests in Global Notes will be limited to Persons
that have accounts with the Depositary ("participants") or Persons that may hold
interests through participants. The Depositary has advised the Company that upon
the issuance of the Global Notes, the Depositary will credit, on its book-entry
registration and transfer system, the participants' accounts with the respective
principal amounts of beneficial interests in the Notes. Ownership of beneficial
interests in such Global Notes will be shown on, and the transfer of such
ownership interests will be effected only through, records maintained by the
Depositary (with respect to interests of participants) and on the records of
participants (with respect to interests of persons holding through
participants). The laws of some states may require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
limits and such laws may impair the ability to own, transfer or pledge
beneficial interests in Global Notes.
So long as the Depositary, or its nominee, is the registered owner of a
Global Note, the Depositary or its nominee, as the case may be, will be
considered the sole owner or Holder of such Global Note for all purposes under
the Indenture. Except as provided below, owners of beneficial interests in a
Global Note will not be entitled to have Notes registered in their names, will
not receive or be entitled to receive physical delivery of the Notes in
definitive form and will not be considered the owners or Holders thereof under
the Indenture. Accordingly, each person owning a beneficial interest in a Global
Note must rely on the procedures of the Depositary and, if such person is not a
participant, on the procedures of the participant through which such person owns
its interest, to exercise any rights of a Holder under the Indenture. The
Company understands that under existing industry practices, in the event that
the Company requests any action of Holders or that an owner of a beneficial
interest in such Global Note desires to give or take any action which a Holder
is entitled to give or take under the Indenture, the Depositary would authorize
the participants holding the relevant beneficial interests to give or take such
action, and such participants would authorize beneficial owners owning through
such participants to give or take such action or would otherwise act upon the
instructions of beneficial owners holding through them.
Payment of principal of, and interest on, the Global Notes will be made to
the Depositary or its nominee, as the case may be, as the sole Holder. None of
the Company, the Trustee or any other agent of the Company or agent of the
Trustee will have any responsibility or liability for any aspect of the records
relating to or payments made on account of beneficial ownership interest or for
supervising or reviewing any records relating to such beneficial ownership
interests. The Depositary, upon receipt of any payment of principal or interest
in respect of a Global Note, will credit the accounts of the participants with
payment in amounts proportionate to their respective beneficial interests in
such Global Note as shown on the records of the Depositary. Payments by
participants to owners of beneficial interests in a Global Note will be governed
by standing customer instructions and customary practices, as is now the case
with securities held for the account of customers in bearer form or registered
in "street name," and will be the responsibility of such participants.
If (x) the Depositary is at any time unwilling or unable to continue as
Depositary or the Depositary ceases to be a clearing agency registered under the
1934 Act or other applicable statute, (y) the Company executes and delivers to
the Trustee a Company order to the effect that the Global Notes shall
9
<PAGE>
be transferable and exchangeable or (z) an Event of Default has occurred and is
continuing, the Global Notes will be transferable or exchangeable for Notes in
definitive form of like tenor in an equal aggregate principal amount. Such
definitive Notes shall be registered in such name or names as the Depositary
shall instruct the Trustee. It is expected that such instructions may be based
upon directions received by the Depositary from participants with respect to
ownership of beneficial interests in such Global Notes. (Section 2.3)
CERTAIN COVENANTS
Consolidation, Merger and Sale of Assets. The Company shall not consolidate
with or merge with or into, or convey, transfer or lease all or substantially
all of its assets to, any person, unless (i) the resulting, surviving or
transferee person (if not the Company) is a person organized and existing under
the laws of the United States of America, any State thereof or the District of
Columbia, and such entity (if not the Company) expressly assumes by supplemental
indenture all of the obligations of the Company under the Notes and the
Indenture; (ii) immediately after giving effect to such transaction, no Default
has occurred and is continuing; (iii) if, as a result of any such consolidation
or merger or such conveyance, transfer or lease, properties or assets of the
Company would become subject to a mortgage, pledge, lien, security interest or
other encumbrance which would not be permitted under the Indenture, the Company
or such successor corporation or person will take such steps as will be
necessary effectively to secure all Notes equally and ratably with all
indebtedness secured thereby; and (iv) the Company delivers to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such supplemental indenture comply with
