<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
SCHEDULE TO
(RULE 14d-100)
(AMENDMENT NO. 3)
TENDER OFFER STATEMENT UNDER SECTION 14(d)(1)
OR SECTION 13(e)(1) OF THE SECURITIES EXCHANGE ACT OF 1934
--------------
TRAVELERS PROPERTY CASUALTY CORP.
(Name of Subject Company (Issuer))
THE TRAVELERS INSURANCE GROUP INC.
CITIGROUP INC.
TRAVELERS PROPERTY CASUALTY CORP.
(Names of Filing Persons (Offerors))
--------------
CLASS A COMMON STOCK, PAR VALUE $.01 PER SHARE
(Title of Class of Securities)
--------------
893939108
(CUSIP Number of Class of Securities)
--------------
Charles O. Prince, III, Esq.
Citigroup Inc.
153 East 53rd Street
New York, New York 10043
Telephone: (212) 559-1000
(Name, address and telephone number of
person authorized to receive notices
and communications on behalf of filing persons)
Copy to:
Eric J. Friedman, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, New York 10036
Telephone: (212) 735-3000
Check the appropriate boxes below to designate any transactions to which the
statement relates:
[X] third-party tender offer subject to Rule 14d-1.
[ ] issuer tender offer subject to Rule 13e-4.
[X] going-private transaction subject to Rule 13e-3.
[ ] amendment to Schedule 13D under Rule 13d-2.
Check the following box if the filing is a final amendment reporting the
results of the tender offer: [ ]
================================================================================
<PAGE>
This Amendment No. 3 amends the Tender Offer Statement on Schedule TO
initially filed on March 23, 2000 by Citigroup Inc., a Delaware corporation
("Parent"), The Travelers Insurance Group Inc., a Connecticut corporation (the
"Purchaser"), and an indirect wholly owned subsidiary of Parent, and Travelers
Property Casualty Corp., a Delaware corporation (the "Company"), relating to
the third-party tender offer by the Purchaser to purchase all of the issued and
outstanding shares of Class A common stock, par value $.01 per Share, of the
Company at a purchase price of $41.50 per Share, net to the seller in cash,
without interest thereon, upon the terms and subject to the conditions set
forth in the Offer to Purchase dated March 23, 2000 (the "Offer to Purchase"),
as amended by the Supplement thereto, dated April 4, 2000 (the "Supplement"),
and in the Letter of Transmittal (which, together with any amendments or
supplements thereto, constitute the "Offer").
The information in each of the Offer to Purchase and the Supplement,
including all schedules and annexes thereto, is hereby expressly incorporated
herein by reference in response to all the items of this Schedule TO, except as
otherwise set forth below.
ITEM 5. PAST CONTACTS, TRANSACTIONS, NEGOTIATIONS AND AGREEMENTS.
Item 5 is hereby amended and supplemented by the following:
(b) The information set forth in "Background of this Offer" of the
Supplement is incorporated herein by reference.
ITEM 11. ADDITIONAL INFORMATION.
Item 11 is hereby amended and supplemented by the following:
(a) The information set forth in "Certain Legal Matters" of the Supplement
is incorporated herein by reference.
ITEM 12. EXHIBITS.
(a)(1)(M) Supplement to Offer to Purchase dated April 4, 2000.
(a)(1)(N) Amendment No. 1 to the Recommendation Statement on Schedule 14D-9
of the Company dated April 4, 2000.
(a)(5)(O) Complaint of Sidney Wolgin, on behalf of himself and others
similarly situated, against Travelers Property Casualty Corp.,
Robert I. Lipp, Jay S. Fishman, Frank J. Tasco, Dudley C. Mecum
II, Arthur Zankel, Kenneth J. Bialkin, Sanford I. Weill, Leslie B.
Disharoon and Citigroup Inc., filed in the Court of Chancery of
the State of Delaware on March 31, 2000.
(a)(5)(P) Second Amended Complaint of Howard Vogel, on behalf of himself and
all others similarly situated, against Travelers Property Casualty
Corp., Robert I. Lipp, Jay S. Fishman, Frank J. Tasco, Dudley C.
Mecum II, Arthur Zankel, Kenneth J. Bialkin, Sanford I. Weill, TAP
Merger Corp., Leslie B. Disharoon and Citigroup Inc., filed in the
Court of Chancery of the State of Delaware on April 1, 2000
(included as Annex B of the Supplement to the Offer to Purchase
filed herewith as Exhibit (a)(1)(M)).
(c)(3) Letter from Morgan Stanley & Co. Incorporated to the Special
Committee of the Board of Directors of the Company, dated April 3,
2000 (included as Annex A of the Supplement to the Offer to
Purchase filed herewith as Exhibit (a)(1)(M)).
(c)(4) Materials presented by Morgan Stanley & Co. Incorporated to the
Special Committee of the Board of Directors of the Company on
April 3, 2000.
(c)(5) Valuation Analysis of Salomon Smith Barney Inc. prepared in
connection with presentation to members of Citigroup Inc.'s
management, dated March 20, 2000.
2
<PAGE>
ITEM 13. INFORMATION REQUIRED BY SCHEDULE 13E-3.
Item 13 is hereby amended and supplemented by the following:
The information set forth in the INTRODUCTION, "Background of this Offer,"
"Opinion of Financial Advisor," "Position of Parent and the Purchaser Regarding
Fairness of the Offer and the Merger" and "Interests of Certain Persons in the
Offer and the Merger" in the Supplement is incorporated herein by
reference.
3
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
SCHEDULE TO AND SCHEDULE 13E-3
CITIGROUP INC.
By: /s/ Charles O. Prince, III
-------------------------------------
Name: Charles O. Prince, III
Title: General Counsel and Corporate
Secretary
THE TRAVELERS INSURANCE GROUP INC.
By: /s/ Irwin Ettinger
-------------------------------------
Name: Irwin Ettinger
Title: Senior Vice President
SCHEDULE 13E-3
TRAVELERS PROPERTY CASUALTY CORP.
By: /s/ James M. Michener
-------------------------------------
Name: James M. Michener
Title: Senior Vice President,
Secretary and
General Counsel
Date: April 4, 2000
4
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- -----------
(a)(1)(M) Supplement to Offer to Purchase dated April 4, 2000.
(a)(1)(N) Amendment No. 1 to the Recommendation Statement on Schedule 14D-9
of the Company dated April 4, 2000.
(a)(5)(O) Complaint of Sidney Wolgin, on behalf of himself and others
similarly situated, against Travelers Property Casualty Corp.,
Robert I. Lipp, Jay S. Fishman, Frank J. Tasco, Dudley C. Mecum
II, Arthur Zankel, Kenneth J. Bialkin, Sanford I. Weill, Leslie B.
Disharoon and Citigroup Inc., filed in the Court of Chancery of
the State of Delaware on March 31, 2000.
(a)(5)(P) Second Amended Complaint of Howard Vogel, on behalf of himself and
all others similarly situated, against Travelers Property Casualty
Corp., Robert I. Lipp, Jay S. Fishman, Frank J. Tasco, Dudley C.
Mecum II, Arthur Zankel, Kenneth J. Bialkin, Sanford I. Weill, TAP
Merger Corp., Leslie B. Disharoon and Citigroup Inc., filed in the
Court of Chancery of the State of Delaware on April 1, 2000
(included as Annex B of the Supplement to the Offer to Purchase
filed herewith as Exhibit (a)(1)(M)).
(c)(3) Letter from Morgan Stanley & Co. Incorporated to the Special
Committee of the Board of Directors of the Company, dated April 3,
2000 (included as Annex A of the Supplement to the Offer to
Purchase filed herewith as Exhibit (a)(1)(M)).
(c)(4) Materials presented by Morgan Stanley & Co. Incorporated to the
Special Committee of the Board of Directors of the Company on
April 3, 2000.
(c)(5) Valuation Analysis of Salomon Smith Barney Inc. prepared in
connection with presentation to members of Citigroup Inc.'s
management, dated March 20, 2000.
5
<PAGE>
SUPPLEMENT TO THE OFFER TO PURCHASE FOR CASH DATED MARCH 23, 2000
THE TRAVELERS INSURANCE GROUP INC.
AN INDIRECT WHOLLY OWNED SUBSIDIARY OF
CITIGROUP INC.
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF CLASS A COMMON STOCK
OF
TRAVELERS PROPERTY CASUALTY CORP.
AT
$41.50 NET PER SHARE
- --------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON WEDNESDAY, APRIL 19, 2000, UNLESS THE OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
THIS OFFER IS BEING MADE PURSUANT TO AN AGREEMENT AND PLAN OF MERGER,
DATED AS OF MARCH 22, 2000, BY AND AMONG CITIGROUP INC. ("PARENT"), THE
TRAVELERS INSURANCE GROUP INC. (THE "PURCHASER") AND TRAVELERS PROPERTY
CASUALTY CORP. (THE "COMPANY").
THE BOARD OF DIRECTORS OF THE COMPANY, BASED UPON THE UNANIMOUS
RECOMMENDATION OF A SPECIAL COMMITTEE OF INDEPENDENT DIRECTORS OF THE BOARD,
(A) UNANIMOUSLY DETERMINED THAT EACH OF THE OFFER AND THE MERGER IS FAIR TO AND
IN THE BEST INTERESTS OF THE COMPANY'S STOCKHOLDERS (OTHER THAN PARENT AND THE
PURCHASER), (B) UNANIMOUSLY APPROVED THE OFFER, THE MERGER AND THE MERGER
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT, AND (C)
UNANIMOUSLY RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS ACCEPT THE OFFER AND
TENDER THEIR SHARES PURSUANT TO THE OFFER AND APPROVE AND ADOPT THE MERGER
AGREEMENT AND THE MERGER.
MORGAN STANLEY & CO. INCORPORATED, FINANCIAL ADVISOR TO THE SPECIAL
COMMITTEE, HAS DELIVERED AN OPINION TO THE SPECIAL COMMITTEE ON BEHALF OF THE
BOARD OF DIRECTORS TO THE EFFECT THAT THE CONSIDERATION TO BE RECEIVED BY THE
COMPANY'S STOCKHOLDERS (OTHER THAN PARENT AND ITS SUBSIDIARIES) IN THE OFFER
AND THE MERGER IS FAIR FROM A FINANCIAL POINT OF VIEW TO SUCH STOCKHOLDERS. SEE
"SPECIAL FACTORS--OPINION OF FINANCIAL ADVISOR" IN THE OFFER TO PURCHASE.
THIS OFFER IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF SHARES BEING
TENDERED. THE OFFER IS SUBJECT TO CERTAIN CONDITIONS. SEE "THE TENDER
OFFER--SECTION 13. CERTAIN CONDITIONS TO THE OFFER" IN THE OFFER TO PURCHASE.
IMPORTANT
Any stockholder desiring to tender all or any portion of such
stockholder's shares of Class A common stock, par value $.01 per share, of the
Company (the "Shares" or the "Company Common Stock") should either (i) complete
and sign the Letter of Transmittal (or a facsimile thereof) previously
furnished to such stockholder in accordance with the instructions in the Letter
of Transmittal, have such stockholder's signature thereon guaranteed (if
required by Instruction 1 to the Letter of Transmittal), mail or deliver the
Letter of Transmittal (or a facsimile thereof) and any other required documents
to the Depositary (as defined herein) and either deliver the certificates for
such Shares along with the Letter of Transmittal to the Depositary or tender
such Shares pursuant to the procedures for book-entry transfer set forth in
"THE TENDER OFFER--Section 3. Procedures for Tendering Shares" of the Offer to
Purchase or (ii) request such stockholder's broker, dealer, commercial bank,
trust company or other nominee to effect the transaction for such stockholder.
Any stockholder whose Shares are registered in the name of a broker, dealer,
commercial bank, trust company or other nominee must contact such broker,
dealer, commercial bank, trust company or other nominee to tender such Shares.
--------------
The Dealer Manager for the Offer is:
SALOMON SMITH BARNEY
The Information Agent for the Offer is:
Innisfree M&A Incorporated
April 4, 2000
<PAGE>
ANY STOCKHOLDER WHO DESIRES TO TENDER SHARES AND WHOSE CERTIFICATES
EVIDENCING SUCH SHARES ARE NOT IMMEDIATELY AVAILABLE, OR WHO CANNOT COMPLY WITH
THE PROCEDURES FOR BOOK-ENTRY TRANSFER DESCRIBED IN "THE TENDER OFFER--SECTION
3. PROCEDURES FOR TENDERING SHARES" IN THE OFFER TO PURCHASE ON A TIMELY BASIS,
OR WHO CANNOT DELIVER ALL REQUIRED DOCUMENTS TO THE DEPOSITARY PRIOR TO THE
EXPIRATION OF THE OFFER, MAY TENDER SUCH SHARES BY FOLLOWING THE PROCEDURES FOR
GUARANTEED DELIVERY SET FORTH IN "THE TENDER OFFER--SECTION 3. PROCEDURES FOR
TENDERING SHARES" OF THE OFFER TO PURCHASE.
Questions and requests for assistance or for additional copies of the
Offer to Purchase, this Supplement, the Letter of Transmittal or other tender
offer materials may be directed to Innisfree M&A Incorporated (the "Information
Agent") or Salomon Smith Barney Inc. (the "Dealer Manager") at their respective
addresses and telephone numbers set forth on the back cover of this Supplement.
Stockholders may also contact brokers, dealers, commercial banks or trust
companies for assistance concerning the Offer.
--------------
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR
MERITS OF SUCH TRANSACTION OR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION
CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
<PAGE>
TABLE OF CONTENTS
INTRODUCTION ............................................................... 1
Background of this Offer ................................................... 2
Opinion of Financial Advisor ............................................... 2
Interests of Certain Persons in the Offer and the Merger.................... 2
Position of Parent and the Purchaser Regarding Fairness of the Offer and
the Merger ............................................................... 2
Certain Legal Matters ...................................................... 5
Miscellaneous .............................................................. 6
ANNEX A -- LETTER FROM MORGAN STANLEY & CO. INCORPORATED TO THE
SPECIAL COMMITTEE OF THE BOARD OF DIRECTORS OF THE
COMPANY, DATED APRIL 3, 2000. ................................... A-1
ANNEX B -- SECOND AMENDED COMPLAINT OF HOWARD VOGEL, ON BEHALF OF
HIMSELF AND ALL OTHERS SIMILARLY SITUATED, AGAINST
TRAVELERS PROPERTY CASUALTY CORP., ROBERT I. LIPP, JAY S.
FISHMAN, FRANK J. TASCO, DUDLEY C. MECUM II, ARTHUR ZANKEL,
KENNETH J. BIALKIN, SANFORD I. WEILL, TAP MERGER CORP., LESLIE
B. DISHAROON AND CITIGROUP INC., FILED IN THE COURT OF
CHANCERY OF THE STATE OF DELAWARE ON APRIL 1, 2000. ............. B-1
<PAGE>
To the Holders of Class A Common Stock
of Travelers Property Casualty Corp.:
INTRODUCTION
The following information amends and supplements the Offer to Purchase
dated March 23, 2000 (the "Offer to Purchase") of The Travelers Insurance Group
Inc., a Connecticut corporation (the "Purchaser"), pursuant to which the
Purchaser is offering to purchase all the outstanding shares of Class A common
stock, par value $.01 per share (the "Shares" or the "Company Common Stock"),
of Travelers Property Casualty Corp., a Delaware corporation (the "Company"),
at $41.50 per Share, net to the seller in cash (the "Offer Price"), upon the
terms and subject to the conditions set forth in the Offer to Purchase, this
Supplement and in the related Letter of Transmittal (which together, as they
may be amended from time to time, constitute the "Offer"). The Purchaser is an
indirect wholly owned subsidiary of Citigroup Inc., a Delaware corporation
("Parent").
This Supplement should be read in conjunction with the Offer to Purchase.
The terms and conditions previously set forth in the Offer to Purchase and the
Letter of Transmittal previously mailed to stockholders remain applicable in
all respects to the Offer. Terms used but not defined herein have the meaning
set forth in the Offer to Purchase.
STOCKHOLDERS ARE URGED TO READ THE OFFER TO PURCHASE, THIS SUPPLEMENT AND
THE RELATED LETTER OF TRANSMITTAL CAREFULLY BEFORE DECIDING WHETHER TO TENDER
THEIR SHARES.
The Purchaser believes that the following information would be beneficial
to all holders of Shares in determining whether such holder should tender their
Shares in the Offer:
1
<PAGE>
BACKGROUND OF THIS OFFER. The discussion set forth in "SPECIAL
FACTORS--Background of this Offer" is amended and supplemented as follows:
On April 3, 2000, the Special Committee met telephonically with Morgan
Stanley and counsel to the Special Committee. At the meeting, representatives
of Morgan Stanley discussed with the Special Committee the matters concerning
the financial terms of the Offer and the Merger described in this Supplement
under "--Opinion of Financial Advisor" and informed the Special Committee that
the corrections described therein did not alter the conclusions of Morgan
Stanley's financial analysis in any material respect. In addition, in a letter
to the Special Committee on behalf of the Company Board, presented to the
Special Committee at the meeting, Morgan Stanley fully confirmed its March 21,
2000 opinion that, as of such date, the $41.50 per Share in cash to be received
by holders of Shares (other than Parent and its subsidiaries) in the Offer and
the Merger is fair from a financial point of view to such stockholders. A copy
of the letter is attached hereto as Annex A and is incorporated herein by
reference. The Special Committee continues its recommendation set forth under
"SPECIAL FACTORS--Recommendation of the Special Committee and the Company
Board; Fairness of the Offer and the Merger--Recommendation of the Special
Committee and the Company Board" based on the factors described under "SPECIAL
FACTORS--Recommendation of the Special Committee and the Company Board;
Fairness of the Offer and the Merger--The Special Committee" and the matters
described above in this paragraph.
OPINION OF FINANCIAL ADVISOR. The discussion set forth in "SPECIAL
FACTORS--Opinion of Financial Advisor" is amended and supplemented as follows:
At the April 3, 2000 meeting of the Special Committee, Morgan Stanley
informed the Special Committee that certain of the information regarding
precedent transactions used by Morgan Stanley in performing the analyses
presented to the Special Committee at its meeting on March 20, 2000, and
described in the Offer to Purchase under "SPECIAL FACTORS--Opinion of Financial
Advisor--Going Private Premium Analysis," was inadvertently set forth
inaccurately in such presentation. Such presentation is included as Exhibit
(c)(2) to the Tender Offer Statement on Schedule TO initially filed on March
23, 2000. Morgan Stanley noted that it had thoroughly reviewed each of the
precedent transactions underlying such analyses and had reperformed the
analyses based on the corrected data, which is attached as Exhibit (c)(4) to
Amendment No. 3 to the Offer to Purchase and is incorporated herein by
reference. Morgan Stanley noted that the correction of these inaccuracies
resulted in a change to certain of the mean and medium premiums set forth in
Appendix 2 of its March 20, 2000 presentation materials, "Analysis of Selected
Acquisitions of Minority Interests -- Analysis of Selected Minority Interest
Acquisitions 1992 To Present." In particular, the "Mean (All Transactions) --
Unaffected Price" increased to 26.8% from 24.7%; the "Mean (All Transactions)
- -- Day Prior to Public Announcement" increased to 23.1% from 21.1%; the "Mean
(All Transactions) -- All Time High" increased to -19.4% from -19.9%; the
"Median (All Transactions) -- Unaffected Price" increased to 23.2% from 21.3%;
the "Median (All Transactions) -- Day Prior to Public Announcement" increased
to 20.0% from 19.0%; the "Mean (Insurance Transactions) -- Unaffected Price"
decreased to 21.6% from 24.3%; the "Mean (Insurance Transactions) -- Day Prior
to Public Announcement" decreased to 19.6% from 22.1%; the "Mean (Insurance
Transactions) -- All Time High" increased to -1.6% from -4.6%; the "Median
(Insurance Transactions) -- Unaffected Price" decreased to 21.5% from 24.3%;
the "Median (Insurance Transactions) -- Day Prior to Public Announcement"
decreased to 17.9% from 20.3%; and the "Median (Insurance Transactions) -- All
Time High" increased to 5.2% from -2.0%.
INTERESTS OF CERTAIN PERSONS IN THE OFFER AND THE MERGER. The discussions set
forth in "SPECIAL FACTORS-- Interests of Certain Persons in the Offer and the
Merger" is amended and supplemented as follows:
In addition to the present principal occupation and the five-year
employment history of Leslie B. Disharoon set forth in Schedule I "INFORMATION
CONCERNING THE DIRECTORS AND EXECUTIVE OFFICERS OF PARENT AND THE PURCHASER--3.
Directors and Executive Officers of the Company" of the Offer to Purchase, Mr.
Disharoon was a director of Travelers Group Inc. (a predecesssor of Parent)
from 1986 to 1998. In addition, as of and since March 21, 2000, Mr. Disharoon
and Mr. Tasco may be deemed to directly or indirectly beneficially own
approximately 280,059 and 9,000 shares of common stock of Parent worth
$16,260,926 and $522,563, respectively (based upon the closing sales price of
the Parent common stock on the NYSE on March 21, 2000). The ownership interests
in Parent common stock described above should be taken into account by
stockholders in considering whether to tender their Shares.
POSITION OF PARENT AND THE PURCHASER REGARDING FAIRNESS OF THE OFFER AND THE
MERGER. The discussion set forth in "SPECIAL FACTORS--Position of Parent and
the Purchaser Regarding Fairness of the Offer and the Merger" is amended and
supplemented as follows:
Parent asked Salomon Smith Barney to assist Parent in its examination of
strategic alternatives with respect to Parent's ownership interest in the
Company. See "SPECIAL FACTORS--Background of the Offer"
2
<PAGE>
in the Offer to Purchase. In connection therewith, Salomon Smith Barney
developed a valuation analysis regarding the Company, dated March 20, 2000 (the
"Valuation Analysis"). Although the results of the Valuation Analysis were
discussed with members of Parent's senior management, the Valuation Analysis
was not presented in written form to the Parent Board. The Valuation Analysis
is not a fairness opinion. The Valuation Analysis, however, does include the
same types of information and analyses Salomon Smith Barney normally includes
in a presentation to directors in connection with a business combination for
which Salomon Smith Barney renders a fairness opinion.
The following is a summary of the analyses performed by Salomon Smith
Barney in the Valuation Analysis:
Public Market Comparables. Salomon Smith Barney compared certain financial
information at or for the twelve months ended September 30, 1999 of the Company
with the following companies: The Allstate Corporation, The Chubb Corporation,
Hartford Financial Services Group Inc., The St. Paul Companies, Inc., CNA
Financial Corporation, SAFECO Corporation, American Financial Group, Inc. and
Mercury General Corp. The financial information compared included market
capitalization, current share price, the ratio of price to estimated earnings
per share for 2000 and 2001 and the ratio of price to book value per share.
Estimated earnings were based on the median First Call estimates for 2000 and
2001 for all companies except for the Company, which were based on the Company
management's 2000 and 2001 budget estimates as set forth in "SPECIAL
FACTORS--Opinion of Financial Advisor" in the Offer to Purchase. In addition,
Salomon Smith Barney reviewed certain financial information of the Cincinnati
Financial Corporation and the American International Group, Inc., however,
Salomon Smith Barney did not include those companies in the group of
comparables because of, among other reasons, their different business mix and
comparatively disparate operating ratios.
This data provided a framework for an analysis of indicative public market
for comparable companies that led to the following:
<TABLE>
<CAPTION>
MEDIAN OF SELECTED IMPLIED VALUE RANGE
COMPARABLE COMPANIES RANGE(1) FOR THE SHARES
-------------------- -------- --------------
<S> <C> <C> <C>
PRICE/2000 EARNINGS ......... 9.4x 7.9x--10.9x $ 29.94--$41.33
PRICE/2001 EARNINGS ......... 8.6x 7.1x--10.1x $ 28.54--$40.63
PRICE/BOOK VALUE ............ 1.13x .93x--1.33x $ 21.49--$30.73
</TABLE>
- ----------
(1) Salomon Smith Barney determined the selected range based on the median of
the comparable companies.
Salomon Smith Barney also performed a regression analysis of estimated
2001 return on average common equity to latest book value multiples for the
comparable companies in the analysis. Based on this analysis, Salomon Smith
Barney derived a 1.35x to book value multiple implying a value of $31.20 per
Share based on an expected return on common equity of 15.3% which was based on
the Company management's budget estimates.
