<PAGE> 1
Filed Pursuant to Rule 424(b)(3)
Registration No. 333-04195
Prospectus Supplement No. 2
to
Prospectus Dated July 18, 1996
------------------
GCR HOLDINGS LIMITED
ORDINARY SHARES
(par value $0.10 per share)
------------------
See "Risk Factors" on pages 13 through 23 of the Prospectus dated
July 18, 1996 for certain considerations relevant to an investment in the
Ordinary Shares.
The Ordinary Shares have been approved for quotation in the Nasdaq
National Market under the symbol "GCREF."
---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
--------------------
This Prospectus Supplement, together with the Prospectus dated July 18,
1996, has been prepared for and is to be used by Goldman, Sachs & Co. in
connection with offers and sales of the Ordinary Shares related to market-making
transactions, at prevailing market prices, related prices or negotiated prices.
This Company will not receive any of the proceeds of such sales. Goldman, Sachs
& Co. may act as a principal or agent in such transactions. See "Plan of
Distribution."
GOLDMAN, SACHS & CO.
--------------------
The date of this Prospectus Supplement is August 6, 1996.
Page 1 of 27
<PAGE> 2
This Prospectus Supplement is intended to be read in conjunction with
the Prospectus dated July 18, 1996 (the "Prospectus"). Capitalized terms used in
this Prospectus Supplement and not otherwise defined herein have the same
meanings as in the Prospectus.
The closing for the Offering referred to in the Prospectus occurred
on July 24, 1996. The underwriters exercised a portion of their over-allotment
option which represented 600,000 shares on July 29, 1996. The closing for the
shares represented by the underwriters' over-allotment option occurred on August
1, 1996.
On August 6, 1996, the Company announced that Mr. Richard Spurling
has resigned from the Board of Directors of the Company and that the Board has
appointed Mr. Loay Al-Naqib as a director. Mr. Al-Naqib's term will continue
until the next annual shareholders' meeting (or until his successor is elected
or appointed).
On August 6, 1996 the Company filed with the Securities and Exchange
Commission a report on Form 10-Q, an EDGARized copy of which is attached hereto
and deemed to be a part hereof.
Page 2 of 27
<PAGE> 3
FORM 10-Q
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended June 30, 1996
Commission file number 0-27220
GCR Holdings Limited
(Exact name of registrant as specified in its charter)
Cayman Islands not applicable
(state or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Sofia House, 48 Church Street, Hamilton HM 12, Bermuda
(Address of principal executive offices) (Zip Code)
(441) 292 9415
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate the number of shares outstanding of the issuer's classes of common
stock, as of the latest practicable date.
<TABLE>
<CAPTION>
Class Outstanding July 29, 1996
----- ------------------------------
<S> <C>
Ordinary shares, U.S. $0.10 par value 25,671,255
Other shares, U.S. $0.10 par value 0
</TABLE>
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<PAGE> 4
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GCR HOLDINGS LIMITED AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(in thousands of U.S. dollars)
<TABLE>
<CAPTION>
JUNE 30, SEPTEMBER 30,
1996 1995
---- ----
(unaudited)
<S> <C> <C>
ASSETS
Fixed maturity investments, at fair value (amortized
cost $428,394 and $484,858) ................................ $ 427,581 $ 485,322
Cash and cash equivalents .................................. 32,077 41,490
Premiums receivable ........................................ 63,572 49,716
Deferred acquisition costs ................................. 9,882 10,257
Accrued investment income .................................. 3,924 10,073
Other assets ............................................... 864 783
--------- ---------
Total Assets ............................................... $ 537,900 $ 597,641
========= =========
LIABILITIES
Reserve for losses and loss expenses ....................... $ 33,922 $ 33,390
Unearned premium reserve ................................... 67,499 61,688
Loans payable .............................................. - 142,000
Accrued expenses ........................................... 1,742 4,165
--------- ---------
Total Liabilities .......................................... 103,163 241,243
--------- ---------
SHAREHOLDERS' EQUITY
Share capital .............................................. 2,567 2,236
Paid in capital ............................................ 375,912 338,354
Notes receivable for shares issued ......................... (1,359) (1,783)
Unrealized appreciation (depreciation) on investments, net.. (813) 464
Retained earnings .......................................... 58,430 17,127
--------- ---------
Total Shareholders' Equity ................................. 434,737 356,398
--------- ---------
Total Liabilities and Shareholders' Equity ................. $ 537,900 $ 597,641
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements
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<PAGE> 5
GCR HOLDINGS LIMITED AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
(in thousands of U.S. dollars, except per share data)
<TABLE>
<CAPTION>
QUARTER ENDED JUNE 30, NINE MONTHS ENDED JUNE 30,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES
Premiums written .............................. $ 25,715 $ 40,455 $ 99,739 $ 119,745
Change in unearned premiums ................... 4,792 (8,607) (5,728) (32,065)
------------ ------------ ------------ ------------
Premiums earned ............................... 30,507 31,848 94,011 87,680
Investment income, net ........................ 6,661 8,675 22,605 23,897
Realized gains (losses) on investments, net ... (1,045) 146 95 (1,327)
Exchange gain (loss) .......................... (75) (88) (58) 318
------------ ------------ ------------ ------------
Total Revenues ................................ 36,048 40,581 116,653 110,568
------------ ------------ ------------ ------------
EXPENSES
Losses and loss expenses ...................... 4,054 3,085 17,448 20,278
Acquisition expenses .......................... 5,203 5,122 14,583 11,865
General and administrative expenses ........... 2,818 1,717 7,928 4,895
Interest expense .............................. - - 3,563 -
------------ ------------ ------------ ------------
Total Expenses ................................ 12,075 9,924 43,522 37,038
------------ ------------ ------------ ------------
NET INCOME .................................... 23,973 30,657 73,131 73,530
Retained earnings, beginning of period ........ 50,371 72,688 17,127 29,815
Dividends to shareholders ..................... (15,914) - (31,828) -
------------ ------------ ------------ ------------
Retained earnings, end of period .............. $ 58,430 $ 103,345 $ 58,430 $ 103,345
============ ============ ============ ============
Net income per share .......................... $ 0.92 $ 1.33 $ 2.93 $ 3.22
Proforma net income per share
(giving effect to sponsor warrant exercise
and share repurchase) ..................... $ 0.96 $ 1.24 $ 2.94 $ 2.96
Weighted average shares outstanding ........... 25,668,255 22,457,015 24,666,111 22,506,720
</TABLE>
The accompanying notes are an integral part of these financial statements
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<PAGE> 6
GCR HOLDINGS LIMITED AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(in thousands of U. S. dollars)
<TABLE>
<CAPTION>
NINE MONTHS ENDED JUNE 30,
1996 1995
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ............................................... $ 73,131 $ 73,530
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization ....................... 275 226
Realized (gains) losses on sale of investments, net.. (95) 1,327
Add (deduct) changes in assets and liabilities:
Premiums receivable ............................. (13,856) (36,018)
Deferred acquisition costs ...................... 375 (5,369)
Accrued investment income ....................... 6,149 (1,258)
Other assets .................................... (273) (274)
Reserve for losses and loss expenses ............ 532 7,526
Unearned premium reserve ........................ 5,811 32,065
Accrued expenses ................................ (2,423) 346
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES ................ 69,626 72,101
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of investments ........................ 640,446 294,974
Purchase of investments .................................. (583,887) (464,532)
Purchase of fixed assets ................................. (83) (300)
--------- ---------
NET CASH PROVIDED BY(USED IN) INVESTING ACTIVITIES ....... 56,476 (169,858)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issue of ordinary shares ................... 37,889 20
Retirement of ordinary shares ............................ (2,280)
Repayment of notes receivable ............................ 424 317
Repayment of loans ....................................... (142,000)
Dividends to shareholders ................................ (31,828) -
--------- ---------
NET CASH USED IN FINANCING ACTIVITIES .................... (135,515) (1,943)
--------- ---------
NET DECREASE IN CASH ..................................... (9,413) (99,700)
Cash and cash equivalents at beginning of period ......... 41,490 121,496
--------- ---------
Cash and cash equivalents at end of period ............... $ 32,077 $ 21,796
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements
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<PAGE> 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
1) The consolidated interim financial statements of GCR Holdings Limited (the
"Company") and its wholly owned subsidiary, Global Capital Reinsurance
Limited ("Global Capital Re" and, together with the Company, "GCR"), have
been prepared on the basis of United States generally accepted accounting
principles and, in the opinion of management, reflect all adjustments
(consisting of normal recurring accruals) necessary for a fair presentation
of results. These interim financial statements should be read in
conjunction with the audited consolidated financial statements of the
Company for the fiscal year ended September 30, 1995. The results of
operations for any interim period are not necessarily indicative of results
for the full fiscal year.