the Indenture. (Section 4.1) Upon any such consolidation, merger or transfer,
the resulting surviving or transferee person shall succeed to, and may exercise
every right and power of, the Company under the indenture. (Section 4.2)
Limitations on Disposition of Stock of Restricted Subsidiaries. The
Indenture provides that the Company will not, and will not permit any Subsidiary
to, sell, transfer or otherwise dispose of any shares of capital stock of any
Restricted Subsidiary (or of any Subsidiary having direct or indirect control of
any Restricted Subsidiary) except for, subject to the covenant relating to
consolidations, mergers and sales and conveyances of assets described in the
immediately preceding paragraph, (i) a sale, transfer or other disposition of
any capital stock of any Restricted Subsidiary (or of any Subsidiary having
direct or indirect control of any Restricted Subsidiary) to a wholly-owned
Subsidiary of the Company; (ii) a sale, transfer or other disposition of the
entire capital stock of any Restricted Subsidiary (or of any Subsidiary having
direct or indirect control of any Restricted Subsidiary) held by the Company and
its Subsidiaries for at least fair value (as determined by the Board of
Directors of the Company acting in good faith); or (iii) a sale, transfer or
other disposition of any capital stock of any Restricted Subsidiary (or of any
Subsidiary having direct or indirect control of any Restricted Subsidiary) for
at least fair value (as determined by the Board of Directors of the Company
acting in good faith) if, after giving effect thereto, the Company and its
Subsidiaries would own more than 80% of the issued and outstanding voting stock
of such Restricted Subsidiary (or Subsidiary). (Section 3.4)
The Company is not required pursuant to the Indenture to repurchase the
Notes, in whole or in part, with the proceeds of any sale, transfer or other
disposition of any shares of capital stock of any Restricted Subsidiary (or of
any Subsidiary having direct or indirect control of any Restricted Subsidiary).
Furthermore, the Indenture does not provide for any restrictions on the
Company's use of any such proceeds.
Limitations on Liens. The Indenture provides that the Company will not, nor
will it permit any Restricted Subsidiary to, incur, issue, assume or guarantee
any indebtedness for borrowed money (all such indebtedness for borrowed money
incurred, issued, assumed or guaranteed being "Debt") if such Debt is secured by
a Lien upon any property or assets, whether now owned or hereafter acquired, of
the Company or any Restricted Subsidiary or upon any shares of stock of a
Restricted Subsidiary without in any such case effectively providing that the
Notes (together with, if the Company shall so determine,
10
<PAGE>
any other Debt (or any bonds, debentures, notes or other similar evidences of
indebtedness, whether or not for borrowed money) of the Company or such
Restricted Subsidiary then existing or thereafter created which is not
subordinated to the Notes) shall be secured equally and ratably with or prior to
such Debt, except that the foregoing restriction shall not apply to:
(i) Liens on property of, or on any shares of stock of, any corporation
existing at the time such corporation becomes a Restricted Subsidiary;
(ii) Liens on property or shares of stock existing at the time of
acquisition thereof by the Company or any Restricted Subsidiary;
(iii) Liens on property or shares of stock hereafter acquired (or, in
the case of property, constructed (including construction of improvements or
additions to improvements on existing property)) by the Company or any
Restricted Subsidiary and created prior to, at the time of, or within one
year after such acquisition (or, in the case of property, the completion of
such construction (including construction of improvements or additions to
improvements on existing property) or commencement of commercial operation
of such property, whichever is later) to secure or provide for the payment
of all or any part of the purchase price (or, in the case of property
(including construction of improvements or additions to improvements on
existing property), the construction price) thereof;
(iv) Liens in favor of the Company or any Restricted Subsidiary;
(v) Liens in favor of the United States of America, any State thereof or
the District of Columbia, or any political subdivision, agency, department
or other instrumentality thereof, to secure progress, advance or other
payments pursuant to any contract or provision of any statute;
(vi) Liens on property of a person existing at the time such person is
merged into or consolidated with the Company or a Restricted Subsidiary; or
(vii) any extension, renewal or replacement (or successive extensions,
renewals or replacements), as a whole or in part, of any Lien referred to in
the foregoing clauses (i) to (vi), inclusive; provided, however, that (x)
such extension, renewal or replacement Lien shall be limited to all or a
part of the same property or shares of stock that secured the Lien extended,
renewed or replaced (plus improvements (including additions to improvements)
on such property) and (y) the Debt secured by such Lien at such time is not
increased (except, with respect to a Lien on property, to the extent that
additional Debt was incurred to provide for the payment of all or any part
of the construction price of improvements or additions to improvements on
such property).
