Rule 424(b)
File No. 333-11053
PROSPECTUS
MUTUAL RISK MANAGEMENT LTD.
36,214 SHARES OF COMMON STOCK
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All of the Shares of Common Stock offered hereby (the "Securities") are being
sold by the Selling Securityholder. See "Selling Securityholder". The Company
will not receive any of the proceeds from the sales of Shares being offered
hereby. The Securities will be offered for sale from time to time on terms to be
determined at the time of sale by the Selling Securityholder. The Company's
Common Stock are listed on the New York Stock Exchange under the symbol "MM" and
the closing price of the Common Stock as reported on the New York Composite Tape
on August 20, 1996 was $28 5/8. The Company will pay the expenses of this
offering and will not receive any proceeds from the sale of the Securities. See
"Use of Proceeds."
SEE "RISK FACTORS" ON PAGE 4 FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE
CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED HEREBY,
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR THE NORTH CAROLINA
INSURANCE COMMISSIONER, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION,
ANY STATE SECURITIES COMMISSION OR THE NORTH CAROLINA INSURANCE
COMMISSIONER PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
Proceeds to
Price to Underwriting Discounts Selling
Public and Commissions(1(2)) Shareholders
Per Share $28.625 $0 $28.625
Total $1,036,625.75 $0 $1,036,625.75
(1). The Company and the Selling Shareholder have agreed to indemnify the
Underwriter against certain liabilities, including liabilities under the
Securities Act of 1933, as amended.
(2) Before deducting expenses payable by the Company estimated at $5,000.
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The Selling Securityholder directly, through agents designated from time to
time, or through dealers or underwriters also to be designated, may sell the
Securities from time to time on terms to be determined at the time of sale. To
the extent required, the specific Securities to be sold, the purchase price, the
public offering price, the name of any such agent, dealer or underwriter, and
any applicable commission or discount with respect to a particular offer will be
set forth in a Prospectus Supplement. The aggregate proceeds to the Selling
Securityholder from the Securities will be the purchase price of such Securities
sold less the aggregate agents' commissions and underwriters' discounts, if any,
and other expenses of issuance and distribution not borne by the Company. Any
such Prospectus Supplement will also set forth any additional information
regarding indemnification by the Company of the Selling Securityholder or any
underwriter, dealer or agent against certain liabilities, including liabilities
under the Securities Act of 1933, as amended (the "Securities Act"). The Selling
Securityholder and any broker-dealers, agents or underwriters that participate
with the Selling Securityholder in the distribution of any of the Securities may
be deemed to be "underwriters" within the meaning of the Securities Act, and any
commission received by them and any profit on the resale of the Securities
purchased by them may be deemed to be underwriting commissions or discounts
under the Securities Act. See "Plan of Distribution".
The date of this Prospectus is September 25, 1996
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NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN AS CONTAINED IN
THIS PROSPECTUS AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, ANY SELLING
SHAREHOLDER OR THE UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY BY ANY PERSON IN ANY JURISDICTION IN
WHICH IT IS UNLAWFUL FOR SUCH PERSON TO MAKE SUCH AN OFFERING OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER
ANY CIRCUMSTANCE IMPLY THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY DATE
SUBSEQUENT TO THE DATE HEREOF.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports and other information with the Securities and
Exchange Commission (the "Commission"). Such reports, proxy statements and other
information concerning the Company can be inspected and copied at the public
reference facilities maintained by the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549, and at Regional Offices of the
Commission located at Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661 and at 7 World Trade Center, 13th Floor, New York,
New York 10048. Copies of such material can be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. Such reports, proxy statements and other information
may also be inspected at the offices of the New York Stock Exchange, Inc., 20
Broad Street, New York, New York 10004.
INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents have been filed with the Commission and are
incorporated herein by reference:
(a) The Company's Annual Report on Form 10-K for the year ended
December 31, 1995;
(b) The Company's Quarterly Reports on Form 10-Q for the three month
periods ended March 31, 1996 and June 30, 1996;
(c) The Company's definitive Proxy Statement dated March 25, 1996 for
the Company's Annual Meeting of Stockholders to be held on May
15, 1996; and
(d) The description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-A dated May 14, 1991
as declared effective by the Commission on June 25, 1991.
