<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999.
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period to .
----------------------- ------------------
Commission file number 0-14737
TRENWICK GROUP INC.
(Exact name of registrant as specified in its charter)
Delaware 06-1152790
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Canterbury Green
Stamford, Connecticut 06901
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203) 353-5500
None
-----
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
Indicate the number of shares outstanding of each of the issuer's classes of
common stock.
Class Outstanding at July 31, 1999
----- ----------------------------
Common Stock, $.10 par value 10,630,510
<PAGE> 2
TRENWICK GROUP INC.
INDEX
<TABLE>
<CAPTION>
Page
PART I. Financial Information Number
------
<S> <C>
Consolidated Balance Sheets
June 30, 1999 and December 31, 1998 3
Consolidated Statements of Income and Comprehensive Income
Three and Six Months Ended June 30, 1999 and 1998 4
Consolidated Statements of Changes in Common Stockholders' Equity
Three and Six Months Ended June 30, 1999 and 1998 5
Consolidated Statements of Cash Flows
Six Months Ended June 30, 1999 and 1998 6
Notes to Consolidated Financial Statements 7-9
Management's Discussion and Analysis
of Financial Condition and Results of Operations 10-14
PART II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 6. Exhibits and Reports on Form 8-K 15
Signatures 16
</TABLE>
<PAGE> 3
TRENWICK GROUP INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
----------- -----------
<S> <C> <C>
(dollars in thousands)
Assets
Securities available for sale at fair value:
Debt securities (amortized cost: $874,037 and $867,552) $ 876,747 $ 893,020
Equity securities (cost: $56,493 and $44,342) 60,967 49,188
Cash and cash equivalents 19,463 63,003
----------- -----------
Total investments and cash 957,177 1,005,211
Accrued investment income 16,001 15,974
Receivables from ceding insurers 152,777 138,550
Reinsurance recoverable balances, net 149,931 140,173
Prepaid reinsurance premiums 22,605 22,632
Deferred policy acquisition costs 44,179 35,261
Net deferred income taxes 20,826 14,101
Other assets 21,561 20,359
----------- -----------
Total assets $ 1,385,057 $ 1,392,261
=========== ===========
Liabilities and common stockholders' Equity
Liabilities:
Unpaid claims and claims expenses $ 666,101 $ 682,428
Unearned premium income 181,658 152,051
6.70% senior notes due 2003 75,000 75,000
Other liabilities 29,710 24,753
----------- -----------
Total liabilities 952,469 934,232
----------- -----------
Company-obligated mandatorily redeemable preferred
capital securities of subsidiary trust holding solely junior
subordinated debentures of Trenwick Group Inc. 110,000 110,000
----------- -----------
Common stockholders' equity:
Common stock, $.10 par value, 30,000,000 shares
authorized; 10,630,510 and 11,051,394 shares outstanding 1,063 1,105
Additional paid-in-capital 111,747 124,180
Deferred compensation under stock award plan (4,297) (2,905)
Retained earnings 214,532 206,312
Accumulated other comprehensive income (457) 19,337
----------- -----------
Total common stockholders' equity 322,588 348,029
----------- -----------
Total liabilities and common stockholders' equity $ 1,385,057 $ 1,392,261
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE> 4
TRENWICK GROUP INC.
CONSOLIDATED STATEMENTS OF INCOME AND
COMPREHENSIVE INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------- ---------------------------
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
(in thousands except per share data)
Revenues:
Net premiums earned $ 66,071 $ 70,964 $ 125,039 $ 116,788
Net investment income 13,317 14,976 27,140 27,360
Net realized investment gains 523 540 3,029 1,260
Other income (loss) (141) 320 113 332
--------- --------- --------- ---------
Total revenues 79,770 86,800 155,321 145,740
--------- --------- --------- ---------
Expenses:
Claims and claims expenses incurred 43,348 43,071 81,324 69,576
Policy acquisition costs 18,046 20,773 34,453 35,931
Underwriting expenses 7,269 7,112 13,036 10,568
Amortization of goodwill 5 -- 43 --
General and administrative expenses 961 1,025 2,162 1,849
Interest expense 1,344 1,291 2,696 1,349
Minority interest in subsidiary trust 2,426 2,425 4,851 4,851
--------- --------- --------- ---------
Total expenses 73,399 75,697 138,565 124,124
--------- --------- --------- ---------
Income before income taxes 6,371 11,103 16,756 21,616
Income taxes 706 2,128 2,986 3,396
--------- --------- --------- ---------
Net income $ 5,665 $ 8,975 $ 13,770 $ 18,220
========= ========= ========= =========
BASIC EARNINGS PER SHARE $ .54 $ .75 $ 1.30 $ 1.53
========= ========= ========= =========
DILUTED EARNINGS PER SHARE $ .53 $ .74 $ 1.28 $ 1.51
========= ========= ========= =========
DIVIDENDS PER COMMON SHARE $ .26 $ .25 $ .52 $ .50
========= ========= ========= =========
Comprehensive income (loss):
Net Income $ 5,665 $ 8,975 $ 13,770 $ 18,220
Other comprehensive income (loss):
Unrealized investment gains (losses), net of
income taxes (9,215) 1,636 (13,051) 2,961
Realized investment gains (losses), net of
income taxes, included in net income (340) (351) (1,969) (819)
Foreign currency translation adjustment,
net of income taxes (2,119) (1) (4,774) (1)
--------- --------- --------- ---------
Total other comprehensive income (loss) (11,674) 1,284 (19,794) 2,141
--------- --------- --------- ---------
Comprehensive income (loss) $ (6,009) $ 10,259 $ (6,024) $ 20,361
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE> 5
TRENWICK GROUP INC.
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCKHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
----------------------- -----------------------
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
(dollars in thousands)
Common stockholders' equity, beginning of period $ 331,082 $ 365,244 $ 348,029 $ 357,649
Common stock, $.10 par value, and additional paid-in-capital:
Exercise of employer stock options
(4,500 and 27,000 shares) -- 132 -- 460
Income tax (expense)/benefit from compensation deductions
Restricted common stock awarded (2) -- (18) 207
(65,985 and 82,889 shares)
Common stock purchased and retired -- -- 1,914 2,952
(486,869 and 4,250 shares)
-- -- (14,371) (150)
Deferred compensation under stock award plan:
Restricted common stock awarded
Compensation expense recognized -- -- (1,914) (2,952)
283 153 522 274
Retained earnings:
Net income
Cash dividends ($.26, $.25, $.52 and $.50) 5,665 8,975 13,770 18,220
(2,766) (3,014) (5,550) (6,027)
Accumulated other comprehensive income:
Other comprehensive income (loss)
(11,674) 1,284 (19,794) 2,141
--------- --------- --------- ---------
Common stockholders' equity, end of period
$ 322,588 $ 372,774 $ 322,588 $ 372,774
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE> 6
TRENWICK GROUP INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
---------------------------
1999 1998
--------- ---------
<S> <C> <C>
(in thousands)
Cash flows from operating activities:
Premiums collected $ 135,275 $ 112,853
Ceded premiums paid (18,395) (34,781)
Claims and claims expenses paid (128,738) (80,183)
Claims and claims expenses recovered 12 978 8,914
Underwriting expenses paid (15,727) (12,542)
--------- ---------
Cash used for underwriting activities (14,607) (5,739)
Net investment income received 29,509 28,384
Interest expense and subsidiary trust dividends paid (7,428) (4,809)
Income taxes recovered (paid) 1,744 (6,443)
General and administrative expense (2,162) (1,849)
Other income received 116 11
--------- ---------
Cash provided by operating activities 7,172 9,555
--------- ---------
Cash flows for investing activities:
Purchases of debt securities (337,785) (252,322)
Sales of debt securities 72,028 233,262
Maturities of debt securities 246,368 33,654
Purchases of equity securities (20,345) (5,382)
Sales of equity securities 12,023 1,453
Investment in subsidiary, net of cash acquired (171) (39,784)
Additions to premises and equipment (1,279) (203)
--------- ---------
Cash used for investing activities (29,161) (29,322)
--------- ---------
Cash flows for financing activities:
Repurchase of common stock (14,924) (150)
Dividends paid (5,550) (6,027)
Issuance costs of senior notes (2) (784)
Issuance of senior notes -- 75,000
Issuance of common stock -- 454
--------- ---------
Cash provided by (used for) financing activities (20,476) 68,493
--------- ---------
Effect of exchange rate on cash (1,075) (692)
Change in cash and cash equivalents (43,540) 48,034
Cash and cash equivalents, beginning of period 63,003 12,847
--------- ---------
Cash and cash equivalents, end of period $ 19,463 $ 60,881
========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
6
<PAGE> 7
TRENWICK GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The interim consolidated financial statements include those of Trenwick
Group Inc. and its subsidiaries ("Trenwick" or the "Company") and have
been prepared in conformity with generally accepted accounting principles
applied on a basis consistent with prior periods. Certain items in the
financial statements have been reclassified to conform with the 1999
presentation.
