S-3: Registration statement for specified transactions by certain issuers
Published on August 18, 1998
As filed with the Securities and Exchange Commission on August 18, 1998
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
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FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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RENAISSANCERE HOLDINGS LTD.
(Exact name of registrant as specified in its charter)
Bermuda 98-013-8020
(State or other jurisdiction (I.R.S. Employer
of incorporation of organization) Identification No.)
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Renaissance House
8-12 East Broadway
Pembroke HM 19 Bermuda
(441) 295-4513
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
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James N. Stanard
Chairman, President and Chief Executive Officer
8-12 East Broadway
Pembroke HM 19 Bermuda
(441) 295-4513
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
with a copy to:
John S. D'Alimonte, Esq.
Willkie Farr & Gallagher
787 Seventh Avenue
New York, New York 10019
(212) 728-8000
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Approximate date of commencement of proposed sale of the securities to
the public: As soon as practicable after this Registration Statement becomes
effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective Registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
(1) Estimated pursuant to Rule 457(c) under the Securities Act solely for
the purpose of calculating the registration fee based upon the average of
the high and low prices of the Common Shares quoted on The New York Stock
Exchange on August 12, 1998.
(2) The shares owned by the Selling Shareholder (as defined herein) consist
of the Registrant's Diluted Voting Class II Common Shares, par value $1.00
per share (the "DVII Shares"). The DVII Shares are convertible into an equal
number of the Registrant's Full Voting Common Shares on a one-for-one basis
at the option of the holder thereof upon two days prior written notice to
the Registrant. The Common Shares being registered hereby constitute the
Full Voting Common Shares into which such DVII Shares are convertible. See
"Plan of Distribution."
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The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment that specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933, as amended, or until this
Registration Statement shall become effective on such date as the
Commission, acting pursuant to said Section 8(a), may determine.
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PROSPECTUS
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SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED AUGUST 18, 1998
318,213 COMMON SHARES
RENAISSANCERE HOLDINGS LTD.
This Prospectus relates to the offering for sale (the "Offering") of
318,213 common shares, par value $1.00 per share (the "Common Shares") of
RenaissanceRe Holdings Ltd., a Bermuda company (the "Company"), owned by a
current shareholder of the Company (the "Selling Shareholder"). Such 318,213
shares (the "Shares") may be offered by the Selling Shareholder from time to
time in brokerage transactions at prevailing market prices on The New York Stock
Exchange, Inc. (the "NYSE") or on any other exchange on which the Common Shares
may be traded, in the over-the-counter market or otherwise, in negotiated
transactions, through the writing of options on the Shares or a combination of
such methods of sale, at fixed prices that may be changed, at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices or at negotiated prices. The Selling Shareholder may effect such
transactions by selling the Shares in or through broker-dealers, and such
broker-dealers may receive compensation in the form of discounts, concessions or
commissions from the Selling Shareholder and/or the purchasers of the Shares for
whom such broker-dealers may act as agents or to whom they sell as principal, or
both (which compensation as to a particular broker-dealer might be in excess of
customary commissions). See "Selling Shareholder" and "Plan of Distribution."
The Common Shares held by the Selling Shareholder consist of the
Company's Diluted Voting Class II Common Shares, par value $1.00 per share (the
"DVII Shares"), which have limited voting rights. The DVII Shares are
convertible into an equal number of the Company's Full Voting Common Shares on a
one-for-one basis at the option of the holder thereof upon two days prior
written notice to the Company. The Common Shares being registered hereby
constitute the Full Voting Common Shares into which such DVII Shares are
convertible. See "Selling Shareholder" and "Plan of Distribution."
None of the proceeds from the sale of the Shares by the Selling
Shareholder will be received by the Company. The Company has agreed to bear all
expenses (other than selling discounts, concessions or commissions and certain
other fees and expenses of certain advisors to the Selling Shareholder) in
connection with the registration and sale of the Shares being offered by the
Selling Shareholder. The Company has agreed to indemnify the Selling Shareholder
against certain liabilities, including liabilities under the Securities Act of
1933, as amended (the "Securities Act").
The shares of Common Stock are listed on the NYSE under the symbol
"RNR." On August 17, 1998, the closing price of the Common Shares, as reported
by the NYSE, was $45 3/4 per share.
The Shares have not been registered for sale under the securities laws
of any state or jurisdiction as of the date of this Prospectus. Brokers or
dealers effecting transactions in the Shares should confirm the registration
thereof under the securities laws of the state in which such transactions occur,
or the existence of any exemption from registration.