2) An initial public offering of 7.6 million shares of the Company held by
existing shareholders was priced on December 18, 1995 and closed on
December 22, 1995. Proceeds to shareholders were $131.8 million ($17.30 per
share net of underwriters discount). In connection with the initial public
offering, the shareholders approved an increase in authorized capital and
the Board of Directors approved a share split in the form of a share
dividend effected at a ratio of 5:1, both of which became effective on
December 22, 1995. Also, on December 22, 1995 the Company's sponsors
exercised warrants to acquire 3.3 million shares at an aggregate exercise
price of $36.3 million ($11.00 per share) and, of that amount, $34 million
was used to reduce outstanding borrowings.
A second public offering, of 4.8 million shares of the Company held by
original shareholders, was priced on July 18, 1996 and closed July 24,
1996. Proceeds to shareholders were $99.4 million ($20.92 per share, net of
underwriters discount). In connection with that offering, one million
shares were repurchased by a subsidiary of the Company for $20.9 million,
net of underwriters discount, and are considered constructively retired.
3) The authorized share capital of the Company is $7,500,000 consisting of
50,000,000 ordinary shares of $0.10 par value, of which 25,668,255 shares
were issued and outstanding on June 30, 1996, and 25,000,000 other shares
of $0.10 par value, none of which have been issued.
4) Net income per share is based on earnings divided by the weighted average
number of common shares, including common share equivalents, outstanding
during the relevant period. For each period presented, such number of
shares assumes that all employee and director options and sponsors'
warrants outstanding during the period (or any portion thereof) were
exercised and that the proceeds of such exercise were used to purchase
outstanding shares pursuant to the treasury stock method, calculated in
each case using the average market value (book value prior
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<PAGE> 8
to December 19, 1995) per share for the period (or portion thereof). The
employee and director options are or may become exercisable over various
periods.
Pro forma net income per share was $0.96 and $1.24 for the three months
ended June 30, 1996 and 1995 and $2.94 and $2.96 for the nine months ended
June 30, 1996 and 1995, respectively. Pro forma net income per share is
calculated in the manner described above, except that the shares issued on
exercise of the sponsors' warrants are assumed to have been outstanding
throughout each period presented, and no other effect is given to such
warrants, and the one million shares repurchased by the Company's
subsidiary in the offering of July 18, 1996 are assumed to be
constructively retired throughout each period presented.
5) On May 15, 1996 the Company paid a quarterly dividend of $0.62 per share to
shareholders of record on May 1, 1996. On July 25, 1996 the Board of
Directors declared a quarterly dividend of $0.62 per share payable August
20, 1996 to shareholders of record on August 5, 1996.
8 of 27
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATION AND
LIQUIDITY AND CAPITAL RESOURCES
The consolidated interim financial statements included in this Form 10-Q are for
the third quarter and nine months ended June 30, 1995 and 1996. The Company
reports on a September 30 fiscal year. All amounts are reported in United States
currency.
Renewal dates for property catastrophe reinsurance policies are generally
concentrated in the first quarter of each calendar year - i.e., in the second
quarter of the Company's fiscal year. Approximately half of GCR's reinsurance
programs and more than half of its premiums written are related to contracts
with renewal dates (primarily January 1) in the second quarter of the Company's
fiscal year - i.e., the quarter ending March 31. Nevertheless, because premiums
generally are earned over the term in which the related reinsurance coverage is
provided, GCR's premiums earned are not concentrated in any interim period.
PRICING TRENDS AND EFFECT ON PREMIUMS WRITTEN
Based on industry trade publications, underwriting submissions and meetings with
clients and brokers, management believes that premium rates in the global
property catastrophe reinsurance market decreased by an average of 10% to 15% in
1995 compared to 1994 and in the first quarter of 1996 compared to the same
period last year and by 15% to 20% for renewals of Japanese business in the
second calendar quarter of 1996, as a result of favorable loss experience. If
and while this favorable loss experience continues, management expects further
downward pressure on rates during the remainder of 1996 and into 1997. In the
U.S. market, where the level of property catastrophe losses has generally been
higher than in international markets in recent years, rates have decreased but
will remain at a higher level than those which prevailed in 1992. Moreover, the
levels of catastrophe risk exposure that U.S. ceding insurers are generally
prepared to retain continue to be substantially higher than in 1992. Higher
retentions tend to reduce GCR's exposure to losses from catastrophic events of
relatively higher frequency and lower severity.