Management is required to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
The interim consolidated financial statements are unaudited; however, in
the opinion of management, the interim consolidated financial statements
include all adjustments, consisting only of normal recurring adjustments,
necessary for a fair statement of the results for the interim periods.
These interim statements should be read in conjunction with the 1998
audited financial statements and related notes.
Acquisition of Trenwick International Limited
Trenwick International's insurance operations were included in the
Company's results beginning with the second quarter of 1998 following its
acquisition by the Company on February 27, 1998.
2. ACQUISITION OF CHARTWELL RE CORPORATION
On June 21, 1999, Trenwick and Chartwell Re Corporation ("Chartwell")
signed a definitive agreement for Trenwick to acquire Chartwell through a
merger. Under the terms of the merger agreement, shareholders of Chartwell
will receive 0.825 Trenwick shares for each Chartwell share in a tax-free
transaction. Based on Trenwick's closing price of $28.88 per share on June
21, 1999, each Chartwell share would be valued at $23.82, and the total
consideration for the acquisition, including the assumption of Chartwell's
debt and the planned purchase by Chartwell of reinsurance, would be
approximately $368 million. The equity consideration plus the cost of
reinsurance is approximately equal to 0.9 times Chartwell's book value at
March 31, 1999.
7
<PAGE> 8
3. REINSURANCE
Trenwick purchases reinsurance to reduce its exposure to catastrophe
losses and other large losses in all lines of business. Trenwick, however,
remains liable in the event that its retrocessionaires do not meet their
contractual obligations. The effects of reinsurance on premiums written,
premiums earned and claims and claims expenses incurred are as follows (in
thousands):
<TABLE>
<CAPTION>
Premiums Written
---------------------------------------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------- ---------------------------
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Direct $ 21,320 $ 23,176 $ 41,359 $ 23,176
Assumed 75,785 69,181 161,299 130,710
Ceded (19,769) (17,401) (44,528) (34,437)
--------- --------- --------- ---------
Net $ 77,336 $ 74,956 $ 158,130 $ 119,449
========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
Premiums Earned
---------------------------------------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------- ---------------------------
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Direct $ 17,024 $ 19,046 $ 33,940 $ 19,046
Assumed 69,120 70,049 134,712 134,475
Ceded (20,073) (18,131) (43,613) (36,733)
--------- --------- --------- ---------
Net $ 66,071 $ 70,964 $ 125,039 $ 116,788
========= ========= ========= =========
</TABLE>
The company recorded ceded claims and claims expenses incurred of $16,773 and
$43,367 for the second quarter and first half of 1999 compared to $13,042 and
$33,248 for the same periods in 1998.
4. STOCKHOLDERS' EQUITY
Preferred Stock
Trenwick has 2,000,000 shares of $.10 par value preferred stock authorized
and none outstanding.
Common Stock
For the six months ended June 30, 1999, Trenwick awarded key employees an
aggregate of 65,985 shares of common stock under the terms of the 1993
Stock Plan, at an average price of $29.00 per share (approximately
$1,914,000). Trenwick is recognizing compensation expense determined by
the value of the shares, amortized over a five year vesting period. During
the period, 8,369 shares were repurchased at an average price of $31.54
per share (approximately $264,000) in connection with the satisfaction of
withholding taxes payable upon the vesting of shares previously awarded
under the plan.
8
<PAGE> 9
During the first half of 1999, Trenwick purchased 478,500 shares under its
buyback plan at an average price of $29.48 per share. Trenwick has an
authorization of 21,000 shares remaining under the current plan.
Dividends declared and paid by Trenwick during the first half of 1999 were
approximately $5,550,000.
5. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted
earnings per share (in thousands except per share data):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- ----------------------
1999 1998 1999 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
NET INCOME AVAILABLE TO COMMON
STOCKHOLDERS: $ 5,665 $ 8,975 $13,770 $18,220
======= ======= ======= =======
WEIGHTED AVERAGE SHARES OF COMMON
STOCK OUTSTANDING:
Weighted average shares outstanding (basic) 10,476 11,954 10,626 11,944
Weighted average shares issuable on exercise
of employee stock options, net of assumed
repurchases 145 195 128 164
------- ------- ------- -------
Weighted average shares outstanding
(diluted) 10,621 12,149 10,754 12,108
======= ======= ======= =======
PER SHARE AMOUNTS:
Basic $ .54 $ .75 $ 1.30 $ 1.53
======= ======= ======= =======
Diluted $ .53 $ .74 $ 1.28 $ 1.51
======= ======= ======= =======
</TABLE>
9
<PAGE> 10
MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
Trenwick Group Inc. ("Trenwick") is a holding company with two principal
operating subsidiaries, Trenwick America Reinsurance Corporation ("Trenwick
America Re"), which reinsures property and casualty risks written by U.S.
insurance companies, and Trenwick International Limited ("Trenwick
International"), which writes insurance and reinsurance property and casualty
risks outside of the U.S. Substantially all of Trenwick America Re's business is
produced by reinsurance brokers. Trenwick International obtains its business
from a variety of resources, including insurance and reinsurance brokers.
Trenwick America Re and Trenwick International underwrite both treaty and
facultative business.
ACQUISITION OF CHARTWELL RE CORPORATION
Trenwick and Chartwell Re Corporation ("Chartwell") signed a definitive
agreement on June 21, 1999 for Trenwick to acquire Chartwell through a merger.
Under the terms of the merger agreement, shareholders of Chartwell will receive
0.825 Trenwick shares for each Chartwell share in a tax-free transaction. On a
combined basis, the new Trenwick would have total assets in excess of $3.0
billion, shareholders' equity of approximately $500 million and total
capitalization of approximately $800 million. The combination of the two
companies is expected to provide a cost-effective means of augmenting capital,
accelerating premium growth and adding structural platforms for future
expansion. The addition of Chartwell's U.S. reinsurance business, its admitted
and non-admitted U.S. insurance companies and its operations at Lloyd's will
further Trenwick's strategy of entering new markets and product lines. The
acquisition is expected to generate substantial economies, producing a
transaction that will be accretive to Trenwick's shareholders. Trenwick also
believes that the acquisition will provide additional means for competing under
currently difficult industry conditions. Subject to shareholder and regulatory
approvals and other customary closing conditions, Trenwick expects to close the
transaction in the fourth quarter of 1999.