Notwithstanding the above, the Company and one or more Restricted Subsidiaries
may, without securing the Notes, issue, assume or guarantee secured Debt which
would otherwise be subject to the foregoing restrictions, provided that after
giving effect thereto the aggregate amount of such Debt secured pursuant to such
exception (not including secured Debt permitted under the foregoing exceptions)
does not exceed 15% of Consolidated Tangible Net Worth at the time such Debt is
incurred. (Section 3.3)
Based on the Company's September 30, 1995 balance sheet included in the
September 1995 10-Q, as of the date of this Prospectus the amount of Debt which
the Company and its Restricted Subsidiaries would be permitted to secure
pursuant to the exception set forth in the last sentence of the preceding
paragraph would be approximately $64 million.
The following definitions apply to the covenants described above:
"Consolidated Tangible Net Worth" means, at any date, the total assets
appearing on the most recently prepared consolidated balance sheet of the
Company and its Subsidiaries as at the
11
<PAGE>
end of a fiscal quarter of the Company, prepared in accordance with
generally accepted accounting principles consistently applied, less (a) the
total liabilities appearing on such balance sheet, and (b) intangible
assets. "Intangible assets" means the value (net of any applicable
reserves), as shown on or reflected in such balance sheet, of: (i) all trade
names, trademarks, licenses, patents, copyrights and goodwill; (ii)
organizational and development costs; and (iii) unamortized debt discount
and expense, less unamortized premium. "Intangible assets" excludes deferred
policy acquisition costs and deferred income tax assets.
"Lien" means any mortgage, pledge, security interest, conditional sale
or other title retention agreement or other similar lien.
"Restricted Subsidiary" means any Subsidiary which is incorporated under
the laws of the United States of America, any State thereof or the District
of Columbia, and which is a regulated insurance or reinsurance company
principally engaged in one or more of the property, casualty and life
insurance businesses; provided, however, that no Subsidiary shall be a
Restricted Subsidiary if the total assets of such Subsidiary are less than
10% of the total assets of the Company and its consolidated Subsidiaries
(including such Subsidiary) in each case as set forth on the most recently
prepared balance sheets of such Subsidiary and the Company and its
consolidated Subsidiaries, respectively, as at the end of a fiscal quarter
of the Company or such Subsidiary, as applicable, and computed in accordance
with generally accepted accounting principles.
"Subsidiary" means a corporation of which a majority of the capital
stock having voting power under ordinary circumstances to elect a majority
of the board of directors is owned by (i) the Company, (ii) the Company and
one or more Subsidiaries or (iii) one or more Subsidiaries. (Section 1.1)
Based on the Company's September 30, 1995 balance sheet included in the
September 1995 10-Q, as of the date of this Prospectus, NAC is the Company's
only Restricted Subsidiary. As of September 30, 1995, NAC's assets represented
approximately 97% of the Company's consolidated total assets and NAC's net
income for the nine month period ended September 30, 1995 represented all of the
Company's consolidated net income during such period.
