SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): February 23, 2000
EVEREST RE GROUP, LTD.
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(Exact Name of Registrant as Specified in Charter)
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Bermuda 1-13816 Not Applicable
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(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
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c/o ABG Financial & Management Services Inc.
Parker House, Wildey Road
St. Michael, Barbados Not Applicable
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: 246-436-6287
Not Applicable
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(Former Name or Former Address, if Changed Since Last Report)
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ITEM 5. OTHER EVENTS.
COMPLETION OF RESTRUCTURING
Effective as of 12:01 a.m. on February 24, 2000, Everest Reinsurance
Holdings, Inc. ("Everest Re Holdings"), a Delaware corporation, completed a
corporate restructuring whereby it became the wholly owned subsidiary of Everest
Re Group, Ltd. (the "Company"), a company organized under the laws of Bermuda
and with its principal offices in Barbados. The new holding company structure is
intended to provide the Company with an enhanced ability to compete by
permitting it to take maximum advantage of favorable business, regulatory, tax
and financing environments in Bermuda and Barbados.
The holding company restructuring was effected pursuant to an Agreement
and Plan of Merger (the "Merger Agreement") among Everest Re Holdings, the
Company and Everest Re Merger Corporation, a Delaware corporation and wholly
owned subsidiary of the Company. The Merger Agreement provided, among other
things, for the merger of Everest Re Merger Corporation with and into Everest Re
Holdings, with Everest Re Holdings as the surviving corporation. The
stockholders of Everest Re Holdings approved the merger and restructuring at a
special meeting of stockholders held on February 23, 2000.
By virtue of the merger, Everest Re Holdings became a wholly owned
subsidiary of the Company and each issued and outstanding share of common stock
of Everest Re Holdings was automatically converted into one common share of the
Company. As a result, each holder of common stock of Everest Re Holdings became
the owner of the same number of common shares of the Company as the number of
shares of Everest Re Holdings common stock owned by such stockholder prior to
the merger. Pursuant to Rule 12g-3(a) under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), the Company's common shares are deemed to be
registered under Section 12(b) of the Exchange Act. In addition, the Company has
assumed all registration statements and reports filed by Everest Re Holdings
under either the Exchange Act or the Securities Act of 1933, as amended.
The Company's common shares will trade on the New York Stock Exchange
under the trading symbol RE, the same trading symbol under which the common
stock of Everest Re Holdings has traded since 1995. Because the Company's common
shares will bear a new CUSIP number of G3223R 10 8, the Company's transfer agent
will deliver to each Everest Re Holdings stockholder a transmittal form with
instructions on how to exchange stock certificates of Everest Re Holdings for
share certificates of the Company. In addition, pursuant to the terms of the
Merger Agreement, each outstanding option to purchase shares of common stock of
Everest Re Holdings has been converted into an option to purchase, on the same
terms and conditions, an identical number of common shares of the Company.
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ACQUISITION OF GIBRALTAR CASUALTY COMPANY
On February 24, 2000, Everest Re Holdings signed a definitive agreement
(the "Stock Purchase Agreement") to acquire Gibraltar Casualty Company
("Gibraltar") from The Prudential Insurance Company of America ("The
Prudential").
Gibraltar, one of the largest run-off property-casualty insurers in the
United States, has a long relationship with Everest Re Holdings and its
principal operating company, Everest Reinsurance Company ("Everest Re").
Gibraltar was formed in 1978 by Everest Re and wrote direct insurance until
1985, when it was placed in run off. In 1991, Gibraltar became a subsidiary of
The Prudential. Gibraltar is also a reinsurer of Everest Re (all as detailed in
filings that Everest Re Holdings has made with the Securities and Exchange
Commission). Under a series of transactions dating to 1986, Gibraltar reinsured
several components of Everest Re's business. In particular, in connection with
The Prudential's initial public offering of Everest Re Holdings stock in 1995,
Gibraltar provided stop-loss reinsurance protection for Everest Re's reserves,
with $375 million in limits, $90 million of which remains available. The
stop-loss and other reinsurance contracts between Gibraltar and Everest Re will
remain in effect following the transaction.