OPERATING RESULTS
Trenwick reported consolidated net income of $5.7 million, or $.54 per share,
for the second quarter of 1999 compared to $9.0 million, or $.75 per share, for
the second quarter of 1998. Net income for the second quarter of 1999 and 1998
includes after-tax realized investment gains of $349,000 or $.03 per share and
$351,000 or $.03 per share, respectively. Net income per share on a diluted
basis was $.53 for the second quarter of 1999 compared to $.74 for the second
quarter of 1998. Operating income for the second quarter of 1999 was $5.3
million or $.51 per share compared to $8.6 million or $.72 per share for the
second quarter of 1998.
For the first half of 1999, Trenwick's consolidated net income was $13.8 million
or $1.30 per share, compared to $18.2 million or $1.53 per share in the first
half of 1998. Net income for the first half of
10
<PAGE> 11
1999 and 1998 includes after-tax realized investment gains of $2.0 million or
$.19 per share and $819,000 or $.07 per share, respectively. Net income per
diluted share was $1.28 for the first half of 1999 compared to $1.51 for the
first half of 1998. Operating income for the first half of 1999 and 1998 was
$11.8 million or $1.11 per share and $17.4 million or $1.46 per share,
respectively.
Trenwick's net operating income in the second quarter was affected by continued
competitive market conditions in all segments of its business and by declining
interest rates, which primarily impacted Trenwick International's investment
income. Net income was also reduced by costs associated with merger and
acquisition activities. The pending acquisition of Chartwell will result in
additional charges which are expected to impact the second half of 1999. While
having a negative effect on short-term earnings, the Company believes its
increasing merger and acquisition costs represent an important business strategy
that will create incremental long-term value for shareholders. Trenwick plans to
continue to pursue this strategy after the Chartwell acquisition has been
completed.
PREMIUMS
Trenwick's consolidated net premium writings in the second quarter and first
half of 1999 totaled $77.3 million and $158.1 million compared to $75.0 million
and $119.5 million in 1998, respectively. The 32% increase for the first half of
1999 primarily reflects the inclusion of Trenwick International's business
beginning with the second quarter of 1998.
Net premium writings from Trenwick America, the group's U.S. operations,
amounted to $43.4 million and $87.6 million in the second quarter and first half
of 1999, compared to $40.1 million and $84.6 million for the same periods last
year. While the overall insurance and reinsurance market remains highly
competitive, the moderate increase in net premium writings for the second
quarter and the first half reflects the fact Trenwick America's continued
withdrawal from certain business has been offset by new business and growth in
certain existing accounts.
Trenwick International reported net premium writings of $33.9 million and $70.5
million in the second quarter and first half of 1999 compared to $34.8 million
for the second quarter and first half of last year. Trenwick International's
results were included in Trenwick's consolidated results from February 28, 1998,
the date of purchase. Despite competitive market conditions, management expects
net premium writings to grow as Trenwick International expands into new markets
that were prohibited by its previous parent and continues to restructure its
reinsurance program to retain a greater percentage of the business it writes.
UNDERWRITING EXPERIENCE
The combined ratio is one means of measuring the profitability of a property and
casualty company. The combined ratio reflects underwriting experience, but does
not reflect income from investments or provisions for income taxes. A combined
ratio below 100% indicates profitable underwriting and a combined ratio
exceeding 100% indicates unprofitable underwriting. Although a reinsurer may
have unprofitable underwriting results, the reinsurer may still be profitable
because of investment income earned on the accumulated invested assets.
11
<PAGE> 12
The following tables set forth Trenwick's combined ratios and the components
thereof calculated on a GAAP basis for the periods indicated:
<TABLE>
<CAPTION>
Three Months Ended
June 30,
------------------------------------------------------------------------------
1999 1998
-------------------------------------- ------------------------------------
Group Inter- Domestic Group Inter- Domestic
national national
-------------------------------------- ------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Claims and claims expense ratio 65.6% 66.6% 65.0% 60.7% 66.8% 57.2%
----- ----- ----- ----- ----- -----
Expense ratio:
Policy acquisition expense ratio 27.3 20.9 31.6 29.3 20.8 34.1
Underwriting expense ratio 11.0 15.7 7.8 10.0 14.6 7.4
----- ----- ----- ----- ----- -----
Total expense ratio 38.3% 36.6% 39.4% 39.3% 35.4% 41.5%
----- ----- ----- ----- ----- -----
Combined ratio 103.9% 103.2% 104.4% 100.0% 102.2% 98.7%
===== ===== ===== ===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended
June 30,
------------------------------------------------------------------------------
1999 1998
-------------------------------------- ------------------------------------
Group Inter- Domestic Group Inter- Domestic
national national
-------------------------------------- ------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Claims and claims expense ratio 65.0% 68.1% 63.1% 59.6% 66.8% 57.5%
----- ----- ----- ----- ----- -----
Expense ratio:
Policy acquisition expense ratio 27.6 20.6 32.0 30.8 20.8 33.6
Underwriting expense ratio 10.4 14.3 7.9 9.0 14.6 7.5
----- ----- ----- ----- ----- -----
Total expense ratio 38.0% 34.9% 39.9% 39.8% 35.4% 41.1%
----- ----- ----- ----- ----- -----
Combined ratio 103.0% 103.0% 103.0% 99.4% 102.2% 98.6%
===== ===== ===== ===== ===== =====
</TABLE>
As indicated in the preceding table Trenwick's claims and claims expense ratio
increased from 60.7% and 59.6% to 65.6% and 65.0% primarily due to Trenwick's
domestic business. Trenwick's claims and claims expense ratio for the first half
of 1999 includes favorable reserve development of approximately $2.0 million
compared to approximately $3.0 million of favorable reserve development for the
same period in 1998.
The increase in Trenwick's domestic claims and claims expense ratio for the
quarter and first half of 1999 resulted from higher loss ratios selected on its
property business written during the first half reflecting a change in the
business mix. The Company wrote two large non-standard automobile treaty
accounts. A significant portion of the premiums associated with these accounts
represents automobile physical damage, a property line. Included in Trenwick's
domestic claims and claims expense ratio for the first half of 1999 is favorable
reserve development of $388,000.
Due to different types of business underwritten by Trenwick International,
underwriting results in that subsidiary reflect a higher claims and claims
expense ratio than Trenwick's domestic business. Included in Trenwick
International's claims and claims expense ratio for the first half of 1999 is
favorable reserve development of $1.6 million.
12
<PAGE> 13
INVESTMENT INCOME
Trenwick's net investment income of $13.3 million and $27.1 million decreased
11% and 1%, respectively, in the second quarter and first half of 1999 compared
to $15 million and $27.4 million for the same periods in 1998. Pre-tax yields on
invested assets, excluding equity securities, averaged 6.0% in 1999 and 6.3% in
1998. The decrease in investment income is due to reduced yields on invested
assets, reduced operating cash flow and a decrease in invested assets from the
repurchase of shares.
After-tax net investment income in the second quarter and first half of 1999 was
$9.9 million and $20.1 million compared to $11.1 million and $20.5 million for
the comparative periods in 1998. The effective income tax rate on net investment
income for the first half of 1999 was approximately 25.8% versus 25.2% for the
same period in 1998.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1999, Trenwick's consolidated investment and cash totaled $957.2
million, as compared to $1.0 billion at December 31, 1998. The fair value of the
Company's debt securities portfolio exceeded amortized cost of $874.0 million
and $867.6 million by $2.7 million and $25.5 million at June 30, 1999 and
December 31, 1998, respectively. At June 30, 1999 and December 31, 1998, the
fair value of the Company's equity securities exceeded cost of $56.5 million and
$44.3 million by $4.5 million and $4.9 million, respectively.
Trenwick generally limits its investments in debt securities that are rated
below investment grade, as these investments are subject to a higher degree of
credit risk than investment grade securities. Trenwick closely monitors its
below investment grade securities as well as the creditworthiness of the
portfolio as a whole. When fair values decline for reasons other than changes in
interest rates or other perceived temporary conditions, the security is written
down to its net realizable value. In the first half of 1999, Trenwick wrote down
the value of certain securities by $3.5 million.