AMENDMENT AND WAIVER
Subject to certain exceptions, the Indenture may be amended with the written
consent of the holders of at least a majority in principal amount of the Notes
then outstanding and any past default or compliance with any provision may be
waived with the consent of the holders of at least a majority in principal
amount of the Notes then outstanding. (Section 8.2 and Section 5.4) However,
without the consent of each holder of any outstanding Note affected thereby, no
amendment may, among other things, (i) reduce the amount of Notes whose holders
must consent to an amendment; (ii) reduce the rate of or extend the time for
payment of interest on any Note; (iii) reduce the principal of or extend the
fixed maturity of any Note; (iv) make any Note payable in money other than that
stated in the Note; (v) impair the right to receive payment of principal of and
interest on or with respect to the Notes or impair the right to institute suit
for the enforcement of any payment on or with respect to any Note; or (vi) waive
certain payment defaults with respect to the Notes. (Section 8.2) Without the
consent of any holders of the Notes, the Company and the Trustee may amend the
Indenture (A) to cure any ambiguity, omission, defect or inconsistency, (B) to
provide for the assumption by a successor corporation of the obligations of the
Company under the Indenture, (C) to provide for uncertificated Notes in addition
to or in place of certificated Notes so long as such uncertificated Notes are in
registered form for the purposes of the Internal Revenue Code of 1986, as
amended, (D) to add guarantees of the Notes, (E) to add to the covenants of the
Company for the benefit of the holders of the Notes or to surrender any right or
power conferred upon the Company, (F) to comply with any requirement of the
Commission in connection with the qualification of the Indenture under the Trust
Indenture Act of
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<PAGE>
1939, as amended, and (G) to make any change that does not adversely affect the
rights of any holder of the Notes. (Section 8.1)
TRANSFER
The Notes will be issued only in registered form. The Notes (other than
Global Notes and beneficial interests therein) will be transferable only upon
the surrender to the Registrar of such Notes being transferred for registration
of transfer. (Section 2.7)
EVENTS OF DEFAULT
An Event of Default as defined in the Indenture includes the occurrence of
any of the following: (i) a default in the payment of principal of any Note when
due at its stated maturity, upon declaration or otherwise; (ii) a default in the
payment of interest on any Note when due, and such default continues for 30
days; (iii) a failure by the Company for 15 days after notice to comply with its
obligations under the covenants described above under "Certain
Covenants--Consolidation, Merger and Sale of Assets," and "Certain
Covenants--Limitations on Disposition of Stock of Restricted Subsidiaries"; (iv)
a failure by the Company for 60 days after notice to comply with its other
agreements contained in the Notes or in the Indenture; (v) the principal amount
of any indebtedness of the Company or any Subsidiary for borrowed money in
excess of $5,000,000 is not paid within any applicable grace period after final
maturity or is accelerated by the holders thereof because of an event of
default, and such failure to pay or acceleration continues for 15 days after
notice; or (vi) certain events of bankruptcy, insolvency or reorganization of
the Company or a Restricted Subsidiary. (Section 5.1)
If an Event of Default occurs and is continuing with respect to the
Indenture or the Notes, the Trustee or the holders of 25% in principal amount of
the outstanding Notes may declare the principal of and accrued interest on all
Notes to be due and payable. Upon such a declaration, or automatically in the
case of certain events of bankruptcy, insolvency or reorganization of the
Company or a Restricted Subsidiary, such principal and interest will be due and
payable immediately. Under certain circumstances, the holders of a majority in
principal amount of the outstanding Notes may rescind any such acceleration with
respect to such Notes and its consequences. (Section 5.2)
Prior to taking any action under the Indenture, the Trustee shall be
entitled to indemnification satisfactory to it in its sole discretion against
all losses and expenses caused by taking or not taking such action. Subject to
such provisions for indemnification and certain limitations contained in the
Indenture, the holders of a majority in principal amount of the Notes at the
time outstanding have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on the Trustee. (Section 5.5)
No holder of any Note may pursue any remedy with respect to the Indenture or
the Notes, unless (i) such holder shall have given to the Trustee written notice
of a continuing Event of Default with respect to the Notes; (ii) the holders of
at least 25% in principal amount of the outstanding Notes shall have made
written request to the Trustee to pursue the remedy, and shall have offered the
Trustee reasonable security or indemnity against any loss, liability or expense;
(iii) within 60 days following the receipt of such request and offer of security
and indemnity, the Trustee shall not have received from the holders of a
majority in principal amount of the outstanding Notes a direction inconsistent
with such request; and (iv) the Trustee shall have failed to comply with such
request within such 60-day period. (Section 5.6) Notwithstanding any other
provision of the Indenture, the right of a holder of a Note to receive payment
of the principal of and interest on such Note on or after the respective due
dates expressed in such Note, or to bring suit for the enforcement of any such
payment, shall not be impaired or affected without the consent of such holder.
