<PAGE> 1
Filed pursuant to rule 424(b)(1)
Registration no. 333-33395
PROSPECTUS
SEPTEMBER 9, 1997
1,000,000 SHARES
[LOGO]
COMMON STOCK
All of the 1,000,000 shares (the "Shares") of common stock, par value $0.01
per share (the "Common Stock"), offered hereby (the "Offering") are being sold
by Executive Risk Inc. ("ERI" or the "Company"). The Common Stock is listed on
the New York Stock Exchange ("NYSE") under the symbol "ER". The closing price of
the Common Stock on the NYSE on September 8, 1997 was $62.25 per share. See
"Price Range of Common Stock and Dividends."
SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE COMMON STOCK.
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.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
PRICE UNDERWRITING PROCEEDS
TO THE DISCOUNTS AND TO THE
PUBLIC COMMISSIONS(1) COMPANY(2)
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share.......................... $62.25 $3.05 $59.20
Total(3)........................... $62,250,000 $3,050,000 $59,200,000
- --------------------------------------------------------------------------------------------------
</TABLE>
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(2) Before deducting expenses payable by the Company, estimated at $300,000.
(3) The Company has granted the Underwriters an option, exercisable within 30
days after the date of this Prospectus, to purchase up to an additional
150,000 shares of Common Stock, at the Price to the Public, less
Underwriting Discounts and Commissions, solely to cover over-allotments, if
any. If such option is exercised in full, the total Price to the Public,
Underwriting Discounts and Commissions and Proceeds to the Company will be
$71,587,500, $3,507,500 and $68,080,000, respectively. See "Underwriting."
The Shares offered hereby are being offered by the several Underwriters,
subject to prior sale, when, as and if delivered to and accepted by the
Underwriters and subject to various prior conditions, including their right to
reject orders in whole or in part. It is expected that delivery of the Shares
will be made in New York, New York on or about September 12, 1997.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
CONNING & COMPANY
OPPENHEIMER & CO., INC.
<PAGE> 2
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK
OFFERED HEREBY. SPECIFICALLY, THE UNDERWRITERS MAY OVER-ALLOT IN CONNECTION WITH
THE OFFERING, AND MAY BID FOR, AND PURCHASE, SHARES OF THE COMMON STOCK IN THE
OPEN MARKET. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
------------------------
NORTH CAROLINA INVESTORS: THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE COMMISSIONER OF INSURANCE FOR THE STATE OF NORTH CAROLINA
(THE "NORTH CAROLINA INSURANCE COMMISSIONER") NOR HAS THE NORTH CAROLINA
INSURANCE COMMISSIONER RULED UPON THE ACCURACY OR THE ADEQUACY OF THIS
PROSPECTUS.
ERI, A DELAWARE CORPORATION, OWNS ALL OF THE SHARES OF CAPITAL STOCK OF
CERTAIN INSURANCE COMPANIES DOMICILED IN THE STATES OF CONNECTICUT AND DELAWARE.
THE CONNECTICUT AND DELAWARE INSURANCE LAWS REQUIRE PRIOR APPROVAL BY THEIR
RESPECTIVE STATE INSURANCE COMMISSIONERS OF ANY ACQUISITION OF CONTROL OF A
DOMESTIC INSURANCE COMPANY OR OF ANY COMPANY WHICH CONTROLS A DOMESTIC INSURANCE
COMPANY. "CONTROL" IS GENERALLY PRESUMED TO EXIST THROUGH THE OWNERSHIP OF, OR
THE HOLDING OF PROXIES WITH RESPECT TO, 10% OR MORE OF THE VOTING SECURITIES OF
AN INSURANCE COMPANY OR OF ANY COMPANY WHICH CONTROLS AN INSURANCE COMPANY. ANY
PURCHASER OF COMMON STOCK HOLDING POWER TO VOTE 10% OR MORE OF THE OUTSTANDING
SHARES OF COMMON STOCK WILL BE PRESUMED TO HAVE ACQUIRED CONTROL OF ERI'S
INSURANCE SUBSIDIARIES UNLESS THE RELEVANT INSURANCE COMMISSIONER, FOLLOWING
APPLICATION BY SUCH PURCHASER, DETERMINES OTHERWISE. ACCORDINGLY, ANY PURCHASE
RESULTING IN A PURCHASER'S HOLDING THE POWER TO VOTE 10% OR MORE OF THE
OUTSTANDING SHARES OF COMMON STOCK WOULD REQUIRE PRIOR APPROVAL BY THE INSURANCE
COMMISSIONERS OF THE ABOVE-REFERENCED STATES.
NO ACTION HAS BEEN OR WILL BE TAKEN IN ANY JURISDICTION BY THE COMPANY OR
BY ANY UNDERWRITER THAT WOULD PERMIT A PUBLIC OFFERING OF THE COMMON STOCK OR
POSSESSION OR DISTRIBUTION OF THIS PROSPECTUS IN ANY JURISDICTION WHERE ACTION
FOR THAT PURPOSE IS REQUIRED, OTHER THAN IN THE UNITED STATES AND CANADA.
PERSONS INTO WHOSE POSSESSION THIS PROSPECTUS COMES ARE REQUIRED BY THE COMPANY
AND THE UNDERWRITERS TO INFORM THEMSELVES ABOUT AND TO OBSERVE ANY RESTRICTIONS
AS TO THE OFFERING OF THE SHARES AND THE DISTRIBUTION OF THIS PROSPECTUS.
------------------------
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company with the Commission can be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington, DC
20549, and at the following regional offices of the Commission: 7 World Trade
Center, Suite 1300, New York, NY 10048; and Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, IL 60661-2511. Copies of such materials can be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, DC 20549, at prescribed rates. The Commission
maintains a Web site on the Internet at http://www.sec.gov that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission. In addition, copies of
the above reports, proxy statements and other information also may be inspected
at the offices of the NYSE, 20 Broad Street, New York, NY 10005.