As of June 30, 1999, Trenwick's consolidated stockholders' equity totaled $322.6
million or $30.34 per share, as compared to $348.0 million or $31.49 per share
at December 31, 1998. Since December 31, 1998, the unrealized appreciation of
debt and equity investments decreased $15 million, net of tax, or $1.41 per
share. Reflected in consolidated stockholders' equity during the first half of
1999 is the repurchase of 486,869 shares of Trenwick's common stock at an
average price of $29.52 totaling approximately $14.4 million. Trenwick America
Re's statutory surplus was $312.1 million as of June 30, 1999, compared to
$330.5 million at December 31, 1998. Trenwick International's statutory surplus
was $127.8 million as of June 30, 1999 compared to $131.9 million at December
31, 1998.
Cash flow from operations of $7.2 million in the first half of 1999 decreased
approximately 25% compared to cash flow from operations of $9.6 million in the
first half of 1998. The reduction in cash flow from operations was due to a
large amount of paid losses associated with business underwritten by Trenwick
America including 1998 catastrophe losses.
13
<PAGE> 14
Cash used by financing activities in the first half of 1999 was $20.5 million
compared to cash provided by financing activities of $68.5 million in the first
half of 1998. Cash used by financing activities for the first half of 1999
included repurchases of common stock of approximately $14.9 million. Included in
the same period last year were the proceeds from the issuance of $75 million
principal amount of 6.7% senior notes.
Trenwick declared a second quarter dividend of $.26 per share in 1999, a 4%
increase compared to $.25 per share in the second quarter of 1998. During the
first half of 1999, Trenwick purchased 478,500 shares under its buyback plan at
an average price of $29.48 per share. Trenwick has an authorization of 21,000
shares remaining under the current plan.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Trenwick reviewed the change in its exposure to market risks since December 31,
1998. The components of Trenwick's investment holdings and its risk management
strategy and objectives have not materially changed. Therefore, Trenwick
believes that the potential for loss in each market risk sector described at
year-end has not materially changed.
SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS
Certain statements made in this document that are not based on current or
historical fact are forward-looking in nature including, without limitation,
statements containing words, 'believes," anticipates," "intends," "expects,"
"estimates," predicts," and words of similar import. Such forward-looking
statements involve known and unknown risks, assumptions, uncertainties, and
other factors that may cause actual results, performance, or achievements of
Trenwick or its industry to differ materially from any future results,
performance, or achievements expressed or implied by such forward-looking
statements.
Trenwick has identified certain risk factors which could cause actual plans or
results to differ substantially from those included in any forward-looking
statements. These risk factors are discussed in Trenwick's 1998 audited
financial statements and related notes and such discussion regarding risk
factors should be read in conjunction with other cautionary statements that are
included herein or elsewhere in the Company's filings with the SEC.
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<PAGE> 15
Part II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
A total of 9,143,265 shares, or 86% of the 10,630,510 shares of common stock
outstanding on the March 25, 1999 record date, were represented at the Company's
Annual Meeting of Stockholders held on May 20, 1999. Voting results were as
follows:
On the proposal to elect three directors to serve in Class III until 2002, Mr.
Anthony S. Brown was elected by an affirmative vote of 9,108,171 shares, with
35,094 shares withheld, Mr. Neil Dunn was elected by an affirmative vote of
9,108,231 shares, with 35,034 shares withheld, and Mr. P. Anthony Jacobs was
elected by an affirmative vote of 9,108,231 shares, with 35, 034 shares
withheld. Messrs. James F. Billett, Jr., W. Marston Becker and Joseph D. Sargent
continue to serve in Class I until 2000, and Messrs. Frederick D. Watkins and
Stephen B. Wilcox continue to serve in Class II until 2001.
On the proposal to ratify the appointment of PricewaterhouseCoopers as
independent accountants for the year ending December 31, 1999, there were
9,139,585 shares voted in favor, 2,725 shares opposed and 955 shares abstaining.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
3. Trenwick's By-laws
27.0 Financial Data Schedule
b) Reports on Form 8-K
The following reports on Form 8-K were filed during the quarter ended June
30, 1999:
Date of Report Item Reported
-------------- -------------
June 21, 1999 The Agreement and Plan of
Merger dated as of June 21,
1999, between Trenwick and
Chartwell Re Corporation
(the "Merger Agreement"),
the Stock Option Agreement
dated as of June 21, 1999,
entered into in connection
with the Merger Agreement,
and the press release
announcing the planned
acquisition of Chartwell Re
Corporation by Trenwick
pursuant to the Merger
Agreement.
15
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TRENWICK GROUP INC.
---------------------------------------
(Registrant)
Date: August 16, 1999 JAMES F. BILLETT, JR.
---------------- ---------------------------------------
James F. Billett, Jr.
Chairman, President and
Chief Executive Officer
Date: August 16, 1999 ALAN L. HUNTE
--------------- ---------------------------------------
Alan L. Hunte
Vice President, Chief Financial Officer
and Treasurer
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<PAGE> 1
TRENWICK GROUP INC.
(A Delaware Corporation)
BY-LAWS
ARTICLE I
STOCKHOLDERS
1. CERTIFICATES REPRESENTING SHARES. Every holder of shares in the
corporation shall be entitled to have a certificate or certificates signed by,
or in the name of, the corporation by the Chairman or Vice-Chairman of the Board
of Directors if any, or by the President or a Vice-President and by the
Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary
certifying the shares owned by him in the corporation. Any and all signatures on
any such certificate(s) may be facsimiles. In case any officer, transfer agent,
or registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent, or registrar
before such certificate is used, it may be issued by the corporation with the
same effect as if he were such officer, transfer agent, or registrar at the date
of issue.
Whenever the corporation shall be authorized to issue more than one
class of shares or more than one series of any class of shares, and whenever the
corporation shall issue any shares as partly paid, the certificates representing
shares of any such class or series or of any such partly paid shares shall set
forth thereon the statements prescribed by the General Corporation Law. Any
restrictions on the transfer or registration of transfer of any shares of any
class or series shall be noted conspicuously on the certificate representing
such shares.
The corporation may issue a new certificate of shares in place of any
certificate theretofore issued by it, alleged to have been lost, stolen, or
destroyed, and the Board of Directors may require the owner of any lost, stolen,
or destroyed certificate, or his legal representative, to give the corporation a
bond sufficient to indemnify the corporation against any claim that may be made
against it on account of the alleged loss, theft, or destruction of any such
certificate or the issuance of any such new certificate.
2. FRACTIONAL SHARE INTERESTS. The corporation may, but shall not be
required to, issue fractions of a share. If the corporation does not issue
fractions of a share, it shall (1) arrange for the disposition of fractional
interests by those entitled thereto, (2) pay in cash the fair value of fractions
of a share as of the time when those entitled to receive such fractions are
determined, or (3) issue scrip or warrants in registered or bearer form which
shall entitle the holder to receive a certificate for a full share upon the
surrender of such scrip or warrants aggregating a full share. A certificate for
a fractional share shall, but scrip or warrants shall not unless otherwise
provided therein, entitle the holder to exercise voting rights, to receive
dividends thereon, and to participate in any of the assets of the corporation in
<PAGE> 2
the event of liquidation. The Board of Directors may cause scrip or warrants to
be issued subject to the condition that they shall become void if not exchanged
for certificates representing full shares before a specified date, or subject to
the condition that the shares for which scrip or warrants are exchangeable may
be sold by the corporation and the proceeds thereof distributed to the holders
of scrip or warrants, or subject to any other conditions which the Board of
Directors may impose.