Selected Adjusted M&A Transaction Precedents. Salomon Smith Barney
reviewed certain financial information with respect to selected mergers and
acquisitions transactions since 1996. From these transactions, Salomon Smith
Barney identified those transactions which are the most comparable, based on
the nature of the businesses of the companies involved, to the Offer and the
Merger. The financial information reviewed included the purchase price paid in
the transactions as an adjusted multiple of the target companies' GAAP
estimated earnings and book value. The multiples were adjusted to reflect the
change in public market valuations since the announcement of the particular
transaction.
<TABLE>
<CAPTION>
MEDIAN OF SELECTED IMPLIED VALUE RANGE
COMPARABLE COMPANIES RANGE(1) FOR THE SHARES
-------------------- -------- --------------
<S> <C> <C> <C>
ADJUSTED PRICE-TO-ESTIMATED
EARNINGS ...................... 10.7x 9.7x--11.7x $ 36.80--$44.40
ADJUSTED PRICE-TO-BOOK ......... 1.10x .90x--1.30x $ 20.77--$30.01
</TABLE>
- ----------
(1) Salomon Smith Barney determined the selected range based on the median of
the comparable companies.
Minority Acquisition Transactions. Salomon Smith Barney reviewed certain
financial information for precedent transactions since 1992 which involved an
eighty percent or more shareholder in a minority acquisition transaction.
Within this universe of transactions, Salomon Smith Barney focused on twelve
which involved companies in the financial services industry. The financial
information included the premium over the market price per share one week prior
to announcement of the transaction and the premium over the market price per
share one month prior to announcement. This review indicated that the minority
acquisition transaction premium over the price per share one week prior to
announcement ranged from 11.3% to 21.3% and
3
<PAGE>
resulted in an implied value range for the Shares based on median premiums of
$33.51 to $36.52, and the premium over the price per share one month prior to
announcement ranged from 11.2% to 21.2% and resulted in an implied range for
the Shares based on median premiums of $35.03 to $38.18.
Discounted Cash Flow Analysis. Salomon Smith Barney performed a discounted
cash flow analysis to calculate the present value of the stand-alone cash flows
that the Company would generate from January 1, 2000 through December 31, 2004
assuming operating earnings of the Company would be the Company management's
budget estimates for 2000 and 2001 grown at a long-term IBES growth rate of
11.5% for 2002 through 2004 and year 2000 dividends would equal research
analysts' estimates grown at 16% for 2001 through 2004. Terminal values were
applied on the basis of 2004 book value and 2005 earnings whereby 2005 earnings
were estimated by growing 2004 estimated earnings by the long-term IBES growth
rate of 11.5%.
Salomon Smith Barney discounted the estimated cash flows provided by its
model using discount rates of 8.0% to 13.0%. Salomon Smith Barney calculated
terminal values both as a multiple of the Company's estimated 2004 book value
and as a multiple of the Company's estimated 2005 operating earnings. The
implied range of values calculated by Salomon Smith Barney for the Shares based
upon terminal values calculated as a multiple of 1.3x to 1.5x of estimated 2004
book value derived from the discounted cash flows analysis at discount rates of
10.0% and 11.0% ranged from $35.84 to $42.76. The implied range of values
calculated by Salomon Smith Barney for the Shares based upon terminal values
calculated as a multiple of 9.0x to 11.0x of estimated 2005 operating earnings
derived from the discounted cash flows analysis at discount rates of 10.0% and
11.0% ranged from $36.13 to $45.49. Salomon Smith Barney based its
determination of the applicable discount rates in its analysis based on a
weighted average cost of capital analysis of the Company.
Other Analyses. Salomon Smith Barney also conducted certain other analyses
that it deemed relevant, including a review of the historical stock price
performance of the Shares and comparisons of the performance of the Shares to
the performance of the Salomon Smith Barney Property Casualty Index and the S&P
500 since the Company's initial public offering in April 1996, a comparative
analysis of the operating ratios of comparable companies and a review of
selected published research reports disseminated by various Wall Street firms.
The preceding discussion is a summary of the material financial analyses
performed by Salomon Smith Barney and does not purport to be a complete
description of the analyses performed by Salomon Smith Barney. The preparation
of financial analyses is a complex process involving subjective judgments, and
is not necessarily susceptible to partial analysis or summary description.
Salomon Smith Barney made no attempt to assign specific weights to particular
analyses or factors considered, but, rather made qualitative judgments as to
the significance and relevance of all analyses and factors considered.
Accordingly, Salomon Smith Barney believes that its analyses, and the summary
set forth above, must be considered as a whole, and that selecting portions of
the analyses and of the factors considered by Salomon Smith Barney, without
considering all of the analyses and factors, could create a misleading or
incomplete view of the processes underlying the analyses conducted by Salomon
Smith Barney. With regard to the comparable companies analyses summarized
above, Salomon Smith Barney selected comparable public companies on the basis
of various factors, including the size and similarity of the line of business;
however, no company utilized as a comparison in these analyses summarized above
is identical to the Company. As a result, these analyses are not purely
mathematical, but also take into account differences in financial and operating
characteristics of the subject companies and other factors that could affect
the public trading value of the subject companies to which the Company is being
compared. In its analyses, Salomon Smith Barney made numerous assumptions with
respect to the Company, industry performance, general business, economic,
market and financial conditions, and other matters, many of which are beyond
the control of the Company. Any estimates contained in Salomon Smith Barney
analyses are not necessarily indicative of actual values or predictive of
future results or values, which may be significantly more or less favorable
than those suggested by these analyses. Estimates of values of companies do not
purport to be appraisals or necessarily to reflect the prices at which
companies may actually be sold. Because these estimates are inherently subject
to uncertainty, none of Parent, Salomon Smith Barney or any other person
assumes responsibility if future results or actual value differ materially from
the estimates.
Salomon Smith Barney's analyses were prepared solely to assist Parent in
its examination of strategic alternatives with respect to Parent's ownership
interest in the Company. Salomon Smith Barney is an indirect wholly owned
subsidiary of Parent. Salomon Smith Barney is a nationally recognized
investment banking and advisory firm. Salomon Smith Barney, as part of its
investment banking business, is continually engaged in the valuation of
businesses and securities in connection with mergers and acquisitions,
negotiated underwritings, competitive biddings, secondary distributions of
listed and unlisted securities, private placements and valuations for corporate
and other purposes.
Salomon Smith Barney is a full service securities firm engaged in
securities trading and brokerage activities, financing and financial advisory
services in addition to its investment banking activities. In the
4
<PAGE>
ordinary course of its trading, brokerage, and financing activities, Salomon
Smith Barney or its affiliates may at any time hold long or short positions,
and may trade or otherwise effect transactions, for the accounts of its
customers, in debt or equity securities or senior loans of the Company, Parent
or their affiliates.
Although it is expected that Parent will pay a customary fee to Salomon
Smith Barney for its assistance in Parent's examination of strategic
alternatives with respect to the Company, no agreement has been reached at this
time.
A copy of the Salomon Smith Barney Valuation Analysis is included as
Exhibit (c)(5) to the Tender Offer Statement on Schedule TO.
CERTAIN LEGAL MATTERS. The discussion set forth in "THE TENDER OFFER--Section
14. Certain Legal Matters" of the Offer to Purchase is amended and supplemented
as follows:
State Insurance Approvals. The Company has received written notice from
the Connecticut Insurance Commissioner that the Offer and the Merger are not
subject to the "change of control" provisions of the Connecticut insurance laws
and no further approval of the Connecticut Department of Insurance is necessary
to consummate the Offer or the Merger.
Litigation. There have now been at least thirteen lawsuits filed alleging
substantially similar claims as those described in "THE TENDER OFFER--Section
14. Certain Legal Matters" in the Offer to Purchase.
In addition, on March 28, 2000, the plaintiff in Civil Action No. 17902-NC
filed an Amended Complaint against the Company, its directors and Parent, and
on April 1, 2000 the plaintiff filed a second Amended Complaint (the "Second
Amended Complaint") against the Company, its directors and Parent.
The Second Amended Complaint alleges, among other things, that the
consideration that Parent has offered in the Offer, $41.50 per Share in cash,
is grossly inadequate and unfair and was not arrived at through the fair
process to which the Company's minority stockholders are entitled because the
Special Committee appointed by the Company Board to represent the interests of
the public stockholders was not properly constituted and did not function
faithfully to the Company's public stockholders.
In particular, the Second Amended Complaint alleges that the financial
loyalties of the members of the Special Committee, Messrs. Disharoon and Tasco,
are aligned with Parent because their respective holdings in Parent are larger
than their respective holdings in the Company. The Second Amended Complaint
alleges that the last publicly reported information indicated the following
stock ownership:
<TABLE>
<CAPTION>
COMPANY'S STOCK PARENT'S STOCK
--------------- --------------
<S> <C> <C>
Disharoon: 2,820 shares valued at $117,000 243,363 shares valued at $14.6 million
Tasco: 8,695 shares valued at $361,000 38,879 shares valued at $2.3 million
</TABLE>
The Second Amended Complaint alleges that on March 21, 2000, the day the
Offer was announced, the market price of Parent's shares rose $1.87 per share
and that because of this increase, the value of Mr. Disharoon's Parent shares
increased in value by over $455,000 and the value of Mr. Tasco's Parent shares
rose almost $73,000.
In addition, the Second Amended Complaint alleges that the compensation of
Morgan Stanley, the Special Committee's financial advisor, is, in large part,
contingent upon the consummation of the Offer.
The Second Amended Complaint further alleges that defendants have withheld
and obscured vital material information needed by stockholders to properly
assess and consider the Offer and the true value of the Company. In particular,
the Second Amended Complaint alleges that:
o "Defendants have failed to disclose that the so-called `Special
Committee' appointed by the [Company Board] was riddled with conflicts
of interest. The 14D-1 does not disclose the material fact that
defendant Leslie B. Disharoon, the Chairman of the Special Committee,
was formerly affiliated with [Parent] (or its predecessors) and,
therefore, has a material conflict of interest. The 14D-1 is
inaccurate when it states that the Special Committee was
`independent.'
o The financial analyses performed by Morgan Stanley Dean Witter
(`Morgan Stanley'), the Special Committee's financial advisor,
contained material inaccuracies and, therefore, the true range of
value for the Company's shares is materially higher than that being
reported to shareholders.
o Morgan Stanley's `Analysis Of Selected Acquisitions Of Minority
Interests -- Analysis Of Selected Minority Interest Acquisitions 1992
To Present,' falsely reported the `final consideration' received in
certain minority-squeeze outs, materially understating the premiums
paid in order to create the appearance of fairness for this offer.
5
<PAGE>
o Morgan Stanley's selected minority squeeze-out analysis also omitted
several pertinent and comparable squeeze-out transactions which would
have further demonstrated the inadequacy of the $41.50 Tender Offer
price. These transactions all occurred between 1992 and the present
(the same time period used by Morgan Stanley) and were used by Salomon
Brothers, the predecessor to Salomon Smith Barney (`Salomon'),
[Parent's] financial advisor, in another analysis of a squeeze-out
acquisition of a property and casualty insurance company.
o Many other of the analyses performed by Morgan Stanley to justify the
$41.50 Tender Offer price were based on inaccurate and incomplete
data. For instance, several Morgan Stanley analyses claimed to be
based on management estimates when, in fact, the actual estimates
claimed by Morgan Stanley as management estimates (but not used in the
analyses) were significantly higher than the purported management
estimates used.
o Defendants assert in the 14D-1 mailed to shareholders that Morgan
Stanley calculated a `summary indicative value range' for [the
Company's] shares of $38.00 to $48.00 per share, but have failed to
disclose that Morgan Stanley actually claimed that its six valuations
analyses (which were themselves artificially low) indicated a $40.00
to $48.00 summary indicative reference range. The 14D-1 also fails to
disclose that Morgan Stanley performed an analysis which illustrated
that `Indicative Premiums Paid in Precedent Mergers & Acquisitions'
yielded values materially in excess of all of the summary ranges, and
that Morgan Stanley did not incorporate those higher value ranges into
its final analysis.
o Defendants did not disclose that Salomon, [Parent's] financial
advisor, upon which [Parent] purportedly relied for its statement that
`the consideration to be received by [the Company's] stockholders 'was
fair to and in the best interests' of those stockholders, was
irremediably conflicted, as Salomon is a wholly-owned subsidiary of
[Parent]."
The Second Amended Complaint also alleges that, as a result of the
foregoing, the Company's stockholders will be forced, without full or complete
disclosure by defendants, to make final decisions regarding their ownership in
the Company and are threatened with the immediate divestiture of their Shares
as a result of defendants' alleged wrongful course of conduct.
The Second Amended Complaint seeks, among other things, a declaration that
defendants and each of them have committed or participated in a gross abuse of
trust and have breached their fiduciary duties to plaintiff and other members
of the Class or aided and abetted such breaches; a declaration that defendants
have breached their duty of candor; an Order enjoining the Offer or, if the
transaction is consummated, rescinding it; an Order that defendants make
corrective disclosures; an award of compensatory and/or rescissory damages; and
an award to plaintiff of the costs and disbursements of the action, including
reasonable fees and expenses of plaintiff's attorneys and experts.
Copies of each of the complaints filed in the thirteen pending lawsuits as
well as the Amended Complaint and Second Amended Complaint have been filed as
exhibits to the Tender Offer Statement on Schedule TO filed by Parent, the
Purchaser and the Company with the SEC and are incorporated herein by
reference. In addition, a copy of the Second Amended Complaint is attached
hereto as Annex B and is incorporated herein by reference.
On March 31, 2000, the Court of Chancery of the State of Delaware
scheduled a hearing on plaintiff's motion for preliminary injunction for April
14, 2000.
MISCELLANEOUS. Parent, the Purchaser and the Company have filed with the SEC a
Tender Offer Statement on Schedule TO, as amended, together with all exhibits
thereto, pursuant to Regulation M-A under the Exchange Act (the "Exchange Act
Rules"), furnishing certain additional information with respect to the Offer
which includes the information required by Schedule 13E-3. In addition, the
Company has filed a Solicitation/ Recommendation Statement on Schedule 14D-9,
as amended, together with all exhibits thereto, pursuant to Rule 14d-9 of the
Exchange Act Rules setting forth its recommendation with respect to the Offer
and the reasons for such recommendations and furnishing certain additional
related information. Such Schedules and any amendments thereto, including
exhibits, may be inspected and copies may be obtained from the offices of the
SEC in the manner set forth in "THE TENDER OFFER--Section 7. Certain
Information Concerning the Company" of the Offer to Purchase (except that they
will not be available at the regional offices of the SEC).
The Travelers Insurance Group Inc.
April 4, 2000
6
<PAGE>
ANNEX A
MORGAN STANLEY DEAN WITTER
1585 Broadway
New York, New York
10036
(212) 761-4000
April 3, 2000
Special Committee
On Behalf of the Board of Directors
Travelers Property Casualty Corp.
One Tower Square -- 8GS
Hartford, CT 06183
To the Special Committee on Behalf of the Board of Directors:
At the request of the Special Committee (the "Special Committee") of the
Board of Directors of Travelers Property Casualty Corp. (the "Company"), we
have reexamined certain analyses we performed in connection with the delivery
of our written opinion, dated March 21, 2000 (the "Opinion"), concerning the
fairness from a financial point of view of the consideration to be paid to the
holders (other than Citigroup Inc. and its subsidiaries) of the Company's Class
A common stock, par value $.01 per share, pursuant to the tender offer (the
"Offer"), commenced on March 23, 2000, in which The Travelers Insurance Group
Inc. ("Buyer") has offered to purchase all outstanding shares of such Class A
common stock (other than those held directly or indirectly by Buyer) for $41.50
net per share in cash, and in the related merger of a subsidiary of Buyer with
and into the Company. In particular, you have requested that we (i) review and
discuss the allegations concerning our analyses contained in the Second Amended
Complaint filed in Civil Action No. 17902-NC, pending in the Court of Chancery
for the State of Delaware in and for New Castle County, and (ii) reaffirm our
Opinion as of the date thereof.
In connection with your request, we have conducted such analyses as we
deem appropriate to reaffirm our Opinion. In addition, we have arrived at our
views in light of, and subject to, the matters and assumptions set forth in our
Opinion.
Based on the foregoing, we are pleased to reaffirm our Opinion as of the
date thereof.
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
By: /s/ Phillip Barnett
-------------------
Phillip S. Barnett
Managing Director
A-1
<PAGE>
ANNEX B
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
- ----------------------------------------------
HOWARD VOGEL, on behalf of himself and all
others similarly situated,
Plaintiff, Civil Action No. 17902 NC
-against-
TRAVELERS PROPERTY CASUALTY CORP.,
ROBERT I. LIPP, JAY S. FISHMAN, FRANK J. TASCO,
DUDLEY C. MECUM II, ARTHUR ZANKEL,
KENNETH J. BIALKIN, SANFORD I. WEILL, TAP
MERGER CORP., LESLIE B. DISHAROON and
CITIGROUP INC.,
Defendants.
- ----------------------------------------------
SECOND AMENDED COMPLAINT
Plaintiff, by his attorneys, for his second amended complaint against
defendants, alleges upon personal knowledge with respect to himself, and upon
information and belief based, inter alia, upon the investigation of counsel, as
to all other allegations herein, as follows:
NATURE OF THE ACTION
1. This is a class action on behalf of the public stockholders of
Travelers Property Casualty Corp. ("Travelers" or the "Company"), against the
directors and controlling stockholder of Travelers for injunctive and other
relief concerning the acquisition of the outstanding publicly-held shares of
Travelers common stock by Travelers' majority shareholder, defendant Citigroup
Inc. ("Citigroup"), through a wholly-owned Delaware subsidiary.
2. On March 21, 2000, Travelers publicly announced that it had agreed to a
transaction with Citigroup whereby Citigroup, through entities under its
control, would be commencing a cash tender offer (the "Tender Offer") for all
of the outstanding shares of the Company to be followed by a merger at the same
price. Pursuant to the transaction, Travelers' shareholders are to receive
$41.50 in cash for each share of their stock, which constitutes grossly
inadequate and unfair compensation given Travelers' valuable product lines and
promising future results. Beginning on or about March 24, 2000, Travelers and
Citigroup issued an Offer to Purchase on Schedule 14D-1 (the "14D-1") an Offer
to Purchase on Schedule 14D-1 (the "14D-1") and a Solicitation/ Recommendation
Statement on Schedule 14D-9 (the "14D-9") to Travelers' stockholders concerning
the Tender Offer.
3. As set forth in detail below, defendants are seeking to induce
Travelers' shareholders to tender their shares by claiming in the 14D-9 that
the transaction is "fair" to them. Yet, defendants have withheld and obscured
vital material information needed by shareholders to properly assess and
consider the Tender Offer and the true value of Travelers. In particular, as
set forth more fully below:
o Defendants have failed to disclose that the so-called "Special
Committee" appointed by the Travelers Board of Directors (the "Special
Committee") was riddled with conflicts of interest. For instance, the
14D-1 does not disclose the material fact that defendant Leslie B.
Disharoon, the Chairman of the Special Committee, was formerly
affiliated with Citigroup (or its predecessors) and, therefore, has a
material conflict of interest. The 14D-1 is inaccurate when it states
that the Special Committee was "independent."
B-1
<PAGE>
o The financial analyses performed by Morgan Stanley Dean Witter
("Morgan Stanley"), the Special Committee's financial advisor,
contained material inaccuracies and, therefore, the true range of
value for the Company's shares is materially higher than that being
reported to shareholders.
o Morgan Stanley's "Analysis Of Selected Acquisitions Of Minority
Interests -- Analyses Of Selected Minority Interest Acquisitions 1992
To Present" falsely reported the "final consideration" received in
certain minority-squeeze outs, materially understating the premiums
paid in order to create an appearance of fairness for this offer.
o Morgan Stanley's selected minority squeeze-out analysis also omitted
several pertinent and comparable squeeze-out transactions which would
have further demonstrated the inadequacy of the $41.50 Tender Offer
price. These transactions all occurred between 1992 and the present
(the same time period used by Morgan Stanley) and were used by Salomon
Brothers, the predecessor to Salomon Smith Barney ("Salomon"),
Citigroup's financial advisor, in another analysis of a squeeze-out
acquisition of a property and casualty insurance company.
o Many other of the analyses performed by Morgan Stanley to justify the
$41.50 Tender Offer price were based on inaccurate and incomplete
data. For instance, several Morgan Stanley analyses claimed to be
based on management estimates when, in fact, the actual estimates
claimed by Morgan Stanley as management estimates (but not used in the
analyses) were significantly higher than the purported management
estimates used.
o Defendants assert in the 14D-1 mailed to shareholders that Morgan
Stanley calculated a "summary indicative value range" for Travelers'
shares of $38.00 to $48.00 per share, but have failed to disclose that
Morgan Stanley actually claimed that its six valuations analyses
(which were themselves artificially low) indicated a $40.00 to $48.00
summary indicative reference range. The 14D-1 also fails to disclose
that Morgan Stanley performed an analysis which illustrated the
"Indicative Premiums Paid In Precedent Mergers & Acquisitions" yielded
values materially in excess of all of the summary ranges, and that
Morgan Stanley did not incorporate those higher value ranges into its
final analysis.
o Defendants did not disclose that Salomon, Citigroup's financial
advisor, upon which Citigroup purportedly relied for its statement
that "the consideration to be received" by Travelers' stockholders
"was fair to and in the best interests" of those stockholders, was
irremediably conflicted, as Salomon is a wholly-owned subsidiary of
Citigroup.
4. Furthermore, as demonstrated herein, the consideration that Citigroup
has offered in the Tender Offer, $41.50 per share in cash, is grossly
inadequate and unfair and was not arrived at through the "fair process" to
which Travelers' minority stockholders are entitled because the Special
Committee appointed by the Travelers' Board of Directors to purportedly
represent the interests of the public shareholders of Travelers was not
properly constituted and did not execute its function faithfully to Travelers'
public stockholders. In addition to these conflicts of interest, the
compensation of Morgan Stanley, the Special Committee's financial advisor is,
in large part, contingent upon the consummation of Citigroup's $41.50 offer.
Thus, it is clear that the true purpose of the "Special Committee" was to
create the appearance that the public shareholders of Travelers were being
independently represented and having their interests protected when, in fact,
that was not the case.
5. As a result of the foregoing, Travelers' shareholders will be forced,
without full or complete disclosure by defendants, to make final decisions
regarding their ownership in the Company and are threatened with the immediate
divestiture of their shares at an inadequate price as a result of defendants'
wrongful course of conduct.
THE PARTIES
6. Plaintiff, at all relevant times, has owned Travelers common stock.
7. Travelers is a Delaware corporation with its principal executive
offices located at One Tower Square, Hartford, Connecticut. Travelers provides
a broad range of insurance products and services.
8. Defendant Citigroup, a Delaware corporation, is a diversified financial
services holding company that provides a broad range of financial services.
Citigroup was formed in 1998 through the merger of Citicorp and
B-2
<PAGE>
Travelers Group. Salomon Smith Barney is a wholly-owned subsidiary of
Citigroup. Citigroup and its affiliates hold approximately 85% of the total
equity of Travelers and own shares with approximately 98% voting control over
the Company. As such, Citigroup and its representatives on Travelers' Board
effectively control and dominate Travelers affairs. Citigroup, therefore, is a
controlling shareholder and owes fiduciary obligations of good faith, candor,
loyalty and fair dealing to the public shareholders of Travelers.
9. Defendant TAP Merger Corp., a wholly owned Delaware subsidiary of the
Travelers Insurance Group Inc., which is a wholly-owned subsidiary of defendant
Citigroup was established to facilitate the acquisition of Travelers'
publicly-held shares.
10. Defendant Robert I. Lipp ("Lipp") is a Director of Travelers and the
Chief Executive Officer of Citigroup's Global Insurance Business.
11. Defendant Jay S. Fishman ("Fishman") is the President and Chief
Executive Officer of Travelers and Chairman of its Board of Directors.
12. Defendant Frank J. Tasco ("Tasco") is a Director of Travelers. From
1991 to 1998, Tasco was a Director of Travelers Group, a predecessor of
Citicorp.
13. Defendant Dudley C. Mecum II ("Mecum") is a Director of Travelers and
a Director of Citigroup.
14. Defendant Arthur Zankel ("Zankel") is a Director of Travelers and a
Director of Citigroup.
15. Defendant Kenneth J. Bialkin ("Bialkin") is a Director of Travelers
and a Director of Citigroup.