The recent decline in worldwide premium rates in the property catastrophe
reinsurance market adversely affected the level of premiums written by GCR in
the January and April 1996 renewal seasons. In furtherance of its underwriting
principle of targeting reinsurance programs with superior risk/return profiles,
GCR declined to offer coverage on a substantial number of new programs, as well
as on a number of renewal programs, submitted for its review with proposed
pricing terms that management considered inadequate. Due to these underwriting
decisions, and to the generally lower rates applicable to programs that were
written and to the effect of the shift in the renewal date of a large existing
third quarter program which contributed $4 million of written premium in 1995 to
the fourth quarter in 1996, the level of premiums written by GCR in the third
quarter and first nine months of fiscal year 1996 was $14.7 million and $20.0
million
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<PAGE> 10
lower, respectively, than in the same periods last year. While management
expects this trend to continue during the remainder of fiscal year 1996, the
level of premiums written during the fourth fiscal quarter should increase
modestly due to the program renewal date shift described above compared to the
same period last year. Due to industry renewal cycles, a larger portion of the
reinsurance programs written by GCR in the third and fourth fiscal quarters
involves international risks, for which premium rates generally have declined
further than those for domestic risks in recent periods.
Despite the decline in premiums written, GCR earned net income of $73.1 million
during the first nine months of fiscal year 1996, level with that of the same
period last year. This result is primarily attributable to favorable loss
experience during the periods.
RESULTS OF OPERATIONS, QUARTER AND NINE MONTHS ENDED JUNE 30, 1996 AND 1995
Written premiums for the third quarter and nine months ended June 30, 1996 were
$25.7 million and $99.7 million, respectively, a decrease of $14.7 million and
$20.0 million compared to written premiums for the same periods of the prior
fiscal year. These decreases are the result of increasing price competition in
GCR's property catastrophe line of business and the effect of the shift in the
renewal date of a large existing third quarter program which contributed $4
million of written premium in 1995 to the fourth quarter in 1996. Price
competition has caused GCR to reduce, and in some cases cancel, its
participation in business it does not consider to be adequately priced. Premium
rates in the global property catastrophe market have decreased in recent periods
due to favorable loss experience in the industry. If and while this favorable
loss experience continues, management expects further downward pressure on rates
during the remainder of 1996 and into 1997, which would continue to adversely
affect the level of premiums written by GCR.
Premiums earned for the third quarter were $30.5 million, 4% less than premiums
earned in the third quarter of the prior fiscal year. For the year to date,
premiums earned were $94.0 million, an increase of 7.2% compared to the first
nine months of the prior fiscal year. This increase reflects the practice of
earning premiums ratably over the reinsurance contract period (generally one
year) and, therefore, the earning of premiums written largely in the previous
fiscal year when the Company achieved significant growth in new business from
new and existing clients.
Losses and loss expenses for the quarter ended June 30, 1996 were $4.1 million,
an increase of 31.4% from the very favorable level of $3.1 million for the
quarter ended June 30, 1995. The quarter ended June 30, 1995 included release of
$2.5 million of reserves established related to the earthquake in Kobe, Japan in
early 1995. For the nine months ended June 30, 1996 losses and loss expense were
$17.4 million compared to $20.3 million for the same period in the prior fiscal
year, a decline of 14%. GCR was not affected by any significant catastrophic
events in the most recent quarter and has seen modest favorable loss development
during the latest nine month period regarding events recorded in previous
periods. The Company's loss ratio-i.e., the ratio of losses
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<PAGE> 11
and loss expenses to earned premium-was 13.3% for the quarter and 18.6% for the
nine months ended June 30, 1996, compared to 9.7% and 23.1% for the same periods
of the prior fiscal year. While loss experience for the quarter was favorable,
GCR is subject to infrequent but severe effects of natural and man-made
catastrophes, which can lead to volatile losses and financial results. The
Company experienced no significant losses in Hurricane Bertha which struck the
East Coast of the United States on July 12, 1996 or Typhoon Eve which struck
Japan on July 21, 1996
Investment income was $6.7 million for the quarter and $22.6 million for the
nine months ended June 30, 1996. The 23.2% and 5.4% decrease from $8.7 million
in the third quarter and $23.9 million in the nine months of the prior fiscal
year reflects the sale of investments to repay borrowings under the Company's
line of credit offset in part by positive cash flow from operations added to the
investment portfolio.
Acquisition expenses, primarily commission and brokerage related to the
production of written premiums, were $5.2 million for the third quarter,
compared to $5.1 million for the same quarter a year ago, and $14.6 million for
the first nine months of fiscal year 1996, compared to $11.9 million for the
first nine months of fiscal year 1995. Acquisition expenses are amortized over
the underlying contract coverage period. The increase in acquisition expenses in
the nine months ended June 30, 1996 is related to growth of international
property catastrophe business and higher commission rates on proportional
business.
General and administrative expenses increased over 64% to $2.8 million in the
latest quarter and over 62.0% to $7.9 million for the first nine months compared
to the prior year periods. These increases reflect an increase in GCR's staff,
compensation expense of $1.6 million related to an adjustment in the exercise
price of outstanding options and certain expenses associated with the initial
public offering in December 1995 and the public offering in July 1996. See
"Liquidity and Capital Resources". The Company's expense ratio-i.e., the ratio
of acquisition, general and administrative expenses related to underwriting to
earned premium-was 22.7% for the quarter and 21.0% for the nine months ended
June 30, 1996, compared to 20.0% and 17.9% for the quarter and nine months ended
June 30, 1995.
Interest expense of $3.6 million for the nine months ended June 30, 1996
reflects borrowing under the Company's line of credit in August 1995 of $142
million at 6.7% per annum. Of that amount, $34 million was repaid in late
December 1995 and the balance was repaid on February 22, 1996.
Net income for the third quarter of GCR's fiscal year was $24.0 million, or
$0.92 per share, compared to $30.7 million, or $1.33 per share, for the third
quarter of the prior fiscal year. For the first nine months of fiscal 1996 and
1995, net income was $73.1 million, or $2.93 per share and $73.5 million, or
$3.22 per share, respectively. Pro forma net income per share was $0.96 and
$1.24 for the quarters ended June 30, 1996 and 1995, and $2.94 and $2.96 for the
nine months ended June 30, 1996 and 1995, respectively,
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<PAGE> 12
assuming shares issued on exercise of the sponsor warrants on December 22, 1995
had been outstanding and that the 1 million shares repurchased in July 1996 had
been constructively retired for those periods.
Although GCR remains focused principally on the property catastrophe reinsurance
market, it continues to explore opportunities to build or acquire new lines of
business throughout the world. Management's objective is to identify new lines
that are compatible with GCR's exposure to catastrophic events and that will
contribute to shareholder value. To date, these efforts have focused on
expanding GCR's portfolio of marine reinsurance business, which represents a
growing portion of GCR's premiums written ($7.2 million premiums written, or
7.2% of total, for the latest nine-month period compared with $6.1 million, or
5.1% for the same prior year period). There can be no assurance that new
opportunities will be identified or as to the effect that any new lines might
have on GCR.
LIQUIDITY AND CAPITAL RESOURCES
The Company is a holding company that conducts no operations of its own and
whose assets essentially consist of its equity interest in Global Capital Re.