3. SHARE TRANSFERS. Upon compliance with provisions restricting the
transfer or registration of transfer of shares, if any, transfers or
registration of transfers of shares of stock of the corporation shall be made
only on the stock ledger of the corporation by the registered holder thereof, or
by his attorney thereunto authorized by power of attorney duly executed and
filed with the Secretary of the corporation or with a transfer agent or a
registrar, if any, and on surrender of the certificate or certificates for such
shares properly endorsed and the payment of all taxes due thereon.
4. RECORD DATE FOR STOCKHOLDERS. For the purpose of determining the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or entitled to receive payment of any dividend or other
distribution or the allotment of any rights, or entitled to exercise any rights
in respect of any change, conversion, or exchange of shares or for the purpose
of any other lawful action, the directors may fix, in advance, a record date,
which shall not be more than sixty days or less than ten days before the date of
such meeting, nor more than sixty days prior to any other action. If no record
date is fixed, the record date for determining stockholders entitled to notice
of or to vote at a meeting of stockholders shall be at the close of business on
the day next preceding the day on which notice is given, or, if notice is
waived, at the close of business on the day next preceding the day on which
meeting is held; and the record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto. A determination of
stockholders of record entitled to notice of or to vote at any meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
5. CALLS ON SHARES. The Board of Directors may from time to time make
calls upon the stockholders in respect of any moneys unpaid on their shares and
not by the conditions of the allotment thereof made payable at fixed times. A
call may be revoked or postponed at the discretion of the Board of Directors. A
call shall be deemed to have been made at the time when the resolution of the
Board of Directors authorizing the call was passed and may be required to be
paid by installments. If a sum called in respect of a share is not paid before
or on the day appointed for payment thereof, the stockholder from whom the sum
is due shall pay interest on the sum from the day appointed for payment thereof
to the time of actual payment at such rate not exceeding ten percent (10%) per
annum as the Board of Directors may determine, but the Board of Directors shall
be at liberty to waive payment of such interest wholly or in part. Any sum which
by the terms of issue of a share becomes payable on allotment or at any fixed
date shall for the purposes of these By-laws be deemed to be a call duly made
and payable on the date on which by the terms of issue the same becomes payable,
and in case of non-payment all the relevant provisions of these By-laws as to
payment
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<PAGE> 3
of interest and expenses, forfeiture or otherwise shall apply as if such
sum had become payable by virtue of a call duly made and notified. The Board of
Directors may, if they deem it appropriate, receive from any stockholder willing
to advance the same, all or any part of the moneys uncalled and unpaid upon any
shares held by such stockholder, and upon all or any of the monies so advanced
may pay interest at such rate not exceeding ten percent (10%) per annum as may
be agreed between the Board of Directors and the stockholder paying such sum in
advance.
6. FORFEITURE OF SHARES. If any stockholder fails to pay any call or
installment on or before the date appointed for payment of the same, the Board
of Directors may at any time thereafter, during such time as the call or
installment remains unpaid, serve a notice on such stockholder requiring him to
pay the same, together with any interest that may have accrued, and any expenses
that may have been incurred by the corporation by reason of such non-payment.
The notice shall designate a date (not less than thirty (30) days from the date
of the notice), and a place on and at which such call or installment and such
interest and expenses as aforesaid are to be paid. The notice shall also state
that in the event of non-payment at or before the time and at the place
appointed, the shares in respect of which the call was made or the installment
is payable will be subject to forfeiture. If the requirements of any such notice
are not complied with, any shares in respect of which such notice has been given
may, at any time thereafter, before payment of all calls or installments,
interest and expenses due in respect thereof, be forfeited by resolution of the
Board of Directors. Such forfeiture shall include all dividends declared or
accruing in respect of the forfeited shares, and not actually paid before
forfeiture. When any shares shall have been so forfeited, notice of the
resolution shall be given to the stockholder in whose name it stood immediately
before the forfeiture. Any shares so forfeited shall be deemed to be the
property of the corporation, and the Board of Directors may sell, re-allot, or
otherwise dispose of the same in such manner as it thinks fit. The Board of
Directors may, at any time before any shares so forfeited shall have been sold,
re-allotted or otherwise disposed of, cancel the forfeiture. Any stockholder
whose shares have been forfeited shall be liable to pay, and shall forthwith pay
to the Corporation, all calls, installments, interest and expenses owing upon or
in respect of such shares at the time of the forfeiture, together with interest
thereon from the time of forfeiture until payment at ten percent (10%) per
annum, and the Board of Directors may enforce the payment thereof if it thinks
fit.
7. STOCKHOLDERS MEETINGS.
a. TIME. The annual meeting shall be held on the date and at the
time fixed, from time to time, by the directors, provided, that each annual
meeting shall be held within six (6) months after the end of the corporation's
fiscal year, and each successive annual meeting shall be held on a date within
thirteen (13) months after the date of the preceding annual meeting. Special
meetings shall be held on the dates and at the times fixed by the Board of
Directors.
3
<PAGE> 4
b. PLACE. Annual meetings and special meetings shall be held at such
place, within or without the State of Delaware, as the Board of Directors may,
from time to time fix. Whenever the Board of Directors shall fail to fix such
place, the meeting shall be held at the principal office of the corporation.
c. CALL. Except as otherwise required by law and subject to the
rights of the holders of any one or more classes or series of preferred stock
issued by the corporation, annual meetings and special meetings of stockholders
of the corporation may be called only by the Chairman or President of the
corporation pursuant to a resolution approved by a majority of the Board of
Directors. The stockholders of the corporation shall not be entitled to request
special meetings of stockholders.
d. NOTICE OF WAIVER OF NOTICE. Written notice of all meetings shall
be given, stating the place, date, and hour of the meeting and stating the place
within the city or other municipality or community at which the list of
stockholders of the corporation may be examined. The notice of an annual meeting
shall state that the meeting is called for the election of directors and for the
transaction of other business which may properly come before the meeting, and
shall, (if any other action which could be taken at a special meeting is to be
taken at such annual meeting) state the purpose or purposes. The notice of a
special meeting shall in all instances state the purpose or purposes for which
the meeting is called. The notice of any meeting shall also include, or be
accompanied by, any additional statements, information, or documents prescribed
by the General Corporation Law. Except as otherwise provided by the General
Corporation Law, a copy of the notice of any meeting shall be given, personally,
by telex or by mail, not less than ten days nor more than sixty days before the
date of the meeting, unless the lapse of the prescribed period of time shall
have been waived, and directed to each stockholder at his record address or at
such other address which he may have furnished by request in writing to the
Secretary of the corporation. Notice by mail shall be deemed to be given when
deposited, with postage thereon prepaid, in the United States mail. Notice by
telex shall be deemed to be given on the date following the date on which it was
sent. An affidavit of the Chairman of the Board, the President or the Secretary
that the notice has been sent shall be sufficient evidence of the facts stated
therein. All notices mailed to addresses outside the United States shall be
forwarded by air mail. If a meeting is adjourned to another time, not more than
thirty days (30) hence, and/or to another place, and if an announcement of the
adjourned time and/or place is made at the meeting, it shall not be necessary to
give notice of the adjourned meeting unless the directors, after adjournment,
fix a new record date for the adjourned meeting. Notice need not be given to any
stockholder who submits a written waiver of notice signed by him before or after
the time stated therein. Attendance of a stockholder at a meeting of
stockholders shall constitute a waiver of notice of such meeting, except when
the stockholder attends the meeting for the express purpose of objecting, at the
beginning of the meeting, to the
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<PAGE> 5
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders need be specified in any written
waiver of notice.
e. STOCKHOLDER LIST. The officer who has charge of the stock ledger
of the corporation shall prepare and make, at least ten days (10) before every
meeting of stockholders, a complete list of the stockholders, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city or other municipality or community
where the meeting is to be held, which place shall be specified in the notice of
the meeting, or if not so specified, at the place where the meeting is to be
held. The list shall also be produced and kept at the time and place of the
meeting during the whole time thereof, and may be inspected by any stockholder
who is present. The stock ledger shall be the only evidence as to who are the
stockholders entitled to examine the stock ledger, the list required by this
section or the books of the corporation, or to vote at any meeting of
stockholders.
f. CONDUCT OF MEETING. Meetings of the stockholders shall be
presided over by one of the following officers in the order of seniority and if
present and acting - the Chairman of the Board, the Vice-Chairman of the Board,
if any, the President, a Vice-President, or, if none of the foregoing is in
office and present and acting, by a chairman to be chosen by the stockholders.