The Company has filed with the Commission a Registration Statement on Form
S-3 (the "Registration Statement") under the Securities Act of 1933, as amended
(the "Securities Act"), with respect to the securities offered hereby. This
Prospectus does not contain all of the information set forth in the Registration
Statement and the exhibits and schedules thereto. For further information with
respect to the Company and the securities offered hereby, reference is hereby
made to the Registration Statement and the exhibits and schedules filed
therewith, which may be obtained from the principal office of the Commission in
Washington, DC, upon payment of the fees prescribed by the Commission.
2
<PAGE> 3
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated by reference:
(i) Annual Report on Form 10-K for the fiscal year ended December 31,
1996;
(ii) Quarterly Reports on Form 10-Q for the quarters ended March 31,
1997 and June 30, 1997;
(iii) Current Reports on Form 8-K filed on February 18, 1997 and June 5,
1997; and
(iv) description of the Company's capital stock contained in the
Company's Registration Statement on Form 8-A, filed with the
Commission on February 9, 1994, as amended by Form 8-A/A, filed with
the Commission on May 8, 1996, and as further amended by Form 8-A/A,
filed with the Commission on August 26, 1997, including any further
amendment updating such description.
All documents filed by the Company with the Commission pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of the Offering made hereby shall be
deemed to be incorporated by reference into this Prospectus and to be a part
hereof from their respective dates of filing. Any statement contained herein or
in a document incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus to
the extent that a statement contained in any other subsequently filed document
which also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
The Company will provide without charge to each person (including any
beneficial owner of Shares purchased in the Offering) to whom this Prospectus is
delivered, upon written or oral request, a copy of any or all of the foregoing
documents incorporated herein by reference (other than exhibits to such
documents, unless such exhibits are specifically incorporated by reference into
such documents). Written or telephone requests should be directed to the Company
at 82 Hopmeadow Street, Simsbury, CT 06070, Attention: Mr. Robert V. Deutsch,
Executive Vice President, telephone number (860) 408-2000.
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements. This Prospectus and the documents
incorporated by reference herein, or any other written or oral statements made
by or on behalf of the Company, may include forward-looking statements which
reflect the Company's current views with respect to future events and financial
performance. These forward-looking statements are subject to uncertainties and
other factors that could cause actual results to differ materially from such
statements. These uncertainties and other factors (which are described in more
detail elsewhere in the Company's Annual Report on Form 10-K for the year ended
December 31, 1996, which is incorporated herein by reference) include, but are
not limited to, uncertainties relating to cyclical industry conditions,
uncertainties relating to government and regulatory policies, the legal
environment, the uncertainties of the reserving process, the competitive
environment in which the Company operates, the uncertainties inherent in
international operations, interest rate fluctuations and uncertainties related
to the Company's possible entrance into new insurance lines and new geographic
markets. The words "believe," "expect," "anticipate," "project," and similar
expressions identify forward-looking statements. Readers are cautioned not to
place undue reliance on these forward-looking statements, which speak only as of
their dates. The Company undertakes no obligation to publicly update or revise
any forward-looking statements, whether as a result of new information, future
events or otherwise.
3
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and consolidated financial
statements appearing elsewhere, or incorporated by reference, in this
Prospectus. Except where otherwise indicated, (i) the "Company" or "ERI" refers
to Executive Risk Inc., with respect to any period subsequent to December 31,
1993, and to its wholly-owned subsidiary, Executive Re Inc. ("Executive Re"),
with respect to any period prior to January 1, 1994; (ii) "ERII" refers to
Executive Risk Indemnity Inc. and "ERSIC" refers to Executive Risk Specialty
Insurance Company (ERII and ERSIC are wholly-owned insurance company
subsidiaries of the Company and are sometimes collectively referred to as the
"Insurance Subsidiaries"); (iii) "ERMA" refers to Executive Risk Management
Associates, the Company's wholly-owned underwriting agency which offers
insurance policies issued by ERII and ERSIC, as well as by certain other
insurance companies; and (iv) all financial information in this Prospectus is
presented in accordance with generally accepted accounting principles ("GAAP"),
unless specified as being in accordance with statutory accounting practices
("SAP").
THE COMPANY
ERI is a specialty insurance holding company which, through its
subsidiaries, develops, markets and underwrites directors and officers liability
insurance ("D&O") and errors and omissions liability insurance ("E&O") for
lawyers and other professionals. Based on the most recently available survey of
the domestic D&O market by Watson Wyatt Worldwide, the Company is a leading D&O
underwriter and is the leading underwriter of D&O for not-for-profit health care
organizations based on policy count. The Company's subsidiaries also offer
fiduciary liability insurance and fidelity bonds for corporations, employment
practices liability insurance for corporations and their employees, technology
maintenance and repair coverage for hospitals and clinics and stop-loss
arrangements for providers of medical services. The Company markets its products
primarily through independent agents and brokers throughout the United States.
In recent years, the Company also has been marketing insurance outside the
United States, particularly in Europe. The Company intends to continue the
expansion of its international business.
Both D&O and E&O are designed to protect insureds against lawsuits and
associated legal defense expenses. In connection with D&O coverage of for-profit
corporations, such liabilities can arise from claims by customers, vendors,
competitors and former employees, although the most severe liabilities have
historically arisen from lawsuits by stockholders alleging director or officer
failure to discharge duties to the corporation or violations of federal
securities laws. In the case of not-for-profit organizations, the Company's
coverage is often implicated in employment practices litigation. E&O is most
often sold to professionals, such as attorneys, psychologists and insurance
agents, among others, where the principal sources of potential claims are
dissatisfied clients alleging breaches of professional standards or ethical
violations. Fiduciary liability coverages are intended primarily to protect
those who invest and administer benefit plan trusts, and fidelity insurance
coverages insure against losses associated with employee theft and other types
of employee dishonesty. Employment practices liability insurance, which is
available to cover both the employing organization and its supervisors, insures
against losses associated with employee claims such as sexual harassment,
wrongful termination and discriminatory treatment. The Company's non-liability
related products include a service contract and cost management product for
owners of high-tech diagnostic equipment and related healthcare technology, and
a stop-loss policy for providers of medical services that receive revenues for
their services under the capitation method.