16. Defendant Sanford L. Weill ("Weill") is a Director of Travelers and
the Co-Chairman and Co-Chief Executive Officer of Citigroup
17. Defendant Leslie B. Disharoon ("Disharoon") is a Director of
Travelers. From 1986 to 1988, Disharoon was a Director of Travelers Group.
18. At all relevant times, defendants Lipp, Fishman, Tasco, Mecum, Zankel,
Bialkin, Weill and Disharoon (collectively, the "Individual Defendants")
constituted Travelers' Board of Directors.
19. None of the Individual Defendants maintains significant ownership of
Travelers' stock. Collectively, the 16 executive officers and directors of
Travelers hold approximately 312,000 of the over 57 million shares of the
Company's publicly-traded (non-Citigroup) common stock. Defendants Disharoon
and Tasco, the members of the Special Committee, hold just 11,515 shares of
Travelers stock. By contrast, at the time they left their long standing Board
memberships with Travelers Group less than two years ago, Disharoon had 243,363
shares of Travelers Group (now Citigroup) stock, and Tasco held 38,879 shares
of Travelers Group stock.
20. By virtue of their positions as directors and/or officers of Travelers
and/or their exercise of control and dominant ownership over the business and
corporate affairs of Travelers, each Individual Defendant and Citigroup owed
and owes Travelers and its stockholders fiduciary obligations and were and are
required to: use their ability to control and manage Travelers in a fair, just
and equitable manner; act with complete candor when soliciting shareholder
action; act in furtherance of the best interests of Travelers and its
stockholders; refrain from abusing their positions of control; and not favor
their own interests at the expense of Travelers and its stockholders.
21. As discussed in detail below, Citigroup, in concert with the
Individual Defendants, who collectively control the actions of Travelers, have
breached their fiduciary duties to Travelers' public stockholders by acting to
cause or facilitate Citigroup's acquisition of the publicly-held minority
shares of Travelers for unfair and inadequate consideration, and colluding in
Citigroup's coercive tactics in accompanying such buy-out.
CLASS ACTION ALLEGATIONS
22. Plaintiff brings this action pursuant to Rule 23 of the Rules of this
Court on behalf of himself and all other shareholders of the Company except the
defendants herein and any persons, firm, trust, corporation, or other entity
related to or affiliated with them and their successors in interest, who are or
will be threatened with injury arising from defendants' actions, as more fully
described herein (the "Class").
B-3
<PAGE>
23. This action is properly maintainable as a class action for the
following reasons:
a. The Class is so numerous that joinder of all members is impracticable.
There are millions of shares of Travelers common stock outstanding, held by
hundreds if not thousands of stockholders of Travelers stock who are
members of the Class.
b. Members of the Class are scattered throughout the United States and
are so numerous that it is impracticable to bring them all before this
Court.
c. There are questions of law and fact that are common to the Class
including, inter alia, the following:
(1) whether defendants have engaged in and are continuing to engage in
conduct which unfairly benefits Citigroup at the expense of the members
of the Class;
(2) whether the Individual Defendants, as officers and/or directors of
the Company, and Citigroup, the controlling stockholder of Travelers are
violating their fiduciary duties to plaintiff and the other members of
the Class;
(3) whether plaintiff and the other members of the Class would be
irreparably damaged were defendants not enjoined from the conduct
described herein;
(4) whether defendants have initiated and timed their buy-out of
Travelers shares to unfairly benefit Citigroup at the expense of
Travelers' public shareholders.
d. The claims of plaintiff are typical of the claims of the other members
of the Class in that all members of the Class will be damaged by
defendants' actions.
e. Plaintiff is committed to prosecuting this action and has retained
competent counsel experienced in litigation of this nature. Plaintiff is an
adequate representative of the Class.
f. The prosecution of separate actions by individual members of the Class
would create the risk of inconsistent or varying adjudications with respect
to individual members of the Class which would establish incompatible
standards of conduct for defendants, or adjudications with respect to
individual members of the Class which would as a practical matter or
dispositive of the interests of the other members not parties to the
adjudications or substantially impair or impede their ability to protect
their interests.
g. The defendants have acted, or refused to act, on grounds generally
applicable to, and causing injury to, the Class and, therefore, preliminary
and final injunctive relief on behalf of the Class as a whole is
appropriate.
SUBSTANTIVE ALLEGATIONS
A. THE COMPANY
24. Travelers provides a broad range of insurance products and services
for the commercial and consumer markets. Travelers is the second largest writer
of personal insurance lines through independent agents and the third largest
writer of commercial lines. It is the third largest publicly traded United
States property and casualty company by market capitalization. Among other
things, Travelers has (1) a universally highly-regarded management team, (2) a
proven consolidation ability, (3) a high quality balance sheet and (4) reserve
quality. Indeed, Travelers is considered to be the premiere player in the
property and casualty sector. Travelers' 3-year average return on equity of
15.1% significantly outperformed the Company's property and casualty insurance
peer group median 3-year return on equity of 10.9%. Travelers' 3-year operating
income growth of 9.0% also handily beat the peer group median 3-year operating
income growth of 5.7%.
B. A CONFLICTED SPECIAL COMMITTEE IS FORMED
25. According to the 14D-1, during the March 3, 2000 meeting of the
Travelers Board of Directors, a representative of Citigroup advised the
Travelers Board that Citigroup was "examining strategic alternatives" with
respect to its ownership of Travelers shares. Therefore, because of "possible
conflicts of interest,"
B-4
<PAGE>
Travelers formed a Special Committee consisting of defendants Disharoon and
Tasco, neither of whom, according to the 14D-1 was "employed by or affiliated
with the Company (except in their capacity as directors; or Parent [Citigroup]
or any of its affiliates." Disharoon was appointed Chairman of the Special
Committee.
26. Defendants Disharoon and Tasco, however, are former Directors of
Travelers Group, the former parent of Travelers, which itself is now a
wholly-owned subsidiary of Citigroup, having served in that position from
1986-1998 and 1992-1998, respectively. At the time they left Travelers Group,
Disharoon and Tasco also served on Travelers Group's Audit Committee (along
with defendant Mecum) and Finance Committee (along with defendant Zankel).
Defendant Weill, the former head of Travelers Group, is now the Co-Chief
Executive Officer of Citigroup, and Disharoon and Tasco were co-directors with
Weill, during their tenure on the Travelers Group Board. Defendants Disharoon
and Tasco, therefore, have overriding loyalties to defendant Weill and were and
are not truly independent. Moreover, Disharoon and Tasco's significant holdings
in Citigroup stock vastly outweighs their minimal holdings in Travelers stock.
Based on their last reported Travelers and Citigroup (or predecessor) holdings
and assuming the $41.50 cash Tender Offer price for Travelers and an
approximate current price of Citigroup stock at $60 per share, Disharoon and
Tasco's financial loyalties are clearly aligned with Citigroup:
<TABLE>
<CAPTION>
TRAVELERS STOCK CITIGROUP STOCK
--------------------------------- ---------------------------------------
<S> <C> <C>
Disharoon: 2,820 shares valued at $117,000 243,363 shares valued at $14.6 million
Tasco: 8,695 shares valued at $361,000 38,879 shares valued at $2.3 million
</TABLE>
27. Thus, the 14D-1 is inaccurate when it states that the Special
Committee was "independent."
28. The 14D-1 also purports to list the "material positions held during
the past five years" for each Travelers' Director but fails to disclose that
Disharoon was a Director of Travelers Group until 1998.
29. On March 10, 2000, the Special Committee retained Morgan Stanley to
act as its financial advisor and to "prepare an analysis as to the range of
values" of Travelers shares.
30. The 14D-1 states that prior to the Special Committee meeting with
Morgan Stanley to review Morgan Stanley's results, the "Special Committee had
been informally advised" by Citigroup that it planned to make an offer "no
higher than the mid to high $30's." If, as is likely, the Special Committee
conveyed this information to Morgan Stanley prior to its analysis, then Morgan
Stanley did not actually undertake to derive a "range of values" for Travelers'
shares, but, rather, was working to justify the price which Citigroup wanted to
pay for Travelers. The 14D-1 fails to disclose whether Morgan Stanley, prior to
preforming its analysis, had been informed of the range of consideration which
Citigroup was willing to pay.
31. Pursuant to Morgan Stanley's engagement letter, Travelers agreed to
pay Morgan Stanley (1) an advisory fee upon commencement of its engagement of
$350,000 for the first month of the assignment and up to $75,000 per month for
each month thereafter, (2) a fee of $5,000,000 upon delivery of its fairness
opinion and (3) if the deal is completed, a "Transaction Fee" against which the
advisory and opinion fees will be credited. The Transaction Fee will be 0.4% of
the total dollar value of the consideration paid for acquiring the
publicly-held shares. Based on the current transaction valuation of $2.37
billion, Morgan Stanley's Transaction Fee is valued at approximately $9.48
million. The full Transaction Fee is payable at the time at which 95% or more
of the Company's common stock is controlled by Citigroup or its affiliates. The
fact that Morgan Stanley's compensation could double depending on whether the
Citigroup offer succeeds is an arrangement which irremediably conflicted Morgan
Stanley and incentivized Morgan Stanley to skew it fairness opinion toward a
deal that had a reasonable probability of consummation, rather than put the
transaction at risk by seeking to accurately and fairly investigate whether
Citigroup's offer was fair.
C. CITIGROUP OFFERS TO PURCHASE TRAVELERS SHARES, MORGAN STANLEY OPINES THAT
$41.50 PER SHARE IS FAIR AND REASONABLE AND THE COMPANY'S BOARD APPROVES
THE TRANSACTION
32. On March 21, 2000, Citigroup contacted the Special Committee and
formally offered to acquire all the publicly-held shares of Travelers that it
did not presently own for $41.50 cash per share. Later that day, Morgan Stanley
rendered its opinion to the Special Committee that this consideration to be
received by
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<PAGE>
Travelers' public shareholders was "fair to and in the best interest of"
Travelers' shareholders "from a financial point of view." The Special Committee
then unanimously recommended that the Travelers Board vote in favor of the
merger. The Board, thereafter, approved the merger.
D. THE TRANSACTION IS ANNOUNCED
33. Also, on March 31, 2000, Travelers issued a press release announcing
the transaction, which is valued at $2.4 billion. According to Keith Anderson,
a Travelers spokesman, the merger "will simply change the company's capital
structure. It will not affect employment levels, or how we do business." On
that day, the market price of Citigroup's shares rose $1.87 per share,
reflecting investors' judgment of the level of value which Travelers would add
to Citigroup based on the accretive nature of the transaction to Citigroup.
With over 3.37 billion shares outstanding, Citigroup's overall market
capitalization increased by over $6.3 billion immediately following the
announcement. Disharoon's 243,363 Citigroup shares increased in value by over
$455,000, and Tasco's 38,879 shares rose almost $73,000.
34. On or about March 24, 2000, Citigroup and Travelers disseminated the
14D-1 and 14D-9 to Travelers' shareholders purportedly describing, inter alia,
the merger transaction, the history of negotiations between the companies, the
opinion of the Special Committee's financial advisor and certain other
information. The Tender Offer is scheduled to expire on April 19, 2000.
E. DEFENDANTS BREACHED THEIR FIDUCIARY DUTIES TO PLAINTIFF AND THE CLASS
(1) THE TENDER OFFER PRICE GROSSLY UNDERVALUES THE COMPANY'S SHARES
35. The Tender Offer represents only a modest premium over the trading
price of Travelers stock prior to the announcement of the offer. Indeed, the
offer is timed to take advantage of a temporarily depressed trading price of
Travelers common stock and the property and casualty insurance industry in
general. This temporary depression is ending, as pricing in the property and
casualty industry is improving and expected to improve further and as noted by
the substantial value which representatives of the Company as well as various
analysts have placed on Travelers. Travelers is well positioned to take
advantage of improving industry conditions.
36. For example, on March 20, 2000, Travelers announced that Jay S.
Fishman, Travelers' President and Chief Executive Officer, was elected to also
serve as Chairman of the Company. Commenting on Mr. Fishman's appointment,
defendant Lipp, Travelers' departing Chairman stated:
Today's action by the Board underscores the success of our company under
Jay's leadership as the Chief Executive Officer. That success is
particularly noteworthy in light of the challenging market conditions
faced by the property-casualty industry during Jay's tenure. During this
period, Travelers Property Casualty has recorded record earnings each
year, built a solid capital base, and positioned the company as a leader
in the industry. [Emphasis added]
37. Furthermore, the Wall Street Journal reported on March 23, 2000 that
Weston Hicks, an analyst at J.P. Morgan Securities, stated that Citigroup's bid
for Travelers "is `a validation' that insurers are at the bottom of this rough
cycle... If you've got a three-to-five year investment horizon, it's a good
time to be moving assets into this industry...Citigroup is buying assets when
they are cheap and things are improving." The article also stated that, "For
its part, Citigroup believes Travelers stock is cheap - about 11 times
projected earnings, at the cash takeover price of $41.50 per share. Some
portfolio managers owning Travelers complain that it is a steal at that price.
Mr. Hicks, the J. P. Morgan analyst, had estimated that Travelers had an
intrinsic value of $47 a share." Applying an 11 times P/E multiple to
Travelers' year 2000 estimated earnings translates to $43.56 per share - even
before applying any minority squeeze out premium. That, however, is not
reflected in the $41.50 acquisition price.
(2) MORGAN STANLEY'S FAIRNESS OPINION WAS MATERIALLY INACCURATE AND DID NOT
VALIDATE THE TRANSACTION
38. The 14D-1 contains a summary of the results of various financial
analyses performed by Morgan Stanley in connection with its fairness opinion.
The Special Committee purports to have relied heavily on the
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<PAGE>
Morgan Stanley analyses. Indeed, the first factors the Special Committee
identified in reaching its conclusion to recommend the transaction refer to
Morgan Stanley's financial analyses. A review of these analyses, however,
confirms that the consideration to be received by Travelers' public
shareholders is grossly unfair and inadequate and these analyses are riddled
with material inaccuracies which were or should have been obvious to the
Special Committee members, who therefore knew or should have known that Morgan
Stanley's analysis could not be relied upon.
39. Morgan Stanley performed six principal valuation analyses for the
Special Committee, each of which contained or was based on inaccurate or
incomplete data. Moreover, the final reference ranges indicated by the flawed
analyses were then manipulated by Morgan Stanley in order to justify the
inadequate $41.50 Tender Offer price.
40. In providing a general overview of Travelers and its peers in the
property/casualty sector, Morgan Stanley notes the quality of Travelers'
fundamentals, even in a temporarily depressed market for the overall sector.
Indeed, Travelers' has consistently outperformed it peers. This is most readily
seen through the critical measures of (1) "return on equity" or "ROE" and (2)
operating income growth (i.e. how you grow that return). Travelers' 3-year
average return on equity of 15.1% significantly outperformed the property and
casualty insurance peer group median 3-year return on equity of 10.9%, and
Travelers' 3-year operating income growth of 9.0% also handily beat the peer
group median 3-year operating income growth of 5.7%. Indeed, as the property
and casualty sector is emerging from the depressed market through price firming
in commercial lines (as acknowledged by Morgan Stanley), Travelers is well
situated to benefit from the upswing.
41. Morgan Stanley's review also demonstrates Travelers' ability to
carefully manage analysts' expectations. For the past year, for instance,
Morgan Stanley noted that Travelers has consistently beat the street earnings
estimates reflected in the Institutional Brokers Estimate System ("IBES") by a
significant percentage:
<TABLE>
<CAPTION>
ANNOUNCEMENT IBES ESTIMATE ACTUAL EARNINGS PER SHARE
------------ ------------- -------------------------
<S> <C> <C>
4Q98 $ 0.81 $ 0.88
1Q99 $ 0.81 $ 0.83
2Q99 $ 0.83 $ 0.86
3Q99 $ 0.84 $ 0.85
4Q99 $ 0.85 $ 0.90
</TABLE>
42. Despite Travelers managements' ability to consistently beat analysts'
estimates and despite the fact that analysts estimates identified by Morgan
Stanley were below management's projections, Morgan Stanley used the IBES
estimates to calculate reference ranges of value in an effort to depress the
value ranges indicated by its analyses.
43. Morgan Stanley's first valuation analysis was an "Indicative Public
Market Trading Valuation" to determine the short-term valuation of Travelers
stock based largely on earnings estimates and without the application of a
minority squeeze-out premium. The analysis was flawed in several material
respects, and understated the value range of Travelers' stock. First, Morgan
Stanley used IBES earnings per share ("EPS") estimates that the Company has
consistently exceeded. Second, Morgan Stanley's analysis used "management's"
estimated EPS of $3.65 for 2000 and $3.85 for 2001, when, in fact, Morgan
Stanley claims that management's estimated EPS was actually $3.96 for 2000 and
$3.98 for 2001. Third, Morgan Stanley applied a "comparables trading range"
that was misleading because as Morgan Stanley had noted, Travelers outperformed
its peer group and should realistically be valued in a higher range. The use of
flawed data provided an artificially low value range, but Morgan Stanley
further manipulated that range downward by claiming a "reference range" that
disproportionately weighted the lower numbers of the range. Thus, the final
reference range of $33.00 to $38.00 was artificially low.
44. The faulty reference range from the Indicative Public Market Trading
Valuation was then used as the basis for Morgan Stanley's second valuation
analysis, an "Indicative Minority Squeeze-out Premium Valuation," which
similarly depressed the reference ranges calculated. Thus, the final reference
range of $40.00 to $48.00 was artificially low.
45. Morgan Stanley's third valuation analysis, an "Indicative
Long-term/'Normalized' Trading Range" sought to determine the long-term
valuation of Travelers stock. Like the short-term Indicative Public Market
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Trading Valuation, the Indicative Long-Term/Normalized Trading Range
misleadingly used the IBES estimates which Morgan Stanley knew that Travelers
had and would continue to exceed and the wrong (lower) management EPS
estimates. As a result, the final reference range of $40.00 to $48.00 was too
low. Moreover, this analysis was additionally misleading because Morgan Stanley
- -- already faced with a $41.50 price at the low end of the $40.00 to $48.00
reference range -- did not apply any squeeze-out premium to valuation.
46. Morgan Stanley's fourth valuation analysis, "Indicative Premiums Paid
in Squeeze-Out Transactions," was misleading because the price basis for which
the premium ranges were applied should have been the trading valuations,
short-term and long-term, that Morgan Stanley calculated in its earlier
analyses. Instead, Morgan Stanley used a lower market price from the bottom 15%
of the short-term valuation and over $6 short of the bottom end of the
long-term valuation (which ranges were artificially low to begin with, as
explained above). Thus, the final reference range of $40.40 to $44.00 was
artificially low.
47. Morgan Stanley's fifth analysis, "Indicative Premiums paid in
Precedent Mergers and Acquisitions," was misleading because Morgan Stanley
again relied upon the inapplicable (lower) IBES estimates and the wrong (lower)
management EPS estimates. Thus, the final reference range of $50.00 to $60.00
was artificially low. Nonetheless, Morgan Stanley did not incorporate this
range into the final "summary indicative value range" set forth in the 14D-1,
and the $50.00 to $60.00 reference range was not described in the "summary
analysis" section of the 14D-1 or in the 14D-9.
48. The value range claimed by the sixth analysis, "Discount Cash Flow,"
was false and misleading because Morgan Stanley manipulated the range downward.
Morgan Stanley claimed a $40.00 to $47.00 value range despite the fact that
none of the per share values calculated through that analysis was $40.00 per
share or lower. Rather, the low end of the analysis was $40.62, and the high
end was $48.47.
49. Morgan Stanley's "going private premium analysis" also contains
incomplete and inaccurate data. According to the 14D-1, that analysis implied a
value reference range for Travelers' shares of $40.00 to $48.00 per share. At
$41.50 per share, the Tender Offer price is only marginally higher than the
number at the lower end of that range. The underlying data for the "going
private premium analysis" is annexed as Exhibit 99 (C)(2) to the 14D-1, in a
document entitled "Project Juice Presentation to the Special Committee March
20, 2000." The analysis, however, contains at least six material inaccuracies
which relate to the prices paid in other comparable deals. In each and every
one of the six instances, the price paid by the acquiror was materially higher
(and, therefore, the premium was higher) than that reported by Morgan Stanley
in the analysis. These inaccuracies caused the "going private premium analysis"
to understate the range of values for that analysis and, in turn, created a
false range of values here.
50. For example, in its "Analysis Of Selected Acquisitions Of Minority
Interests -- Analysis Of Selected Minority Interest Acquisitions 1992 To
Present," Morgan Stanley reported false "final consideration" data for several
minority squeeze-outs:
a. Morgan Stanley reported that the final consideration paid in the
PEC Israel Economic Corp./Investor Group transaction was $30.00 per share.
That number is wrong. The actual final consideration received by PEC's
shareholders was $36.50 per share;
b. Morgan Stanley reported that the final consideration for the
Wheelabrator Technologies Inc./Waste Management, Inc. squeeze-out was
$15.00 per share, when, in fact, the actual final consideration received by
shareholders was $16.50 per share;
c. Morgan Stanley reported that the final consideration for the Fina
Inc./Petrotina S.A. squeeze-out was $60.00 per share, when, in fact, the
actual final consideration received by shareholders was $60 cash, plus an
additional warrant valued at $4.25-$4.75 per share;
d. Morgan Stanley reported that the final consideration for the Lin
Broadcasting Corp./AT&T Corp. squeeze-out was $129.50 per share, when, in
fact, the actual final consideration received by shareholders was $129.90
per share,
e. Morgan Stanley reported that the final consideration for the
Medical Marketing Group Inc./Medco Containment Services Inc. squeeze-out
was $27.25, when, in fact, the actual consideration received by
shareholders was $27.75 per share; and
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<PAGE>
f. Morgan Stanley reported that the final consideration for the Mafco
Consolidated Group/Mafco Holdings squeeze-out was $33.50, when, in fact,
the actual consideration received by shareholders was $33.50, plus an
additional cash dividend of $10.00 per share, yielding final consideration
of $43.50 cash per share. Significantly, Morgan Stanley acted as the
financial advisor to the Special Committee in the Mafco Consolidated/Mafco
Holding Merger.
51. In addition to these material inaccuracies, Morgan Stanley also
omitted several pertinent squeeze-out transactions from its analysis which
would have further demonstrated the inadequacy of the $41.50 Tender Offer
price. These transactions all occurred between 1992 and the present (the same
time period used in the Morgan Stanley analysis), and were used by Salomon
Brothers, the predecessor to Salomon, Citigroup's financial advisor, in a
minority squeeze-out transaction analysis of an acquisition of another property
and casualty insurance company. These transactions include (1) the 1997
acquisition of Calgene, Inc by Monsanto, Inc., which had an implied premium of
60% over Calgene's unaffected market price one week before the transaction was
announced, (2) the 1994 acquisition of Orient-Express Hotels, Inc. by Sea
Containers Ltd., which had an implied premium of 64.8% over Orient-Express
Hotels' unaffected market price one week before the transaction was announced,
(3) the 1995 acquisition of Rust International, Inc. by WMX Technologies, Inc.,
which had an implied premium of 39.1% over Rust's unaffected market price one
week before the transaction was announced and (4) the 1992 acquisition of
Spelling Entertainment Inc., by Charter Co., which had an implied premium of
45% over Spelling's unaffected market price one week before the transaction was
announced.
52. While omitting other relevant squeeze-out transactions that would have
increased the indicated premiums paid, at least one transaction included by
Morgan Stanley involved a significant discount rather than a premium and
therefore lowered the mean and median premiums calculated for the analysis.
That transaction was the Lin Broadcasting Corp./AT&T Corp. squeeze-out (which
Morgan Stanley had already misstated). The unique terms of that transaction,
involving competing bankers seeking to value the company through a
previously-determined and contractually-provided formula, involved a discount
of between 3% and 11% to the market price of Lin. Thus, that transaction was so
dissimilar to any other comparable transaction and rendered it inapplicable as
a comparable for the valuation of Travelers or the fairness of the Tender
Offer.
53. Ultimately, Morgan Stanley's inclusion of irrelevant transactions,
exclusion of relevant transactions, and use of erroneous data and other
manipulations of the valuation process served to materially understate the
value range for Travelers, and as such Morgan Stanley's opinion that the Tender
Offer was fair to Travelers stockholders from a financial point of view was
false, and, in fact, the transaction is unfair.