Consequently, the Company's cash flows are limited to distributions from Global
Capital Re and borrowings under the Company's credit facility described below,
which are the only sources of cash to pay creditors and to pay any dividends to
holders of ordinary shares. Distributions by Global Capital Re to the Company
are limited pursuant to the statutory capital and surplus requirements described
below. As a result of the application of those requirements to the financial
position of Global Capital Re as of September 30, 1995, Global Capital Re would
be required to notify Bermuda authorities before making any distribution to the
Company in excess of approximately $121.5 million during any fiscal year. This
amount is determined based on Global Capital Re's financial position as of
September 30 of each year and is subject to annual adjustment, up or down,
depending on Global Capital Re's operating results, particularly the frequency
and severity of claims made under the reinsurance coverage it provides.
Cash flow from operations was $69.6 million for the first nine months of fiscal
1996 compared to $72.1 million for the same period of the previous fiscal year.
These amounts represent the excess of premiums collected and net investment
income over losses, loss expenses and underwriting and other expenses paid. Net
cash flows from operating activities are added to funds available for investment
by Global Capital Re. GCR is unable to predict its cash flow from operating
activities, as it may be required to make large catastrophe claims payments to
its clients. In years in which GCR experiences a relatively low level of
catastrophe losses (such as the past two fiscal years and the current fiscal
year to date), cash flow from operations should be substantial. However, GCR can
be expected to incur significant catastrophe losses from time to time and, as a
result, generate substantially reduced or even negative cash flow from operating
activity. As a consequence, cash flow from operating activities may fluctuate
substantially between individual quarters and years.
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<PAGE> 13
Cash flow provided by investing activities (i.e., the net liquidation of a
portion of GCR's investment portfolio) was $56.5 million in the latest
nine-month period, compared to $169.9 million of cash flow used in investing
activities (i.e., the net purchase of investments for GCR's portfolio) in the
nine months ended June 30, 1995. In the most recent period, investments were
liquidated to provide funds to repay borrowings under the Company's line of
credit.
Under the terms of most of its reinsurance contracts covering U.S. risks and
some covering non-U.S. risks, GCR is required to provide letters of credit to
reinsureds (at the end of their fiscal years) in amounts sufficient to cover any
outstanding claims and/or unearned premiums. GCR currently obtains these letters
of credit from one commercial bank and secures them by depositing securities
with the bank. The maximum amount deposited in respect of all such letters of
credit at any one time through June 30, 1996, and the amount deposited on such
date, was $30.4 million.
An initial public offering of 7.8 million ordinary shares of the Company on
behalf of existing shareholders was priced on December 18, 1995. Proceeds to the
shareholders were $131.8 million ($17.30 per share net of underwriters'
discount). The Company incurred expenses related to the offering of
approximately $2.0 million, a significant portion of which was accrued in the
fiscal year ended September 30, 1995. In connection with the offering, the
shareholders approved an increase in authorized capital and a share split at a
ratio of 5:1 effected in the form of a share dividend, both of which were
effective on December 22, 1995. Also, on December 22, 1995, the Company's
sponsors exercised warrants to acquire 3.3 million ordinary shares at an
aggregate exercise price of $36.3 million ($11.00 per share), which was added to
capital of the Company.
A second public offering, of 4.8 million shares of the Company held by original
shareholders, was priced on July 18, 1996 and closed July 23, 1996. Proceeds to
shareholders were $99.4 million ($20.92 per share, net of underwriters
discount). In connection with that offering, one million shares were repurchased
by a subsidiary of the Company for $20.9 million, net of underwriters discount,
and are considered constructively retired.
The Company repaid $34 million of the borrowing of $142 million under its line
of credit from the proceeds of sponsor warrant exercise on December 28, 1995 and
the balance from liquidation of investments on February 22, 1996.
The Company maintains a three year, $150 million revolving credit facility with
various commercial banks, for which the First National Bank of Chicago is acting
as agent. Currently, no amounts are outstanding under the facility and the
facility is available for general corporate purposes, subject to ongoing
compliance with financial ratios and other requirements. Among other things, the
Company is required to maintain a consolidated net worth, and cause Global
Capital Re to maintain a net worth, of at least $250 million (as of June 30,
1996, such consolidated net worth of the Company was approximately
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<PAGE> 14
$435 million or approximately $398 million after repurchase of Company shares in
the July 1996 offering and payment of the August 1996 dividend) and will cause
Global Capital Re to maintain a ratio of premiums written to net worth,
determined as of the end of each fiscal quarter for the four fiscal quarters
ending on such date, of not more than 0.75 to 1.0 (as of June 30, 1996, such
ratio was less than 0.27 to 1). As security for its obligations under the line
of credit, the Company has pledged to the agent for the lenders all of the
capital shares of Global Capital Re. The revolving credit facility terminates on
August 17, 1998.
A dividend of $15.9 million or $0.62 per share was paid on May 15, 1996
14 of 27
<PAGE> 15
PART 11. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
(a) The Company's Amended and Restated Memorandum of Association, the
Company's Amended and Restated Articles of Association, the Amended and
Restated Shareholders' Agreement dated as of December 18, 1995 and the
Registration Rights Agreement dated as of December 18, 1995 all became
effective on December 22, 1995. A description thereof containing
substantially the same information as required by this item has been
previously reported by the Company in its Registration Statement on
Form S-1, File No. 33-97736, filed October 4, 1995, and all amendments
thereto.
As indicated in the Registration Statement specified above, the
Company's Amended and Restated Articles of Association include certain
restrictions on the transferability of the Company's ordinary shares
and the exercise of voting rights associated with such shares. Among
other things, pursuant to the Articles, the Company's directors (or
their designee) must decline to register any transfer of ordinary
shares if they have reason to believe that such transfer would result
in a U.S. person (or any group of which a U.S. person is a member),
other than Goldman, Sachs & Co. and their affiliates, beneficially
owning, directly or indirectly, 10% or more of the ordinary shares, or
in Goldman, Sachs & Co. and their affiliates beneficially owning,
directly or indirectly, 25% or more of such shares. The directors (or
their designee) also have absolute discretion to decline to register a
transfer or ordinary shares if they have reason to believe that such
transfer would have adverse tax or regulatory consequences for the
Company or any of its shareholders or clients. Restrictions similar to
those described above would also apply to the Company's ability to
issue new shares or to repurchase outstanding shares. In addition, the
Articles generally provide that any U.S. person (or any group of which
a U.S. person is a member) holding, directly or by attribution, or
otherwise beneficially owning ordinary shares carrying 10% or more of
the total voting rights attached to all of the company's outstanding
capital shares, will have the voting rights attached to its issued
shares reduced so that it may not exercise more than approximately 9.9%
of the total voting rights associated with all of the Company's
outstanding capital shares. The Company is authorized to request
information from any holder or prospective acquiror of shares as
necessary to give effect to the transfer and voting restrictions
referred to above, and may decline to register a transfer, or may
disregard votes attached to any shares, if complete and accurate
information is not received as requested. These provisions (including
certain defined terms and exceptions) are described in greater detail
in the Registration Statement referred to above, under the caption
"Description of Capital Shares," and such description is incorporated
herein by reference.