Gibraltar's insurance reserves have been strengthened by more than $200
million (before adjustments for paid losses) over the past 18 months, and stand
at $525 million as of December 31, 1999. With performing assets and accrued
income of $499 million and total assets of $697 million supporting its reserves,
Gibraltar had GAAP stockholders' equity of approximately $49 million at December
31, 1999. In connection with the acquisition, The Prudential will provide
reinsurance to Gibraltar covering 80% of the first $200 million of any adverse
development of Gibraltar's reserves.
The purchase price to be paid by Everest Re Holdings for Gibraltar is
book value at closing, subject to certain adjustments. The acquisition is
subject to regulatory approval and is expected to close in the second quarter of
2000.
SAFE HARBOR DISCLOSURE
In connection with the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995 (the "Act"), the Company sets forth
below cautionary statements identifying important factors, among others, that in
some cases have affected and that could cause its actual results to differ
materially from those which might be projected, forecasted, or estimated in its
forward-looking statements, as defined in the Act, made by or on behalf of the
Company in press releases, written statements or documents filed with the
Securities and Exchange Commission, or in its communications and discussions
with investors and analysts in the normal course of business through meetings,
phone calls and conference calls. These cautionary statements supplement other
factors contained in this report that could cause the Company's actual results
to differ materially from those that might be projected, forecasted or estimated
in its forward-looking statements.
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Such forward-looking statements may include, but are not limited to,
projections of premium revenue, investment income, other revenue, losses,
expenses, earnings (including earnings per share), cash flows, plans for future
operations, common stockholders' equity (including book value per share),
investments, financing needs, capital plans, dividends, plans relating to
products or services of the Company, and estimates concerning the effects of
litigation or other disputes, as well as assumptions for any of the foregoing
and are generally expressed with words such as "believes," "estimates,"
"expects," "anticipates," "plans," "projects," "forecasts," "goals," "could
have," "may have" and similar expressions. Undue reliance on any forward-looking
statements should be avoided. 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.
Forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause the Company's results to differ
materially from such forward-looking statements. In connection with the
statements made in the Company's press release issued February 24, 2000 and
filed as an exhibit hereto, such risks, uncertainties and other factors include,
but are not limited to, the following:
1. Changes in the level of competition in the domestic and
international reinsurance or primary insurance markets that adversely affect the
volume or profitability of the Company's reinsurance or insurance business.
These changes include, but are not limited to, the intensification of price and
contract terms competition, the entry of new competitors, consolidation in the
reinsurance and insurance industry and the development of new products by new
and existing competitors;
2. Changes in the demand for reinsurance and insurance products of
the type offered by the Company and its ceding insurer customers;
3. The ability of the Company to execute its strategies;
4. Catastrophe losses in the Company's domestic or international
reinsurance or insurance business;
5. Adverse development on claim and claim expense liabilities related
to business written in prior years, including, but not limited to, evolving case
law and its effect on environmental, asbestos and other latent injury claims,
changing government regulations, newly identified toxins, newly reported claims,
new theories of liability, or new insurance and reinsurance contract
interpretations;
6. Greater than expected loss ratios on reinsurance or insurance
written by the Company;
7. Changes in inflation that affect the profitability of the
Company's current reinsurance and insurance businesses or the adequacy of its
claim and claim expense liabilities;
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8. Changes in the Company's retrocessional arrangements;
9. Lower than estimated retrocessional or reinsurance recoveries on
losses, including, but not limited to, losses due to a decline in the
creditworthiness of the Company's retrocessionaires or reinsurers;
10. Changes in the reinsurance/retrocessional market impacting the
Company's ability to cede risks above its desired level of retention.
11. Changes in interest rates, increases in which cause a reduction in
the market value of the Company's fixed income investment portfolio, and its
common stockholders' equity, and decreases in which cause a reduction of income
earned on new cash flow from operations as well as on the reinvestment of the
proceeds from sales, calls or maturities of existing investments;
12. Decline in the value of the Company's common equity investments;
13. Changes in the composition of the Company's investment portfolio;
14. Gains or losses related to changes in foreign currency exchange
rates;
15. Changes in the role of reinsurance brokers and the relationship of
the Company with such brokers;
16. Potential for Year 2000 claims under reinsurance and insurance
contracts written by the Company;
17. Adverse results in litigation matters, including, but not limited
to, litigation related to environmental, asbestos and other potential mass tort
claims;
18. Changes in the Company's capital needs;
19. Changes in the Company's ratings;
20. The impact of current and future regulatory environments,
generally, and on the ability of the Company's subsidiaries to enter and exit
reinsurance or insurance markets; and
21. Changes in the commission or brokerage levels that competitors are
willing to offer to ceding companies, brokers or agents.