SEE "RISK FACTORS" BEGINNING ON PAGE 7 FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
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.
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The date of this Prospectus is , 1998.
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, THE SHARES IN ANY JURISDICTION WHERE, 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 IMPLICATIONS THAT THERE HAS NOT BEEN ANY CHANGE IN THE
FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE
DATE HEREOF.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE COMMISSIONER OF
INSURANCE FOR THE STATE OF NORTH CAROLINA, NOR HAS THE COMMISSIONER OF INSURANCE
RULED UPON THE ACCURACY OR THE ADEQUACY OF THIS DOCUMENT. THE BUYER IN NORTH
CAROLINA UNDERSTANDS THAT NEITHER THE COMPANY NOR ITS SUBSIDIARIES ARE LICENSED
IN NORTH CAROLINA PURSUANT TO CHAPTER 58 OF THE NORTH CAROLINA GENERAL STATUTES
NOR COULD THEY MEET THE BASIC ADMISSIONS REQUIREMENTS IMPOSED BY SUCH CHAPTER AT
THE PRESENT TIME.
TABLE OF CONTENTS
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
THIS PROSPECTUS INCLUDES "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF
SECTION 27A OF THE SECURITIES ACT AND SECTION 21E OF THE SECURITIES EXCHANGE ACT
OF 1934, AS AMENDED (THE "EXCHANGE ACT"). ALL STATEMENTS OTHER THAN STATEMENTS
OF HISTORICAL FACTS INCLUDED IN THIS PROSPECTUS OR INCORPORATED HEREIN BY
REFERENCE REGARDING THE COMPANY'S FINANCIAL POSITION AND BUSINESS STRATEGY MAY
CONSTITUTE FORWARD-LOOKING STATEMENTS. THESE FORWARD-LOOKING STATEMENTS RELATE,
AMONG OTHER THINGS, TO THE PLANS AND OBJECTIVES OF THE COMPANY FOR FUTURE
OPERATIONS. IN LIGHT OF THE RISKS AND UNCERTAINTIES INHERENT IN ALL FUTURE
PROJECTIONS, THE INCLUSION OF FORWARD-LOOKING STATEMENTS IN THIS REPORT SHOULD
NOT BE CONSIDERED AS A REPRESENTATION BY THE COMPANY OR ANY OTHER PERSON THAT
THE OBJECTIVES OR PLANS OF THE COMPANY WILL BE ACHIEVED. NUMEROUS FACTORS COULD
CAUSE THE COMPANY'S ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE IN THE
FORWARD-LOOKING STATEMENTS, INCLUDING THE FOLLOWING: (I) THE OCCURRENCE OF
CATASTROPHIC EVENTS WITH A FREQUENCY OR SEVERITY EXCEEDING THE COMPANY'S
ESTIMATES; (II) A DECREASE IN THE LEVEL OF DEMAND FOR PROPERTY CATASTROPHE
REINSURANCE, OR INCREASED COMPETITION OWING TO INCREASED CAPACITY OF PROPERTY
CATASTROPHE REINSURERS; (III) ANY LOWERING OR LOSS OF ONE OF THE FINANCIAL OR
CLAIMS-PAYING RATINGS OF THE COMPANY OR ONE OR MORE OF ITS SUBSIDIARIES; (IV)
ACTIONS OF COMPETITORS; (V) LOSS OF SERVICES OF ANY ONE OF THE COMPANY'S KEY
EXECUTIVE OFFICERS; (VI) THE PASSAGE OF FEDERAL OR STATE LEGISLATION SUBJECTING
RENAISSANCE REINSURANCE TO SUPERVISION OR REGULATION IN THE UNITED STATES; (VII)
CHALLENGES BY INSURANCE REGULATORS IN THE UNITED STATES TO RENAISSANCE
REINSURANCE'S CLAIM OF EXEMPTION FROM INSURANCE REGULATION UNDER THE CURRENT
LAWS; (VIII) CHANGES IN ECONOMIC CONDITIONS, INCLUDING CURRENCY RATE CONDITIONS;
OR (IX) A CONTENTION BY THE UNITED STATES INTERNAL REVENUE SERVICE THAT THE
COMPANY OR RENAISSANCE REINSURANCE IS ENGAGED IN THE CONDUCT OF A TRADE OR
BUSINESS WITHIN THE U.S. ALTHOUGH THE COMPANY BELIEVES THAT THE EXPECTATIONS
REFLECTED IN SUCH FORWARD-LOOKING STATEMENTS ARE REASONABLE, IT CAN GIVE NO
ASSURANCE THAT SUCH EXPECTATIONS WILL PROVE TO HAVE BEEN CORRECT. IMPORTANT
FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE COMPANY'S
EXPECTATIONS ("CAUTIONARY STATEMENTS") ARE DISCLOSED IN THIS PROSPECTUS,
INCLUDING WITHOUT LIMITATION, IN CONJUNCTION WITH THE FORWARD-LOOKING STATEMENTS
UNDER "RISK FACTORS." ALL SUBSEQUENT WRITTEN AND ORAL FORWARD-LOOKING STATEMENTS
ATTRIBUTABLE TO THE COMPANY OR PERSONS ACTING ON ITS BEHALF ARE EXPRESSLY
QUALIFIED IN THEIR ENTIRETY BY THE CAUTIONARY STATEMENTS.