The Company is in the process of exploring entry into certain new insurance
lines. Such entry could be by means of the establishment of new businesses or
the acquisition of existing businesses. Such new insurance lines may or may not
be related to the Company's core D&O and E&O lines. There can be no assurance as
to whether the Company will in fact enter into any such new insurance lines or,
if it does, as to the timing thereof, or as to the results of operations of such
new insurance lines.
4
<PAGE> 5
The following table sets forth the Company's gross premiums written by line
of business for the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------
1996 GROSS 1995 GROSS 1994 GROSS
PREMIUMS PERCENT PREMIUMS PERCENT PREMIUMS PERCENT
WRITTEN OF TOTAL WRITTEN OF TOTAL WRITTEN OF TOTAL
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Domestic D&O............................ $240,680 72% $159,491 76% $104,871 81%
Lawyers E&O............................. 35,679 11 28,744 14 17,964 14
Miscellaneous E&O....................... 32,329 10 11,649 5 5,153 4
International D&O....................... 11,046 3 9,934 5 1,620 1
Other................................... 12,351 4 822 -- 591 --
--------- ----- --------- ----- --------- -----
Total................................. $332,085 100% $210,640 100% $130,199 100%
========= ===== ========= ===== ========= =====
</TABLE>
The table below sets forth statutory combined ratios for the periods
indicated for the Insurance Subsidiaries and the property/casualty industry as a
whole. The Insurance Subsidiaries' specialty products business is not directly
comparable to the business of the property/casualty industry as a whole.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
SAP DATA:
Insurance Subsidiaries' Combined Ratio..... 92.7% 90.7% 97.6% 102.1% 102.8%
Industry Combined Ratio(1)................. 105.9% 106.4% 108.4% 106.9% 115.7%
</TABLE>
- ------------------------------
(1) Source: For 1996, Best Week P/C Supplement, March 24, 1997 edition; for 1992
through 1995, Best's Aggregates & Averages--Property-Casualty.
Approximately 91% of the Company's investment portfolio at June 30, 1997,
on a fair value basis, consisted of cash and investment grade fixed maturity
securities. At that date, the Company's investment portfolio had an amortized
cost and fair value of $783.0 million and $818.3 million, respectively, and the
tax equivalent yield on the fixed maturity portfolio was 8.0%. The Company's
investment philosophy is to seek optimum total return in a manner consistent
with what the Company believes is a generally conservative investment approach.
At June 30, 1997, the Company's total assets were $1.1 billion and stockholders'
equity was $171.2 million.
The Insurance Subsidiaries' current pooled rating from A.M. Best Company,
Inc. ("A.M. Best") is "A (Excellent)" and their current pooled claims-paying
ability rating from Standard & Poor's Corporation ("S&P") is "A+ (Good)." These
ratings are based upon factors of concern to policyholders, including financial
condition and solvency, and are not directed to the protection of investors.
There can be no assurance that such ratings will not change in the future.
ERI employs approximately 400 people, most of whom are located at the
Company-owned headquarters building at 82 Hopmeadow Street, Simsbury,
Connecticut 06070.
5
<PAGE> 6
THE OFFERING
Common Stock offered by the
Company......................... 1,000,000 Shares
Common Stock to be outstanding
after the offering (1).......... 10,578,568 shares
Use of proceeds................. The net proceeds to the Company from the
Offering, based on a public offering price of
$62.25 per share and after deducting
underwriting discounts and commissions and
estimated offering expenses, will be $58.9
million ($67.8 million if the Underwriters'
over-allotment option is exercised in full).
The Company expects to use the net proceeds
from the Offering to make surplus
contributions to current and newly-formed
insurance company subsidiaries of the Company
in order to support existing business lines
and to finance entry into new business lines,
and for general corporate purposes. See "Use
of Proceeds."
Dividend policy................. The Company intends to continue to pay
quarterly cash dividends of $0.02 per share
of Common Stock ($0.08 annually), subject to
declaration by the Board of Directors and
certain regulatory and other constraints.
NYSE symbol..................... ER
- ------------------------------
(1) Based on 9,578,568 shares of Common Stock outstanding as of September 5,
1997. Does not include (i) 1,660,834 shares of Common Stock issuable upon
exercise of employee stock options, (ii) 100,000 shares of Common Stock
issuable upon exercise of the option owned by Aetna Inc. (the "Aetna
Option"), (iii) 43,117 shares of Common Stock issuable upon exercise of
options granted to directors under the Company's Nonemployee Directors
Option Plan, (iv) 35,780 shares of Common Stock issuable upon exercise of
options granted to former directors of Executive Re, (v) any shares of
Common Stock issuable pursuant to the Company's Stock Incentive Plan and
Performance Share Plan and (vi) 150,000 shares of Common Stock which may be
sold by the Company upon exercise of the Underwriters' over-allotment
option. See "Underwriting."