15 of 27
<PAGE> 16
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
On October 30, 1995 an Extraordinary General Meeting of shareholders of
the Company was held. At that meeting shareholders were asked to vote
upon resolutions (1) to amend and restate the Memorandum and Articles
of Association of the Company, (2) to amend and restate the then
current shareholders agreement, (3) to approve a new registration
rights agreement and (4) to condition the effectiveness of each of the
resolutions on the closing of the initial public offering of the
Company's ordinary shares. All resolutions were passed by the following
vote of shareholders: For -- 2,745,229; Against -- 22,500; Abstentions
-- None. These numbers do not reflect the 5:1 share split effective
December 22, 1995. No other business was conducted at the Extraordinary
General Meeting.
16 of 27
<PAGE> 17
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit Index
Attached:
Exhibit 11 Computation of Earnings Per Share
Exhibit 99 Description of Capital Shares
(b) Reports on Form 8-K
Report on Form 8-K dated June 26, 1996 reporting that on June 26, 1996,
the Registrant files Amendment No. 1 (the "Amendment") to its
Registration Statement on Form S-1 (Registration No. 333-04195) for the
registration of a proposed maximum aggregate offering price of
$115,000,000 of Ordinary Shares to be offered by certain shareholders
of the Registrant.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GCR Holdings Limited
Date: August 5, 1996 By: /s/ Frederick W. Deichmann
-----------------------------------
Frederick W. Deichmann
Chief Financial Officer
and Secretary
(as principal financial officer and
duly authorized officer)
17 of 27
<PAGE> 18
EXHIBIT INDEX
-------------
Exhibit No. Description
----------- -----------
Exhibit 11 Computation of Earnings Per Share
Exhibit 99 Description of Capital Shares
Exhibit 27 Financial Data Schedule
18 of 27
<PAGE> 19
EXHIBIT 11
GCR HOLDINGS LIMITED AND SUBSIDIARY
COMPUTATION OF EARNINGS PER SHARE (unaudited)
(in thousands of U. S. dollars, except per share amounts)
<TABLE>
<CAPTION>
QUARTER ENDED JUNE 30, NINE MONTHS ENDED JUNE 30,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
PRIMARY:
Net Income .................................. $ 23,973 $ 30,657 $ 73,131 $ 73,530
Weighted Average
Ordinary Shares Outstanding ................. 25,668,255 22,457,015 24,673,369 22,506,492
Dilutive Effect of:
Stock Options .......................... 309,646 35,782 254,036 23,490
Warrants ............................... - 491,914 - 328,998
----------- ----------- ----------- -----------
Total .............................. 25,977,901 22,984,711 24,927,405 22,858,980
=========== =========== =========== ===========
Net Income per Ordinary Share (after giving
effect to the Share Split) ............. $ 0.92 $ 1.33 $ 2.93 $ 3.22
FULLY DILUTED:
Net Income .................................. $ 23,973 $ 30,657 $ 73,131 $ 73,530
Weighted Average
Ordinary Shares Outstanding ................. 25,668,255 22,457,015 24,673,369 22,506,492
Dilutive Effect of:
Stock Options .......................... 318,767 42,301 287,665 29,093
Warrants ............................... - 578,317 - 403,267
----------- ----------- ----------- -----------
Total .............................. 25,987,022 23,077,633 24,961,034 22,938,852
=========== =========== =========== ===========
Fully Diluted Net Income per Ordinary Share
(after giving effect to the Share Split).. $ 0.92 $ 1.33 $ 2.93 $ 3.21
</TABLE>
The calculation of fully diluted earnings per share is submitted in accordance
with Regulation S-K item 601 (b) (11) although not required by footnote 2 to
paragraph 14 of APB Opinion No. 15 because it results in dilution of less than
3%
19 of 27
<PAGE> 20
EXHIBIT 99
GCR HOLDINGS LIMITED AND SUBSIDIARY
DESCRIPTION OF CAPITAL SHARES
DESCRIPTION OF CAPITAL SHARES
The following summary of the Company's capital shares does not purport
to be complete and is subject in all respects to applicable law of the Cayman
Islands and to the provisions of the Company's Memorandum and Articles, copies
of which have been filed as exhibits to the Registration Statement of which
this Prospectus is a part.
On October 30, 1995, the shareholders of the Company approved certain
amendments to the Memorandum and Articles which will become effective
immediately prior to the closing of the Offering. The following description
assumes that such amendments have become effective and that the Share Split has
occurred.
GENERAL
The authorized share capital of the Company consists of two classes of
shares: (i) 50,000,000 Ordinary Shares, par value $0.10 per share of which
22,361,600 Ordinary Shares were outstanding at September 30, 1995 (25,665,255
Ordinary Shares, assuming exercise in full of the Sponsors' Warrants) and (ii)
25,000,000 other shares, par value $0.10 per share, none of which were
outstanding at September 30, 1995. As of September 30, 1995, there were 482
holders of record of the Company's Ordinary Shares.
ORDINARY SHARES
All outstanding Ordinary Shares are validly issued, fully paid and
nonassessable. The Ordinary Shares have no conversion, preemptive or sinking
fund rights. Holders of the Ordinary Shares are entitled to receive dividends
ratably when, as and if declared by the Board, and to share ratably in the
assets of the Company upon dissolution and liquidation thereof.
Outstanding Ordinary Shares are currently not subject to redemption by
the Company. The Company's Memorandum and Articles designate all Ordinary
Shares as redeemable ordinary shares; this permits the Company to create in the
future Ordinary Shares that would be redeemable at the option of the Company,
but only with the approval of the holders of the outstanding Ordinary Shares,
by special resolution.
Each holder of an Ordinary Share present at a meeting is entitled to
one vote if the action is to be taken by a show of hands, and one vote per
Ordinary Share held by such holder in the case of action by poll, subject to
reduction as described under "-Limitation on Voting Rights." Voting rights Of
Ordinary Shares are not cumulative, which means that holders of a majority of
the outstanding Ordinary Shares entitled to vote at a general meeting will be
able to elect all of the directors of the Company to be elected at such meeting.
20 of 27
<PAGE> 21
For a description of the Board arrangements to be in effect upon the
closing of the Offering, see "Management--Executive Officers and Directors" and
"--Provisions Governing the Board of Directors--Number and Terms."