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"). Reports, proxy
statements and other information filed by the Company with the Commission can be
inspected and copied at 450 Fifth Street, NW, Washington, D.C. 20549, and at the
following regional offices of the Commission: 7 World Trade Center, Suite 1300,
New York, New York 10048, and 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such material can also be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, NW, Washington, D.C.
20549, at prescribed rates. The Commission also maintains a World Wide Web site
(http://www.sec.gov) containing these reports, proxy statements and other
information. The Common Shares are listed on the New York Stock Exchange, and
these records and other information can also be inspected at the offices of the
New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005.
The Company has filed with the Commission a Registration Statement on
Form S-3 (together with all exhibits and amendments, the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act"),
with respect to the Shares offered hereby. This Prospectus does not contain all
of the information set forth in the Registration Statement and the exhibits and
schedules thereto, certain portions of which are omitted as
permitted by the rules and regulations of the Commission. For further
information with respect to the Company and the Common Shares, reference is made
to the Registration Statement, including the exhibits and schedules thereto. The
Registration Statement may be inspected, without charge, at the Commission's
principal office at 450 Fifth Street, NW, Washington, D.C. 20549, and also at
the regional offices of the Commission listed above. Copies of such material may
also be obtained from the Commission upon the payment of prescribed rates. The
Registration Statement may also be accessed from the Commission's World Wide Web
site listed above.
Statements contained in the Prospectus as to any contracts, agreements
or other documents filed as an exhibit to the Registration Statement are not
necessarily complete, and in each instance reference is hereby made to the copy
of such contract, agreement or other document filed as an exhibit to the
Registration Statement for a full statement of the provisions thereof, and each
such statement in the Prospectus is qualified in all respects by such reference.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated herein by reference:
1. The Company's Annual Report on Form 10-K (File No. 34-0-26512) for
the fiscal year ended December 31, 1997, filed pursuant to Section 13(a) of the
Exchange Act (the "1997 10-K").
2. The Company's Quarterly Reports on Form 10-Q (File No. 34-0-26512)
for the fiscal periods ended March 31, 1998 and June 30, 1998 (the "Forms
10-Q").
3. The Company's Current Report on Form 8-K (File No. 34-0-26512) filed
by the Company on January 6, 1998.
4. The Registration Statement on Form 8-A (File No. 000-26512) filed by
the Company on July 24, 1995, which contains a description of the Common Shares.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14
or 15(d) of the Exchange Act after the date of this Prospectus and prior to
termination of this offering of Common Stock shall be deemed to be incorporated
by reference into this Prospectus and to be a part hereof from the dates of
filing of such documents.
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 herein or in any other subsequently filed document that also is
incorporated or 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 any person to whom this
Prospectus is delivered, upon the written request of such person, a copy of any
or all of the foregoing documents incorporated herein by reference (other than
certain exhibits to such documents). Requests for such copies should be directed
to John D. Nichols, Jr., Secretary, RenaissanceRe Holdings Ltd., P.O. Box 2527,
Hamilton, HMGX, Bermuda, telephone number (441) 295-4513.
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ENFORCEABILITY OF CIVIL LIABILITIES UNDER UNITED
STATES FEDERAL SECURITIES LAWS
The Company is organized pursuant to the laws of Bermuda. In addition,
certain of the directors and officers of the Company, as well as certain of the
experts named herein, reside outside the United States, and all or a substantial
portion of their assets and the assets of the Company are located outside the
United States. As a result, it may be difficult for investors to effect service
of process within the United States upon such persons or to realize against them
in courts of the United States upon judgments of courts of the United States
predicated upon civil liabilities under the United States federal securities
laws.