6
<PAGE> 7
SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA
The following selected consolidated historical financial data as of June
30, 1997 and 1996 and for each of the six-month periods ended June 30, 1997 and
1996 have been derived from unaudited consolidated financial statements and
include all adjustments (consisting only of normal recurring accruals) that the
Company considers necessary for a fair presentation of such financial
information for those periods. The results of operations for the six months
ended June 30, 1997 are not necessarily indicative of the results that may be
expected for any other interim period or for the full year ended December 31,
1997. The selected consolidated historical financial data as of December 31,
1996, 1995, 1994, 1993 and 1992 and for each of the years in the five-year
period ended December 31, 1996 have been derived from the audited consolidated
financial statements of the Company. The data set forth below should be read in
conjunction with the financial and other information included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1996 and Quarterly
Report on Form 10-Q for the quarter ended June 30, 1997.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
------------------- ----------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Gross premiums written............. $194,788 $148,039 $332,085 $210,640 $130,199 $ 84,255 $ 82,667
Net premiums written............... 121,978 96,165 210,376 145,121 108,285 70,519 74,605
Net premiums earned................ 96,435 70,338 155,784 116,434 94,961 69,014 71,926
Net investment income.............. 21,360 14,825 32,646 26,706 22,497 20,475 19,702
Net realized capital gains
(losses)......................... 1,341 (354) 1,047 1,588 (455) 1,964 869
Equity in earnings of ERMA......... -- -- -- -- -- 2,707 2,736
Other income (loss)................ 115 287 166 83 82 (364) --
-------- -------- -------- -------- -------- -------- --------
Total revenues................... 119,251 85,096 189,643 144,811 117,085 93,796 95,233
Loss and loss adjustment
expenses......................... 65,110 47,501 105,335 78,530 64,171 46,640 51,427
Policy acquisition costs........... 15,442 12,969 27,803 21,931 18,723 18,613 18,535
General and administrative costs... 12,085 7,080 17,068 10,730 8,890 8,749 6,409
Long-term incentive compensation... -- 187 187 1,458 1,009 1,100 --
Interest expense................... 1,419 1,874 4,511 2,022 1,519 1,421 1,420
Minority interest in Executive Risk
Capital Trust.................... 4,337 -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Total expenses................... 98,393 69,611 154,904 114,671 94,312 76,523 77,791
-------- -------- -------- -------- -------- -------- --------
Income before income taxes......... 20,858 15,485 34,739 30,140 22,773 17,273 17,442
Income tax expense................. 3,876 2,700 6,634 4,854 3,533 2,360 2,870
-------- -------- -------- -------- -------- -------- --------
Income before cumulative effect of
change in accounting for income
taxes............................ 16,982 12,785 28,105 25,286 19,240 14,913 14,572
Cumulative effect of change in
accounting for income taxes...... -- -- -- -- -- -- 1,387
-------- -------- -------- -------- -------- -------- --------
Net income......................... $ 16,982 $ 12,785 $ 28,105 $ 25,286 $ 19,240 $ 14,913 $ 15,959
======== ======== ======== ======== ======== ======== ========
Earnings per common and common
equivalent share(1).............. $ 1.66 $ 1.17 $ 2.67 $ 2.11 $ 1.80 $ 3.53 $ 3.44
======== ======== ======== ======== ======== ======== ========
Weighted average shares
outstanding...................... 10,217 10,910 10,509 11,956 10,108 3,128 3,120
Earnings per common share--assuming
full dilution(1)................. $ 1.66 $ 1.17 $ 2.67 $ 2.11 $ 1.69 $ 1.69 $ 1.66
======== ======== ======== ======== ======== ======== ========
Weighted average shares
outstanding-- assuming full
dilution ........................ 10,241 10,950 10,542 11,978 11,365 9,238 9,230
</TABLE>
7
<PAGE> 8
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
--------------------- ------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (AT END OF
PERIOD):
Cash and invested assets....... $ 818,303 $581,056 $690,975 $549,852 $431,849 $371,596 $319,773
Total assets(2)................ 1,147,124 773,375 941,247 705,920(6) 516,747 420,382 361,149
Long-term debt................. -- 70,000 70,000 25,000 25,000 25,000 25,000
Company obligated mandatorily
redeemable preferred
securities................... 125,000 -- -- -- -- -- --
Stockholders' equity(2)........ 171,173 118,528 144,775 177,725 130,854 114,837 92,473
OTHER DATA:
Loss ratio..................... 67.5% 67.5% 67.6% 67.4% 67.6% 67.6% 71.5%
Expense ratio.................. 28.6 28.5 28.8 28.1 29.1 39.6 34.7
---------- -------- -------- -------- -------- -------- --------
Combined ratio................. 96.1% 96.0% 96.4% 95.5% 96.7% 107.2% 106.2%
========== ======== ======== ======== ======== ======== ========
Ratio of net premiums written
to statutory surplus(3)(4)... 1.2x 1.5x 1.5x 1.2x 1.0x 0.7x 0.8x
Statutory surplus (at end of
period)(3)................... $ 200,256 $122,293 $138,405 $121,465 $107,401 $ 94,445 $ 91,689
Operating margin(5)............ 21.4% 20.7% 20.3% 21.3% 21.1% 19.3% 19.3%
</TABLE>
- ------------------------------
(1) Per share information is based on income before cumulative effect of change
in accounting for income taxes. Earnings per common and common equivalent
share and earnings per common share--assuming full dilution based on net
income were $3.88 and $1.81, respectively, for the year ended December 31,
1992.
(2) As of June 30, 1997 and 1996 and as of December 31, 1996, 1995, 1994 and
1993, includes $11.6 million, $7.6 million, $11.7 million, $15.4 million,
($3.3) million and $12.4 million, respectively, net of deferred taxes, in
total assets and stockholders' equity from unrealized gains (losses)
pursuant to Statement of Financial Accounting Standards No. 115, "Accounting
for Certain Investments in Debt and Equity Securities."
(3) Statutory data has been derived from the financial statements of the
Insurance Subsidiaries prepared in accordance with SAP.
(4) Ratios of net premiums written to statutory surplus are calculated on a
rolling twelve month basis.
(5) Consists of income before taxes, excluding interest expense, minority
interest in Executive Risk Capital Trust, realized capital gains (losses)
and certain non-recurring expenses, divided by total revenues, excluding
realized capital gains (losses).