(3) THE 14D-1 AND 14D-9 FAIL TO DISCLOSE MATERIAL INFORMATION
54. The 14D-1 and 14D-9 also fail to disclose material information
necessary for Travelers shareholders to make an informed decision. The 14D-1
does not provide a basis upon which shareholders can independently determine
the value of the Company's stock and decide whether or not to tender their
shares. Among other things, the 14D-1 fails to disclose and/or misrepresents:
a. That defendant Disharoon, the Chairman of the Special Committee,
was formerly affiliated with Citigroup (or its predecessors) and, therefore
is aligned with the interests of Citigroup, and is thereby irremediably
conflicted. In this regard, the 14D-1 is inaccurate when it states that the
Special Committee was "independent";
b. The fact that Salomon, Citigroup's financial advisor upon whom
Citigroup purportedly relied for its statement that the "consideration to
be received" by Travelers' stockholders "was fair to and the best
interests" of those stockholders, was irremediably conflicted as Salomon is
a wholly-owned subsidiary of Citigroup;
c. The fact that Morgan Stanley's squeeze-out analysis contained
material inaccuracies and omissions as described above;
d. The fact that Morgan Stanley's six valuation analyses used the
wrong bases by using inapplicable IBES EPS estimates or purported
management estimates that were significantly lower than what Morgan Stanley
claimed were the actual estimates. Thus, the value ranges that Morgan
Stanley derives were artificially low;
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<PAGE>
e. The fact that Morgan Stanley manipulated the already artificially
low value ranges by disproportionately including or further discounting the
lower end of the range and excluding the higher end;
f. The fact that the $50.00 to $60.00 value range determined through
Morgan Stanley's "Indicative Premiums Paid In Precedent Mergers &
Acquisitions" yielded values materially in excess of the $38.00 to $48.00
"summary indicative value range" set forth in the 14D-1 (which itself was
misleading because the Morgan Stanley actually determined a $40.00 to
$48.00 "summary indicative reference range" from its six valuation
analyses). The results the "Indicative Premiums Paid In Precedent Mergers &
Acquisitions Analysis" are not described in the "summary analysis" section
of the 14D-1 or in the 14D-9, and were not incorporated into any of Morgan
Stanley's final analyses;
g. That Morgan Stanley was "tipped-off" by the Special Committee as to
the price which Citigroup was willing to pay for Travelers' shares prior to
Morgan Stanley performing its "analysis as to the range of values" of
Travelers' shares. If a "tip-off" occurred, Morgan Stanley was not actually
undertaking to derive an objective "range of values for Travelers' shares
but, rather, given the large financial incentive to Morgan Stanley from an
acquisition of Travelers by Citigroup, was justifying the price which
Citigroup wanted to pay for Travelers' shares; and
h. Citigroup has timed the Tender Offer to take advantage of the
depressed price of Travelers' common stock and that, given the Company's
strong financial prospects, the timing of the Tender Offer was designed to
artificially "cap" the price of Travelers' common stock.
CLAIM FOR RELIEF
55. In light of the foregoing, the Tender Offer is wrongful, unfair and
harmful to Class members. In seeking to consummate the transaction, defendants
have failed to negotiate a fair price and to afford Class members adequate
procedural safeguards and have acted in breach of their duty of candor.
56. Citigroup is the controlling stockholder of Travelers and is,
therefore, well aware of the true financial condition and operating earnings
potential of Travelers.
57. In making its inadequate offer to acquire the remaining stock of
Travelers, Citigroup has tried to take advantage of the fact that the market
price of Travelers stock does not fully reflect the true value of the Company
based on Travelers' earnings prospects and ability to take advantage of
improving industry conditions.
58. Any transaction to acquire the Company at the price being considered
does not represent the true value of the Company and is unconscionable, unfair
and grossly inadequate and constitutes unfair dealing.
59. The price that Citigroup has offered has been dictated by Citigroup to
serve its own interests, and is being forced upon Travelers' minority
shareholders to relinquish the Travelers shares at a grossly unfair price.
60. In addition, defendants' failure to disclose all material facts
relevant to the proposed transaction in an accurate and non-misleading manner
constitutes a breach of defendants' duty of candor.
61. Citigroup, by reason of its 85% ownership of Travelers' outstanding
shares, is in a position to ensure effectuation of the transaction without
regard to its fairness to Travelers' public shareholders.
62. Because Citigroup is in possession of proprietary corporate
information concerning Travelers' future financial prospects, the degree of
knowledge and economic power between Citigroup and the class members is
unequal, making it grossly and inherently unfair for Citigroup to obtain the
remaining 15% of Travelers' shares at the unfair and inadequate price that it
has proposed.
63. By offering a grossly inadequate price for Travelers' shares and
threatening or planning to use its coercive means of control to force the
consummation of the transaction, Citigroup is violating its duties as a
majority shareholder.
64. Any buy-out of Travelers public shareholders by Citigroup on the terms
recently offered, will deny class members their right to share proportionately
and equitably in the true value of Travelers' valuable and profitable business,
and future growth in profits and earnings, at a time when the Company is poised
to increase its profitability.
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<PAGE>
65. Defendants' fiduciary obligations require them to: (a) act
independently so that the interests of Travelers' public stockholders will be
protected; (b) adequately ensure that no conflicts of interest exist between
defendants' own interests and their fiduciary obligation of entire fairness or,
if such conflicts exist, to ensure that all the conflicts are resolved in the
best interests of Travelers' public stockholders; and (c) provide Travelers'
stockholders with independent representation in the negotiations with
Citigroup.
66. Because Citigroup controls 85% of Travelers and dominates its Board,
no auction or market check can be effected to establish Travelers' worth
through arm's-length bargaining. Thus, Citigroup has the power and is
exercising its power to acquire Travelers' minority shares and dictate terms
which are in Citigroup's best interest, without competing bids and regardless
of the wishes or best interests of the class members or the intrinsic value of
Travelers' stock.
67. By reason of the foregoing, defendants have breached and will continue
to breach their duties to the minority public shareholders of Travelers and are
engaging in improper, unfair dealing and wrongful and coercive conduct.
68. Plaintiff and the Class will suffer irreparable harm unless defendants
are enjoined from breaching their fiduciary duties and from carrying out the
aforesaid plan and scheme.
69. By reason of the foregoing, defendants have violated the fiduciary
duties which each of them owes to plaintiff and the other members of the Class.
70. Unless enjoined by this Court, defendants will continue to breach
their fiduciary duties owed to plaintiff and the other members of the Class,
and are prepared to consummate a buy-out on unfair and inadequate terms which
will exclude the Class from its fair proportionate share of Travelers' valuable
assets and businesses, all to the irreparable harm of the Class, as aforesaid.
71. Plaintiff and the other class members are immediately threatened by
the acts and transactions complained of herein, and lack an adequate remedy at
law.
WHEREFORE, plaintiff demands judgment and preliminary and permanent
relief, including injunctive relief, in their favor and in favor of the Class
and against defendants as follows:
A. Declaring that this action is properly maintainable as a class
action, and certifying plaintiff as a class representative;
B. Declaring that the defendants and each of them have committed or
participated in a gross abuse of trust and have breached their fiduciary
duties to plaintiff and other members of the Class or aided and abetted
such breaches;
C. Declaring that defendants have breached their duty of candor;
D. Enjoining the Tender Offer or, if the transaction is consummated,
rescinding it;
E. Ordering defendants to make corrective disclosures;
F. Awarding plaintiff and the Class compensatory damages and/or
rescissory damages;
G. Awarding plaintiff the costs and disbursements of this action,
including reasonable fees and expenses of plaintiff's attorneys and
experts; and
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<PAGE>
H. Granting such other, and further relief as this Court may deem to
be just and proper.
ROSENTHAL, MONHAIT, GROSS &
GODDESS, P.A.
By: /s/ Norman M. Monhait
--------------------------------------
Suite 1401, Mellon Bank Center
P.O. Box 1070
Wilmington, Delaware 19899
(302) 656-4433
Attorneys for Plaintiff
OF COUNSEL:
Arthur N. Abbey
Lee Squitieri
James S. Noris
ABBEY, GARDY & SQUITIERI, LLP
212 East 39th Street
New York, NY 10016
(212) 889-3700
Robert A. Wallner
& Seth Orrensoser
MILBERG WEISS BERSHAD HYNES
& LERACH LLP
One Pennsylvania Plaza
New York, NY 10119
(212) 594-5300
Nadeem Faruqi
FARUQI & FARUQI, LLP
320 East 39th Street
New York, NY 10016
(212) 983-9330
April 1, 2000
B-12
<PAGE>
Manually signed facsimile copies of the Letter of Transmittal will be
accepted. Letters of Transmittal and certificates for Shares should be sent or
delivered by each stockholder of the Company or his broker, dealer, commercial
bank, trust company or other nominee to the Depositary at one of its addresses
set forth below:
The Depositary for the Offer is:
CITIBANK, N.A.
<TABLE>
<S> <C> <C>
By Mail: By Overnight Courier Delivery: By Hand:
Citibank, N.A. Citibank, N.A. Citibank, N.A.
Corporate Actions Corporate Actions, Suite 4660 c/o Securities Transfer and
P.O. Box 2544 525 Washington Boulevard Reporting Services Inc.
Jersey City, New Jersey Jersey City, New Jersey 07303-2544 Attention:
07303-2544 Corporate Actions
100 William Street
New York, NY 10038
</TABLE>
Facsimile for Eligible Institutions:
(201) 324-3284
Any questions or requests for assistance may be directed to the
Information Agent at its address and telephone numbers set forth below.
Requests for additional copies of this Offer to Purchase and the Letter of
Transmittal may be directed to the Information Agent or the Depositary.
Stockholders may also contact their brokers, dealers, commercial banks, trust
companies or other nominees for assistance concerning the Offer.
The Information Agent for the Offer is:
[INNISFREE LOGO]
501 Madison Avenue, 20th Floor
New York, New York 10022
Telephone: (212) 750-5833 (call collect)
or
Call Toll Free (888) 750-5835
The Dealer Manager for the Offer is:
SALOMON SMITH BARNEY
388 Greenwich Street
New York, New York 10013
Call Toll-Free 1-800-996-7920
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------
AMENDMENT NO. 1 TO
SCHEDULE 14D-9
(RULE 14D-101)
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT
TO SECTION 14(d)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
------------
TRAVELERS PROPERTY CASUALTY CORP.
(Name of subject company)
TRAVELERS PROPERTY CASUALTY CORP.
(Name of person(s) filing statement)
------------
Class A Common Stock, par value $.01 per share
(Title of class of securities)
893939 10 8
(CUSIP number of class of securities)
-----------
JAMES M. MICHENER, ESQ.
General Counsel and Secretary
One Tower Square - 8GS
Hartford, Connecticut 06183
(860) 277-0111
(Name, address and telephone number of person authorized
to receive notice and communications on behalf of
person(s) filing statement)
------------
With Copies To:
MARTIN LIPTON, ESQ. ERIC J. FRIEDMAN, ESQ.
Wachtell, Lipton, Rosen & Katz Skadden, Arps, Slate, Meagher & Flom LLP
51 West 52nd Street Four Times Square
New York, New York 10019 New York, New York 10036
(212) 403-1000 (212) 735-3000
[ ] Check the box if the filing relates solely to preliminary communications
made before commencement of a tender offer.
<PAGE>
AMENDMENT NO. 1
TO SCHEDULE 14D-9
This Amendment No. 1 ("Amendment No. 1") to Schedule 14D-9 amends and
supplements the Schedule 14D-9 filed with the Securities and Exchange Commission
(the "SEC") on March 23, 2000 (the "Schedule 14D-9") by Travelers Property
Casualty Corp. (the "Company"), relating to a tender offer (the "Offer")
commenced by The Travelers Insurance Group Inc. ("Purchaser"), a Connecticut
corporation and an indirect wholly-owned subsidiary of Citigroup Inc., a
Delaware corporation ("Parent"), on March 23, 2000 to purchase all of the
outstanding shares of Class A common stock, par value $.01 per share, of the
Company. Unless otherwise indicated, all capitalized terms used
but not defined herein shall have the meanings assigned to them in the Schedule
14D-9.
On the date hereof, Parent, Purchaser and the Company are filing
Amendment No. 3 to the Schedule TO filed March 23, 2000 with the SEC, which
includes as Exhibit (a)(1)(M) thereto the Supplement (the "Supplement") to the
Offer to Purchase of Purchaser dated March 23, 2000 (the "Offer to Purchase").
The information in the 14D-9 is hereby expressly incorporated herein by
reference in response to all the items of this Amendment No. 1, except as
otherwise set forth below.
ITEM 3. PAST CONTACTS, TRANSACTIONS, NEGOTIATIONS AND AGREEMENTS.
Item 3 of the Schedule 14D-9 is hereby amended and supplemented as
follows:
The information contained under "INTRODUCTION", "Interest of Certain
Persons in the Offer and the Merger" and "Certain Legal Matters" in the
Supplement is incorporated herein by reference.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
Item 4 of the Schedule 14D-9 is hereby amended and supplemented as
follows:
The information contained under "Background of this Offer" and "Opinion
of Financial Advisor" in the Supplement is incorporated herein by reference.
ITEM 8. ADDITIONAL INFORMATION.
Item 8 of the Schedule 14D-9 is hereby amended and supplemented as
follows:
The information contained under "Position of Parent and the Purchaser
Regarding Fairness of the Offer and the Merger" and "Certain Legal Matters" in
the Supplement is incorporated herein by reference.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
Item 9 is hereby amended and supplemented as follows:
EXHIBIT NO. DESCRIPTION
- ----------- -----------
(a)(1)(M) Supplement to Offer to Purchase Dated April 4, 2000.*
- -------------------
* Incorporated by reference to Amendment No. 3 to Schedule TO filed by Parent,
Purchaser and the Company on April 4, 2000.
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this Amendment No. 1 is true, complete, and
correct.
April 4, 2000
TRAVELERS PROPERTY CASUALTY CORP.
By: /s/ James M. Michener
------------------------------------
Name: James M. Michener
Title: General Counsel and Secretary
<PAGE>
EXHIBIT (a)(5)(O)
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
- ----------------------------------------------
SIDNEY WOLGIN, on behalf of himself and all
others similarly situated,
Plaintiff, C.A. No. 17956 NC
-against-
TRAVELERS PROPERTY CASUALTY CORP.,
ROBERT I. LIPP, JAY S. FISHMAN, FRANK J. TASCO,
DUDLEY C. MECUM II, ARTHUR ZANKEL,
KENNETH J. BIALKIN, SANFORD I. WEILL,
LESLIE B. DISHAROON and CITIGROUP INC.,
Defendants.
- ----------------------------------------------
COMPLAINT
Plaintiff alleges upon personal knowledge with respect to himself, and
upon information and belief as to all other allegations herein, as follows:
NATURE OF THE ACTION
1. This is a class action on behalf of the public stockholders of
Travelers Property Casualty Corp. ("Travelers" or the "Company"), in connection
with the proposed acquisition of the publicly owned shares of Travelers common
stock by its majority controlling shareholder, defendant Citigroup Inc.
("Citigroup").
2. The consideration that Citigroup stated it would offer to members of
the Class (as defined below) in the proposed acquisition is unfair and
inadequate because, among other things, the intrinsic value of Travelers'
common stock is materially in excess of the amount offered, giving due
consideration to the Company's growth and anticipated operating results, net
asset value and profitability.
THE PARTIES
3. Plaintiff Sidney Wolgin is the owner of shares of Travelers common
stock.
4. Travelers is a Delaware corporation with its principal executive
offices at One Tower Square, Hartford, Connecticut.
5. Defendant Citigroup is a diversified financial services holding company
that provides a broad range of financial services. Citigroup and its affiliates
control approximately 85% of the outstanding common stock of Travelers. As
such, Citigroup and its representatives on the Travelers board effectively
control and dominate Travelers' affairs. Citigroup, therefore, is a controlling
shareholder and owes fiduciary obligations of good faith, candor, loyalty and
fair dealing to the public shareholders of Travelers.
6. (a) Defendants Robert I. Lipp, Jay S. Fishman, Frank J. Tasco, Dudley
C. Mecum II, Arthur Zankel, Kenneth J. Bialkin, Sanford I. Weill, Leslie B.
Disharoon serve as directors of Travelers (collectively, the "Individual
Defendants").
(b) In addition, defendant Lipp is Chairman of the Company and defendant
Fishman is President and Chief Executive Officer.
(c) Defendants Lipp, Mecum, Zankel, Bialkin and Weill are Citigroup's
appointees to the Travelers' Board of Directors.
7. Each individual defendant owed and owes Travelers' public stockholders
fiduciary obligations and were and are required to: use their ability to
control and manage Travelers in a fair, just and equitable manner; act in
furtherance of the best interests of Travelers' public stockholders; govern
Travelers in such a manner as to heed the expressed views of its public
shareholders; and refrain from abusing their positions of control.
1
<PAGE>
CLASS ACTION ALLEGATIONS
8. Plaintiff brings this action, pursuant to Rule 23 of the Rules of this
Court, on behalf of himself and all other shareholders of the Company (except
the defendants herein and any persons, firm, trust, corporation, or other
entity related to or affiliated with them) and their successors in interest,
who are or will be threatened with injury arising from defendants' actions, as
more fully described herein (the "Class").
9. This action is properly maintainable as a class action for the
following reasons:
a. The Class is so numerous that joinder of all members is
impracticable. There are millions of shares of Travelers common stock which are
outstanding, held by hundreds if not thousands of stockholders who are members
of the Class.
b. There are questions of law and fact that are common to the Class and
that predominate over questions affecting any individual class member. The
common questions include, inter alia, the following:
(i) whether defendants have engaged in and are continuing to engage in
conduct which unfairly benefits Citigroup at the expense of the members of the
Class;
(ii) whether the Individual Defendants, as officers and/or directors
of the Company, and Citigroup, the controlling stockholder of Travelers are
violating their fiduciary duties to plaintiff and the other members of the
Class;
(iii) whether plaintiff and the other members of the Class would be
irreparably damaged were defendants not enjoined from the conduct described
herein; and
(iv) whether defendants have initiated and timed their buy-out of
Travelers shares to unfairly benefit Citigroup at the expense of Travelers'
public shareholders.
c. The claims of plaintiff are typical of the claims of the other
members of the Class in that all members of the Class will be damaged alike by
defendants' actions.
d. Plaintiff is committed to prosecuting this action and has retained
competent counsel experience in litigation of this nature. Accordingly,
plaintiff is an adequate representative of the Class.
SUBSTANTIVE ALLEGATIONS
A. THE COMPANY
10. Travelers provides a broad range of insurance products and services
for the commercial and consumer markets.
B. THE OFFER
11. On March 21, 2000, Citigroup issued a press release stating that it
intends to make a cash tender offer for all the publicly-held shares of
Travelers that it does not presently own for $41.50 per share. According to the
press release, the transaction was purportedly approved by a special committee
of the Board of Directors of Travelers.
12. Given Citigroup's stranglehold on the Travelers Board, any purported
independent committee is a sham.
13. Citigroup is the primary financial backer of Travelers and is,
therefore, well aware of the true financial condition of Travelers. In making
its inadequate offer to acquire the remaining stock of Travelers, Citigroup has
tried to take advantage of the fact that the market price of Travelers stock
does not fully reflect the true value of the Company.
14. Any transaction to acquire the Company at the price being considered
does not represent the true value of the Company and is unfair and inadequate
and constitutes unfair dealing.
15. The price that Citigroup has offered has been dictated by Citigroup to
serve its own interests, and is being crammed down by Citigroup and its
representatives on Travelers' Board to force Travelers' minority shareholders
to relinquish their Travelers shares at a grossly unfair price.
16. Because Citigroup is in possession of proprietary corporate
information concerning Travelers' future financial prospects, the degree of
knowledge and economic power between Citigroup and the class members is
2
<PAGE>
unequal, making it grossly and inherently unfair for Citigroup to obtain the
remaining 15% of Travelers' shares at the unfair and inadequate price that it
has proposed.
17. By offering an inadequate price for Travelers' shares and planning to
use its control to force the consummation of the transaction. Citigroup is
violating its duties as majority shareholder.
18. Any buy-out of Travelers' public shareholders by Citigroup on the
terms recently offered on lesser terms, will deny class members their right to
share proportionately and equitably in the true value of Travelers' valuable
and profitable business, and future growth in profits and earnings, at a time
when the Company is poised to increase its profitability.
19. Because Citigroup controls 85% of Travelers and dominates its Board,
no auction or market check can be effected to establish Travelers' worth
through arm's-length bargaining. Thus, Citigroup has the power and is
exercising its power to acquire Travelers' minority shares and dictate terms
which are in Citigroup's best interest, without competing bids and regardless
of the wishes or best interests of the class members or the intrinsic value of
Travelers' stock.
20. By reason of the foregoing, defendants have breached and will continue
to breach their duties to the minority public shareholders of Travelers and are
engaging in improper, unfair dealing and wrongful and coercive conduct.
21. Plaintiff and the Class will suffer irreparable harm unless defendants
are enjoined from breaching their fiduciary duties and from carrying out the
aforesaid plan and scheme.
22. Plaintiff and the other class members are immediately threatened by
the acts and transactions complained of herein and lack an adequate remedy at
law.
WHEREFORE, plaintiff demands judgment as follows:
A. Declaring that this action is properly maintainable as a class action,
and certifying plaintiff as class representative;
B. Enjoining the proposed transaction and, if the transaction is
consummated, rescinding the transaction;
C. Awarding plaintiff and the Class compensatory damages and/or
rescissory damages;
D. Awarding plaintiff the costs and disbursements of this action,
including reasonable allowance for plaintiff's attorneys' and experts'
fees; and
E. Granting such other, and further relief as this Court may deem to be
just and proper.
ROSENTHAL, MONHAIT, GROSS &
GODDESS, P.A.
By: /s/ Illegible
-----------------------------
Suite 1401, Mellon Bank Center
919 North Market Street
Wilmington, Delaware 19899
(302) 656-4433
Attorneys for Plaintiff
OF COUNSEL:
GREENFIELD & GOODMAN LLC
222 W. Lancaster Avenue, Suite 201
P.O. Box 1785
Paoli, PA 19301
(610) 251-9900
3
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SELECTED MINORITY INTEREST ACQUISITIONS
PREMIUM OFFERED OVER MARKET:
--------------------------------------
DATE OF INITIAL FINAL PURCHASE UNAFFECTED DAY PRIOR TO ALL-TIME
PUBLIC OWNERSHIP CONSIDERATION VALUE OFFERED PRICE PUBLIC ANN. HIGH
ANN. ACQUIREE/ACQUIROR POSITION % $ $MM % % %
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
05/07/99 J. Ray McDermott SA/ 63.0 35.62 514.5 12.7 16.8 (31.8)
- ------------------------------------------------------------------------------------------------------------------------------------
McDermott Int'l. Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
04/29/99 Killeam Properties Inc./ 62.0 5.50 1.9 20.1 20.5 (76.0)
- ------------------------------------------------------------------------------------------------------------------------------------
Killeam Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
03/19/99 Spelling Entertainment Group/ 80.9 9.75 191.6 39.7 44.4 (80.5)
- ------------------------------------------------------------------------------------------------------------------------------------
Viacom Inc. (Nat'l Amusements)
- ------------------------------------------------------------------------------------------------------------------------------------
03/08/99 LabOne Inc. (Lab Holdings Inc.)/ 80.5 12.75 34.3 9.2 17.2 (67.1)
- ------------------------------------------------------------------------------------------------------------------------------------
Lab Holdings Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
01/22/99 Treadco Inc./ 49.2 9.00 23.2 32.8 38.5 (60.0)
- ------------------------------------------------------------------------------------------------------------------------------------
Arkansas Best Corp.
- ------------------------------------------------------------------------------------------------------------------------------------
12/03/98 Banner Aerospace Inc./ 85.0 11.00 82.4 42.1 25.7 (22.1)
- ------------------------------------------------------------------------------------------------------------------------------------
Fairchild Corp.
- ------------------------------------------------------------------------------------------------------------------------------------
11/12/98 Aquila Gas Pipeline Corp./ 81.6 8.00 43.2 20.9 23.1 (57.3)
- ------------------------------------------------------------------------------------------------------------------------------------
UtiliCorp United Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
10/27/98 Citizens Corp./ 81.8 33.25 212.4 25.7 20.6 (4.0)
- ------------------------------------------------------------------------------------------------------------------------------------
Allmerica Financial
- ------------------------------------------------------------------------------------------------------------------------------------
10/19/98 BRC Holdings Inc. 49.0 19.00 133.1 17.3 16.9 (25.1)
- ------------------------------------------------------------------------------------------------------------------------------------
Affiliated Computer Services
- ------------------------------------------------------------------------------------------------------------------------------------
09/29/98 Newmont Gold Company/ 93.8 25.37 264.8 18.0 (5.2) (59.2)
- ------------------------------------------------------------------------------------------------------------------------------------
Newmont Mining Corp.