All documents filed by the Company pursuant to Section 13 (a), 13(c),
14 or 15(d) of the Exchange Act after the date of this Prospectus shall be
deemed to be incorporated by reference and to be a part of this Prospectus from
the respective dates of filing of those documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall be
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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 so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Prospectus.
The Company hereby undertakes to 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 or all of the documents referred to above which
have been incorporated in this Prospectus by reference, other than exhibits to
such documents (unless such exhibits are specifically incorporated by reference
into such documents). Written or telephone requests for such copies should be
directed to the Secretary, Mutual Risk Management Ltd., 44 Church Street,
Hamilton HM 12, Bermuda (441) 295-5688.
ENFORCEMENT OF CIVIL LIABILITIES
The Company is organized pursuant to the laws of Bermuda and certain of
the Company's directors and officers, certain of the Selling Shareholders and
certain of the experts named herein reside outside of the United States.
Moreover, a substantial portion of the assets of the Company and of certain of
the Selling Shareholders is located outside the United States. Consequently, it
may not be possible to effect service of process on such persons or entities
within the United States or to enforce against any of them judgments of courts
in the United States predicated upon the civil liability provisions of the
federal securities laws of the United States. The Company has been informed by
Conyers, Dill & Pearman, its legal advisor in Bermuda, that the United States
and Bermuda do not have a treaty providing for reciprocal recognition and
enforcement of judgments in civil and commercial matters and a final judgment
for the payment of money rendered by any federal or state court in the United
States based on civil liability, whether or not predicated solely upon the
federal securities laws, would, therefore, not be automatically enforceable in
Bermuda. A Bermuda court may impose civil liability on the Company, its
directors or officers or the Selling Shareholders who reside in Bermuda in a
suit brought in The Supreme Court of Bermuda against the Company or such persons
with respect to a violation of federal securities law, provided that the facts
surrounding such violation would constitute or give rise to a cause of action
under Bermuda law.
TABLE OF CONTENTS
Available Information..........................................................3
Enforcement of Civil Liabilities...............................................4
The Company....................................................................5
Risk Factors...................................................................5
Selling Securityholder/Use of Proceeds.........................................8
Plan of Distribution...........................................................8
Legal Matters..................................................................8
Experts........................................................................9
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THE COMPANY
Mutual Risk Management Ltd. provides risk management services to
clients seeking alternatives to traditional commercial insurance for certain of
their risk exposures, especially workers' compensation, which in 1995
represented approximately 71% of the Company's fee income. Risk management
involves a process of analyzing loss exposures and developing risk financing
methods to reduce exposure to loss and to control associated costs. The use of
such loss financing methods in place of traditional insurance has become known
as the alternative market and involves clients self-funding a significant amount
of their loss exposure and transferring only the unpredictable excess risk to
insurers. The benefits of such alternative market techniques typically include
lower and more stable costs, greater control over the client's risk management
program and an increased emphasis within the client's organization on loss
prevention and loss control.
The Company's principal source of profits is fees received for the
various services provided to clients in connection with the Company's programs.
In a typical program, these fees total between 11% and 13% of the client's
premium. The structure of the Company's programs places most of the underwriting
risk with the Company's client. For regulatory and other reasons, however, the
Company is required to assume a limited amount of risk. The Company seeks to
limit this risk to the minimum level feasible. This approach to risk
distinguishes the Company from typical property/casualty companies which assume
significant levels of underwriting risk as part of their business. The Company
does not seek to earn income from underwriting risk, but rather from fees for
services provided. The Company markets its services exclusively to retail
insurance brokers and consultants representing clients.
The Company was incorporated in 1977 and has participated in the growth
of the alternative market since 1980 when it established its rent-a-captive
program known as the Insurance Profit Center Program (the "IPC Program"). The
Company is incorporated and based in Bermuda, the leading worldwide domicile for
captive insurance companies. The Company operates through subsidiaries in the
United States, Bermuda, Barbados, the Cayman Islands and Europe. The Company's
principal executive offices are located at 44 Church Street, Hamilton HM 12,
Bermuda (441) 295-5688.