(6) Certain 1995 amounts have been reclassified to conform with the 1996
presentation.
8
<PAGE> 9
RISK FACTORS
In addition to the other information in this Prospectus, the following
factors and risks should be considered carefully by potential purchasers in
evaluating the Company, its business and the shares of Common Stock offered
hereby:
CERTAIN BUSINESS CONSIDERATIONS
Factors affecting the sectors of the insurance industry in which the
Company operates may subject the Company to significant fluctuations in
operating results. These factors include competition and general economic
conditions, including interest rate levels, as well as legislative initiatives,
the frequency of litigation, and the size of judgments obtained against
directors and officers. The impact of these factors can dramatically affect
demand for the Company's products, insurance capacity, pricing and claims
experience and, consequently, the Company's results of operations. Due to the
Company's underwriting policy of pricing its insurance products primarily
according to perceived risk exposure rather than according to pricing patterns
in the market, it is possible that the Company will seek to raise prices during
times of excess insurance capacity (or, will not seek to raise prices during
times of limited insurance capacity) with an accompanying adverse impact on the
Company's results of operations, market share or both.
The professional liability insurance sectors of the property/casualty
industry have experienced a prolonged "soft market," characterized by intense
competition and strong downward pricing pressures. The Company's business
strategy for continued growth relies on finding underserved markets, primarily
in the D&O and E&O sectors, where it can create and profitably underwrite
attractive insurance products. The Company's ability to pursue such strategy
entails certain risks, due to the highly competitive nature of the insurance
industry. The Company competes with domestic and foreign insurers and
reinsurers, some of which have greater financial, marketing and management
resources and experience than the Company. The Company may also be required to
compete with new market entrants in the future. Competition is based on many
factors, including the perceived financial strength of the insurer, pricing and
other terms and conditions, levels of customer service (including the speed with
which claims are paid), ratings assigned by independent rating organizations
(including A.M. Best and S&P) and reputation and experience in the business.
This competition could have an adverse effect on the Company's results of
operations. In addition, with respect to the Company's ratings, A.M. Best and
S&P each reviews its ratings of insurance companies from time to time. There can
be no assurance that any particular rating will continue for any given period of
time or that it will not be changed or withdrawn entirely if, in the judgment of
the rating agency, circumstances so warrant. If either the Company's A.M. Best
rating or its claims-paying ability rating from S&P were downgraded from its
current level, the Company's results of operations could be materially and
adversely affected.
The Company offers liability coverage to members of various professions on
a program basis, that is, through wholesale brokers who control regional or
national books of business. These "program administrators" function similarly to
managing general agents. They are authorized to receive insurance applications
and issue Insurance Subsidiary policies, all in accordance with underwriting
criteria specified by the Company. Program administrators generally are not
authorized to handle or pay claims or to bind reinsurance. Distribution through
program administrators entails certain fidelity, credit and underwriting risks
not ordinarily encountered in connection with the Company's other distribution
methods.
REGULATION
The Insurance Subsidiaries are subject to a substantial degree of
regulatory oversight, which generally is designed to protect the interests of
policyholders as opposed to stockholders. Such regulation relates to authorized
lines of business, policy rates and forms, capital and surplus requirements,
investment parameters, underwriting limitations, transactions with affiliates,
dividend limitations, changes in control and a variety of other financial and
nonfinancial components of an insurance company's business. The Company believes
that more, rather than less, regulation is likely in the future. The National
Association of Insurance Commissioners (the "NAIC") has adopted a system of
assessing the financial condition and stability of insurance companies, known as
"IRIS ratios," and a system to test the adequacy of statutory capital, known as
"risk-based capital," each of which applies to the Insurance Subsidiaries. IRIS
ratios consist of 11 ratios that are compiled annually from each insurance
company's statutory financial reports and then compared against the
NAIC-established
9
<PAGE> 10
"usual range" for each ratio. The Insurance Subsidiaries, which are experiencing
rapid premium growth, have fallen outside the usual range for certain IRIS
ratios from time to time. The risk-based capital rules, required for the first
time in regulatory filings for 1994, establish statutory capital requirements
based on levels of risk assumed by an insurance company. The formulas for
determining the amount of risk-based capital specify various weighting factors
that are applied to financial balances or various levels of activity based on
the perceived degree of risk. Regulatory compliance is determined by a ratio of
the insurance company's regulatory total adjusted capital to its authorized
control level risk-based capital, both as defined by the NAIC, calculated as of
the end of each fiscal year. At December 31, 1996, the total adjusted capital
(as defined by the NAIC) of ERII and ERSIC was in excess of the risk-based
capital regulatory action level. The application of the proceeds from the
February 1997 offering of 8.675% Series A Capital Securities by a trust
affiliated with the Company (the "Capital Securities") caused the total adjusted
capital of ERII and ERSIC to exceed the risk-based capital company action level,
which is a higher standard. See Note 16 of the Notes to Consolidated Financial
Statements included in the Company's Annual Report on Form 10-K incorporated
herein by reference. Failure to maintain risk-based capital at the required
levels, or generation of IRIS ratios far outside the NAIC's usual range, could
adversely affect the Insurance Subsidiaries' ability to secure regulatory
approvals as necessary or appropriate in connection with their insurance
businesses.