(Section 5.7)
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<PAGE>
The Company will deliver to the Trustee within 120 days after the end of
each fiscal year of the Company an Officers' Certificate stating whether or not
any Default has occurred during such fiscal year. The Officers' Certificate
shall describe such Default, its status and what action the Company is taking or
proposes to take with respect thereto. (Section 3.5)
SATISFACTION AND DISCHARGE OF THE INDENTURE
The Indenture provides that when (i) the Company delivers to the Trustee all
outstanding Notes for cancellation or (ii) all outstanding Notes have become due
and payable and the Company irrevocably deposits with the Trustee funds
sufficient to pay at maturity all outstanding Notes, including interest thereon,
and if in either case the Company pays all other sums payable under the
Indenture by the Company, then the Indenture shall cease to be of further
effect, except for certain obligations, including those respecting the
obligations to register the transfer or exchange of the Notes, to replace
mutilated, destroyed, lost or stolen Notes and to maintain a Registrar and
Paying Agent in respect to the Notes. The Trustee shall acknowledge satisfaction
and discharge of the Indenture on demand of the Company accompanied by an
Officer's Certificate and an Opinion of Counsel and at the cost and expense of
the Company. (Section 7.1(a))
DEFEASANCE
The Indenture provides that the Company at any time may terminate its
obligations under the Indenture and the Notes ("defeasance"), except for certain
obligations, including those respecting the defeasance trust and obligations to
register the transfer or exchange of the Notes, to replace mutilated, destroyed,
lost or stolen Notes and to maintain a Registrar and Paying Agent in respect of
the Notes. (Sections 7.1(b) and (c))
If the Company exercises its defeasance option, payment of the Notes may not
be accelerated because of an Event of Default with respect thereto. (Section
7.1(b))
In order to exercise its defeasance option, the Company must (i) irrevocably
deposit in trust with the Trustee money or U.S. Government Obligations for the
payment of principal and interest on the Notes to maturity; (ii) deliver to the
Trustee an Opinion of Counsel to the effect that the holders of the Notes will
not recognize income, gain or loss for federal income tax purposes as a result
of such deposit, defeasance or discharge, and the trust resulting from the
deposit does not constitute, or is qualified as, a regulated investment company
under the Investment Company Act of 1940; (iii) comply with certain other
conditions; and (iv) deliver to the Trustee an Officers' Certificate and an
Opinion of Counsel, each stating that all conditions precedent to the defeasance
and discharge of the Notes have been complied with. (Section 7.2)
GOVERNING LAW
The Indenture provides that it will be governed by, and construed in
accordance with, the laws of the State of New York but without giving effect to
applicable principles of conflicts of law to the extent that the application of
the law of another jurisdiction would be required thereby. (Section 9.9)
CONCERNING THE TRUSTEE
Shawmut Bank Connecticut, National Association will act as trustee for the
Notes issued under the Indenture. Shawmut Bank Connecticut, National Association
currently serves as trustee under the indenture relating to the Company's 8%
Notes due 1999 and as trustee under the indenture relating to the Company's 5
1/4% Convertible Subordinated Debentures due 2002 (the "Convertible Debenture
Indenture"), is a lender under the Company's revolving credit and term loan
facility and NAC's line of credit agreement and provides other commercial
banking services to the Company on a regular basis. Upon the occurrence of a
default under any or all of the Indenture, the Convertible Debenture Indenture,
the revolving credit and term loan facility or the line of credit agreement, the
Trustee may be required to resign as trustee under the Indenture, in which case
a successor trustee will be appointed.
14
<PAGE>
UNDERWRITING
The names of the Underwriters of the Notes offered hereby and the principal
amount thereof which each has severally agreed to purchase from the Company,
subject to the terms and conditions specified in the Underwriting Agreement,
dated November 20, 1995, are as follows:
PRINCIPAL AMOUNT
UNDERWRITER OF NOTES
----------- ----------------
Dillon, Read & Co. Inc............................. $ 50,000,000
Oppenheimer & Co., Inc............................. 50,000,000
----------------
Total...................................... $100,000,000
----------------
----------------
Dillon, Read & Co. Inc. ("Dillon Read") is the lead Underwriter. Oppenheimer
& Co., Inc. ("Oppenheimer") is co-lead. If any Notes offered hereby are
purchased by the Underwriters, all Notes will be so purchased. The Underwriting
Agreement contains provisions whereby, if either Underwriter defaults in its
obligation to purchase Notes, and if the aggregate obligations of the
Underwriter so defaulting do not exceed $10,000,000, the remaining Underwriter
must assume such obligations.