- ------------------------------------------------------------------------------------------------------------------------------------
09/23/98 J&L Specialty Steel Inc./ 53.5 6.38 115.0 75.6 100.0 (76.5)
- ------------------------------------------------------------------------------------------------------------------------------------
Usinor SA
- ------------------------------------------------------------------------------------------------------------------------------------
09/08/98 PEC Israel Economic Corp./ 81.4 36.50 125.0 47.8 60.0 6.2
- ------------------------------------------------------------------------------------------------------------------------------------
Investor Group
- ------------------------------------------------------------------------------------------------------------------------------------
07/13/98 Tele-Communications Int'l/ 81.1 21.00 379.1 1.8 (4.0) (19.2)
- ------------------------------------------------------------------------------------------------------------------------------------
Liberty Media
- ------------------------------------------------------------------------------------------------------------------------------------
07/07/98 Life Technologies/ 52.0 39.13 470.8 23.2 25.2 1.6
- ------------------------------------------------------------------------------------------------------------------------------------
Dexter Corp.
- ------------------------------------------------------------------------------------------------------------------------------------
04/30/98 Mycogen Corp./ 68.2 28.00 379.3 49.1 41.8 (3.9)
- ------------------------------------------------------------------------------------------------------------------------------------
Dow AgroSciences
- ------------------------------------------------------------------------------------------------------------------------------------
03/17/98 BET Holdings/ 57.9 63.00 462.3 15.2 4.0 4.0
- ------------------------------------------------------------------------------------------------------------------------------------
Investor Group
- ------------------------------------------------------------------------------------------------------------------------------------
03/10/98 IP Timberlands Ltd./ 84.4 13.63 99.5 32.2 33.0 (55.5)
- ------------------------------------------------------------------------------------------------------------------------------------
IP forest Resources
- ------------------------------------------------------------------------------------------------------------------------------------
Source: Thomson Financial Securities Data, SEC filings and company press releases; all historical stock price data from FactSet
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
SELECTED MINORITY INTEREST ACQUISITIONS
PREMIUM OFFERED OVER MARKET:
-------------------------------------
INITIAL OWNERSHIP FINAL PURCHASE UNAFFECTED DAY PRIOR TO ALL-TIME
DATE OF POSITION CONSIDERATION VALUED OFFERED PRICE PUBLIC ANN. HIGH
PUBLIC ANN. ACQUIREE/ACQUIROR % $ $MM % % %
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
03/05/98 XLConnect Solutions/ 80.0 20.00 93.0 18.9 (11.1) (34.7)
- -----------------------------------------------------------------------------------------------------------------------------
Xerox Corp.
- -----------------------------------------------------------------------------------------------------------------------------
03/02/98 Coleman Company Inc./ 83.0 30.14 486.0 85.0 44.4 15.9
- -----------------------------------------------------------------------------------------------------------------------------
Sunbeam Corp.
- -----------------------------------------------------------------------------------------------------------------------------
01/22/98 BT Office Products/ 70.0 13.75 138.1 75.0 32.5 (41.5)
- -----------------------------------------------------------------------------------------------------------------------------
Burhmann
- -----------------------------------------------------------------------------------------------------------------------------
01/08/98 Rayonier Timberlands/ 74.7 13.00 65.8 24.8 11.2 (69.6)
- -----------------------------------------------------------------------------------------------------------------------------
Rayonier Inc.
- -----------------------------------------------------------------------------------------------------------------------------
01/02/98 NACT Telecommunications/ 68.0 17.50 53.1 8.2 12.0 (1.4)
- -----------------------------------------------------------------------------------------------------------------------------
World Access
- -----------------------------------------------------------------------------------------------------------------------------
09/18/97 Guaranty National Corp./ 77.3 36.00 117.2 26.0 10.8 10.8
- -----------------------------------------------------------------------------------------------------------------------------
Orion Capital Corp.
- -----------------------------------------------------------------------------------------------------------------------------
09/12/97 Western National/ 44.7 30.90 1,215.0 16.6 9.8 6.8
- -----------------------------------------------------------------------------------------------------------------------------
American General
- -----------------------------------------------------------------------------------------------------------------------------
06/26/97 Rhone-Poulenc Rorer Inc./ 65.0 97.00 4,830.0 28.0 22.1 19.9
- -----------------------------------------------------------------------------------------------------------------------------
Rhone-Poulenc SA
- -----------------------------------------------------------------------------------------------------------------------------
06/20/97 Wheelabrator Technologies, Inc./ 65.4 16.50 869.7 29.8 26.9 (45.7)
- -----------------------------------------------------------------------------------------------------------------------------
Waste Management Inc.
- -----------------------------------------------------------------------------------------------------------------------------
06/02/97 Acordia/ 66.8 40.00 193.2 12.7 12.7 10.3
- -----------------------------------------------------------------------------------------------------------------------------
Anthem
- -----------------------------------------------------------------------------------------------------------------------------
05/22/97 Chaparral Steel Co./ 85.0 15.50 72.8 27.0 20.4 (7.5)
- -----------------------------------------------------------------------------------------------------------------------------
Texas Industries Inc.
- -----------------------------------------------------------------------------------------------------------------------------
05/14/97 Enron Global Power & Pipelines/ 51.9 35.00 437.5 24.0 15.7 13.8
- -----------------------------------------------------------------------------------------------------------------------------
Enron Group
- -----------------------------------------------------------------------------------------------------------------------------
03/03/97 American Financial Enterprises Inc./ 83.0 37.00 82.6 38.0 34.5 28.7
- -----------------------------------------------------------------------------------------------------------------------------
American Financial Group Inc.
- -----------------------------------------------------------------------------------------------------------------------------
02/25/97 Fina Inc./ 85.3 60.00 257.0 18.0 19.7 8.1
- -----------------------------------------------------------------------------------------------------------------------------
Petrofina S.A.
- -----------------------------------------------------------------------------------------------------------------------------
01/21/97 Mafco Consolidated Group/ 85.0 43.50 150.5 68.8 60.4 42.0
- -----------------------------------------------------------------------------------------------------------------------------
Mafco Holdings
- -----------------------------------------------------------------------------------------------------------------------------
01/13/97 Zurich Reinsurance/ 65.7 39.50 355.0 23.0 28.5 12.5
- -----------------------------------------------------------------------------------------------------------------------------
Zurich Insurance Co.
- -----------------------------------------------------------------------------------------------------------------------------
01/13/97 Systemix Inc./ 73.2 19.50 107.6 29.0 27.3 (67.6)
- -----------------------------------------------------------------------------------------------------------------------------
Novartis AG
- -----------------------------------------------------------------------------------------------------------------------------
Source: Thomson Financial Securities Data, SEC filings and company press releases; all historical stock price data from FactSet
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SELECTED MINORITY INTEREST ACQUISITIONS
PREMIUM OFFERED OVER MARKET:
-----------------------------------------
INITIAL OWNERSHIP FINAL PURCHASE UNAFFECTED DAY PRIOR TO ALL-TIME
DATE OF POSITION CONSIDERATION VALUE OFFERED PRICE PUBLIC ANN. HIGH
PUBLIC ANN. ACQUIREE/ACQUIROR % $ $MM % % %
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
12/17/96 Allmerica Property & Casualty/ 59.3 33.00 816.9 15.0 15.8 8.2
- ------------------------------------------------------------------------------------------------------------------------------------
Allmerica Financial Corp.
- ------------------------------------------------------------------------------------------------------------------------------------
08/26/96 Bankers Life Holding 88.5 25.00 120.8 14.9 14.9 (11.1)
- ------------------------------------------------------------------------------------------------------------------------------------
Conseco
- ------------------------------------------------------------------------------------------------------------------------------------
08/08/96 Roto Rooter/ 54.9 41.00 93.6 11.0 12.3 (1.2)
- ------------------------------------------------------------------------------------------------------------------------------------
Chemed Corp.
- ------------------------------------------------------------------------------------------------------------------------------------
10/18/95 Applied Immune Sciences/ 46.0 11.75 84.4 47.0 67.9 (64.4)
- ------------------------------------------------------------------------------------------------------------------------------------
Rhone-Poulenc Rorer
- ------------------------------------------------------------------------------------------------------------------------------------
09/26/95 SCOR U.S/ 80.0 15.25 60.0 37.1 37.1 (26.5)
- ------------------------------------------------------------------------------------------------------------------------------------
SCOR SA
- ------------------------------------------------------------------------------------------------------------------------------------
08/25/95 GEICO/ 52.6 70.00 2,306.0 25.6 25.6 3.7
- ------------------------------------------------------------------------------------------------------------------------------------
Berkshire Hathaway
- ------------------------------------------------------------------------------------------------------------------------------------
05/19/95 Bic Corp/ 77.7 40.50 212.6 30.0 13.3 (1.2)
- ------------------------------------------------------------------------------------------------------------------------------------
Bic SA
- ------------------------------------------------------------------------------------------------------------------------------------
04/05/95 Club Med., Inc./ 67.0 32.00 153.4 44.0 41.4 (1.9)
- ------------------------------------------------------------------------------------------------------------------------------------
Club Mediterranee S.A.
- ------------------------------------------------------------------------------------------------------------------------------------
03/07/95 Lin Broadcasting Corp./ 52.0 129.50 3,323.3 (7.0) 1.2 (11.5)
- ------------------------------------------------------------------------------------------------------------------------------------
AT&T Co.
- ------------------------------------------------------------------------------------------------------------------------------------
02/27/95 CCP/ 48.1 23.25 273.7 19.9 20.0 (26.2)
- ------------------------------------------------------------------------------------------------------------------------------------
Conseco
- ------------------------------------------------------------------------------------------------------------------------------------
12/28/94 Fleet Mortgage Group Inc./ 81.0 20.00 188.1 21.0 19.4 (21.6)
- ------------------------------------------------------------------------------------------------------------------------------------
Fleet Financial Group Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
11/02/94 Pacific Telecom/ 86.8 30.00 159.0 21.0 23.7 (11.1)
- ------------------------------------------------------------------------------------------------------------------------------------
PacifiCorp Holdings
- ------------------------------------------------------------------------------------------------------------------------------------
09/08/94 Contel Cellular Inc./ 90.0 25.50 254.3 39.0 43.7 (4.7)
- ------------------------------------------------------------------------------------------------------------------------------------
GTE Corp.
- ------------------------------------------------------------------------------------------------------------------------------------
08/24/94 Castle & Cooke Inc./ 83.0 15.75 81.5 52.0 35.5 0.0
- ------------------------------------------------------------------------------------------------------------------------------------
Dole Foods
- ------------------------------------------------------------------------------------------------------------------------------------
07/28/94 Chemical Waste Management/ 78.6 8.85 397.4 4.0 10.6 (67.5)
- ------------------------------------------------------------------------------------------------------------------------------------
WMX Technologies
- ------------------------------------------------------------------------------------------------------------------------------------
06/06/94 Ogden Projects Inc./ 84.2 17.96 107.8 14.9 3.3 (40.6)
- ------------------------------------------------------------------------------------------------------------------------------------
Ogden Corp.
- ------------------------------------------------------------------------------------------------------------------------------------
03/01/94 Foxmeyer Corp./ 80.5 14.46 79.7 (4.9) 7.1 (9.6)
- ------------------------------------------------------------------------------------------------------------------------------------
National Intergroup Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Source: Thomson Financial Securities Data, SEC filings and company press releases; all historical stock price data from FactSet
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
SELECTED MINORITY INTEREST ACQUISITIONS
PREMIUM OFFERED OVER MARKET:
----------------------------------
INITIAL OWNERSHIP FINAL PURCHASE UNAFFECTED DAY PRIOR TO ALL-TIME
DATE OF POSITION CONSIDERATION VALUE OFFERED PRICE PUBLIC ANN. HIGH
PUBLIC ANN. ACQUIREE/ACQUIROR % $ $MM % % %
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
11/23/93 Southeastern Public Service Co./ 71.0 22.20 86.1 (5.0) 9.6 (10.8)
- -----------------------------------------------------------------------------------------------------------------------------------
Triarc Co. (DWG)
- -----------------------------------------------------------------------------------------------------------------------------------
10/13/93 Medical Marketing Group Inc./ 54.2 27.25 122.5 (8.0) (19.3) (25.3)
- -----------------------------------------------------------------------------------------------------------------------------------
Medco Containment Services Inc.
- -----------------------------------------------------------------------------------------------------------------------------------
02/22/93 United Investors Management Company 84.0 31.25 205.8 13.0 16.3 7.8
- -----------------------------------------------------------------------------------------------------------------------------------
Torchmark Corp.
- -----------------------------------------------------------------------------------------------------------------------------------
08/17/92 PHLCorp. Inc./ 63.1 25.78 140.0 28.0 12.1 8.5
- -----------------------------------------------------------------------------------------------------------------------------------
Leucadia National Corp.
- -----------------------------------------------------------------------------------------------------------------------------------
03/02/92 Grace Energy Corp./ 83.4 19.00 77.3 60.0 31.0 (23.6)
- -----------------------------------------------------------------------------------------------------------------------------------
W.R. Grace & Co.
- -----------------------------------------------------------------------------------------------------------------------------------
02/24/92 Unocal Exploration Corp./ 96.0 11.68 117.5 18.0 18.3 (51.3)
- -----------------------------------------------------------------------------------------------------------------------------------
Unocal Corp.
- -----------------------------------------------------------------------------------------------------------------------------------
MEAN (ALL TRANSACTIONS) 26.8 23.1 (19.4)
- -----------------------------------------------------------------------------------------------------------------------------------
MEDIAN (ALL TRANSACTIONS) 23.2 20.0 (11.1)
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
MEAN (INSURANCE TRANSACTIONS) 21.6 19.6 (1.6)
- -----------------------------------------------------------------------------------------------------------------------------------
MEDIAN (INSURANCE TRANSACTIONS) 21.5 17.9 5.2
- -----------------------------------------------------------------------------------------------------------------------------------
Source: Thomson Financial Securities Data, SEC filings and company press releases; all historical stock price data from FactSet
</TABLE>
<PAGE>
CONFIDENTIAL
PROJECT HUSKY
VALUATION ANALYSIS
March 20, 2000
QWE
<PAGE>
<TABLE>
<CAPTION>
PROJECT HUSKY
VALUATION SUMMARY
FIRST CALL ESTIMATES FOR COMPARABLE COMPANIES AND 2000-2001 BUDGET FOR T CO.
Valuation Methodology $26.00 $28.00 $30.00 $32.00 $34.00 $36.00 $37.50 $39.00 $40.00 $42.00 $44.00 $46.00
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PUBLIC MARKET COMPARABLES: 7.9x 9.4x 10.9x
------------------------------------------------------------
Price/2000E Earnings (1) $29.94 - $41.33
------------------------------------------------------------
7.1x 8.6x 10.1x
---------------------------------------------------------------
$28.54 - $40.63
---------------------------
Price/2001E Earnings (1) 0.93x 1.13x 1.33x
-----------------------
Price/Book Value (1) $21.49 - $30.73
-------------------------
SELECTED ADJUSTED M&A TRANSACTIONS: 9.7x 10.7x 11.7x
------------------------------------------------
Price/Estimated Earnings (3) $36.80 - $44.40
0.90x 1.10x 1.30x ------------------------------------------------
--------------------------
Price/Book Value (3) $20.77 - $30.01
--------------------------
MINORITY ACQUISITION TRANSACTIONS: 11.3% 16.3% 21.3%
-----------------
One Week Prior to Announcement (4) $33.51 - $36.52
-----------------
11.2% 16.2% 21.2%
---------------------
One Month Prior to Announcement (4) $35.03 - $38.18
---------------------
DIVIDEND DISCOUNT MODEL: 9.0x 10.0x 11.0x
----------------------------------------------------
Price/Estimated Earnings (5) $36.13 - $45.49
----------------------------------------------------
1.30x 1.40x 1.50x
------------------------------------------
Price/Book Value (5) $35.84 - $42.76
------------------------------------------
Reference
Implied Multiples Point $28.00 $30.00 $32.00 $34.00 $36.00 $37.50 $39.00 $40.00 $42.00 $44.00 $46.00
- -------------------------------------------------------------------------------------------------------------------------
Premium to Market $ 33.75 (17.0)% (11.1)% (5.2)% 0.7% 6.7% 11.1% 15.6% 18.5% 24.4% 30.4% 36.3%
Price/2000E Earnings 3.80 7.4x 7.9x 8.4x 9.0x 9.5x 9.9x 10.3x 10.5x 11.1x 11.6x 12.1x
Price/2001E Earnings 4.03 6.9 7.4 7.9 8.4 8.9 9.3 9.7 9.9 10.4 10.9 11.4
Price/Book Value 23.09 1.21 1.30 1.39 1.47 1.56 1.62 1.69 1.73 1.82 1.91 1.99
- -------------------------------------------------------------------------------------------------------------------------
(1) Based on peer group median comparable multiple.
(2) Implied valuation of $31.20 per share based on a price to book multiple of 1.35x from the regression analysis.
(3) Based on selected adjusted precedent M&A transactions since 1995.
(4) Based on the median premiums paid for all financial institutions with 80% or greater majority ownerships since 1992.
(5) Based on discount rate range of 10-11%. Terminal multiple range of 9.0x - 11.0x for estimated earnings and 1.30x - 1.50x for
book value.
</TABLE>
QWE
<PAGE>
<TABLE>
<CAPTION>
PROJECT HUSKY
PUBLIC MARKET TRADING COMPARABLES
($ in millions, except per share data)
March 17, 2000
--------------------------------------------------------------------------------------
PRICE AS A MULTIPLE TO:
CURRENT 52 WEEK -------------------------
SHARE PRICE AS % OF --------------- MARKET DIVIDEND BOOK 2000E 2001E
COMPANY NAME PRICE 52 WK. HIGH HIGH LOW VALUE YIELD VALUE (a) EPS (b) EPS (b)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
The Allstate Corporation $20.88 51.2% $40.75 $17.19 $16,846.1 3.3% 1.15x 7.5x 6.7x
The Chubb Corporation 53.25 69.7 76.38 43.25 9,368.6 2.5 1.48 12.8 11.5
Hartford Financial Services Group Inc. 35.81 53.9 66.44 29.38 7,936.8 2.7 1.35 8.7 7.8
The St. Paul Companies, Inc. 26.63 71.8 37.06 21.31 6,549.8 4.1 1.11 9.7 8.7
CNA Financial Corporation 28.50 62.9 45.31 24.56 5,255.3 --- 0.65 15.6 11.4
SAFECO Corporation 20.75 44.4 46.75 18.00 2,697.7 7.1 0.69 12.2 9.9
American Financial Group, Inc. 22.44 60.0 37.38 18.38 1,363.4 4.5 1.00 8.5 7.7
Mercury General 23.19 58.0 40.00 20.94 1,267.3 4.1 1.39 9.1 8.4
MEDIAN --- --- --- --- 3.7% 1.13x 9.4x 8.6x
- -------------------------------------------------------------------------------------------------------------------------------
T Co. 33.75 80.6 41.88 27.69 13,136.9 1.7 1.46 8.9 8.4
Cincinnati Financial Corporation 31.00 72.9 42.50 26.19 5,240.8 2.5 2.68 18.8 17.2
American International Group, Inc. 97.38 85.0 114.50 78.56 152,586.6 0.2 4.47 26.9 25.2
</TABLE>
<TABLE>
<CAPTION>
IMPLIED
2001E 00-'01 2000E P/E /
COMPANY NAME ROE (a) EPS GROWTH GROWTH RATE
- ------------------------------------------------------------------------
<S> <C> <C> <C>
The Allstate Corporation 15.2% 10.0% 0.75x
The Chubb Corporation 11.9 12.0 1.07
Hartford Financial Services Group Inc. 15.4 11.0 0.79
The St. Paul Companies, Inc. 11.8 10.0 0.97
CNA Financial Corporation 5.5 8.0 1.95
SAFECO Corporation 6.8 10.0 1.22
American Financial Group, Inc. 12.0 14.5 0.58
Mercury General 14.9 12.5 0.73
MEDIAN 12.0% 10.5% 0.88X
- ---------------------------------------------------------------------
T Co. 15.3 11.5 0.77
Cincinnati Financial Corporation 14.4 8.0 2.35
American International Group, Inc. 15.2 14.5 1.86
- ----------------------------
N.B. Financial data at or for the twelve months ended September 30, 1999.
(a) Book value and return on equity shown net of unrealized gains.
(b) Earnings estimated based on median First Call estimates for 2000 and 2001 as of March 17, 2000 for all companies
except T Co. which are based on 2000-2001 budget estimates.
</TABLE>
QWE
<PAGE>
PROJECT HUSKY
REGRESSION ANALYSIS
[CHART OMITTED]
NOTE: The regression analysis excludes CINF and AIG.
QWE
<PAGE>
<TABLE>
<CAPTION>
PROJECT HUSKY
SELECTED ADJUSTED M&A TRANSACTION PRECEDENTS
Purchase Price as a Transaction Value as a
Multiple of GAAP Multiple of Statutory
--------------------------------------------------------- ----------------------
Announced/ Target/ LTM Estimated Adj. Est. Latest Adjusted Latest Adjusted
Effective Acquiror Earnings Earnings Earnings Book Value Book Value Surplus Surplus
- --------- -------- -------- -------- -------- ---------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
7/12/99 ORION CAPITAL CORPORATION NM 18.5X 10.7X 2.11X 1.22X 2.86X 1.65X
11/17/99 ROYAL & SUN ALLIANCE PLC
7/12/99 PERSONAL LINES OF ST. PAUL COS. NA NA NA NA NA NA NA
10/1/99 METROPOLITAN LIFE INSURANCE CO.
6/22/99 PERSONAL LINES OF CNA FINANCIAL NA NA NA NA NA NA NA
10/1/99 ALLSTATE CORPORATION
2/5/99 EXECUTIVE RISK, INC 19.7X 19.9X 12.9X 2.60X 1.69X 2.80X 1.82X
7/20/99 THE CHUBB CORPORATION
2/1/99 GUARDIAN ROYAL EXCHANGE - USA NA NA NA NA NA NA NA
5/10/99 LIBERTY MUTUAL INSURANCE CO.
12/22/98 CIGNA CORP. (P&C) 17.4X 14.9X 8.8X 1.47X 0.87X 3.42X 2.03X
7/2/99 ACE LTD.
5/29/98 ING - US P&C DIVISION/ 23.0X 21.3X 10.6X 2.15X 1.07X 2.66X 1.32X
9/1/98 GRE PLC
5/18/98 ALLIED GROUP INC./ 26.8X 21.9X 11.0X 3.60X 1.80X NA NA
11/13/98 NATIONWIDE MUTUAL INSURANCE CO
1/19/98 USF&G CORP 14.0X 11.8X 6.4X 1.42X 0.77X 2.12X 1.14X
4/24/98 ST. PAUL COS. INC.
6/9/97 AMERICAN STATES FINANCIAL CORP./ 15.8X 16.3X 10.6X 2.11X 1.37X 3.21X 2.08X
10/1/97 SAFECO CORP.
1/13/97 ZURICH RE. CENTRE HOLDINGS/ 35.4X 25.8X 19.2X 1.52X 1.13X 1.79X 1.33X
9/2/97 ZURICH INSURANCE CO.
12/17/96 ALLMERICA PROPERTY & CASUALTY/ 13.4X 14.8X 11.5X 1.22X 0.95X 1.53X 1.19X
7/16/97 ALLMERICA FINANCIAL CORP.
11/29/95 AETNA LIFE AND CASUALTY/ NM N/AP N/AP 1.17X 0.99X 1.73X 1.46X
4/2/96 TRAVELERS
--------------------------------------------------------------------------------------------
Median 18.6x 18.5x 10.7x 1.81x 1.10x 2.66x 1.46x
N/AP: Not Applicable Average 20.7x 18.4x 11.3x 1.94x 1.19x 2.46x 1.56x
NA: Not Available High 35.4x 25.8x 19.2x 3.60x 1.80x 3.42x 2.08x
NM: Not Meaningful Low 13.4x 11.8x 6.4x 1.17x 0.77x 1.53x 1.14x
--------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
REL. VALUE OF REL. VALUE OF
S&P P&C SSB SELECTED
ANNOUNCED/ TARGET/ INSURANCE P&C INDEX
EFFECTIVE ACQUIROR INDEX TODAY TODAY
- --------- -------- ----------- -----
<S> <C> <C> <C>
7/12/99 ORION CAPITAL CORPORATION 54.3% 57.8%
11/17/99 ROYAL & SUN ALLIANCE PLC
7/12/99 PERSONAL LINES OF ST. PAUL COS. 54.3% 57.8%
10/1/99 METROPOLITAN LIFE INSURANCE CO.