HOLDING COMPANY STRUCTURE; DIVIDEND RESTRICTIONS
ERI is an insurance holding company. Dividends and other payments from the
Insurance Subsidiaries and ERMA are ERI's primary source of funds to pay
expenses, service debt and pay dividends, if any. The payment of dividends by
ERII and ERSIC is subject to restrictions set forth in the Delaware and the
Connecticut insurance laws, respectively. In general, these restrictions limit
the aggregate amount of dividends or other distributions that the Insurance
Subsidiaries may declare or pay to ERI within any 12-month period without the
permission of the applicable regulatory authority (generally to an amount less
than the greater of statutory net income (excluding realized capital gains in
the case of Delaware) for the preceding year or 10% of statutory surplus), and
require that the statutory surplus of the applicable Insurance Subsidiary
following any such dividend or distribution be reasonable in relation to its
outstanding liabilities and adequate to its financial needs. The Company may
capitalize other insurance company subsidiaries domiciled in other
jurisdictions, including foreign jurisdictions, which will also impose capital
requirements and dividend restrictions on such other subsidiaries. As of
December 31, 1996, the Company's Insurance Subsidiaries had sufficient capital
and earnings to pay up to $13.8 million of dividends to the Company during 1997
without prior regulatory approval. As of the date hereof, no dividends have been
paid to the Company by the Insurance Subsidiaries during 1997.
In addition, under applicable state insurance laws and regulations, no
person may acquire control of ERII, ERSIC or any corporation controlling either
of them unless such person has filed a statement containing specified
information with appropriate regulatory authorities and approval for such
acquisition has been obtained. Under applicable laws and regulations, any person
acquiring, directly or indirectly, or holding proxies with respect to, 10% or
more of the voting stock of any other person is presumed to have acquired
"control of such person." Accordingly, any purchase resulting in the purchaser
owning 10% or more of the outstanding Common Stock of ERI, in the Offering or
otherwise, would require prior approval by applicable regulatory authorities.
Such prior approval requirement also would apply to an acquisition of proxies to
vote 10% or more of the outstanding Common Stock of ERI and, therefore, in a
proxy contest could delay or prevent a stockholder from acquiring such proxies.
No assurance can be given as to whether or not the Company would seek to invoke
these laws and regulations in the event of a contested solicitation of proxies.
In connection with the issuance of the Capital Securities in February 1997,
the Company issued junior subordinated debentures (the "Junior Subordinated
Debentures") and a guarantee of certain payments (the "Guarantee") with respect
to the Capital Securities. In connection with the Guarantee and the Junior
Subordinated Debentures, the Company has agreed that if an event of default with
respect to the Guarantee or the Junior Subordinated Debentures has occurred, the
Company shall not, in general, declare or pay dividends or distributions on, or
redeem, purchase, acquire, or make a liquidation payment with respect to, any of
the Company's capital stock (which includes common and preferred stock).
10
<PAGE> 11
ADEQUACY OF LOSS RESERVES
The reserves for losses and loss adjustment expenses represent the
Company's estimates of liability on outstanding claims. These estimates involve
actuarial and statistical projections of the expected ultimate cost of
administering and settling these claims based on facts and circumstances then
known, predictions of future events, estimates of future trends in claims
severity and other variable factors such as inflation and new theories of
liability. As estimates, reserves may not accurately reflect amounts that are
ultimately incurred in administering and settling insured losses, particularly
in the instance of companies with relatively short operating histories or
companies that have a heavy reliance on relatively newer product lines, such as
the Company. If the reserve estimates prove to be inadequate, the Company would
be required to augment its reserves, resulting in a charge to earnings in the
period in which such action occurs. Although the Company believes that its
reserves are adequate, there can be no assurance that ultimate loss experience
will not exceed the Company's reserves, resulting in a material adverse effect
on the Company's financial condition and results of operations. Since 1988, the
Company has retained the services of an independent actuarial consulting firm to
provide opinions regarding reserves as required for state regulatory filings.
The Company intends to utilize such services in the future. In addition,
although the Company seeks to spread risk through the use of reinsurance
programs, like other insurance companies, it is subject to the risk of severe or
multiple losses, which could materially and adversely affect its financial
position and results of operations.
REINSURANCE
The Company has historically utilized reinsurance arrangements to limit the
amount of risk retained under policies written or reinsured by the Insurance
Subsidiaries. The Company currently has in place a number of reinsurance
programs pursuant to which it cedes risks. The ceding of risk to reinsurers does
not relieve the Company of liability to its insureds and reinsureds, and
consequently the Company is subject to credit risk with respect to its
reinsurers. While the Company endeavors to reinsure only with financially sound
reinsurers, there can be no assurance that the Company will not experience
difficulties in the future in collecting reinsurance recoverables under these
arrangements should one or more of its reinsurers suffer financial detriment. In
addition, the availability and cost of reinsurance arrangements are subject to
prevailing market conditions, which are beyond the Company's control. The
Company may in the future choose to revise further its reinsurance practices to
increase, decrease or eliminate entirely the amount of risk it cedes to
reinsurers.
ANTI-TAKEOVER EFFECTS OF CERTAIN PROVISIONS
The Company's Certificate of Incorporation and By-laws, its Stockholder
Rights Plan, as well as the Delaware corporation law and the Delaware and
Connecticut insurance laws, all contain provisions that could have the effect of
discouraging a prospective acquirer from making a tender offer or otherwise
attempting to obtain control of the Company.
11
<PAGE> 12
USE OF PROCEEDS
The net proceeds to the Company from the Offering, based on a public
offering price of $62.25 per share and after deducting underwriting discounts
and commissions and estimated offering expenses, will be $58.9 million ($67.8
million if the Underwriters' over-allotment option is exercised in full). The
Company expects to use the net proceeds from the Offering to make surplus
contributions to current and newly-formed insurance company subsidiaries of the
Company in order to support existing business lines and to finance entry into
new business lines, and for general corporate purposes.
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
The Common Stock is traded on the NYSE under the symbol "ER". The following
table sets forth the high and low sales prices of the Common Stock on the NYSE
for the period from January 1, 1995 through September 8, 1997 and the cash
dividends paid for the periods indicated.