RISK FACTORS
A prospective investor should carefully consider all of the information
contained in this Prospectus in deciding whether to purchase the Shares and, in
particular, the following:
Dependence on Key Personnel. The Company is dependent upon the ability
and experience of its executive officers and other key employees. The loss of
the services of one or more of the Company's executive officers could have a
material adverse impact on the business of the Company and its future
operations.
Competition. The Company's products and services compete with other
products both in the alternative and the traditional insurance markets. Such
competitive products include captive insurance companies, rent-a-captives,
self-insurance plans and cash flow insurance products. Many
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of these competitive products are offered by companies with significantly
greater resources than the Company. The Company's competitive position is based,
among other factors, on the quality of its services, its capital position, its
independence from any major insurance company or broker and effective pricing.
There can be no assurance that the Company will be able to maintain its
competitive position.
Beginning in 1993, competition increased significantly in certain
important workers' compensation markets, particularly California, due to open
ratings and other legislative reforms, and this heightened level of competition
has persisted through the current period. This increased competition has lowered
premium rates and this in turn reduces the fee revenue generated by each
individual program. Increased competition also makes sales and renewals of
programs more difficult. A continuation of the current level of competition or
its extension into additional markets or states will adversely affect the
Company's business.
Business Risks. A significant feature of the Company's programs is the
utilization of reinsurance, including aggregate excess reinsurance, to transfer
all or a portion of risk not retained by the insured. The Company currently
obtains such reinsurance from a small number of reinsurance companies. Changing
market conditions or other factors beyond the Company's control may, in the
future, reduce or eliminate the availability of this reinsurance. A lack of
available reinsurance could adversely affect the marketing of the Company's
programs or force the Company to retain all or a part of the risk which cannot
be reinsured.
The Company has in the normal course of operating its programs placed
significant amounts of reinsurance for risks in excess of the client's chosen
retention with a variety of reinsurance companies. Failure of a reinsurer could
result in significant losses as the Company would remain ultimately liable for
the losses not covered by such a reinsurer. The client's chosen retention, which
is ceded by Legion Insurance Company ("Legion"), the Company's licensed
insurance subsidiary, either to one of the Company's non-U.S. insurance
subsidiaries (the "IPC Companies") or to the client's captive insurance company,
is generally also supported by letters of credit. In addition, the Company
relies extensively on letters of credit to secure a portion of the client's
obligation to reimburse the Company for losses on a program. The failure of a
bank to honor its letter of credit or the inability of a client to honor its
uncollaterlized reimbursement obligation could adversely affect the Company.
It is the Company's policy that its insurance company subsidiaries
avoid taking significant insurance underwriting risk. However, some risk is
assumed by these companies in connection with their limited participation in the
Company's excess reinsurance programs. Such subsidiaries could also incur losses
if claims on a policy exceeded the amount of reinsurance coverage. The Company
believes that adequate reserves and reinsurance have been provided on risks
assumed to date. However, the actual liability may be greater or less than the
amount provided for. Any such liability will be recorded in the period in which
it arises.
Tax Matters Affecting Participants in the IPC Program. The competitive
position of the Company's IPC Program could be materially affected by the tax
treatment of the program and competing programs. Such tax treatment has not been
clear in recent years and varies significantly with the circumstances of each
IPC Program participant as is true for competing products. A
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determination that a significant portion of the IPC Program participants are not
entitled to deduct the premiums paid without a similar determination as to
competing products could adversely affect the marketability of the IPC Program.
Amendments have been proposed to the United States Internal Revenue Code to
clarify and restrict when premiums which are paid to foreign captive insurance
companies by U.S. taxpayers/insureds holding 10% or more of the voting shares of
the foreign company are properly deductible by the payors for U.S. income tax
purposes. The Company is not able to determine whether such proposals, if
enacted, would be applicable to IPC Programs or would adversely affect the
business of the Company.
Tax Matters Affecting the Company. Amendments have been proposed to the
United States Internal Revenue Code to clarify and restrict when a foreign
captive insurance company, the voting shares of which are owned to the extent of
10% or more by U.S. shareholders/ insureds, will be treated as an insurance
company for U.S. income tax purposes. In general, the proposed amendments would,
if enacted, deny any deduction for premiums which are paid by large shareholders
if more than fifty percent of the net written premium of their captive insurer
is derived from the insurance or reinsurance of such shareholders and their
related persons. The Company is not able to determine whether such proposals, if
enacted, would be applicable to the Company or would adversely affect the
Company.