The Secretary of the corporation, or in his absence, an Assistant Secretary,
shall act as secretary of every meeting, but if neither the Secretary nor an
Assistant Secretary is present the Chairman of the meeting shall appoint a
secretary of the meeting.
g. PROXY REPRESENTATION. Every stockholder may authorize another
person or persons to act for him by proxy in all matters in which a stockholder
is entitled to participate, whether by waiving notice of any meeting, voting or
participating at a meeting. Every proxy must be signed by the stockholder or by
his attorney-in-fact. No proxy shall be voted or acted upon after three years
from its date unless such proxy provides for a longer period. A duly executed
proxy shall be irrevocable if it states that it is irrevocable and, if, and only
as long as, it is coupled with an interest sufficient in law to support an
irrevocable power. A proxy may be made irrevocable regardless of whether the
interest with which it is coupled is an interest in the shares itself or an
interest in the corporation generally.
h. INSPECTORS. The Board of Directors, in advance of any meeting,
may, but need not, appoint one or more inspectors of election to act at the
meeting or any adjournment thereof. If an inspector or inspectors are not
appointed, the person presiding at the meeting may, but need not, appoint one or
more inspectors. In case any person who may be appointed as an inspector fails
to appear or act, the vacancy may be filled by appointment made by the directors
in advance of the meeting or at the meeting by the person presiding thereat.
Each inspector, if any, before entering upon the discharge of his duties, shall
take and sign an oath faithfully to execute the duties of inspector at such
meeting with strict impartiality and according to the best of his ability. The
inspectors, if any, shall determine the number of
5
<PAGE> 6
shares of stock outstanding and the voting power of each, the shares of stock
represented at the meeting, the existence of a quorum, the validity and effect
of proxies, and shall receive votes, ballots or consents, hear and determine all
challenges and questions arising in connection with the right to vote, count and
tabulate all votes, ballots or consents, determine the result, and do such acts
as are proper to conduct the election or vote with fairness to all stockholders.
On request of the person presiding at the meeting, the inspector or inspectors,
if any, shall make a report in writing of any challenge, question or matter
determined by him or them and execute a certificate of any fact found by him or
them.
i. QUORUM. The holders of a majority of the outstanding votes,
as determined in accordance with the Certificate of Incorporation, shall
constitute a quorum at a meeting of stockholders for the transaction of any
business. The stockholders present may adjourn the meeting despite the absence
of a quorum.
8. VOTING. Voting rights shall be determined in accordance with the
Certificate of Incorporation. Any action shall be authorized by a majority of
the votes cast except where the General Corporation Law, the Certificate of
Incorporation or these By-laws prescribe a different percentage of votes.
For the election of the Board of Directors, and for any other
action, voting need not be by ballot, except that a ballot may be requested by
(a) the Chairman of the meeting; or (b) at least three stockholders present in
person or proxy; or (c) any stockholder or stockholders present in person or
represented by proxy holding ten percent (10%) of the votes.
9. STOCKHOLDER ACTION WITHOUT MEETINGS. Any action required or
permitted to be taken by the stockholders of the corporation must be effected at
a duly called annual or special meeting of such holders and may not be effected
by any consent in writing by the stockholders.
ARTICLE II
DIRECTORS
1. FUNCTIONS AND DEFINITION. The business and affairs of the
corporation shall be managed by the Board of Directors of the corporation. The
Board of Directors shall have authority to fix the compensation of the members
thereof. The use of the phrase "whole Board" herein refers to the total number
of directors which the corporation would have if there were no vacancies.
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<PAGE> 7
2. QUALIFICATIONS AND NUMBER. A director need not be a citizen of the
United States or a resident of the State of Delaware. The Board of Directors
shall consist of not less than three (3) nor more than twenty (20) persons, the
exact number of directors to be determined from time to time by resolution
adopted by affirmative vote of at least a majority of the whole Board.
3. ELECTION AND TERM. (a) The Board of Directors, unless the members
thereof shall have been named in the Certificate of Incorporation, shall be
elected by the incorporator or incorporators and shall hold office until the
first annual meeting of shareholders and until their successors are elected and
qualified or until their earlier resignation or removal. Any director may resign
at any time upon written notice to the corporation. Directors who are elected at
an annual meeting of shareholders, and directors who are elected in the interim
to fill vacancies and newly created directorships, shall hold office until the
next annual meeting of shareholders and until their successors are elected and
qualified or until their earlier resignation or removal. In the interim between
annual meetings of shareholders or of special meetings of shareholders called
for the election of directors and/or for the removal of one or more directors
and for the filling of any vacancy in that connection, newly created
directorships and any vacancies in the Board of Directors, including vacancies
resulting from the removal of directors for cause or without cause, may be
filled by the vote of a majority of the remaining directors then in office,
although less than a quorum.
(b) At the 1987 annual meeting of stockholders, the directors
shall be divided into three classes, designated Class I, Class II and Class III
and the provisions of this Section 3(b) shall become effective. Each class shall
consist, as nearly as may be possible1 of one-third of the total number of
directors constituting the whole Board. Class I directors shall be elected for a
one-year term, Class II directors for a two-year term and Class III directors
for a three-year term. At each succeeding annual meeting of stockholders
beginning in 1988, successors to the class of directors whose term expires at
that annual meeting shall be elected for a three-year term. If the number of
directors is changed, any increase or decrease shall be apportioned among the
classes so as to maintain the number of directors in each class as nearly equal
as possible, and any additional director of any class elected to fill a vacancy
resulting from an increase in such class shall hold office for a term that shall
coincide with the remaining term of that class, but in no case will a decrease
in the number of directors shorten the term of any incumbent director. A
director shall hold office until the annual meeting for the year in which his
term expires and until his successor shall be elected and shall qualify,
subject, however, to prior death, resignation, retirement, disqualification or
removal from office. Any vacancy on the Board of Directors from any cause
whatsoever may be filled by a majority of the remaining directors then in
office, even if less than a quorum, or by a sole remaining director. Any
director elected to fill a vacancy not resulting from an increase in the number
of directors shall have the same remaining term as that of his predecessor.
(c) Notwithstanding the foregoing, whenever the holders of any
one or more classes or series of preferred stock issued by the corporation shall
have the right, pursuant to the Restated Certificate of Incorporation of the
corporation, voting separately by class or series, to elect directors at an
annual or special meeting of stockholders, the election, term of
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<PAGE> 8
office, filling of vacancies and other features of such directorships shall be
governed by the terms of the Restated Certificate of Incorporation applicable
thereto, and such directors so elected shall not be divided into classes
pursuant to this Article II unless expressly provided by such terms.
4. REMOVAL. Subject to the rights of the holders of any one or more
classes or series of preferred stock issued by the corporation, any director may
be removed from office, with or without cause, only by the affirmative vote of
the holders of eighty percent (80%) of the combined voting power of the then
outstanding shares of stock entitled to vote generally in the election of
directors, voting together as a single class.