<TABLE>
<CAPTION>
MARKET PRICE
------------
HIGH LOW DIVIDEND
<S> <C> <C> <C>
1995:
First Quarter.................................................... $17 1/8 $13 5/8 $0.02
Second Quarter................................................... 19 16 5/8 0.02
Third Quarter.................................................... 23 7/8 18 3/8 0.02
Fourth Quarter................................................... 29 22 0.02
1996:
First Quarter.................................................... $33 5/8 $26 1/8 $0.02
Second Quarter................................................... 38 1/4 29 1/4 0.02
Third Quarter.................................................... 38 1/2 33 3/8 0.02
Fourth Quarter................................................... 42 3/8 33 7/8 0.02
1997:
First Quarter.................................................... $49 $35 5/8 $0.02
Second Quarter................................................... 56 3/8 43 1/4 0.02
Third Quarter (through September 8, 1997)........................ 63 1/8 49 5/16 --
</TABLE>
The Company intends to continue to pay quarterly cash dividends of $0.02
per share of Common Stock (a rate of $0.08 annually). The payment of dividends
is subject to the discretion of the Board of Directors and will depend upon
general business conditions, legal and contractual restrictions on the payment
of dividends and other factors that the Board of Directors deems relevant.
As an insurance holding company, ERI depends in large part on dividends and
other payments from its subsidiaries for the payment of cash dividends to
stockholders. In the case of the Insurance Subsidiaries, such payments are
restricted by insurance laws, and insurance regulators have authority in certain
circumstances to prohibit payments of dividends and other amounts by the
Insurance Subsidiaries that would otherwise be permitted without regulatory
approval. The Company is a party to a loan agreement that also restricts the
payment of dividends. As of the date hereof, there is no amount outstanding
under the Company's loan agreement. See Note 6 of the Notes to Consolidated
Financial Statements included in the Company's Annual Report on Form 10-K
incorporated herein by reference.
In connection with the issuance of the Capital Securities in February 1997,
as described more fully in Note 16 of the Notes to Consolidated Financial
Statements included in the Company's Annual Report on Form 10-K incorporated
herein by reference, the Company issued the Junior Subordinated Debentures and
the Guarantee. In connection with the Guarantee and the Junior Subordinated
Debentures, the Company has agreed that if an event of default with respect to
the Guarantee or the Junior Subordinated Debentures has occurred, the Company
shall not, in general, declare or pay dividends or distributions on, or redeem,
purchase, acquire, or make a liquidation payment with respect to, any of the
Company's capital stock (which includes common and preferred stock).
12
<PAGE> 13
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company as of June 30, 1997 and as adjusted to give effect to the sale of
1,000,000 shares of Common Stock offered by the Company based on a public
offering price of $58.90 per share (after deduction of underwriting discounts
and commissions and estimated offering expenses) and the application of the net
proceeds as described in "Use of Proceeds." The data set forth below should be
read in conjunction with the financial and other information included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1996 and
the Quarterly Report on Form 10-Q for the quarter ended June 30, 1997
incorporated herein by reference.
<TABLE>
<CAPTION>
JUNE 30, 1997
----------------------
ACTUAL AS ADJUSTED
(IN THOUSANDS)
<S> <C> <C>
Company obligated mandatorily redeemable preferred securities
of subsidiary Executive Risk Capital Trust holding solely $125,000,000
aggregate principal amount of 8.675% Series B Junior Subordinated
Deferrable Interest Debentures of the Company due February 1, 2027 and
$3,866,000 aggregate principal amount of 8.675% Series A Junior
Subordinated Deferrable Interest Debentures of the Company due
February 1, 2027...................................................... $125,000 $ 125,000
Stockholders' equity:
Common stock, $0.01 par value, 50,000,000 shares authorized;
shares issued: 10,619,027 actual, 11,619,027 as adjusted;
shares outstanding: 9,504,606 actual, 10,504,606 as adjusted(1).... 106 116
Additional paid-in capital............................................ 99,223 158,113
Unrealized gains on investments, net of tax........................... 22,971 22,971
Currency translation adjustments...................................... (556) (556)
Retained earnings..................................................... 81,989 81,989
Cost of shares in treasury, at cost--1,114,421 shares................. (32,560) (32,560)
-------- ---------
Total stockholders' equity......................................... 171,173 230,073
-------- ---------
Total capitalization............................................. $296,173 $ 355,073
======== =========
</TABLE>
- ------------------------------
(1) Does not include (i) 1,323,546 shares of Common Stock issuable upon exercise
of employee stock options, (ii) 100,000 shares of Common Stock issuable upon
exercise of the Aetna Option, (iii) 42,900 shares of Common Stock issuable
upon exercise of options granted to directors under the Company's
Nonemployee Directors Option Plan, (iv) 36,280 shares of Common Stock
issuable upon exercise of options granted to former directors of Executive
Re, (v) any shares of Common Stock issuable pursuant to the Company's Stock
Incentive Plan and Performance Share Plan and (vi) 150,000 shares of Common
Stock which may be sold by the Company upon exercise of the Underwriters'
over-allotment option. See "Underwriting."
The Company currently expects to issue up to $75 million aggregate
principal amount of debt securities during the third or fourth calendar quarter
of 1997. There can be no assurance that such debt securities will be issued, or,
if issued, as to the terms thereof, including without limitation the interest
rate and other financial terms.
13
<PAGE> 14
UNDERWRITING
Subject to the terms and conditions contained in the underwriting
agreement, dated September 9, 1997 (the "Underwriting Agreement"), among the
Company, Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), Conning &
Company ("Conning") and Oppenheimer & Co., Inc., which are acting as
representatives (the "Representatives") for the underwriters named below (the
"Underwriters"), the Company has agreed to sell to the Underwriters and each of
the Underwriters has severally agreed to purchase the number of Shares set forth
opposite its name below.