Ownership Considerations. In the event that the Company were deemed to
be a "Passive Foreign Investment Company" (a "PFIC"), the U.S. income tax due in
the year a United States person that owns any Common Stock receives certain
distributions with respect to, or disposes of, Common Stock will be increased by
an interest charge. Additionally, if the Company is classified or becomes
classified as a "Controlled Foreign Corporation" (a "CFC"), a United States
person that owns directly or indirectly 10% or more of the Company's voting
shares will be required to include in his gross income his pro rata share of
certain income of the Company, whether or not such income is actually
distributed to such United States shareholder. See 'Tax Matters".
Government Regulation. A number of states in which the Company transacts
business, as well as Bermuda and Barbados, have various licensing regulations
applicable to the Company's business. These regulations require that insurance
companies maintain adequate capital, surplus and reserves and limit the ability
of the Company to transfer funds from, and to otherwise engage in certain
transactions with, its licensed subsidiaries. State regulations also limit
premium rates and require participation in guaranty and assigned risk funds.
The Company is unable to predict what additional government regulations,
if any, affecting its business may be promulgated in the future or how they
might be interpreted. The promulgation of new regulations or the adverse
interpretation of existing regulations, particularly in Pennsylvania, where
Legion is domiciled, and California, which is one of the Company's major
markets, could increase the Company's cost of compliance and otherwise adversely
impact operating results.
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SELLING SECURITYHOLDER\USE OF PROCEEDS
The Securities are owned by Mr. Spottswood P. Dudley of 3510 Overlook
Lane N.W., Washington D.C. 20016, USA. The Company will not receive any of the
proceeds from the sale of securities by the Selling Securityholder. The
Securities offered by this Prospectus may be offered from time to time in whole
or in part by the Selling Securityholder. As of August 23, 1996 the aggregate
number of Common Shares owned by Mr Dudley was 36,214 Common Shares.
PLAN OF DISTRIBUTION
Any and all of the Securities offered hereby may be sold from time to
time to purchasers directly by the Selling Securityholder. Alternatively, the
Selling Securityholder may from time to time offer the Securities through
brokers, underwriters, dealers or agents, who may receive compensation in the
form of underwriting discounts, concessions or commissions from the Selling
Securityholder and/or the purchasers of Securities for whom they may act as
agent. The Selling Securityholder and any such underwriters, dealers or agents
that participate in the distribution of the Securities may be deemed to be
underwriters, and any profit on the sale of Securities by them and any
discounts, commissions or concessions received by any such underwriters, dealers
or agents might be deemed to be underwriting discounts and commissions under the
Securities Act. The Securities may be sold at varying prices determined at the
time of sale or at negotiated prices. Such prices will be determined by the
Selling Securityholder, or by agreement between the Selling Securityholder and
underwriters or dealers.
At the time a particular offer of Securities is made, to the extent
required, a Prospectus Supplement will be prepared by the Company based on
information provided by the Selling Securityholder which will set forth the
number of Securities being offered and the terms of the offering, including the
name or names of any underwriters, dealers or agents, any discounts, commissions
or concessions allowed or reallowed or paid to dealers, including the proposed
selling price to the public.
In order to comply with certain states' securities laws, if applicable,
the Securities will be sold in such jurisdictions only through registered or
licensed brokers or dealers. In addition, in certain states the Securities may
not be sold unless the Securities have been registered or qualified for sale in
such state or an exemption from registration or qualification is available and
such sale is made in compliance with the exemption.
LEGAL MATTERS
The validity of the Common Stock being offered hereby will be passed
upon for the Company by Messrs Conyers, Dill & Pearman of Hamilton, Bermuda.
David J. Doyle, who is associated with this firm, is a director of the Company.
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EXPERTS
The consolidated financial statements of the Company and its
subsidiaries at December 31, 1995 and for the year then ended, which are
incorporated by reference herein, have been audited by Ernst & Young,
independent auditors, and at December 31, 1994 and for each of the two years in
the period ended December 31, 1994, by KPMG Peat Marwick, independent auditors,
as set forth in their respective reports thereon and incorporated by reference
herein, and are included in reliance upon such reports given upon the authority
of said firms as experts in accounting and auditing.
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