6/22/99 PERSONAL LINES OF CNA FINANCIAL 52.5% 56.0%
10/1/99 ALLSTATE CORPORATION
2/5/99 EXECUTIVE RISK, INC 59.6% 65.0%
7/20/99 THE CHUBB CORPORATION
2/1/99 GUARDIAN ROYAL EXCHANGE - USA 58.3% 63.6%
5/10/99 LIBERTY MUTUAL INSURANCE CO.
12/22/98 CIGNA CORP. (P&C) 54.4% 59.2%
7/2/99 ACE LTD.
5/29/98 ING - US P&C DIVISION/ 46.8% 49.8%
9/1/98 GRE PLC
5/18/98 ALLIED GROUP INC./ 46.1% 50.1%
11/13/98 NATIONWIDE MUTUAL INSURANCE CO
1/19/98 USF&G CORP 49.8% 54.0%
4/24/98 ST. PAUL COS. INC.
6/9/97 AMERICAN STATES FINANCIAL CORP./ 60.1% 64.9%
10/1/97 SAFECO CORP.
1/13/97 ZURICH RE. CENTRE HOLDINGS/ 69.1% 74.3%
9/2/97 ZURICH INSURANCE CO.
12/17/96 ALLMERICA PROPERTY & CASUALTY/ 69.7% 77.4%
7/16/97 ALLMERICA FINANCIAL CORP.
11/29/95 AETNA LIFE AND CASUALTY/ 83.6% 84.4%
4/2/96 TRAVELERS
-----------------------------------
Median 54.4% 59.2%
N/AP: Not Applicable Average 58.4% 62.6%
NA: Not Available High 83.6% 84.4%
NM: Not Meaningful Low 46.1% 49.8%
-----------------------------------
</TABLE>
QWE
<PAGE>
PROJECT HUSKY
INSURANCE VALUATIONS: RIGHT WHERE WE WERE FOUR YEARS AGO...
FOUR YEAR PRICE PERFORMANCE OF U.S. INSURANCE STOCKS
[CHART OMITTED]
Weekly data: 1/1/96 through 3/17/00
QWE
<PAGE>
<TABLE>
<CAPTION>
PROJECT HUSKY
DISCOUNTED CASH FLOW ANALYSIS
TERMINAL VALUE BASED ON A MULTIPLE OF BOOK VALUE
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------------------------- ASSUMED CAGR
PROJECTIONS 2000 2001 2002 2003 2004 2000-2004
- ----------- ---- ---- ---- ---- ---- ---------
<S> <C> <C> <C> <C> <C> <C>
Operating Earnings (1) $3.80 $4.03 $4.49 $5.01 $5.59 10.1%
Dividends(2) 0.58 0.67 0.78 0.91 1.05 16.0
Projected Book Value Per Share $27.04 $30.39 $34.11 $38.21 $42.75 12.1
<CAPTION>
TERMINAL VALUE AS A MULTIPLE OF 2004 BOOK VALUE
-----------------------------------------------
1.20x 1.30x 1.40x 1.50x 1.60x
-----------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
DISCOUNT RATE 8.0% $38.03 $40.94 $43.85 $46.76 $49.67
9.0 36.37 39.14 41.92 44.70 47.48
10.0 34.79 37.45 40.10 42.76 45.41
11.0 33.30 35.84 38.38 40.91 43.45
12.0 31.89 34.32 36.74 39.17 41.59
13.0 30.55 32.87 35.19 37.51 39.83
- -----------------------
(1) Based on T Co. 2000-2001 Budget estimates for 2000-2001 grown at long-term I/B/E/S growth rate of
11.5% for 2002-2004 as of March 17, 2000.
(2) 2000 Expected based on Merrill Lynch Research grown at 16.0%.
</TABLE>
QWE
<PAGE>
<TABLE>
<CAPTION>
PROJECT HUSKY
DISCOUNTED CASH FLOW ANALYSIS
TERMINAL VALUE BASED ON A MULTIPLE OF FORWARD EARNINGS (2005)
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------------- ASSUMED CAGR
PROJECTIONS 2000 2001 2002 2003 2004 2000-2004
- ----------- ---- ---- ---- ---- ---- ---------
<S> <C> <C> <C> <C> <C> <C>
Operating Earnings(1) $3.80 $4.03 $4.49 $5.01 $5.59 10.1%
Dividends(2) 0.58 0.67 0.78 0.91 1.05 16.0
Payout Ratio 15.3% 16.7% 17.4% 18.1% 18.8% 5.3
<CAPTION>
TERMINAL VALUE AS A MULTIPLE OF 2005 OPERATING EARNINGS
-------------------------------------------------------
8.0x 9.0x 10.0x 11.0x 12.0x
-------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Discount Rate 8.0% $37.03 $41.27 $45.51 $49.75 $53.99
9.0 35.42 39.46 43.51 47.56 51.61
10.0 33.88 37.75 41.62 45.49 49.36
11.0 32.43 36.13 39.83 43.53 47.22
12.0 31.06 34.59 38.13 41.66 45.20
13.0 29.76 33.14 36.52 39.90 43.28
(1) Based on T Co. 2000-2001 Budget estimates for 2000-2001 grown at long-term
I/B/E/S growth rate of 11.5% for 2002-2004 as of March 17, 2000.
(2) 2000 Expected based on Merrill Lynch Research grown at 16.0%
</TABLE>
QWE
<PAGE>
<TABLE>
<CAPTION>
PROJECT HUSKY
VALUATION MATRIX
($ in millions, except per share data)
- ----------------------------------------------------------------------------------------------------------------------------------
SELECTED VALUE RANGE
- ----------------------------------------------------------------------------------------------------------------------------------
$34.00 $36.00 $38.00 $40.00 $42.00 $44.00 $46.00
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Market Capitalization $13,094.9 $13,865.2 $14,635.5 $15,405.8 $16,176.1 $16,946.4 $17,716.6
Aggregate Transaction Value 1,942.2 2,056.5 2,170.7 2,285.0 2,399.2 2,513.5 2,627.7
IMPLIED PREMIUM (DISCOUNT) TO:
- ----------------------------------------------------------------------------------------------------------------------------------
Close (3/17/00) $33.75 0.7% 6.7% 12.6% 18.5% 24.4% 30.4% 36.3%
- ----------------------------------------------------------------------------------------------------------------------------------
5 Day Average 32.01 6.2 12.5 18.7 25.0 31.2 37.4 43.7
20 Day Average 31.63 7.5 13.8 20.1 26.5 32.8 39.1 45.4
60 Day Average 33.61 1.2 7.1 13.1 19.0 25.0 30.9 36.9
One Year Average 35.29 (3.7) 2.0 7.7 13.3 19.0 24.7 30.3
IMPLIED PRICE TO:
2000E Earnings Per Share (1) 3.80 9.0x 9.5x 10.0x 10.5x 11.1x 11.6x 12.1x
2001E Earnings Per Share (1) 4.03 8.4 8.9 9.4 9.9 10.4 10.9 11.4
12/31/99 Book Value Per Share 23.09 1.47x 1.56x 1.65x 1.73x 1.82x 1.91x 1.99x
12/31/99 Tangible Book Value
Per Share 19.61 1.73 1.84 1.94 2.04 2.14 2.24 2.35
12/31/99 Statutory Surplus 7,656.0 1.71 1.81 1.91 2.01 2.11 2.21 2.31
PREMIUM/(DISCOUNT) TO:
Peer Group Trading Multiple (2)
Price to Book Value 1.13x 30.2% 37.9% 45.5% 53.2% 60.8% 68.5% 76.2%
Price to 2000E Earnings 9.4 (4.6) 1.0 6.6 12.2 17.8 23.5 29.1
Price to 2001E Earnings 8.6 (1.7) 4.1 9.9 15.7 21.4 27.2 33.0
Median Adjusted Selected M&A
Precedent Transactions (3)
Price to Book Value 1.10x 33.9% 41.8% 49.7% 57.6% 65.4% 73.3% 81.2%
Price to Forward Earnings 10.7 (16.3) (11.3) (6.4) (1.5) 3.4 8.4 13.3
Price to Statutory Surplus 1.46 17.14 24.03 30.92 37.81 44.70 51.60 58.49
- ---------------------
(1) Based on T Co. 2000-2001 Budget estimates.
(2) Peer group includes: ALL, CB, HIG, SPC, CNA, SAFC, AFG and MCY.
(3) Selected adjusted property casualty M&A transactions since 1995.
</TABLE>
QWE
<PAGE>
<TABLE>
<CAPTION>
PROJECT HUSKY
VALUATION MATRIX WITH LIMITED RANGE
- ----------------------------------------------------------------------------------------------------------------------
SELECTED VALUE RANGE
- ----------------------------------------------------------------------------------------------------------------------
$36.00 $36.50 $37.00 $37.50 $38.00 $38.50
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Market Capitalization $13,865.2 $14,057.8 $14,250.3 $14,442.9 $14,635.5 $14,828.1
Aggregate Transaction Value 2,056.5 2,085.0 2,113.6 2,142.2 2,170.7 2,199.3
IMPLIED PREMIUM (DISCOUNT) TO:
- ----------------------------------------------------------------------------------------------------------------------
Close (3/17/00) $33.75 6.7% 8.1% 9.6% 11.1% 12.6% 14.1%
- ----------------------------------------------------------------------------------------------------------------------
5 Day Average 32.01 12.5 14.0 15.6 17.1 18.7 20.3
20 Day Average 31.63 13.8 15.4 17.0 18.6 20.1 21.7
60 Day Average 33.61 7.1 8.6 10.1 11.6 13.1 14.6
One Year Average 35.29 2.01 3.4 4.8 6.3 7.7 9.1
IMPLIED PRICE TO:
2000E Earnings Per Share (1) 3.80 9.5x 9.6x 9.7x 9.9x 10.0x 10.1x
2001E Earnings Per Share (1) 4.03 8.9 9.1 9.2 9.3 9.4 9.6
12/31/99 Book Value Per Share 23.09 1.56x 1.58x 1.60x 1.62x 1.65x 1.67x
12/31/99 Tangible Book Value
Per Share 19.61 1.84 1.86 1.89 1.91 1.94 1.96
12/31/98 Statutory Surplus 7,656.0 1.81 1.84 1.86 1.89 1.91 1.94
PREMIUM/(DISCOUNT) TO:
Peer Group Trading Multiple (2)
Price to Book Value 1.13x 37.9% 39.8% 41.7% 43.6% 45.5% 47.4%
Price to 2000E Earnings 9.4 1.01 2.4 3.8 5.2 6.6 8.0
Price to 2001E Earnings 8.6 4.09 5.5 7.0 8.4 9.9 11.3
Median Adj. Selected M&A Precedent
Transactions (3)
Price to Book Value 1.10x 41.8% 43.8% 45.7% 47.7% 49.7% 51.6%
Price to Forward Earnings 10.7 (11.3) (10.1) (8.9) (7.6) (6.4) (5.2)
Price to Statutory Surplus 1.46 24.03 25.76 27.48 29.20 30.92 32.65
<CAPTION>
- ----------------------------------------------------------------------------------------------
SELECTED VALUE RANGE
- ----------------------------------------------------------------------------------------------
$39.00 $39.50 $40.00 $40.50 $41.00
----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Market Capitalization $15,020.6 $15,213.2 $15,405.8 $15,598.4 $15,790.9
Aggregate Transaction Value 2,227.9 2,256.4 2,285.0 2,313.5 2,342.1
IMPLIED PREMIUM (DISCOUNT) TO:
- ----------------------------------------------------------------------------------------------
Close (3/17/00) 15.6% 17.0% 18.5% 20.0% 21.5%
- ----------------------------------------------------------------------------------------------
5 Day Average 21.8 23.4 25.0 26.5 28.1
20 Day Average 23.3 24.9 26.5 28.1 29.6
60 Day Average 16.1 17.5 19.0 20.5 22.0
One Year Average 10.5 11.9 13.3 14.8 16.2
IMPLIED PRICE TO:
2000E Earnings Per Share (1) 10.3x 10.4x 10.5x 10.7x 10.8x
2001E Earnings Per Share (1) 9.7 9.8 9.9 10.0 10.2
12/31/99 Book Value Per Share 1.69x 1.71x 1.73x 1.75x 1.78x
12/31/99 Tangible Book Value
Per Share 1.99 2.01 2.04 2.07 2.09
12/31/98 Statutory Surplus 1.96 1.99 2.01 2.04 2.06
PREMIUM/(DISCOUNT) TO:
Peer Group Trading Multiple (2)
Price to Book Value 49.4% 51.3% 53.2% 55.1% 57.0%
Price to 2000E Earnings 9.4 10.8 12.2 13.6 15.0
Price to 2001E Earnings 12.8 14.2 15.7 17.1 18.6
Median Adj. Selected M&A Precedent
Transactions (3)
Price to Book Value 53.6% 55.6% 57.6% 59.5% 61.5%
Price to Forward Earnings (3.9) (2.7) (1.5) (0.2) 1.0
Price to Statutory Surplus 34.37 36.09 37.81 39.54 41.26
</TABLE>
- ------------------
(1) Based on T Co. 2000-2001 Budget estimates.
(2) Peer group includes: ALL, CB, HIG, SPC, CNA, SAFC, AFG and MCY.
(3) Selected adjusted property casualty M&A transactions since 1995.
QWE
<PAGE>
PROJECT HUSKY
HISTORIC STOCK PRICE PERFORMANCE
DAILY PRICE VOLUME 4/23/1996 THROUGH 3/17/2000
[CHART OMITTED]
Summary Statistics:
IPO Price: $25.00
Since IPO:
Average: $35.58
High: 45.81
Low: 23.63
LTM:
Average: $35.29
High: 41.89
Low: 27.69
QWE
<PAGE>
PROJECT HUSKY
RELATIVE STOCK PRICE PERFORMANCE
DAILY PRICE AS A PERCENT 4/23/1996 TO 3/17/00 DAILY PRICE AS A PERCENT
LATEST TWELVE MONTHS
[CHART OMITTED]
Note: SSB Property Casualty Index includes: AFG, ALL, CB, CINF, CNA, HIG, MCY,
SAFC and SPC.
QWE
<PAGE>
PROJECT HUSKY
TRADE VOLUME CHARTS
4/23/96 - 3/17/00 3/17/99 - 3/17/00
[CHART OMITTED]
During This period: During This period:
o 322% of Class A Chares were traded o 91% of Class A shares were traded
o The weighted average price was $34.81 o The weighted average price was
$36.75
Source: IDD Securities
Since 3/17/99, about
78% of shares traded
(70% of public float)
have been at prices
above $32.00.
QWE
<PAGE>
<TABLE>
<CAPTION>
PROJECT HUSKY
EQUITY RESEARCH PERSPECTIVES
12/31/00 EEPS 12/31/01
----------------- -------- Target
DATE PRICE BROKER ANALYST RECOMMENDATION PREVIOUS CURRENT EST. EPS PRICE
---- ----- ------ ------- -------------- -------- ------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1/18/00 $37.25 Bear Stearns Michael A. Smith Neutral 3.50 $3.55 $3.70 --
3/6/00 37.25 CS First Boston Charles B. Gates Buy 3.55 3.58 3.80 $44.00
3/10/00 37.00 Donaldson, Lufkin & Jenrette Alain Karaoglan Buy NC 3.65 3.95 45.00
2/7/00 36.69 Goldman Sachs & Co. Thomas V. Cholnoky Market outperform NC 3.70 4.05 --
3/2/00 33.31 J.P. Morgan Weston Hicks Market perform 3.65 3.70 4.05 --
1/24/00 33.06 Morgan Stanley Dean Witter G. Alan Zimmerman Outperform NC 3.60 3.75 49.00
1/3/00 33.38 Merrill Lynch Jay A. Cohen Near term-buy 3.70 3.60 3.90 46.00
------------------------------------------------------
Median $3.60 $3.60 $3.90 $45.50
High 3.70 3.70 4.05 49.00
Low 3.50 3.55 3.70 44.00
------------------------------------------------------
Source: First Call estimates as of March 17, 2000
NC= No change
NA= Not applicable
o "T Co is led by highly capable managers who have a sense of urgency absent in most property-casualty insurers. We believe
the stock continues to sell at an extremely attractive valuation." Charles B. Gates, CS First
Boston (10/21/99)
o "We are selecting T Co. as our best investment idea for a second year in a row. In 1999 T Co. was one of only of two non-takeover
property casualty stocks that were up for the year and outperformed the S&P 500. We had selected T Co. last year
because its fundamentals were in the best shape ever, its valuation was attractive and financial services reform was
expected to serve as a catalyst. Why is T Co. a repeat for 2000? The same reasons that made us select the stock in 1999 are
at work in 2000: better fundamentals, better opportunities for top-line growth and an attractive valuation. We also believe
that C Co. will buy the 20% stub of T Co. it does not already own." Alain Karaoglan,
Donaldson, Lufkin & Jenrette (11/30/99)
o "We continue to rate the TAP shares Outperform, as we see several positive factors affecting the company over the next year
or so. We believe that TAP will be able to cross-sell products to a broader customer base through Citibanks's credit card and
branch networks and eventually the Internet. [...] In addition, TAP management notes it is seeing meaningful rate increases,
particularly in the middle market commercial lines. [...] Finally, management states that it continues to look for acquisition
opportunities, which could further enhance earnings." (G. Alan Zimmermann, Morgan Stanley
Dean Witter (1/24/00)
o "We view T Co. as the most obvious beneficiary of the passage of financial services reform due to the company's renewed
ability to acquire other insurance companies and the potential for C Co. to buy in the outstanding T Co. shares it does not
own. We studied the minority buyouts in the insurance industry over the past five years. On average, the final offer for the
minority shares was equal to 24% above the quoted price the day before the initial offer was made. The median premium
was 20.6%. While we can not estimate an exact premium that C Co. would have to offer to buy the balance of T Co., we
</TABLE>
QWE
<PAGE>
PROJECT HUSKY
believe that past deals should serve as a guide for investors."
Jay A. Cohen, Merrill Lynch(11/08/99)
<PAGE>
PROJECT HUSKY
GOING PRIVATE TRANSACTIONS - PREMIUM ANALYSIS
SUMMARY STATISTICS FOR 80% OR MORE MAJORITY TRANSACTIONS (SINCE 1992)
o Precedent market premiums (since 1992) for 80% majority shareholders in
going private transactions (No. of transactions):
o One Week Prior:
- All Transactions (40) 18.1%
- Financial Institutions (12) 16.3
o One Month Prior:
- All Transactions (40) 20.7%
- Financial Institutions (12) 16.2
o In 13 of the 40 cases, the original bid was altered:
o In 11 cases the original bid was increased and in 2 cases the original
bid was lowered
o The median increase was 12.5% (relative to the original bid); the
highest increase was 20.8%
QWE
<PAGE>
PROJECT HUSKY
GOING PRIVATE TRANSACTIONS - PREMIUM ANALYSIS
SUMMARY STATISTICS FOR 60% OR MORE MAJORITY TRANSACTIONS (SINCE 1992)
o Precedent market premiums (since 1992) for 60% majority shareholders in
going private transactions (No. of transactions):
o One Week Prior:
- All Transactions (124) 18.7%
- Financial Institutions (36) 16.0
o One Month Prior:
- All Transactions (124) 22.0%
- Financial Institutions (36) 13.0
o In 27 of the 124 cases (All Transactions), the original bid was altered:
o In 25 cases the original bid was increased and in 2 cases the original
bid was lowered
o The median increase was 14.1% (relative to the original bid); the
highest increase was 75.1% (1)
o In 9 of the 36 cases (Financial Institutions), the original bid was altered:
o In 8 cases the original bid was increased and in 1 case the original
bid was lowered
o The median increase was 9.7% (relative to the original bid); the
highest increase was 32.3% (2)
(1) Loucadia Natioanal Group acquires PHLCORPInc. (final premium: 28.9%)
(2) Bank of America National Trust acquires BA Merchant Services(Bank America).
(final premium: 42%)
QWE
<PAGE>
<TABLE>
<CAPTION>
PROJECT HUSKY
MERGER CONSEQUENCES ANALYSIS - ASSUMPTIONS
KEY ASSUMPTIONS
($ in millions, except per share amounts)
- --------------------------------------------------------------- --------------------------------------------------------
Assumptions Cost Savings & Revenue Enhancements
- --------------------------------------------------------------- --------------------------------------------------------
T Co. C Co. COST SAVINGS OPPORTUNITIES Pre-Tax After-Tax
-------- -------- ------- ---------
<S> <C> <C> <C> <C> <C>
Current Price $33.75 $53.90 Transaction Cost Savings -- --
Pricing Date 03/17/00 03/17/00 Additional Investment Income --
2000E EPS (a) $3.80 $3.22 Cost Allocation -- --
-------------------------------- ------- ---------
2001E EPS (a) $4.03 3.64 Total Cost Savings Opportunities -- --
Book Value per Share 23.09
Shares Outstanding 57.1 3,443.5 REVENUE OPPORTUNITIES
C Co. Ownership Percentage of T Co. 85.2% -- --
Goodwill Amortization (Yrs.) 25.0 Leasing Opportunities -- --
-------------------------------- ------- ---------
Tax Rate 35.0% Total Revenue Opportunities -- --
Opportunity Cost of Funds (After-tax) 4.5 Assumed Reinsurance -- --
Transaction Costs $5.0 Ceded Reinsurance Savings -- --
- --------------------------------------------------------------- -------------------------------- ------- ---------
T Co. Net Asset Value Calculation
- ---------------------------------------------------------------
Current T Co. Book Value (Pro Rata) $1,319.0
Transaction Costs 5.0
Existing Goodwill (Pro Rata) 206.2
After-tax Held to Maturity Portfolio Gain --
- ----------------------------------------- ---------
ADJUSTED NET ASSET VALUE $1,107.8
(a) First Call median estimates as of 3/17/00 for C Co. and T Co. 2000-2001 budget estimates.
</TABLE>
QWE
<PAGE>
<TABLE>
<CAPTION>
PROJECT HUSKY
MERGER CONSEQUENCES ANALYSIS - PURCHASE
Consideration Mix
Stock --
Cash 100.0
- ----------------------------------------------------- ---------
100.0%
- ------------------------------------------------------------------------------------------------------------------------------------
$36.00 $37.00 $38.00 $39.00 $40.00 $41.00 $42.00
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
PRICING ANALYSIS
Total Equity Value $2,056.5 $2,113.6 $2,170.7 $2,227.9 $2,285.0 $2,342.1 $2,399.2
Premium to Market 6.7% 9.6% 12.6% 15.6% 18.5% 21.5% 24.4%
Price/2000E EPS 9.5x 9.7x 10.0x 10.3x 10.5x 10.8x 11.1x
Price/12/31/99 BVPS 1.56 1.60 1.65 1.69 1.73 1.78 1.82
New Shares Issued -- -- -- -- -- -- --
T Co. Pro Forma Ownership -- -- -- -- -- -- --
Goodwill (b) $948.6 $1,005.8 $1,062.9 $1,120.0 $1,177.1 $1,234.3 $1,291.4
ACCRETION/(DILUTION) ANALYSIS
T Co. 2000E Earnings 216.9 216.9 216.9 216.9 216.9 216.9 216.9
C Co. 2000E Earnings 11,088.1 11,088.1 11,088.1 11,088.1 11,088.1 11,088.1 11,088.1
Combined Earnings 11,304.9 11,304.9 11,304.9 11,304.9 11,304.9 11,304.9 11,304.9
PURCHASE ACCOUNTING ADJUSTMENTS
Goodwill Amortization 37.9 40.2 42.5 44.8 47.1 49.4 51.7
Write-off of existing T Co. goodwill (8.2) (8.2) (8.2) (8.2) (8.2) (8.2) (8.2)
Inv. Income on Employee Retention & Transaction Costs -- -- -- -- -- -- --
After-tax Opportunity Cost of Cash 92.5 95.1 97.7 100.3 102.8 105.4 108.0
Total Purchase Accounting Adjustments 122.2 127.1 132.0 136.8 141.7 146.5 151.4
COMBINED EARNINGS BEFORE SYNERGIES $11,182.7 $11,177.8 $11,173.0 $11,168.1 $11,163.3 $11,158.4 $11,153.6
ACCRETION/(DILUTION) BEFORE SYNERGIES 0.9% 0.8% 0.8% 0.7% 0.7% 0.6% 0.6%
SYNERGIES
Cost Savings -- -- -- -- -- -- --
Investment Income on Cost Savings -- -- -- -- -- -- --
Total -- -- -- -- -- -- --
COMBINED EARNINGS WITH SYNERGIES $11,182.7 $11,177.8 $11,173.0 $11,168.1 $11,163.3 $11,158.4 $11,153.6
Pro Forma 2000E EPS 3.25 3.25 3.24 3.24 3.24 3.24 3.24
C Co. Standalone 2000E EPS 3.22 3.22 3.22 3.22 3.22 3.22 3.22
- ------------------------------------------------------------------------------------------------------------------------------------
EPS ACCRETION/(DILUTION) 0.9% 0.8% 0.8% 0.7% 0.7% 0.6% 0.6%
- ------------------------------------------------------------------------------------------------------------------------------------
RETURN ON INVESTMENT ANALYSIS
- ------------------------------------------------------------------------------------------------------------------------------------
Including Cost of Financing 4.6% 4.2% 3.9% 3.6% 3.3% 3.0% 2.7%
Excluding Cost of Financing 9.1% 8.7% 8.4% 8.1% 7.8% 7.5% 7.2%
- ------------------------------------------------------------------------------------------------------------------------------------
(a) First Call median estimates as of 3/17/00.