The Notes are being initially offered severally by the Underwriters at the
price set forth on the cover page hereof and to certain dealers at such price
less a concession not in excess of 0.40% of the principal amount. The
Underwriters may allow, and such dealers may re-allow, a concession not in
excess of 0.25% of the principal amount on sales to certain dealers. The
offering of Notes is made for delivery when, as and if accepted by the
Underwriters and subject to prior sale and withdrawal, cancellation or
modification of the offer without notice. The Underwriters reserve the right
to reject any offer for the purchase of Notes. After the Notes are released
for sale to the public, the public offering price and other selling terms may
be changed by the Underwriters.
The Notes will not be listed on any securities exchange, and there can be no
assurance that there will be a secondary market for the Notes. From time to time
the Underwriters may make a market in the Notes. However, at this time no
determination has been made as to whether or not the Underwriters will make a
market in the Notes.
The Company has agreed in the Underwriting Agreement to indemnify the
Underwriters against certain liabilities, including liabilities under the Act,
or to contribute to payments that the Underwriters may be required to make in
respect thereof.
John P. Birkelund, a Director of the Company, is Chairman of Dillon Read.
Stephen Robert, a Director of the Company, is Chairman of Oppenheimer. During
1994, Dillon Read and Oppenheimer were retained to provide general financial
advisory services to the Company in 1994 and 1995 for a fee of $100,000 per
firm. Further, Oppenheimer provides investment advisory services with respect to
the Company's pension funds and a small portion of the Company's investment
portfolio. In addition, Dillon Read and Oppenheimer are acting as co-managing
underwriters in connection with the offering of the Common Stock.
LEGAL MATTERS
Certain legal matters in connection with the Notes offered hereby will be
passed upon for the Company by Martha G. Bannerman, Vice President and General
Counsel of the Company, and for the Underwriters by Morgan, Lewis & Bockius LLP,
New York, New York. Ms. Bannerman beneficially owns 68,402 shares of Common
Stock of the Company, including 51,645 shares issuable pursuant to exercisable
options.
15
<PAGE>
EXPERTS
The consolidated financial statements of the Company incorporated by
reference in the Company's Annual Report on Form 10-K for the year ended
December 31, 1994, have been audited by Ernst & Young LLP, independent auditors,
as set forth in their report thereon included therein and incorporated herein by
reference. Such consolidated financial statements are incorporated herein by
reference in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
With respect to the unaudited consolidated interim financial information for
the nine month periods ended September 30, 1995 and 1994 incorporated by
reference herein, Ernst & Young LLP have reported that they have applied limited
procedures in accordance with professional standards for a review of such
information. However, their separate reports, included in the Company's
quarterly reports on Form 10-Q for the quarters ended September 30, 1995, June
30, 1995 and March 31, 1995 and incorporated herein by reference, state that
they did not audit and they do not express an opinion on that interim financial
information. Accordingly, the degree of reliance on their report on such
information should be restricted in light of the limited nature of the review
procedures applied. The independent auditors are not subject to the liability
provisions of Section 11 of the Act for their report on the unaudited interim
financial information because such report is not a "report" or a "part" of the
Registration Statement prepared or certified by the auditors within the meaning
of Sections 7 and 11 of the Act.
16
<PAGE>
======================================= =======================================
NO PERSON IS AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NAC RE CORP.
OTHER THAN THOSE CONTAINED OR INCORPORATED
BY REFERENCE IN THIS PROSPECTUS, AND, IF
GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL OR A -------------------
SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES OTHER THAN THE NOTES DESCRIBED
IN THIS PROSPECTUS. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY SUCH NOTES
IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER
OR SOLICITATION IS UNLAWFUL. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THERE HAS BEEN $100,000,000
NO CHANGE IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE HEREOF OR THAT THE INFORMATION
CONTAINED OR INCORPORATED BY REFERENCE HEREIN 7.15% NOTES DUE NOVEMBER 15, 2005
IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE
DATE OF SUCH INFORMATION.
-------------------
TABLE OF CONTENTS
PAGE
---- PROSPECTUS
Available Information................. 2
Incorporation of Certain Documents by
Reference........................... 2 November 20, 1995
The Company........................... 3
Ratio of Earnings to Fixed Charges.... 4
Summary Financial Information......... 5 -------------------
Concurrent Offering................... 6
Use of Proceeds....................... 6
Capitalization........................ 7
Description of the Notes.............. 8
Underwriting.......................... 15 DILLON, READ & CO. INC.
Legal Matters......................... 15
Experts............................... 16 OPPENHEIMER& CO., INC.
======================================= =======================================