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22. Adverse changes in tax treatment of the Company's business,
including changes in tax treatment by the United States, Bermuda or Barbados or
other regulatory or political organizations with jurisdiction or potential
jurisdiction over the Company or its affiliates;
23. Inability of the Company to establish, or difficulties in the
Company's establishing of, Everest Reinsurance (Bermuda), Ltd. ("Everest
Bermuda");
24. Lack of success by the Company and Everest Bermuda in launching
their start-up operation in Bermuda;
25. Changes in the regulatory environment or regulatory challenges
that may restrict the ability of Everest Bermuda to conduct business;
26. Inability of Everest Bermuda to arrange security to back its
reinsurance;
27. Inability of Everest Bermuda to execute its business plan
because of Everest Re Group's inability to provide it financing or inability to
provide it financing at an acceptable cost;
28. Failure or inability to close the acquisition of Gibraltar on the
terms agreed to in the Stock Purchase Agreement, or the need to materially alter
the terms of that agreement prior to closing;
29. With respect to Gibraltar, adverse development with respect to
claim and claim expense liabilities, including, but not limited to, evolving
case law and its effect on environmental, asbestos and other latent injury
claims, changing government regulations, newly identified toxins, newly reported
claims, new theories of liability, or new insurance and reinsurance contract
interpretations, to extent that such adverse development exceeds recoveries
available under reinsurance or retrocessional contracts;
30. With respect to Gibraltar, shortfalls in anticipated investment
income as a result of payment of claims and claim expenses at a rate faster than
anticipated or inability to invest at expected investment returns;
31. With respect to Gibraltar, inability to recover, or difficulties
in recovering, under the indemnities provided by The Prudential as described
in the Stock Purchase Agreement;
32. With respect to Gibraltar, inability to negotiate an acceptable
reinsurance transaction between Gibraltar and Everest Bermuda; and
33. With respect to Gibraltar, failure of the acquisition to be
accretive to the Company's reported earnings.
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In addition to the factors outlined above that are directly related to
the Company's businesses, the Company is also subject to general business risks,
including, but not limited to, adverse state, federal or foreign legislation and
regulation, adverse publicity or news coverage, changes in general economic
factors, and the loss of key employees.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(c) Exhibits
2.1 Agreement and Plan of Merger, dated as of September 17, 1999, by
and among Everest Re Holdings, the Company and Everest Re Merger
Corporation (incorporated by reference to Appendix A to the proxy
statement/prospectus included in the Registration Statement on
Form S-4 filed by the Company on September 17, 1999 (No.
333-87361)).
99.1 Press Release issued by the Company on February 24, 2000.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: February 24, 2000
By: /S/ Janet J. Burak
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Name: Janet J. Burak
Title: Senior Vice President, General
Counsel and Secretary
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EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
2.1 Agreement and Plan of Merger, dated as of September 17, 1999,
by and among Everest Re Holdings, the Company and Everest Re
Merger Corporation (incorporated by reference to Appendix A
to the proxy statement/prospectus included in the
Registration Statement on Form S-4 filed by the Company on
September 17, 1999 (No. 333-87361)).
99.1 Press Release issued by the Company on February 24, 2000.
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EXHIBIT 99.1
NEWS RELEASE
EVEREST RE GROUP, LTD.
c/o ABG Financial & Management Services, Inc.
Parker House, Wildey Business Park, Wildey Road, St. Michael, Barbados
Contact:
James H. Foster For Immediate Release
Vice President, Investor Relations
908.604.3169
EVEREST RE COMPLETES RESTRUCTURING, ANNOUNCES DIVIDEND
AND ANNOUNCES AGREEMENT TO ACQUIRE GIBRALTAR CASUALTY COMPANY
ST. MICHAEL, Barbados - February 24, 2000 -- Everest Re Group, Ltd.