(b) Includes $5.0 million of transaction costs
</TABLE>
QWE
<PAGE>
PROJECT HUSKY
APPENDIX
QWE
<PAGE>
<TABLE>
<CAPTION>
PROJECT HUSKY
VALUATION CALCULATIONS
- -------------------------------------------------------------------------------------------------------------------
VALUATION
MARKER MEDIAN RANGE SIZE SELECTED RANGE HARTFORD IMPLIED VALUE
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PUBLIC MARKET COMPARABLES:
Price/2000E Earnings $3.80 9.4x 3.0x 7.9x -- 10.9x 8.7x $29.94 -- $41.33
Price/2001E Earnings 4.03 8.6 3.0 7.1 -- 10.1 7.8 28.54 -- 40.63
Price/Book Value 23.09 1.13 0.40 0.93 -- 1.33 1.35 21.49 -- 30.73
SELECTED M&A TRANSACTIONS:
Price/Estimated Earnings $3.80 10.7x 2.0x 9.7x -- 11.7x $36.80 -- $44.40
Price/Book Value 23.09 1.10 0.40 0.90 -- 1.30 20.77 -- 30.01
MINORITY ACQUISITION TRANSACTIONS:
One Week Prior to Announcement $30.11 16.3% 10.0% 11.3% -- 21.3% $33.51 -- $36.52
One Month Prior to Announcement 31.50 16.2 10.0 11.2 -- 21.2 35.03 -- 38.18
DIVIDEND DISCOUNT MODEL:
Price/Estimated Earnings $3.80 10.0x 2.0x 9.0x -- 11.0x $36.13 -- $45.49
Price/Book Value 23.09 1.40 0.20 1.30 -- 1.50 35.84 -- 42.76
</TABLE>
QWE
<PAGE>
<TABLE>
<CAPTION>
PROJECT HUSKY
ADDITIONAL INFORMATION ON SELECTED ADJUSTED M&A TRANSACTION
PRECEDENTS
Premium Over
Market
----------------
Announced/ Target/ Purchase Price Transaction 1 Day 30 Days
Effective Acquiror Consideration Per Share Aggregate Value Prior Prior
- --------- -------- ------------- --------- --------- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
7/12/99 ORION CAPITAL CORPORATION CASH $50.00 $1,363,900 $1,823,300 22.7% 64.6%
11/17/99 ROYAL & SUN ALLIANCE PLC
7/12/99 PERSONAL LINES OF ST. PAUL COS. CASH N/AP $600,000 $600,000 N/AP N/AP
10/1/99 METROPOLITAN LIFE INSURANCE CO.
6/22/99 PERSONAL LINES OF CNA FINANCIAL CASH N/AP $1,200,000 $1,200,000 N/AP N/AP
10/1/99 ALLSTATE CORPORATION
2/5/99 EXECUTIVE RISK, INC STOCK $73.10 $856,000 $856,000 63.0% 42.0%
7/20/99 THE CHUBB CORPORATION
2/1/99 GUARDIAN ROYAL EXCHANGE - USA CASH N/AP N/AP $1,465,000 N/AP N/AP
5/10/99 LIBERTY MUTUAL INSURANCE CO.
12/22/98 CIGNA CORP. (P&C) CASH N/AP $3,450,000 $3,450,000 N/AP N/AP
7/2/99 ACE LTD.
5/29/98 ING - US P&C DIVISION/ CASH N/AP $1,115,000 $1,115,000 N/AP N/AP
9/1/98 GRE PLC
5/18/98 ALLIED GROUP INC./ CASH $48.25 $1,576,000 $1,576,000 73.8% 54.4%
11/13/98 NATIONWIDE MUTUAL INSURANCE CO
1/19/98 USF&G CORP STOCK $22.00 $2,671,000 $3,371,000 2.6% -1.9%
4/24/98 ST. PAUL COS. INC.
6/9/97 AMERICAN STATES FINANCIAL CORP./ CASH $47.00 $2,800,000 $3,100,000 23.3% 30.6%
10/1/97 SAFECO CORP.
1/13/97 ZURICH RE. CENTRE HOLDINGS/ CASH $39.50 $1,035,294 $1,233,707 28.5% 23.0%
9/2/97 ZURICH INSURANCE CO.
12/17/96 ALLMERICA PROPERTY & CASUALTY/ STOCK & CASH $33.00 $1,975,309 $1,975,309 15.8% 15.3%
7/16/97 ALLMERICA FINANCIAL CORP.
11/29/95 AETNA LIFE AND CASUALTY/ CASH N/AP $4,110,000 $4,110,000 N/AP N/AP
4/2/96 TRAVELERS
-------------------
Median 23.3% 30.6%
N/AP: Not Applicable Average 32.8% 32.6%
NA: Not Available High 73.8% 64.6%
NM: Not Meaningful Low 2.6% -1.9%
-------------------
</TABLE>
QWE
<PAGE>
<TABLE>
<CAPTION>
PROJECT HUSKY
PRECEDENT M&A TRANSACTIONS
($ in thousands, except per share data)
Premium Over
Market
---------------------
Announced/ Target/ Purchase Price Transaction 1 Day 30 Days
Effective Acquiror Consideration Per Share Aggregate Value Prior Prior
- --------- -------- ------------- --------- --------- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
12/6/99 Underwriters Re Cash N/AP $725,000 $725,000 N/AP N/AP
pending Swiss Re
1/26/00 Terra Nova (Bermuda) Holdings Ltd. Cash & Stock $25.00 $630,000 $805,000 (11.3)% (15.3)%
Pending Markel Corporation & CV Right
7/12/99 ORION CAPITAL CORPORATION CASH $50.00 $1,363,900 $1,823,300 22.7% 64.6%
11/17/99 ROYAL & SUN ALLIANCE PLC
7/12/99 PERSONAL LINES OF ST. PAUL COS. CASH N/AP $600,000 $600,000 N/AP N/AP
10/1/99 METROPOLITAN LIFE INSURANCE CO.
6/22/99 PERSONAL LINES OF CNA FINANCIAL CASH N/AP $1,200,000 $1,200,000 N/AP N/AP
10/1/99 ALLSTATE CORPORATION
2/16/99 NAC Re Corp Stock $55.36 $1,185,400 $1,398,300 11.1% 19.9%
6/18/99 XL Capital Ltd.
2/5/99 EXECUTIVE RISK, INC STOCK $73.10 $856,000 $856,000 63.0% 42.0%
7/20/99 THE CHUBB CORPORATION
2/1/99 GUARDIAN ROYAL EXCHANGE - USA CASH N/AP N/AP $1,465,000 N/AP N/AP
5/10/99 LIBERTY MUTUAL INSURANCE CO.
12/22/98 CIGNA CORP. (P&C) CASH N/AP $3,450,000 $3,450,000 N/AP N/AP
7/2/99 ACE LTD.
12/3/98 TIG Holdings, Inc. Cash $16.50 $840,000 $1,029,000 6.5% 17.9%
4/13/99 Fairfax Financial Holdings
7/24/98 Constitution Re/ Cash N/AP $700,000 $785,000 N/AP N/AP
10/27/98 Gerling Kozern Versicherungs
6/19/98 General Re Corp/ Stock $276.50 $22,300,000 $23,764,000 23.3% 24.0%
12/21/98 Berkshire Hathaway Inc
5/29/98 ING - US P&C DIVISION/ CASH N/AP $1,115,000 $1,115,000 N/AP N/AP
9/1/98 GRE PLC
5/18/98 ALLIED GROUP INC./ CASH $48.25 $1,576,000 $1,576,000 73.8% 54.4%
11/13/98 NATIONWIDE MUTUAL INSURANCE CO
1/19/98 USF&G CORP STOCK $22.00 $2,671,000 $3,371,000 2.6% -1.9%
4/24/98 ST. PAUL COS. INC.
6/9/97 AMERICAN STATES FINANCIAL CORP./ CASH $47.00 $2,800,000 $3,100,000 23.3% 30.6%
10/1/97 SAFECO CORP.
1/13/97 ZURICH RE. CENTRE HOLDINGS/ CASH $39.50 $1,035,294 $1,233,707 28.5% 23.0%
9/2/97 ZURICH INSURANCE CO.
12/17/96 ALLMERICA PROPERTY & CASUALTY/ STOCK & CASH $33.00 $1,975,309 $1,975,309 15.8% 15.3%
7/16/97 ALLMERICA FINANCIAL CORP.
11/29/95 AETNA LIFE AND CASUALTY/ CASH N/AP $4,110,000 $4,110,000 N/AP N/AP
4/2/96 TRAVELERS
-----------------------
SELECTED RANGES
-----------------------
Median 23.3% 30.6%
N/AP: Not Applicable Average 32.8% 32.6%
NA: Not Available High 73.8% 64.6%
NM: Not Meaningful Low 2.6% -1.9%
-----------------------
<CAPTION>
Purchase Price as a Transaction Value as a
Multiple of GAAP Multiple of Statutory
------------------------------------- ---------------------
Announced/ Target/ LTM Estimated Latest LTM Latest
Effective Acquiror Co Earnings Earnings Book Value Earnings Surplus
- --------- -------- -- -------- -------- ---------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
12/6/99 Underwriters Re NA NA 1.63x 20.3x 1.2x
pending Swiss Re
1/26/00 Terra Nova (Bermuda) Holdings Ltd. 14.6x 8.8x 1.25x NA NA
Pending Markel Corporation
7/12/99 ORION CAPITAL CORPORATION NM 18.5X 2.11X 12.1X 2.86X
11/17/99 ROYAL & SUN ALLIANCE PLC
7/12/99 PERSONAL LINES OF ST. PAUL COS. NA NA NA NA NA
10/1/99 METROPOLITAN LIFE INSURANCE CO.
6/22/99 PERSONAL LINES OF CNA FINANCIAL NA NA NA NA NA
10/1/99 ALLSTATE CORPORATION
2/16/99 NAC Re Corp 12.3x 14.0x 1.58x 16.2x 2.24x
6/18/99 XL Capital Ltd.
2/5/99 EXECUTIVE RISK, INC 19.7X 19.9X 2.60X NA 2.80X
7/20/99 THE CHUBB CORPORATION
2/1/99 GUARDIAN ROYAL EXCHANGE - USA NA NA NA NA NA
5/10/99 LIBERTY MUTUAL INSURANCE CO.
12/22/98 CIGNA CORP. (P&C) 17.4X 14.9X 1.47X 17.4X 3.42X
7/2/99 ACE LTD.
12/3/98 TIG Holdings, Inc. NM 9.9x 0.72x NM 0.99x
4/13/99 Fairfax Financial Holdings
7/24/98 Constitution Re/ 13.2x 10.7x 1.14x 244.6x 1.98x
10/27/98 Gerling Kozern Versicherungs
6/19/98 General Re Corp/ 22.8x 21.4x 2.66x 24.7x 3.54x
12/21/98 Berkshire Hathaway Inc
5/29/98 ING - US P&C DIVISION/ 23.0X 21.3X 2.15X 18.7X 2.66X
9/1/98 GRE PLC
5/18/98 ALLIED GROUP INC./ 26.8X 21.9X 3.60X 36.9X NA
11/13/98 NATIONWIDE MUTUAL INSURANCE CO
1/19/98 USF&G CORP 14.0X 11.8X 1.42X 17.4X 2.12X
4/24/98 ST. PAUL COS. INC.
6/9/97 AMERICAN STATES FINANCIAL CORP./ 15.8X 16.3X 2.11X 18.0X 3.21X
10/1/97 SAFECO CORP.
1/13/97 ZURICH RE. CENTRE HOLDINGS/ 35.4X 25.8X 1.52X 69.5X 1.79X
9/2/97 ZURICH INSURANCE CO.
12/17/96 ALLMERICA PROPERTY & CASUALTY/ 13.4X 14.8X 1.22X 15.2X 1.53X
7/16/97 ALLMERICA FINANCIAL CORP.
11/29/95 AETNA LIFE AND CASUALTY/ NM N/AP 1.17X NM 1.73X
4/2/96 TRAVELERS
------------------------------------------------------------
SELECTED RANGES
------------------------------------------------------------
Median 18.6x 18.5x 1.81x 17.73x 2.66x
N/AP: Not Applicable Average 20.7x 18.4x 1.94x 25.65x 2.46x
NA: Not Available High 35.4x 25.8x 3.60x 69.49x 3.42x
NM: Not Meaningful Low 13.4x 11.8x 1.17x 12.07x 1.53x
------------------------------------------------------------
Note: Median, average, high, low based on transactions in bold.
</TABLE>
QWE
<PAGE>
<TABLE>
<CAPTION>
PROJECT HUSKY
PREMIUM ANALYSIS - MARKET DATA
TRAILING AVERAGE TO 3/17/00
-------------------------------------
CLOSE CLOSE CLOSE 5 DAY 20 DAY 60 DAY 180 DAY 52 WEEK 52 WEEK IPO
3/17/00 3/10/00 2/17/00 AVERAGE AVERAGE AVERAGE AVERAGE HIGH LOW PRICE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Benchmark $33.75 $30.11 $31.50 $32.01 $31.63 $33.61 $34.34 $41.88 $27.69 $25.00
Offer Price
$34.00 0.7% 12.9% 7.9% 6.2% 7.5% 1.2% (1.0)% (18.8)% 22.8% 36.0%
34.25 1.5 13.8 8.7 7.0 8.3 1.9 (0.3) (18.2) 23.7 37.0
34.50 2.2 14.6 9.5 7.8 9.1 2.7 0.5 (17.6) 24.6 38.0
34.75 3.0 15.4 10.3 8.6 9.9 3.4 1.2 (17.0) 25.5 39.0
35.00 3.7 16.2 11.1 9.3 10.7 4.1 1.9 (16.4) 26.4 40.0
35.50 5.2 17.9 12.7 10.9 12.2 5.6 3.4 (15.2) 28.2 42.0
35.75 5.9 18.7 13.5 11.7 13.0 6.4 4.1 (14.6) 29.1 43.0
36.00 6.7 19.6 14.3 12.5 13.8 7.1 4.8 (14.0) 30.0 44.0
- -----------------------------------------------------------------------------------------------------------
36.25 7.4 20.4 15.1 13.2 14.6 7.9 5.6 (13.4) 30.9 45.0
36.50 8.1 21.2 15.9 14.0 15.4 8.6 6.3 (12.8) 31.8 46.0
36.75 8.9 22.1 16.7 14.8 16.2 9.4 7.0 (12.2) 32.7 47.0
37.00 9.6 22.9 17.5 15.6 17.0 10.1 7.8 (11.6) 33.6 48.0
37.25 10.4 23.7 18.3 16.4 17.8 10.8 8.5 (11.0) 34.5 49.0
37.50 11.1 24.5 19.0 17.1 18.6 11.6 9.2 (10.4) 35.4 50.0
37.75 11.9 25.4 19.8 17.9 19.4 12.3 9.9 (9.9) 36.3 51.0
38.00 12.6 26.2 20.6 18.7 20.1 13.1 10.7 (9.3) 37.2 52.0
- -----------------------------------------------------------------------------------------------------------
38.25 13.3 27.0 21.4 19.5 20.9 13.8 11.4 (8.7) 38.1 53.0
38.50 14.1 27.9 22.2 20.3 21.7 14.6 12.1 (8.1) 39.1 54.0
38.75 14.8 28.7 23.0 21.0 22.5 15.3 12.9 (7.5) 40.0 55.0
39.00 15.6 29.5 23.8 21.8 23.3 16.1 13.6 (6.9) 40.9 56.0
39.25 16.3 30.4 24.6 22.6 24.1 16.8 14.3 (6.3) 41.8 57.0
39.50 17.0 31.2 25.4 23.4 24.9 17.5 15.0 (5.7) 42.7 58.0
39.75 17.8 32.0 26.2 24.2 25.7 18.3 15.8 (5.1) 43.6 59.0
40.00 18.5 32.8 27.0 25.0 26.5 19.0 16.5 (4.5) 44.5 60.0
- -----------------------------------------------------------------------------------------------------------
40.25 19.3 33.7 27.8 25.7 27.3 19.8 17.2 (3.9) 45.4 61.0
40.50 20.0 34.5 28.6 26.5 28.1 20.5 17.9 (3.3) 46.3 62.0
40.75 20.7 35.3 29.4 27.3 28.8 21.3 18.7 (2.7) 47.2 63.0
41.00 21.5 36.2 30.2 28.1 29.6 22.0 19.4 (2.1) 48.1 64.0
41.25 22.2 37.0 31.0 28.9 30.4 22.7 20.1 (1.5) 49.0 65.0
41.50 23.0 37.8 31.7 29.6 31.2 23.5 20.9 (0.9) 49.9 66.0
41.75 23.7 38.7 32.5 30.4 32.0 24.2 21.6 (0.3) 50.8 67.0
42.00 24.4 39.5 33.3 31.2 32.8 25.0 22.3 0.3 51.7 68.0
- -----------------------------------------------------------------------------------------------------------
42.25 25.2 40.3 34.1 32.0 33.6 25.7 23.0 0.9 52.6 69.0
42.50 25.9 41.2 34.9 32.8 34.4 26.5 23.8 1.5 53.5 70.0
42.75 26.7 42.0 35.7 33.5 35.2 27.2 24.5 2.1 54.4 71.0
43.00 27.4 42.8 36.5 34.3 36.0 28.0 25.2 2.7 55.3 72.0
43.25 28.1 43.6 37.3 35.1 36.7 28.7 26.0 3.3 56.2 73.0
43.50 28.9 44.5 38.1 35.9 37.5 29.4 26.7 3.9 57.1 74.0
43.75 29.6 45.3 38.9 36.7 38.3 30.2 27.4 4.5 58.0 75.0
44.00 30.4 46.1 39.7 37.4 39.1 30.9 28.1 5.1 58.9 76.0
- -----------------------------------------------------------------------------------------------------------
</TABLE>
QWE
<PAGE>
<TABLE>
<CAPTION>
PROJECT HUSKY
PREMIUM ANALYSIS - OPERATING DATA
GAAP 1999 STAT 1999 TANG. 1999
BOOK BOOK BOOK 2000E 2001E OPERATING
VALUE VALUE VALUE EPS EPS EPS
----- ----- ----- --- --- ---
<S> <C> <C> <C> <C> <C> <C>
Benchmark $23.09 $19.67 $19.61 $3.80 $4.03 $3.43
OFFER PRICE
$34.00 1.47x 1.73x 1.73x 9.0x 8.4x 9.9x
-----
34.25 1.48 1.74 1.75 9.0 8.5 10.0
34.50 1.49 1.75 1.76 9.1 8.6 10.1
34.75 1.50 1.77 1.77 9.2 8.6 10.1
35.00 1.52 1.78 1.79 9.2 8.7 10.2
35.50 1.54 1.80 1.81 9.4 8.8 10.3
35.75 1.55 1.82 1.82 9.4 8.9 10.4
36.00 1.56 1.83 1.84 9.5 8.9 10.5
36.25 1.57 1.84 1.85 9.5 9.0 10.6
36.50 1.58 1.86 1.86 9.6 9.1 10.6
36.75 1.59 1.87 1.87 9.7 9.1 10.7
37.00 1.60 1.88 1.89 9.7 9.2 10.8
37.25 1.61 1.89 1.90 9.8 9.2 10.9
37.50 1.62 1.91 1.91 9.9 9.3 10.9
37.75 1.63 1.92 1.93 9.9 9.4 11.0
38.00 1.65 1.93 1.94 10.0 9.4 11.1
38.25 1.66 1.94 1.95 10.1 9.5 11.2
38.50 1.67 1.96 1.96 10.1 9.6 11.2
38.75 1.68 1.97 1.98 10.2 9.6 11.3
39.00 1.69 1.98 1.99 10.3 9.7 11.4
39.25 1.70 2.00 2.00 10.3 9.7 11.4
39.50 1.71 2.01 2.01 10.4 9.8 11.5
39.75 1.72 2.02 2.03 10.5 9.9 11.6
40.00 1.73 2.03 2.04 10.5 9.9 11.7
40.25 1.74 2.05 2.05 10.6 10.0 11.7
40.50 1.75 2.06 2.07 10.7 10.0 11.8
40.75 1.76 2.07 2.08 10.7 10.1 11.9
41.00 1.78 2.08 2.09 10.8 10.2 12.0
41.25 1.79 2.10 2.10 10.9 10.2 12.0
41.50 1.80 2.11 2.12 10.9 10.3 12.1
41.75 1.81 2.12 2.13 11.0 10.4 12.2
42.00 1.82 2.14 2.14 11.1 10.4 12.2
42.25 1.83 2.15 2.15 11.1 10.5 12.3
42.50 1.84 2.16 2.17 11.2 10.5 12.4
42.75 1.85 2.17 2.18 11.3 10.6 12.5
43.00 1.86 2.19 2.19 11.3 10.7 12.5
43.25 1.87 2.20 2.21 11.4 10.7 12.6
43.50 1.88 2.21 2.22 11.5 10.8 12.7
43.75 1.89 2.22 2.23 11.5 10.9 12.8
44.00 1.91 2.24 2.24 11.6 10.9 12.8
</TABLE>
QWE
<PAGE>
<TABLE>
<CAPTION>
PROJECT HUSKY
T CO. OWNERSHIP PROFILE
(dollars and shares in thousands)
- ---------------------------------------------------------------------------------------------------------
13-F Institutions Holdings (shares) Value of Holdings(a) Percent of Holdings
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fidelity Mgmt & Research Co 6,394 $215,813 1.7%
Goldman Sachs & Co. 3,926 132,503 1.0
Iridian Asset Management LLC 3,745 126,384 1.0
Northstar Investment Mgmt. Corp. 2,407 81,236 0.6
AXA Financial, Inc. 1,926 64,995 0.5
Perry Corp. 1,899 64,088 0.5
Independence Invt Assoc, Inc. 1,800 60,764 0.5
T. Rowe Price Associates, Inc. 1,695 57,216 0.4
Neuberger Berman Inc. 1,686 56,897 0.4
MSDW Advisors Inc. 1,628 54,930 0.4
Thompson Siegel & Walmsley Inc. 1,573 53,103 0.4
Raiff Partners Inc. 1,563 52,748 0.4
Barclays Bank plc 1,434 48,412 0.4
Other 13-F Institutions 25,435 858,419 6.6
- ------------------------------------- ----------- ----------- -----------
Total 13-F Institutions 57,111 $1,927,509 14.8%
C Co.(b) 328,020 11,070,681 85.2
Directors and Management 13 439 0.0
----------- ----------- -----------
TOTAL 385,145 $12,998,628 100.0%
=========== =========== ===========
(a) Based on T Co. stock price of $33.75 as of March 17, 2000
(b) Source T Co. proxy dated, April 20, 1999.