5. NOMINATIONS. Subject to the rights of holders of any one or more
classes or series of preferred stock issued by the corporation, nominations for
the election of directors may be made by the Board of Directors or a proxy
committee appointed by the Board of Directors or by any stockholder entitled to
vote in the election of directors generally. However, any stockholder entitled
to vote generally in the election of directors may nominate one or more persons
for election as directors at a meeting only if written notice of such
stockholder's intent to make such nomination or nominations has been given,
either by personal delivery or by United States mail, postage prepaid, to the
Secretary of the corporation not later than (i) with respect to an election to
be held at an annual meeting of stockholders, ninety (90) days in advance of
such meeting, and (ii) with respect to an election to be held at a special
meeting of stockholders for the election of directors, the close of business on
the seventh day following the date on which notice of such meeting is first
given to stockholders. Each such notice shall set forth: (a) the name and
address of the stockholder who intends to make the nomination and of the person
or persons to be nominated; (b) a representation that the stockholder is a
holder of record of stock of the corporation entitled to vote at such meeting
and intends to appear in person or by proxy at the meeting to nominate the
person or persons specified in the notice; (c) a description of all arrangements
or understandings between the stockholder and each nominee and any other person
or persons (naming such person or persons) pursuant to which the nomination or
nominations are to be made by the stockholder; (d) such other information
regarding each nominee proposed by such stockholder as would be required to be
included in a proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission, had the nominee been nominated, or intended
to be nominated, by the Board of Directors; and (e) the consent of each nominee
to serve as a director of the corporation if so elected. The chairman of the
meeting may refuse to acknowledge the nomination of any person not made in
compliance with the foregoing procedure.
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<PAGE> 9
6. MEETINGS.
a. TIME. Meetings shall be held at such time as the Board of
Directors shall fix, except that the first meeting of a newly elected Board of
Directors or of a Board of Directors with a newly elected class shall be held as
soon after such election as the Board of Directors may conveniently assemble.
b. PLACE. Meetings shall be held at such place within or
without the State of Delaware as shall be fixed by the Board.
c. CALL. No call shall be required for regular meetings for
which the time and place have been fixed. Any director may, and the Secretary at
the request of a Director shall, request a special meeting of the Board of
Directors.
d. NOTICE OR ACTUAL OR CONSTRUCTIVE WAIVER. No notice shall be
required for regular meetings for which the time and place have been fixed.
Written, oral, or any other mode of notice of the time and place shall be given
for special meetings in sufficient time for the convenient assembly of the
directors thereat. Notice need not be given to any director or to any member of
a committee of directors who submits a written waiver of notice signed by him
before or after the time stated therein. Attendance of any such person at a
meeting shall constitute a waiver of notice of such meeting, except when he
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened. Neither the business to be transacted at, nor the purpose
of, any regular or special meeting of the directors need be specified in any
written waiver of notice.
e. QUORUM AND ACTION. A majority of the whole Board shall
constitute a quorum except when a vacancy or vacancies prevents such majority,
whereupon a majority of the directors in office shall constitute a quorum,
provided, that such majority shall constitute at least one-third of the whole
Board. A majority of the directors present, whether or not a quorum is present,
may adjourn a meeting to another time and place. Except as herein otherwise
provided, and except as otherwise provided by the General Corporation Law, the
vote of the majority of the directors present at a meeting at which a quorum is
present shall be the act of the Board of Directors. The quorum and voting
provisions herein stated shall not be construed as conflicting with any
provisions of the General Corporation Law and these By-laws which govern a
meeting of directors held to fill vacancies and newly created directorships in
the Board of Directors or which govern action of disinterested directors.
f. CHAIRMAN OF THE MEETING. The Chairman of the Board, if
present and acting, shall preside at all meetings. Otherwise, the Vice-Chairman
of the Board, if any, and if present and acting, or the President, if present
and acting, or any other director chosen by the Board of Directors, shall
preside.
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<PAGE> 10
7. COMMITTEES. The Board of Directors may, by resolution passed by a
majority of the whole Board, designate one or more committees, each committee to
consist of two or more of the directors of the corporation. The Board of
Directors may designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
the committee. In the absence or disqualification of any member of any such
committee or committees, the member or members thereof present at any meeting
and not disqualified from voting, whether or not he or they constitute a quorum,
may unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolution of the Board of Directors,
shall have and may exercise the powers and authority of the Board of Directors
in the management of the business and affairs of the corporation with the
exception of any authority the delegation of which is prohibited by Section 141
of the General Corporation Law, and may authorize the seal of the corporation to
be affixed to all papers which may require it.
8. INFORMAL ACTION. Any member or members of the Board of Directors or
of any committee designated by the Board of Directors may participate in a
meeting of the Board of Directors, or any such committee, as the case may be, by
means of conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other. Any action
required or permitted to be taken at any meeting of the Board of Directors or
any committee thereof may be taken without a meeting if all members of the Board
of Directors or committee, as the case may be, consent thereto in writing, and
the writing or writings are filed with the minutes of proceedings of the Board
of Directors or committee.
ARTICLE III
OFFICERS
1. DESIGNATION. The officers of the corporation shall consist of a
Chairman of the Board, a President, one or more Vice-Presidents, a Secretary, a
Treasurer, and, if deemed necessary, expedient, or desirable by the Board of
Directors, a Vice-Chairman of the Board, one or more Assistant Secretaries, one
or more Assistant Treasurers, and such other officers with such titles as the
resolution or instrument choosing them shall designate
2. QUALIFICATION. Except as may otherwise be provided in the resolution
or instrument choosing him, no officer other than the Chairman of the Board, and
the Vice-Chairman of the Board, if any, need be a director. Any number of
offices may be held by the same person, as the directors may determine.
3. TERM OF OFFICE. Unless otherwise provided in the resolution or
instrument choosing him, each officer shall be chosen for a term which shall
continue until the meeting of
10
<PAGE> 11
the Board of Directors following the next annual meeting of stockholders and
until his successor shall have been chosen and qualified.
Any officer may be removed, with or without cause, by the Board
of Directors; and any subordinate or junior officer not chosen by the Board of
Directors, but chosen under duly constituted authority conferred by the Board of
Directors, may be removed, with or without cause, by the officer or officers who
chose him. Any vacancy in any office may be filled by the Board of Directors. A
vacancy in any junior or subordinate office not filled by the Board of Directors
may be filled by the officer or officers duly vested with the authority to
choose the person to fill such office.
4. CHOOSING OFFICERS. The Board of Directors shall choose the Chairman
of the Board, the President, the Vice Presidents, the Secretary, the Treasurers,
the Vice-Chairman of the Board, if any, the Assistant Treasurer, if any, and
Assistant Secretaries, if any, and such other officers as may be designated by
them, and may confer upon any executive officer or officers, authority to choose
junior or subordinate officers.
5. DUTIES AND AUTHORITY. In addition to those duties that may from time
to time be delegated to them by the Board of Directors, the officers of the
corporation shall have the following duties:
a. CHAIRMAN OF THE BOARD. The Chairman of the Board shall be
the chief executive officer of the corporation, shall preside at all meetings of
the stockholders and of the Board of Directors at which he is present, shall be
ex-officio a member of all committees formed by the Board of Directors, shall be
an active participant in the management of the business, shall have authority to
do anything the President may do, and shall have such other duties and powers as
the Board of Directors may prescribe.
b. PRESIDENT. The President shall be the chief operating
officer of the corporation, shall with the Chairman of the Board have general
and active management of the business of the corporation, shall see that all
orders and resolutions of the Board of Directors are carried into effect, and,
in the absence or non-election of the Chairman of the Board, shall preside at
all meetings of the stockholders and the Board of Directors at which he is
present if he is also a director. The President also shall execute bonds,
mortgages, and other contracts requiring a seal under the seal of the
corporation, except where required or permitted by law to be otherwise signed
and executed and except where the signing and execution thereof shall be
delegated expressly by the Board of Directors to some other officer or agent of
the corporation, and shall have such other powers and duties as the Board of
Directors may prescribe.
c. VICE-PRESIDENT. The Vice-President or Vice-Presidents, if
any, shall have such duties and powers as the Board of Directors or the
President may prescribe. In the absence of the President or in the event of his
inability or refusal to act, the Vice-President, if any, or if there be more
than one, the Vice-Presidents, in the order designated by the Board of
Directors, or, in the absence of such designation, then in the order of their
election, shall perform the duties and exercise the powers of the President.