(NYSE:RE) made the following announcements today:
RESTRUCTURING. Everest Re Group has completed the restructuring in
which it became the publicly traded parent of the Everest family of reinsurance
and insurance companies. Following a shareholders' meeting on February 23, 2000
at which over 97% of the shares voting voted in favor of the restructuring, a
certificate of merger was filed with the State of Delaware to complete the
transaction. In the restructuring, each share of issued and outstanding common
stock of Everest Reinsurance Holdings, Inc. was converted into one common share
of Everest Re Group, Ltd., and Everest Reinsurance Holdings became a direct
subsidiary of Everest Re Group.
Everest Re Group, Ltd. common shares will continue trading on the New
York Stock Exchange under the symbol RE. The shares will bear a new CUSIP number
of G3223R 10 8.
DIVIDEND. The Board of Directors declared a dividend of $0.06 per share
payable on or before March 30, 2000 to all shareholders of record as of March 8,
2000.
GIBRALTAR ACQUISITION. Everest Reinsurance Holdings, Inc. has signed an
agreement to acquire Gibraltar Casualty Company from The Prudential Insurance
Company of America.
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Gibraltar, one of the largest run-off property-casualty insurers in the
US, has a long relationship with Everest Reinsurance Holdings and its principal
operating company, Everest Reinsurance Company ("Everest Re"). Gibraltar was
formed in 1978 by Everest Re and wrote direct insurance until 1985, when it was
placed in run off. In 1991, Gibraltar became a subsidiary of The Prudential.
Gibraltar is also a reinsurer of Everest Re (all as detailed in SEC filings by
Everest Reinsurance Holdings over the years). Under a series of transactions
dating to 1986, Gibraltar reinsured several components of Everest Re's business;
in connection with The Prudential's Initial Public Offering of Everest
Reinsurance Holdings stock in 1995, Gibraltar provided a Stop Loss protection on
Everest Re's reserves, with $375 million in limits, $90 million of which remains
available from Gibraltar.
The Stop Loss and other reinsurance contracts between Gibraltar and
Everest Re will remain in effect following the transaction.
Gibraltar's insurance reserves have been strengthened by more than $200
million (before adjustments for paid losses) over the past 18 months, and stand
at $525 million as of December 31, 1999. With performing assets and accrued
income of $499 million and total assets of $697 million supporting its reserves,
Gibraltar had GAAP stockholders' equity of approximately $49 million at December
31, 1999. The purchase price to be paid by Everest Reinsurance Holdings is book
value at closing, subject to certain adjustments.
In connection with the acquisition, The Prudential will provide
reinsurance to Gibraltar covering 80% of the first $200 million of any adverse
development of Gibraltar's reserves at closing.
The acquisition is subject to regulatory approval and is expected to
close in the second quarter of 2000.
Commenting on the transactions, Chairman and Chief Executive Officer
Joseph V. Taranto said " We are pleased that our restructuring plan was
overwhelmingly supported by our shareholders, and are excited to begin building
a Bermuda company to complement our other worldwide operations. The Gibraltar
acquisition makes excellent sense from a financial perspective. With $525
million of ultimate undiscounted reserves, solid supporting assets and the
reinsurance coverage provided by The Prudential, we expect that Gibraltar's
addition to the Group will be immediately accretive to earnings and will add
appreciable long-term value. The business plan for the new reinsurance company
we plan to form in Bermuda will include the assumption of loss portfolios
similar to Gibraltar's. When that company is established and the Gibraltar
acquisition closes, we propose to negotiate a transfer of Gibraltar's
liabilities to the new company."
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Everest Re Group, Ltd. is a Bermuda holding company that operates
through the following subsidiaries: Everest Reinsurance Company provides
reinsurance to property and casualty insurers in both the US and international
markets. The Company plans to form Everest Reinsurance (Bermuda), Ltd. to
provide reinsurance to property and casualty and life insurers in both the
Bermuda and international markets. Everest National Insurance Company provides
property and casualty insurance to policyholders in the United States. Everest
Indemnity Insurance Company offers excess and surplus lines insurance in the
United States. Everest Insurance Company of Canada provides property and
casualty insurance to policyholders in Canada.
Statements made in connection with this release that are not purely
historical may be deemed forward-looking statements. Such statements are subject
to various risks and uncertainties, including but not limited to the impact of
competition, product demand, catastrophes, interest rates and other risks
detailed from time to time in the Company's filings with the Securities and
Exchange Commission. These risks could cause the Company's actual results to
differ materially from those expressed in any forward-looking statement that may
be made by or on behalf of the Company.
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