SHAREHOLDER MEETINGS AND RELATED MATTERS
The Articles provide that the quorum required for a general meeting of
the shareholders is at least 50% of the combined voting power of all
outstanding shares of the Company. Any amendment to the Memorandum or Articles
(including changes to the corporate name or objects and increases in, or
consolidation, division or subdivision of, share capital), any reduction in
share capital, any capital redemption reserve fund or any share premium account
and any voluntary liquidation, dissolution or winding-up of the affairs of the
Company will require approval by a special resolution of the shareholders of
the Company. In addition, any action to vary the rights of any class of shares
shall require a special resolution of the shareholders of that class. A special
resolution may be adopted by the vote of the shareholders holding at least
66 2/3% of the combined voting power of all shares present and entitled to vote
at a duly called and held general meeting. All other matters, including the
election of directors, voted upon at any duly held general meeting of
shareholders shall be carried by the vote of a majority of the combined voting
power of all shares held by shareholders represented, in person or by proxy,
and entitled to vote at the meeting. The directors may at any time convene a
general meeting of the Company, of which the Company must provide at least 10
business days' notice. Shareholders are not entitled to call a meeting or,
unless the directors so request, to act by written consent. The percentages
described above are to be calculated after giving effect to the limitation on
voting rights described below.
Shareholders have the right to nominate directors to the Board and to
submit proposals for consideration by the Board at annual or extraordinary
general meetings. In order to exercise this right, shareholders must deliver
written notice to the Secretary of the Company not later than 60 days prior to
an annual general meeting and not later than 10 days following the date notices
are first sent to shareholders of extraordinary general meetings. In each case,
the written notice must contain certain information such as the name and
address of the person submitting the proposal, an indication of the number of
shares held by such person, information required by the U.S. federal securities
laws and, with respect to nominated directors, the consent of the directors so
nominated.
Reference in this section to "shares" means all capital shares of the
Company, which at present are only the Ordinary Shares. The directors, and only
the directors, are entitled under the Articles to call a general meeting or a
vote of shareholders of a particular class of shares, in which case the
provisions described in this section would apply with respect to the
shareholders of such class, acting as a separate class.
LIMITATION ON VOTING RIGHTS
Each Ordinary Share has one vote on a poll of the shareholders, except
that, if and for as long as the number of issued Controlled Shares (as defined
below) of any U.S. person would constitute 10% or more of the issued shares of
the Company (after giving effect to any prior reduction in voting power as
described below), each such issued Controlled Share, regardless of the identity
of the registered holder thereof, will confer a fraction of a vote as
determined by the following formula (the "Formula"):
(T -- C) / (9.1 X C)
Where: "T" is the aggregate number of votes conferred by all the issued
voting shares immediately prior to that application of the Formula
with respect to any particular shareholder, adjusted to take into
account any prior reduction taken with respect to any other
shareholder pursuant to the "sequencing provision" described below;
and
21 of 27
<PAGE> 22
"C" is the number of issued Controlled Shares attributable to such
person. "Controlled Shares" of any U.S. person refers to all voting
shares owned by such person, whether directly or by application of
the constructive ownership rules of Sections 958(a) and 958(b) of the
Code, together with all shares that such person is deemed to own
beneficially, directly or indirectly, within the meaning of Section
13(d)(3) of the Exchange Act and the rules and regulations thereunder
(including shares as to which beneficial ownership is disclaimed or
would not otherwise exist by reason of certain statutory exceptions).
With respect to any broker. dealer or investment adviser registered as
such under the U.S. federal securities laws (and its affiliates),
"Controlled Shares" do not include shares that are Controlled Shares
solely because such broker, dealer or adviser has discretionary
authority to vote or dispose of such shares on behalf of a client, if
the voting rights carried by such shares are not being exercised by
such broker, dealer or adviser (and the Company has received
satisfactory assurances of the same).
The Formula will be applied successively as many times as may be necessary to
ensure that no person will be a United States 10% Shareholder (as defined
below) at any time (the "sequencing provision"). For the purposes of determining
the votes exercisable by shareholders as of any date, the Formula will be
applied to the shares of each shareholder in declining order based on the
respective numbers of total Controlled Shares attributable to all shareholders.
Thus, the Formula will be applied first to the votes of shares held by the
shareholder to whom the largest number of total Controlled Shares is
attributable and thereafter sequentially with respect to the shareholder with
the next largest number of total Controlled Shares. In each case, calculations
are made on the basis of the aggregate number of votes conferred by the issued
voting shares as of such date, as reduced by the application of the Formula to
any issued shares of any shareholder with a larger number of total Controlled
Shares as of such date. "United States 10% Shareholder" means a U.S. person who
owns, directly or by application of the constructive ownership rules of
Sections 958(a) and 958(b) of the Code, issued shares of the Company carrying
10% or more of the total combined voting rights attaching to all issued shares.
As a result of the provisions described above, the grant by a
shareholder of a revocable proxy to vote his shares (whether in the context of
a proxy contest for the election of the Company's directors or any other matter
requiring a shareholder vote) could result in a reduction of the voting power
associated with such shares. This could occur because, as a result of the proxy
grant, the grantee (and certain related persons) could be deemed to have
acquired beneficial ownership of the proxy shares and, if the grantee (or any
such related person) were a U.S. person, the proxy shares would become
Controlled Shares of the grantee (or such related persons). If the grantee (and
such related persons) already held a sufficiently large number of Controlled
Shares so that, after the grant, his (or their) Controlled Shares exceeded the
10% threshold described above, then all his (or their) Controlled Shares,
including the proxy shares, would be subject to a reduction in voting power
pursuant to the provisions described above, even though the proxy shares were
held by the grantor and in the absence of the proxy grant would not have been
subject to such a reduction.
The directors are empowered to require any shareholder to provide
information as to that shareholder's beneficial share ownership, the names of
persons having beneficial ownership of the shareholder's shares, relationships
with other members or any other facts the directors may deem relevant to a
determination of the number of Controlled Shares attributable to any person.
The directors may disregard the votes attached to shares of any holder failing
to respond to such a request or submitting incomplete or untrue information.
The directors retain limited discretion to make such final adjustments
to the aggregate number of votes attaching to the voting shares of any
shareholder that they consider fair and reasonable in all the circumstances to
ensure that no person will be a United States 10% Shareholder at any time.
22 of 27
<PAGE> 23
RESTRICTIONS ON TRANSFER
The Articles contain several provisions restricting the
transferability of Ordinary Shares. The directors are required to decline to
register a transfer of shares if they have reasons to believe that the result
of such transfer would be (i) to increase the number of total Controlled Shares
of any U.S. person other than a Goldman Sachs Person to 10% or more of the
shares of the Company, (ii) to increase the number of total Controlled Shares
of any Goldman Sachs Person to 10% or more of the shares of the Company without
the prior written consent of Goldman, Sachs & Co. or (iii) that a Goldman Sachs
Person would become or continue to be a United States 25% Shareholder, in each
case without giving effect to the limitation on voting rights described above.