</TABLE>
QWE
<PAGE>
<TABLE>
<CAPTION>
PROJECT HUSKY
IMPACT OF 5% SHARE REPURCHASE OF T CO. STOCK
- --------------------------------------------------------------------------------------------------------------
SELECTED VALUE RANGE
- --------------------------------------------------------------------------------------------------------------
$35.44 $37.13 $38.81 $40.50
----------------------------------------------
<S> <C> <C> <C> <C> <C>
IMPLIED PREMIUM TO:
- --------------------------------------------------------------------------------------------------------------
Close (3/17/00) $33.75 5.0% 10.0% 15.0% 20.0%
- --------------------------------------------------------------------------------------------------------------
Market Capitalization $13,648.6 $14,298.5 $14,948.4 $15,598.4
Aggregate Transaction Value 682.4 714.9 747.4 779.9
Shares Repurchased (000's) 19,257.2 19,257.2 19,257.2 19,257.2
Percent of Current Shares Outstanding 5.0% 5.0% 5.0% 5.0%
2000E Operating Earnings (1) $1,462.2 $1,462.2 $1,462.2 $1,462.2
After-Tax Opportunity Cost of Cash (2) (30.7) (32.2) (33.6) (35.1)
--------- --------- --------- ---------
Pro Forma Earnings 1,431.5 1,430.0 1,428.5 1,427.1
2000E Operating Earnings Per Share (1) $3.80 $3.80 $3.80 $3.80
Pro Forma 2000E EPS 3.91 3.91 3.90 3.90
Accretion/(Dilution) 3.1% 2.9% 2.8% 2.7%
12/31/99 Pro Forma Equity $8,210.6 $8,178.1 $8,145.6 $8,113.1
2000E Return on Equity 16.2% 16.3% 16.3% 16.4%
Debt + Capital Securities / Total Capitalization (3) 12.2% 13.1 13.1 13.1 13.2
N.B. THE DAILY AVERAGE TRADING VOLUME OF THE STOCK IS APPROXIMATELY 292 THOUSAND SHARES. A 5% REPURCHASE
PROGRAM REPRESENTS APPROXIMATELY 66 TIMES THE AVERAGE DAILY TRADING VOLUME OF THE STOCK AND MAY REQUIRE A
LONG TIMEFRAME TO COMPLETE.
- -----------------------
(1) Based on 2000-2001 T Co. Bduget estimates.
(2) Assumes 4.5% after tax opportunity cost of cash.
(3) Assumes 50% equity credit for Trust Preferred Securities.
</TABLE>
QWE
<PAGE>
<TABLE>
PROJECT HUSKY
WEIGHTED AVERAGE COST OF CAPITAL
BOND PORTFOLIO
<CAPTION>
- -------------------------------------------------------
WEIGHTED
AMOUNT YIELD COST
- -------------------------------------------------------
<S> <C> <C> <C>
6.75% Notes due 2001 $500 8.30% 2.37%
6.75% Notes due 2006 150 7.81 0.67
7.75% Notes due 2025 200 8.30 0.95
TRuPS 100 8.89 0.51
TRuPS 800 8.93 4.08
------ ----
Total $1,750 8.58%
WACC CALCULATION
Cost of Debt 8.58%
Effective Tax Rate 30.0
After-Tax Cost of Debt 6.00
Equity Beta 1.00
Risk-Free Rate 6.01%
Market Premium 5.50
Cost of Equity 11.51
Total 1999 GAAP Book Value $8,941
Total Capitalization 10,691
- -------------------------------------
WACC 10.60%
- -------------------------------------
</TABLE>
QWE
<PAGE>
PROJECT HUSKY
REGRESSION ANALYSIS EXCLUDING SAFECO AND CNA
[CHART OMITTED]
QWE
<PAGE>
PROJECT HUSKY
REGRESSION ANALYSIS EXCLUDING SAFECO, CNA AND CHUBB
[CHART OMITTED]
QWE
<PAGE>
<TABLE>
<CAPTION>
PROJECT HUSKY
GOING PRIVATE TRANSACTIONS - PREMIUM ANALYSIS
- ------------------------------------------------------------------------------------------------
All Transactions
- ------------------------------------------------------------------------------------------------
MARKET PREMIUM: ALL DEALS MARKET PREMIUM: LTM DEALS
------------------------- -------------------------
1 MONTH 1 DAY 1 MONTH 1 DAY
- ------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C>
25TH PERCENTILE 13.0% 12.0% 13.3% 7.1%
MEDIAN 26.0 20.6 32.9 20.9
75TH PERCENTILE 44.6 37.0 46.4 30.5
- ------------------------------------------------------------------------------------------------
All Transactions - Consideration
- ------------------------------------------------------------------------------------------------
<CAPTION>
MEDIAN MARKET PREMIUM 75TH PERCENTILE MARKET PREMIUM
NUMBER OF --------------------- ------------------------------
TRANSACTIONS 1 MONTH 1 DAY 1 MONTH 1 DAY
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CASH CONSIDERATION 154 27.6% 21.3% 44.6% 37.4%
STOCK CONSIDERATION 48 22.8 14.9 44.8 34.9
MIXED CONSIDERATION 12 25.9 19.9 49.9 56.5
- -----------------------------------------------------------------------------------------
ALL TRANSACTIONS(1) 220 26.0 20.6 44.6 37.0
- -----------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
Cash-for-Stock Transactions Only
- ------------------------------------------------------------------------------------------------
<CAPTION>
ACQUIROR'S MEDIAN MARKET PREMIUM 75TH PERCENTILE MARKET PREMIUM
HOLDINGS AT NUMBER OF --------------------- ------------------------------
TIME OF OFFER TRANSACTIONS 1 MONTH 1 DAY 1 MONTH 1 DAY
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
60% AND UP 97 28.1% 21.6% 44.6% 31.0%
ALL TRANSACTIONS 154 27.6 21.3 44.6 37.4
- ------------------------------------------------------------------------------------------------
(1) Includes 4 transactions where consideration is not cash or stock.
</TABLE>
Salomon Smith Barney has analyzed the terms of 220 minority acquisition
transactions announced since 1984.
The median premium-to-market appears to vary little with form of consideration
and stake held.
In 25% of announced transactions, target shareholders received a 1 month premium
over 45% (vs. median premium of 26%)
QWE
<PAGE>
<TABLE>
<CAPTION>
PROJECT HUSKY
OPERATING COMPARISONS - STATUTORY DATA
(U.S. Dollars in millions)
- ------------------------------------------------------------------------------------------------------------------------------------
HARTFORD CNA AMERICAN
ALLSTATE CHUBB FINANCIAL ST. PAUL FINANCIAL SAFECO FINANCIAL MERCURY T
CORPORATION CORPORATION SERVICES COMPANIES CORPORATION CORPORATION GROUP GENERAL CO. AVERAGE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATUTORY FINANCIAL DATA
LOSS RATIO
1998 70.1% 67.2% 72.9% 84.8% 81.6% 72.8% 82.7% 61.2% 73.2% 74.0%
1997 72.6 66.1 74.0 72.2 77.1 72.0 73.4 63.7 72.0 71.5
1996 78.3 68.3 92.2 77.2 76.3 71.6 74.8 67.7 86.2 77.0
1995 77.9 66.7 77.4 71.8 77.7 70.8 74.8 68.8 91.5 75.3
1994 87.7 67.9 75.3 73.0 87.3 73.7 70.9 69.5 88.2 77.0
Average 77.3 67.2 78.4 75.8 80.0 72.2 75.3 66.2 82.2 75.0
EXPENSE RATIO
1998 24.4% 33.0% 33.1% 33.2% 34.7% 30.4% 25.6% 27.0% 29.9% 30.2%
1997 24.8 32.7 30.7 31.9 31.7 29.7 27.6 26.2 32.4 29.7
1996 24.3 32.2 28.1 32.4 32.4 29.9 26.7 25.7 32.9 29.4
1995 23.7 32.1 28.7 33.3 30.2 30.3 26.5 24.9 31.6 29.0
1994 24.1 33.2 28.7 33.0 28.9 29.9 28.0 26.1 33.1 29.4
Average 24.3 32.6 29.9 32.7 31.6 30.0 26.9 26.0 32.0 29.5
COMBINED RATIO
1998 94.6% 100.2% 106.0% 118.0% 116.3% 103.2% 108.3% 88.2% 103.1% 104.2%
1997 97.4 98.8 104.7 104.1 108.8 101.7 100.9 89.8 104.4 101.2
1996 102.7 100.5 120.3 109.6 108.7 101.4 101.5 93.4 119.1 106.3
1995 101.6 98.8 106.1 105.1 107.9 101.2 101.3 93.7 123.1 104.3
1994 111.8 101.1 104.0 106.0 116.2 103.6 98.8 95.6 121.2 106.5
Average 101.6 99.9 108.2 108.5 111.6 102.2 102.2 92.2 114.2 104.5
GROSS PREMIUMS WRITTEN
1998 $19,446 $4,989 $5,895 $5,765 $10,078 $4,429 $3,183 $1,144 $9,401 $7,148
1997 18,715 4,758 5,741 6,244 9,970 4,261 3,332 1,104 9,174 7,033
1996 18,028 4,513 5,716 6,652 10,116 4,078 3,212 885 9,016 6,913
1995 16,977 4,343 5,746 6,765 10,369 4,021 3,438 731 9,717 6,901
1994 15,715 4,115 5,814 6,429 10,682 3,916 3,351 647 10,004 6,742
Average 17,776 4,544 5,782 6,371 10,243 4,141 3,303 902 9,462 6,947
NEW PREMIUMS WRITTEN
1998 $19,072 $4,779 $6,028 $5,962 $10,044 $4,257 $2,439 $1,144 $8,210 $6,882
1997 18,260 4,813 5,904 6,412 9,861 4,100 2,832 1,086 7,905 6,797
1996 17,791 4,217 5,842 6,760 10,084 3,914 2,766 854 7,436 6,629
1995 17,506 3,813 5,764 6,250 9,350 3,879 3,070 699 7,766 6,455
1994 16,284 3,567 5,746 5,702 10,338 3,759 3,094 615 8,123 6,359
Average 17,783 4,238 5,857 6,217 9,936 3,982 2,840 880 7,888 6,624
NET INVESTMENT INCOME
1998 $1,856 $693 $1,539 $1,256 $1,556 $496 $333 $90 $1,916 $1,082
1997 1,911 693 2,136 1,313 1,815 517 326 80 2,033 1,203
1996 1,924 645 900 1,256 1,616 517 358 72 1,835 1,014
1995 1,594 559 822 1,192 1,679 549 361 67 1,712 948
1994 1,511 581 731 1,150 1,821 515 319 60 1,530 913
Average 1,759 634 1,226 1,234 1,697 519 339 74 1,805 1,032
</TABLE>
QWE
<PAGE>
<TABLE>
<CAPTION>
PROJECT HUSKY
OPERATING COMPARISONS - STATUTORY DATA
(U.S. Dollars in millions)
- ------------------------------------------------------------------------------------------------------------------------------------
HARTFORD CNA AMERICAN
ALLSTATE CHUBB FINANCIAL ST. PAUL FINANCIAL SAFECO FINANCIAL MERCURY T
CORPORATION CORPORATION SERVICES COMPANIES CORPORATION CORPORATION GROUP GENERAL CO. AVERAGE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATUTORY FINANCIAL DATA
SURPLUS
1998 $13,418 $2,788 $8,539 $3,934 $7,490 $3,347 $1,857 $770 $7,173 $5,480
1997 12,961 2,555 7,727 4,096 7,081 3,152 1,921 682 6,276 5,161
1996 11,025 2,463 4,071 3,835 6,397 3,129 1,663 597 5,505 4,298
1995 9,416 2,267 3,785 3,599 5,741 2,872 1,590 515 5,324 3,901
1994 6,539 1,877 3,247 3,465 4,879 2,483 1,569 442 4,716 3,246
Average 10,672 2,390 5,474 3,786 6,318 2,997 1,720 601 5,799 4,417
NEW PREMIUMS WRITTEN / SURPLUS
1998 1.42x 1.71x 0.71x 1.52x 1.34x 1.27x 1.31x 1.49x 1.14x 1.32x
1997 1.41 1.88 0.76 1.57 1.39 1.30 1.47 1.59 1.26 1.40
1996 1.61 1.71 1.44 1.76 1.58 1.25 1.66 1.43 1.35 1.53
1995 1.86 1.68 1.52 1.74 1.63 1.35 1.93 1.36 1.46 1.61
1994 2.49 1.90 1.77 1.65 2.12 1.51 1.97 1.39 1.72 1.84
Average 1.76 1.78 1.24 1.65 1.61 1.34 1.67 1.45 1.39 1.54
LOSS RESERVES
1998 $14,943 $8,470 $12,003 $13,933 $21,529 $3,961 $3,702 $386 $20,721 $11,072
1997 15,524 8,086 11,963 13,629 22,105 4,124 3,475 386 21,386 11,186
1996 15,289 7,305 11,794 13,772 22,731 4,254 3,397 312 21,804 11,184
1995 15,291 7,236 10,571 12,615 24,155 4,402 3,394 275 21,646 11,065
1994 14,642 6,661 10,312 12,426 24,820 4,508 3,275 248 20,698 10,843
Average 15,138 7,552 11,329 13,275 23,068 4,250 3,449 321 21,251 11,070
LOSS RESERVES / SURPLUS
1998 1.11x 3.04x 1.41x 3.54x 2.87x 1.18x 1.99x 0.50x 2.89x 2.06x
1997 1.20 3.16 1.55 3.33 3.12 1.31 1.81 0.57 3.41 2.16
1996 1.39 2.97 2.90 3.59 3.55 1.36 2.04 0.52 3.96 2.48
1995 1.62 3.19 2.79 3.50 4.21 1.53 2.14 0.53 4.07 2.62
1994 2.24 3.55 3.18 3.59 5.09 1.82 2.09 0.56 4.39 2.94
Average 1.51 3.18 2.36 3.51 3.77 1.44 2.01 0.54 3.74 2.45
1998 NET PREMIUMS WRITTEN
Personal Lines 62.8% 16.7% 27.1% 0.0% 12.1% 40.8% 35.3% 58.3% 30.2% 31.5%
Commercial Lines 37.2 83.3 72.9 100.0 100.0 59.2 64.7 41.7 69.8 69.9
TOP LINES (percent of
1998 NPW) PA - 44.7 CP - 17.9 PA - 19.5 CP - 11.2 WC - 18.3 PA - 24.2 PA - 35.2 PA - 57.5 PA - 18.5
AP - 31.6 LI - 15.8 WC - 17.7 PA - 10.8 CP - 13.3 AP - 19.0 AP - 19.2 AP - 33.6 CP - 17.0
HO - 18.1 HO - 13.6 CP - 15.2 CA - 9.2 GH - 9.7 HO - 16.5 WC - 11.1 CA - 3.1 WC - 14.4
CP - 1.8 WC - 7.9 AP - 11.3 AP - 9.2 CA - 8.1 CP - 5.1 CP - 5.1 AP - 12.0
CA - 1.3 PA - 3.1 HO - 7.5 LI - 8.1 PA - 6.8 WC - 4.8 IM - 4.8 HO - 11.7
AP - Auto Physical IM - Inland Marine
CA - Commercial Auto LI - Liability
CP - Commercial Property PA - Personal Auto
GH - Group Health WC - Workers Compensation
HO - Homeowner
</TABLE>
QWE
<PAGE>
<TABLE>
<CAPTION>
PROJECT HUSKY
OPERATING COMPARISONS - GAAP DATA
(U.S. Dollars in millions)
- ------------------------------------------------------------------------------------------------------------------------------------
HARTFORD CNA AMERICAN
ALLSTATE CHUBB FINANCIAL ST. PAUL FINANCIAL SAFECO FINANCIAL MERCURY T
CORPORATION CORPORATION SERVICES COMPANIES CORPORATION CORPORATION GROUP GENERAL CO. AVERAGE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
GAAP FINANCIAL DATA
RETURN ON EQUITY
1999 NA NA 14.5% NA NA 5.1% NA NA 14.1% 11.3%
1998 20.1% 12.5% 16.2 (1.4)% 3.2% 6.4 7.3% 20.7% 15.9 11.2
1997 21.4 13.8 25.1 15.2 12.6 9.0 11.9 21.7 17.3 16.5
1996 15.9 9.6 (2.1) 13.4 14.0 10.8 15.6 17.5 7.8 11.4
1995 18.0 14.7 14.2 11.6 13.4 11.7 NA 17.7 13.6 14.3
1994 5.2 12.5 17.9 11.7 0.7 11.2 NA 14.6 N/A 10.5
Average 16.1 12.6 14.3 10.1 8.8 9.0 11.6 18.4 13.7 12.7
RETURN ON TOTAL CAPITAL
1999 NA NA 10.4% NA NA 3.4% NA NA 11.9% 8.6%
1998 17.3% 11.3% 11.0 (1.1)% 2.3% 3.9 5.4% 17.8% 11.9 8.9
1997 17.9 12.7 15.5 11.1 8.6 5.1 8.6 17.9 12.5 12.2
1996 14.0 7.8 (1.5) 10.3 9.8 8.2 11.2 14.8 4.5 8.8
1995 13.7 10.9 9.8 7.6 7.8 7.9 NA 15.3 11.6 10.6
1994 5.2 9.6 16.7 9.0 0.7 9.3 NA 13.7 7.3 8.9
Average 13.6 10.5 10.3 7.4 5.8 6.3 8.4 15.9 10.0 9.8
NET OPERATING INCOME
1999 $2,082 $565 $1,235 $799 $(145) $176 $150 $141 $1,915 $769
1998 2,573 641 1,475 509 (152) 320 159 140 1,837 833
1997 2,429 701 1,335 997 488 366 145 118 1,752 926
1996 1,600 434 (318) 840 578 380 175 68 487 472
1995 1,587 584 742 768 463 357 138 49 551 582
1994 268 473 852 728 187 289 NA 36 210 380
Average 1,757 566 887 773 237 315 153 92 1,125 656
EARNINGS GROWTH
1999 (17.4)% (12.1)% (15.1)% 1,034.4% (146.1)% (28.1)% 14.0% (24.7)% (5.0)% 88.9%
1998 6.1 (8.1) (23.8) (109.6) (70.8) (18.2) (35.4) 13.6 8.7 (26.4)
1997 49.6 50.1 NM 26.7 0.1 (2.1) (17.6) 47.8 216.1 46.4
1996 9.0 (26.4) (117.7) 40.7 27.5 10.0 7.4 17.1 (6.7) (4.3)
1995 293.4 31.8 (13.2) 17.6 NM 26.9 NA 36.2 122.9 73.7
1994 (62.8) 63.0 19.9 3.5 (86.5) (26.7) NA (31.1) N/A (17.2)
Average 46.3 16.4 (30.0) 168.9 (55.2) (6.3) (7.9) 9.8 67.2 23.2
ASSETS
1999 NA NA $167,051 NA NA $30,573 NA NA $50,257 $82,627
1998 $87,691 $20,746 150,632 $38,323 $62,359 30,892 $15,845 $1,877 51,274 51,071
1997 80,918 19,616 131,743 37,359 61,675 29,468 15,755 1,726 50,682 47,660
1996 74,508 19,939 108,840 35,146 60,455 19,918 15,051 1,420 49,779 42,784
1995 70,029 19,636 93,855 33,238 60,360 18,768 15,845 1,082 24,062 37,431
1994 60,988 17,761 76,765 30,200 44,320 15,902 NA 912 22,481 33,666
Average 74,827 19,540 121,481 34,853 57,834 24,253 15,624 1,403 41,423 43,471
</TABLE>
QWE
<PAGE>
<TABLE>
<CAPTION>
PROJECT HUSKY
OPERATING COMPARISONS - GAAP DATA
(U.S. Dollars in millions)
- ------------------------------------------------------------------------------------------------------------------------------------
HARTFORD CNA AMERICAN
ALLSTATE CHUBB FINANCIAL ST. PAUL FINANCIAL SAFECO FINANCIAL MERCURY T
CORPORATION CORPORATION SERVICES COMPANIES CORPORATION CORPORATION GROUP GENERAL CO. AVERAGE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
GAAP FINANCIAL DATA
EQUITY
1999 NA NA 5466 NA NA $4,294 NA NA $8,941 $6,234
1998 $17,240 $5,644 $6,423 $6,621 $9,157 5,576 $1,716 $917 9,125 6,935
1997 15,610 5,657 6,085 6,591 8,309 5,462 1,663 800 7,777 6,439
1996 13,452 5,463 4,520 5,631 7,060 4,115 1,554 641 6,480 5,435
1995 12,680 5,263 4,702 5,342 6,736 3,983 1,440 565 3,601 4,923
1994 8,426 4,247 3,184 3,675 4,546 2,830 NA 457 2,581 3,743
Average 13,482 5,255 5,063 5,572 7,162 4,377 1,593 676 6,418 5,511
DEBT / TOTAL CAPITALIZATION
1999 NA NA 26.6% NA NA 36.7% NA NA 12.2% 25.2%
1998 9.2% 9.7% 23.8 18.0% 25.7% 33.6 25.6% 7.8% 15.1 18.7
1997 9.8 6.6 23.1 18.5 25.9 30.0 25.9 8.6 17.1 18.4
1996 9.3 16.4 23.4 18.6 28.1 23.1 25.0 10.5 19.7 19.3
1995 8.8 17.9 17.9 20.5 31.0 21.1 38.0 4.2 0.0 17.7
1994 9.3 23.2 17.6 25.3 16.7 15.9 NA 5.2 0.0 14.2
Average 9.3 14.8 22.1 20.2 25.5 26.7 28.6 7.3 10.7 18.3
LOSS RATIO
1999 NA 70.3% 71.7% NA NA NA NA 66.4% 73.0% 70.4%
1998 70.4% 66.3 70.4 82.1% 80.8% 72.8% 74.2% 61.0 73.5 72.4
1997 71.7 64.5 N/A 71.1 77.1 69.6 73.5 63.5 73.2 70.5
1996 78.9 66.2 N/A 73.2 76.4 69.5 75.0 66.5 83.5 73.6
1995 78.1 64.7 N/A 72.2 77.9 70.6 74.8 67.6 78.2 73.0
1994 88.0 67.0 N/A 72.5 81.9 74.4 NA 68.1 90.2 77.4
Average 77.4 66.5 71.1 74.2 78.8 71.4 74.4 65.5 78.6 73.1
EXPENSE RATIO
1999 NA 32.5% 31.0% NA NA NA NA 26.8% 28.3% 29.7%
1998 22.8% 33.5 32.9 34.1% 32.8% 29.5% 28.3% 26.6 29.4 30.0
1997 22.3 32.4 N/A 32.7 31.3 28.5 27.7 25.1 29.6 28.7
1996 21.6 32.1 N/A 31.9 30.9 28.1 27.4 24.4 31.3 28.5
1995 22.3 32.1 N/A 31.1 29.4 28.4 26.1 24.4 26.4 27.5
1994 23.3 32.5 N/A 32.0 28.3 28.2 NA 25.2 26.2 28.0
Average 22.5 32.5 32.0 32.4 30.5 28.6 27.4 25.4 28.5 28.9
COMBINED RATIO
1999 97.4% 102.8% 102.7% NA 117.9% NA NA 93.2% 101.3% 102.6%
1998 93.2 99.8 103.3 116.2% 113.6 102.3% 102.5% 87.6 102.9 102.4
1997 94.0 96.9 102.3 103.8 108.4 98.1 101.2 88.6 102.8 99.6
1996 100.5 98.3 105.2 105.1 107.3 97.6 102.4 90.9 114.8 102.5
1995 100.4 96.8 104.5 103.3 107.3 99.0 100.9 92.0 104.6 101.0
1994 111.3 99.5 102.5 104.5 110.2 102.7 NA 93.3 116.4 105.0
Average 99.5 99.0 103.4 106.6 110.8 99.9 101.8 90.9 107.1 102.1
SUPPLEMENTARY DATA
A.M. Best Rating A+ A++ A+ A+ A A+ A A+ A+
S&P Rating A+ AA+ A A+ BBB A- BBB+ N/R A+
Moody's Rating A1 Aa3 A2 A1 Baa1 A3 Baa2 N/R A1
GEOGRAPHIC DISTRIBUTION
Domestic 100.0% 86.0% 95.6% 91.3% 94.8% 100.0% 100.0% 100.0% 100.0%
International 0.0 14.0 4.4 8.7 5.2 0.0 0.0 0.0 0.0
</TABLE>
QWE