<TABLE>
<CAPTION>
UNDERWRITERS NUMBER OF SHARES
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation.................. 278,334
Conning & Company.................................................... 278,333
Oppenheimer & Co., Inc. ............................................. 278,333
Chase Securities Inc. ............................................... 30,000
J.P. Morgan Securities Inc. ......................................... 30,000
Morgan Stanley & Co. Incorporated.................................... 30,000
Salomon Brothers Inc ................................................ 30,000
Sanford C. Bernstein & Co., Inc. .................................... 15,000
Dowling & Partners Securities, LLC................................... 15,000
Fox-Pitt, Kelton Inc. ............................................... 15,000
---------
Total...................................................... 1,000,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the Shares offered hereby are
subject to approval of certain legal matters by their counsel and to certain
other conditions. The Underwriters are obligated to take and pay for all such
Shares, if any are taken.
The Company has been advised by the Representatives that the Underwriters
propose initially to offer the Shares, in part, directly to the public at the
price set forth on the cover page of this Prospectus and, in part, to certain
dealers at such price less a concession not in excess of $1.83 per share. The
Underwriters may allow, and such dealers may reallow, a concession not in excess
of $0.10 per share to certain other dealers. After the Offering, the offering
price and other selling terms may be changed by the Representatives.
The Company has granted to the Underwriters an option, exercisable within
30 days after the date of this Prospectus, to purchase up to 150,000 additional
shares of Common Stock at the public offering price, less the underwriting
discount and commissions. The Underwriters may exercise such option solely for
the purpose of covering over-allotments, if any, made in connection with the
Offering. To the extent such option is exercised, each Underwriter will become
obligated, subject to certain conditions, to purchase approximately the same
percentage of such additional shares as the number of Shares to be purchased by
said Underwriter shown in the foregoing table bears to the total number of
Shares initially offered by the Underwriters hereby.
The Company has agreed to indemnify the Underwriters against certain
liabilities under the Securities Act, or to contribute to payments that the
Underwriters may be required to make in respect thereof.
In connection with the Offering, the Underwriters may engage in
transactions that stabilize, maintain or otherwise affect the price of the
Common Stock. Specifically, the Underwriters may over-allot the Offering,
creating a syndicate short position. In addition, the Underwriters may bid for
and purchase shares of Common Stock in the open market to cover such syndicate
short position or to stabilize the price of the Common Stock. These activities
may stabilize or maintain the market price of the Common Stock above independent
market
14
<PAGE> 15
levels. The Underwriters are not required to engage in these activities, and may
end any of these activities at any time.
The Company has agreed, for a period of 90 days after the date of this
Prospectus, without the prior written consent of the Representatives, not to (i)
offer, sell, contract to sell, or grant any option to purchase or otherwise
dispose of any shares of Common Stock other than pursuant to any employee or
director stock-based plans, or (ii) file any registration statement under the
Securities Act with respect to shares of Common Stock other than pursuant to any
employee or director stock-based plans.
From time to time, DLJ and Conning have participated in offerings of
securities issued by the Company or its affiliates. Most recently, in February
1997, DLJ participated in the offering of the Capital Securities. In addition,
both DLJ and Conning participated in an underwritten offering of the Common
Stock in June 1996. In such transactions, DLJ and Conning received customary
compensation. Conning also provides the Company and the Insurance Subsidiaries
with investment advisory, record-keeping and related services pursuant to an
agreement that is annually renewable in June. For services rendered during 1996,
the Company paid Conning approximately $0.6 million
CERTAIN LEGAL MATTERS
Certain legal matters in connection with the offering of the Shares made
hereby will be passed upon for the Company by Dewey Ballantine, 1301 Avenue of
the Americas, New York, New York. James A. FitzPatrick, Jr., Secretary of the
Company, is a member of Dewey Ballantine. From time to time, Dewey Ballantine
represents Donaldson, Lufkin & Jenrette Securities Corporation, one of the
Representatives. Certain legal matters in connection with the offering of the
Shares made hereby will be passed upon for the Underwriters by LeBoeuf, Lamb,
Greene & MacRae, L.L.P., a limited liability partnership including professional
corporations, 125 West 55th Street, New York, New York.
EXPERTS
The consolidated financial statements and schedules of the Company
incorporated by reference or appearing in the Company's Annual Report on Form
10-K for the year ended December 31, 1996, have been audited by Ernst & Young
LLP, independent auditors, as set forth in their report thereon incorporated by
reference therein and incorporated herein by reference. Such consolidated
financial statements and schedules are incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
With respect to the unaudited consolidated interim financial information
for the three-month periods ended March 31, 1997 and March 31, 1996, and the
six-month periods ended June 30, 1997 and June 30, 1996, incorporated by
reference in this Prospectus, Ernst & Young LLP have reported that they have
applied limited procedures in accordance with professional standards for a
review of such information. However, their separate reports, included in the
Company's Quarterly Reports on Form 10-Q for the quarters ended March 31, 1997
and June 30, 1997, and incorporated herein by reference, state that they did not
audit and they do not express an opinion on that interim financial information.
Accordingly, the degree of reliance on their reports on such information should
be restricted considering the limited nature of the review procedures applied.
The independent auditors are not subject to the liability provisions of Section
11 of the Securities Act for their reports on the unaudited interim financial
information because those reports are not "reports" or "parts" of the
Registration Statement prepared or certified by the auditors within the meaning
of Sections 7 and 11 of the Securities Act.
15
<PAGE> 16
======================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES, NOR DOES IT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Prospectus Summary.................... 4
Risk Factors.......................... 9
Use of Proceeds....................... 12
Price Range of Common Stock and
Dividends........................... 12
Capitalization........................ 13
Underwriting.......................... 14
Certain Legal Matters................. 15
Experts............................... 15
</TABLE>
======================================================
======================================================
1,000,000 SHARES
LOGO
COMMON STOCK
------------------------------
PROSPECTUS
------------------------------
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
CONNING & COMPANY
OPPENHEIMER & CO., INC.
SEPTEMBER 9, 1997
======================================================