"Goldman Sachs Person" means any of Goldman, Sachs & Co and their affiliates
and "United States 25% Shareholder" means a U.S. person who owns, directly or
by application of the constructive ownership rules of Sections 958(a) and 958
(b) of the Code, more than 25% of either (i) the total combined voting rights
attaching to the issued Ordinary Shares and the issued shares of any other
class of the Company or (ii) the total combined value of the issued Ordinary
Shares and any other issued shares of the Company, determined pursuant to
Section 957 of the Code. Similar restrictions apply to the Company's ability to
issue or repurchase shares. These transfer, issuance and repurchase
restrictions would terminate when no Goldman Sachs Person holds total
Controlled Shares representing 10% or more of the Company's shares.
These restrictions provide an exception for Goldman, Sachs & Co. to
exceed the 25% threshold solely in connection with market-making transactions,
as long as they do not exceed the 25% threshold for more than 29 consecutive
days at any time or for more than 29 days during any single calendar quarter,
and as long as they do not exceed a 29% ownership threshold at any time. In
addition, these restrictions would permit share transfers or issuances to any
person acting as an underwriter pursuant to an agreement with the Company.
The directors also may, in their absolute discretion, decline to
register the transfer of any shares if they have reason to believe (i) that
such transfer may expose the Company, any subsidiary thereof, any shareholder
or any person ceding insurance to the Company or any such subsidiary to adverse
tax or regulatory treatment in any jurisdiction (including treatment of
shareholders as United States shareholders of a CFC after the restriction
described above is no longer in effect) or (ii) that registration of such
transfer under the Securities Act or under any U.S. state securities laws or
under the laws of any other jurisdiction is required and such registration has
not been duly effected.
The Company is authorized to request information from any holder or
prospective acquiror of shares as necessary to give effect to the transfer,
issuance and repurchase restrictions described above, and may decline to effect
any such transaction if complete and accurate information is not received as
requested.
Maples and Calder, Cayman Islands counsel to the Company, have advised
the Company that while the precise form of the restrictions on transfer
contained in the Articles is untested, as a matter of general principle,
restrictions on transfers are enforceable under Cayman Islands law and are not
uncommon. A transferee will be permitted to dispose of any Ordinary Shares
purchased that violate the restrictions and as to the transfer of which
registration is refused. The transferor of such Ordinary Shares will be deemed
to own such Ordinary Shares for dividend, voting and reporting purposes until a
transfer of such Ordinary Shares has been registered on the stock transfer
records of the Company.
If the directors refuse to register a transfer for any reason, they
must notify the proposed transferor and transferee within thirty days of such
refusal. The Articles also provide that the Board may suspend the registration
of transfers for any reason and for such periods as the Board may determine,
provided that they may not suspend the registration of transfers for more than
45 days in any period of 365 consecutive days.
23 of 27
<PAGE> 24
The directors may designate the Company's Chief Executive Officer to
exercise their authority to decline to register transfers or to limit voting
rights as described above, or to take any other action, for as long as such
officer is also a director.
OTHER CLASSES OR SERIES OF SHARES
The Articles authorize the directors to create and issue one or more
classes or series of shares and determine the rights and preferences of each
such class or series, to the extent permitted by the Articles and applicable
law. Among other rights, the directors may determine: (i) the number of shares
of that class or series and the distinctive designation thereof; (ii) the
voting powers, full or limited, if any, of the shares of that class or series;
(iii) the rights in respect of dividends on the shares of that class or series,
whether dividends shall be cumulative and, if so, from which date or dates and
the relative rights or priority, if any, of payment of dividends on shares of
that class or series and any limitations, restrictions or conditions on the
payment of dividends; (iv) the relative amounts, and the relative rights or
priority, if any, of payment in respect of shares of that class or series,
which the holders of the shares of that class or series shall be entitled to
receive upon any liquidation, dissolution or winding up of the Company; (v) the
terms and conditions (including the price or prices, which may vary under
different conditions and at different redemption dates), if any, upon which all
or any part of the shares of that class or series may be redeemed, and any
limitations, restrictions or conditions on such redemption; (vi) the terms, if
any, of any purchase, retirement or sinking fund to be provided for the shares
of that class or series; (vii) the terms, if any, upon which the shares of that
class or series shall be convertible into or exchangeable for shares of any
other class, classes or series, of securities, whether or not issued by the
Company; (viii) the restrictions, limitations and conditions, if any, upon
issuance of indebtedness of the Company so long as any shares of that class or
series are outstanding: and (ix) any other preferences and relative,
participating, optional or other rights and limitations not inconsistent with
applicable law or the Articles.
In the event that the directors establish a separate class of shares
of the Company, the directors (and only the directors) are authorized to call a
meeting of that particular class of shares and to call for a vote of the
holders of that class, acting separately as a single class. In addition, once a
separate class of shares is issued, the rights attaching to that class of
shares can be varied only with the written consent of the holders of at least
75% of the shares of that class or the approval of a special resolution passed
by the holders of that class of shares.
The restrictions on voting and ownership of the Company's shares, the
authority of the Board to issue other classes of shares with such voting and
other rights as they determine, the inability of shareholders to require that a
shareholders' meeting be called and certain other provisions of the Articles,
as well as certain requirements of Cayman Islands law (see "--Differences in
Corporate Law") could have the effect of discouraging an attempt to obtain
control of the Company through certain actions.
SHAREHOLDERS' AGREEMENT
Prior to the closing of the Offering, the Company will enter into an
Amended and Restated Shareholders' Agreement (the "Shareholders' Agreement"),
with all holders of Ordinary Shares outstanding before the Offering (such
holders, the "Existing Holders" and such shares, the "Existing Shares" ).
Pursuant to the Shareholders' Agreement, (i) the Existing Holders acknowledge
and agree that the Existing Shares have not been registered under the
Securities Act and, accordingly, may not be transferred unless they are first
so registered or are transferred pursuant to an available exemption from the
registration requirements of the Securities Act, such as Rule 144 thereunder,
and that certificates evidencing Existing Shares will bear a restrictive legend
to that effect, and (ii) the Company agrees to use its best efforts to satisfy
certain information reporting requirements necessary to permit Existing Holders
to sell Existing Shares into the open market in reliance on the exemption
provided by Rule 144 (see "Shares Eligible for Future Sale"), and to cause any
Existing Shares that become freely tradeable in accordance with the
requirements of the
24 of 27
<PAGE> 25
Securities Act to be approved for quotation in the Nasdaq National Market.
Transferees of Existing Shares that have not been registered under the
Securities Act or sold in transactions pursuant to Rule 144 will be required to
become parties to the Shareholders' Agreement with respect to such shares. The
Shareholders' Agreement supersedes a shareholders' agreement into which the
Company and the Existing Holders entered in connection with the establishment
of GCR in 1993.
TRANSFER AGENT
The Company's registrar and transfer agent for all Ordinary Shares is
Chemical Mellon Shareholder Services, L.L.C.