11
<PAGE> 12
d. SECRETARIES AND ASSISTANT SECRETARIES. The Secretary shall
record the proceedings of all meetings of the stockholders and all meetings of
the Board of Directors in books to be kept for that purpose, shall perform like
duties for the standing committees when required, and shall give, or cause to be
given, calls and/or notices of all meetings of the stockholders and meetings of
the Board of Directors in accordance with these By-laws. The Secretary also
shall have custody of the corporate seal and attest thereto when authorized by
the Board of Directors or the President, and shall have such other duties and
powers as the Board of Directors may prescribe.
The Assistant Secretary, if any, or if there be more
than one, the Assistant Secretaries, in the order designated by the Board of
Directors, or, if there be no such designation, then in order of their election,
shall, in the absence of the Secretary or in the event of his inability or
refusal to act, perform the duties and exercise the powers of the Secretary and
shall have such other duties and powers as the Board of Directors may prescribe.
In the absence of the Secretary or an Assistant
Secretary, at a meeting of the stockholders or the Board of Directors, an acting
Secretary shall be chosen by the stockholders or directors, as the case may be,
to exercise the duties of the Secretary at such meeting.
In the absence of the Secretary or an Assistant
Secretary, or in the event of the inability or refusal of the Secretary or any
Assistant Secretary to give, or cause to be given, any call and/or notice
required by law or these By-laws, any such call and/or notice may be given by
any person so directed by the Board of Directors, the President or stockholders
at whose request the meeting is called in accordance with these By-laws.
e. TREASURER AND ASSISTANT TREASURER. The Treasurer shall have
the custody of the corporate funds and securities, shall keep full and accurate
accounts of receipts and disbursements in books belonging to the corporation and
shall deposit all moneys and other valuable effects in the name and to the
credit of the corporation in such depositories as may be designated by the Board
of Directors. The Treasurer shall also disburse the funds of the corporation as
may be ordered by the Board of Directors, taking proper vouchers for such
disbursements, shall render to the Board of Directors, when the Board of
Directors so requires, an account of all his transactions as Treasurer and of
the financial condition of the corporation, and shall have such other duties and
powers as the Board of Directors may prescribe. If required by the Board of
Directors, the Treasurer shall give the corporation a bond, which shall be
renewed every six years, in such sum and with such surety or sureties as shall
be satisfactory to the Board of Directors for the faithful performance of the
duties of his office and for the restoration to the corporation, in case of his
death, resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his possession or under
his control belonging to the corporation.
The Assistant Treasurer, if any, or if there be more than one,
the Assistant Treasurers in the order designated by the Board of Directors, or,
in the absence of such designation, then in the order of their election, shall,
in the absence of the Treasurer or in the
12
<PAGE> 13
event of his inability or refusal to act, perform the duties and exercise the
powers of the Treasurer and shall have other duties and powers as the Board of
Directors may prescribe.
f. OTHER OFFICERS. Any other officer shall have such powers
and duties as the Board of Directors may prescribe.
6. RESOLUTIONS AND INSTRUMENTS - EFFECT. The Secretary of the
corporation shall keep, or cause to be kept, with the By-laws of the
corporation, a copy of every resolution or instrument designating and choosing
officers and prescribing their qualifications, tenure, authority, duties,
compensation, and other appropriate incidents and attributes of office; and each
such resolution or instrument shall be deemed to be a component part of these
By-laws.
ARTICLE IV
INDEMNIFICATION
The Corporation shall indemnify its officers, directors,
employees and agents to the full extent permitted by the General Corporation Law
of Delaware.
Expenses incurred by a director of the Corporation in
defending a civil or criminal action, suit or proceeding by reason of the fact
that he is or was a director of the Corporation (or was serving at the
Corporation's request as a director or officer of another corporation) shall be
paid by the Corporation in advance of the final disposition of such action, suit
or proceeding upon receipt of an undertaking by or on behalf of such director to
repay such amount if it shall ultimately be determined that he is not entitled
to be indemnified by the Corporation as authorized by relevant sections of the
General Corporation Law of Delaware.
The indemnification and advancement of expenses provided by
this By-law shall not be deemed exclusive of any other rights provided by any
agreement, vote of stockholders or disinterested directors or otherwise.
ARTICLE V
GENERAL PROVISIONS
1. DIVIDENDS. Dividends upon the shares of the corporation shall be
declared by the Board of Directors in any regular or special meeting, pursuant
to law and to the Certificate of Incorporation. Dividends may be paid in cash,
in property, or in shares. Before payment of any dividend, there may be set
aside out of any funds of the corporation available for dividends such sum or
sums as the directors from time to time, in their absolute discretion, think
proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the corporation, or
for such other purpose as the directors shall think conducive to the interest of
the corporation, and the directors may modify
13
<PAGE> 14
or abolish any such reserve in the manner in which it was created. The Board of
Directors may deduct from the dividends payable to any stockholder all moneys
due to the corporation by such stockholder on account of calls or otherwise.
Upon the declaration of any dividend on fully paid shares, the corporation shall
declare a dividend upon partly paid shares of the same class, but only on the
basis of the percentage of the consideration actually paid thereon.
2. CHECKS. All checks or demands for money and notes of the
corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
3. FISCAL YEAR. The fiscal year of the corporation shall be
fixed by a resolution of the Board of Directors.
4. SEAL. The corporate seal shall have inscribed thereon the
name of the corporation, the year of its organization and the words "Corporate
Seal Delaware". The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
ARTICLE VI
AMENDMENTS
Subject to the provisions of the Restated Certificate of Incorporation,
these By-laws may be altered, amended or repealed at any regular meeting of the
stockholders (or at any special meeting thereof duly called for that purpose) by
a majority vote of the shares represented and entitled to vote at such meeting;
provided that in the notice of such special meeting notice of such purpose shall
be given. Subject to the laws of the State of Delaware, the Restated Certificate
of Incorporation and these By-laws, the Board of Directors may by majority vote
of those present at any meeting at which a quorum is present amend these
By-laws, or enact such other By-laws as in their judgment may be advisable for
the regulation of the conduct of the affairs of the corporation.
14
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS CONTAINED IN FORM 10-Q FOR THE SIX MONTHS ENDED JUNE 30,
1999 FOR TRENWICK GROUP INC.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<EXCHANGE-RATE> 1
<DEBT-HELD-FOR-SALE> 876,747
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 60,967
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 937,714
<CASH> 19,463
<RECOVER-REINSURE> 152,777<F1>
<DEFERRED-ACQUISITION> 44,179
<TOTAL-ASSETS> 1,385,057
<POLICY-LOSSES> 666,101
<UNEARNED-PREMIUMS> 181,658
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 75,000
110,000
0
<COMMON> 1,063
<OTHER-SE> 321,525
<TOTAL-LIABILITY-AND-EQUITY> 1,385,057
125,039
<INVESTMENT-INCOME> 27,140
<INVESTMENT-GAINS> 3,029
<OTHER-INCOME> 113
<BENEFITS> 81,324
<UNDERWRITING-AMORTIZATION> 34,453
<UNDERWRITING-OTHER> 22,788
<INCOME-PRETAX> 16,756
<INCOME-TAX> 2,986
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,770
<EPS-BASIC> 1.30<F2>
<EPS-DILUTED> 1.28
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
<FN>
<F1>Represents net reinsurance recoverable balances after offset of funds held and
reinsurance balances payable.
<F2>Represents basic earnings per share.
</FN>
</TABLE>