DIFFERENCES IN CORPORATE LAW
The Companies Law of the Cayman Islands is modeled after English
legislation, and differs in certain aspects from the corporate laws generally
applicable to United States corporations and their shareholders. Set forth
below is a summary of the more significant provisions of the Companies Law
(including any modifications adopted pursuant to the Articles) applicable to
the Company which differ from provisions generally applicable to United States
corporations and their shareholders. These statements are a brief summary of
certain significant provisions of Cayman Islands Companies Law and, as such, do
not deal with all aspects of every law that may be relevant to corporations and
their shareholders.
INTERESTED DIRECTORS
Subject to disclosure of the interest to the other directors and to
the Company, the Articles provide that any transaction entered into by the
Company in which a director has an interest is not voidable by the Company nor
can such director be liable to the Company for any profit realized pursuant to
such transaction.
DIVIDENDS
Under the Articles the Company may pay dividends, other than share
dividends, only out of accumulated or current year's profits and contributed or
share premium (broadly equivalent to paid-in-surplus) and not out of share
capital other than share premium.
MERGERS AND SIMILAR ARRANGEMENTS
The Company may acquire the business of another company and carry on
such business when it is within the objects of its Memorandum. Under the
Companies Law of the Cayman Islands, the Company may merge or amalgamate with
another company and may reorganize or reconstruct itself pursuant to a plan
that is approved by the holders of not less than 75% of the Ordinary Shares
present and voting on the matter (after giving effect to the voting limitation
described above) and thereafter sanctioned by the Cayman Islands courts. While
a dissenting shareholder may have the right to express to a Cayman Islands
court his view that the transaction sought to be approved would not provide the
shareholders with the fair value of their shares, (i) the court ordinarily
would not disapprove the transaction on that ground absent other evidence of
fraud or bad faith, and (ii) if the transaction were approved and consummated,
the dissenting shareholder would have no rights comparable to the appraisal
rights (i.e., rights to receive payments in cash for the judicially determined
value of their shares) ordinarily available to dissenting shareholders of U.S.
corporations.
TAKEOVERS
Cayman Islands law also provides that where an offer is made by a
company for shares of another company and, within four months of the offer, the
holders of not less than 90% of the shares which are the subject of the offer
accept, the offeror may by notice require the dissenting shareholders to
transfer their shares on the terms of the offer. A dissenting shareholder may
apply to the court within one month of the notice objecting to the transfer.
The burden is on the dissenting shareholders to show that the court should
exercise its discretion to prevent the requirement of
25 of 27
<PAGE> 26
such transfer, which it will be unlikely to do unless there is evidence of
fraud or bad faith or collusion as between the offeror and the holders of the
shares who have accepted the offer as a means of unfairly forcing out minority
shareholders.
SHAREHOLDERS' SUITS
There has until recently been no official law reporting in the Cayman
Islands, and actions subject to the Confidential Relationships (Preservation)
Law 1976, as amended, are held in closed court. However, recently a derivative
action was successfully brought by a shareholder in the Cayman Islands and, in
this regard, the Cayman Islands courts ordinarily would be expected to follow
English precedent, which would permit a minority shareholder to commence an
action against or a derivative action in the name of the corporation only (i)
where the act complained of is alleged to be beyond the corporate power of the
corporation or illegal, (ii) where the act complained of is alleged to
constitute a fraud against the minority perpetrated by those in control of the
corporation, (iii) where the act requires approval by a greater percentage of
the corporation's shareholders than actually approved it or (iv) where there is
an absolute necessity to waive the general rule that a shareholder may not
bring such an action in order that there not be a denial of justice or a
violation of the corporation's memorandum of association.
INDEMNIFICATION
Cayman Islands law does not specifically limit the extent to which a
company's articles of association may provide for the indemnification of
officers and directors, except to the extent that such provision may be held by
the Cayman Islands courts to be contrary to pubic policy (e.g. for purporting
to provide indemnification against the consequences of committing a crime). In
addition, an officer or director may not be able to enforce indemnification for
his own dishonesty or wilful neglect or default.
The Articles contain provisions providing for the indemnity by the
Company of an officer, director, or trustee of the Company for all actions,
proceedings, claims, costs, charges, losses, damages and expenses which they
incur or sustain by reason of any act done or omitted in or about the execution
of their duty in their respective offices or trusts, except such (if any) as
they shall incur or sustain by or through their own wilful neglect or default,
respectively.
INSPECTION OF BOOKS AND RECORDS
Shareholders of a company have no general rights to inspect or obtain
copies of the list of shareholders or corporate records of a company.
26 of 27
<PAGE> 27
[ARTICLE] 7
[LEGEND]
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS FOR NINE MONTHS ENDED JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FORM 10-Q FOR THE PERIOD ENDED JUNE 30, 1996.
[/LEGEND]
[MULTIPLIER] 1,000
[CURRENCY] U.S. DOLLARS
<TABLE>
<S> <C>
[PERIOD-TYPE] 9-MOS
[FISCAL-YEAR-END] SEP-30-1996
[PERIOD-START] OCT-01-1995
[PERIOD-END] JUN-30-1996
[EXCHANGE-RATE] 1
[DEBT-HELD-FOR-SALE] 427,581
[DEBT-CARRYING-VALUE] 0
[DEBT-MARKET-VALUE] 0
[EQUITIES] 0
[MORTGAGE] 0
[REAL-ESTATE] 0
[TOTAL-INVEST] 427,581
[CASH] 32,077
[RECOVER-REINSURE] 0
[DEFERRED-ACQUISITION] 9,882
[TOTAL-ASSETS] 537,900
[POLICY-LOSSES] 33,922
[UNEARNED-PREMIUMS] 67,499
[POLICY-OTHER] 0
[POLICY-HOLDER-FUNDS] 0
[NOTES-PAYABLE] 0
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[COMMON] 2,567
[OTHER-SE] 432,170
[TOTAL-LIABILITY-AND-EQUITY] 537,900
[PREMIUMS] 99,739
[INVESTMENT-INCOME] 22,605
[INVESTMENT-GAINS] 95
[OTHER-INCOME] (58)
[BENEFITS] 17,448
[UNDERWRITING-AMORTIZATION] 14,583
[UNDERWRITING-OTHER] 7,928
[INCOME-PRETAX] 73,131
[INCOME-TAX] 0
[INCOME-CONTINUING] 73,131
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] 73,131
[EPS-PRIMARY] 2.93
[EPS-DILUTED] 2.93
[RESERVE-OPEN] 33,390
[PROVISION-CURRENT] 17,883
[PROVISION-PRIOR] (435)
[PAYMENTS-CURRENT] 7,626
[PAYMENTS-PRIOR] 9,290
[RESERVE-CLOSE] 33,922
[CUMULATIVE-DEFICIENCY] 0
</TABLE>
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