The Company has been advised by its Bermuda counsel, Conyers Dill &
Pearman, that the United States and Bermuda do not currently have a treaty
providing for reciprocal recognition and enforcement of judgments in civil and
commercial matters and that there is doubt (a) whether a final judgment for the
payment of money rendered by a federal or state court in the United States based
on civil liability, whether or not predicated solely upon the civil liability
provisions of the United States federal securities laws, would be enforceable in
Bermuda against the Company or the Company's officers and directors and (b)
whether an action could be brought in Bermuda against the Company or the
Company's officers and directors in the first instance on the basis of liability
predicated solely upon the provisions of the United States federal securities
laws. A Bermuda court may, however, impose civil liability on the Company or its
directors or officers in a suit brought in the Supreme Court of Bermuda against
the Company or such persons provided that the facts alleged constitute or give
rise to a cause of action under Bermuda law. Certain remedies available under
the laws of U.S. jurisdictions, including certain remedies under the U.S.
federal securities laws, would not be allowed in Bermuda courts as contrary to
public policy.
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SUMMARY DESCRIPTION OF THE COMPANY
The following summary is qualified in its entirety by, and should be
read in conjunction with, the more detailed information (including financial
information) incorporated by reference herein. Unless the context requires
otherwise, references herein to "the Company" are to RenaissanceRe Holdings Ltd.
and its subsidiaries and references herein to "Common Shares" refer to the
Company's Common Shares, par value $1.00 per share.
RenaissanceRe Holdings Ltd. is a Bermuda company with its registered and
principal executive offices located at Renaissance House, 8-12 East Broadway,
Pembroke HM 19 Bermuda, telephone (441) 295-4513. The Company was formed in June
1993 and is the parent of Renaissance Reinsurance Ltd., a Bermuda company and a
wholly owned subsidiary ("Renaissance Reinsurance"), Glencoe Insurance Ltd., a
Bermuda company and a wholly owned subsidiary ("Glencoe"), DeSoto Insurance
Company, a Florida company and a wholly owned subsidiary of Glencoe ("DeSoto")
and Nobel Insurance Company ("Nobel"), a Texas domiciled insurance company and
wholly owned subsidiary of Renaissance U.S. Holdings Inc. ("U.S. Holdings").
The Company's principal business is property catastrophe reinsurance,
written on a worldwide basis through Renaissance Reinsurance. The Company is one
of the largest providers of property catastrophe reinsurance coverage in the
world. The Company provides property catastrophe reinsurance coverage to
insurance companies and other reinsurers primarily on an excess of loss basis.
Excess of loss catastrophe coverage generally provides coverage for claims
arising from large natural catastrophes, such as earthquakes and hurricanes, in
excess of a specified loss. In connection with the coverages it provides, the
Company is also exposed to claims arising from other natural and man-made
catastrophes such as winter storms, freezes, floods, fires and tornadoes.
The Company's principal operating objective is to utilize its capital
efficiently by focusing on the writing of property catastrophe insurance and
reinsurance contracts with superior risk/return characteristics, while
maintaining a low cost operating structure in the favorable regulatory and tax
environment of Bermuda. The Company's primary underwriting goal is to construct
a portfolio of insurance and reinsurance contracts that maximizes the return on
shareholders' equity subject to prudent risk constraints. The Company seeks to
moderate the volatility inherent in the property catastrophe reinsurance market
through the use of contract terms, portfolio selection methodology,
diversification criteria and probability analyses. While property catastrophe
reinsurance represented approximately 91% of the Company's gross premiums
written in 1997 and 95% in each of 1996 and 1995, and continues to be the
Company's primary focus, the Company has recently increased its commitment to
the primary insurance business.
The Company is continuing to expand its primary insurance business
through internal growth and acquisition. Glencoe primarily writes property
insurance on properties that are exposed to natural catastrophes. Glencoe
operates as a Bermuda-domiciled company and is eligible to write business on an
excess and surplus lines basis in 29 states, including California, where it has
primarily written earthquake exposure insurance. As of June 30, 1998, the
Company's equity in Glencoe was $57.1 million. On June 5, 1998, Glencoe
purchased all of the common stock of Glencoe held by its sole minority
shareholder, which held 20% of the outstanding stock of Glencoe, for a purchase
price of approximately $15.2 million. The Company now owns 100% of the
outstanding stock of Glencoe. For the year ended December 31, 1997, Glencoe
generated gross premiums written of $7.0 million and net income of $2.4 million.
In January 1998, the Company began to provide personal lines homeowners
coverages through DeSoto. DeSoto is a special purpose Florida homeowners
insurance company that is licensed to assume and renew homeowner policies from
the Florida Joint Underwriting Association (the "JUA"), a state sponsored
insurance company.
On June 25, 1998, the Company consummated the acquisition of the
operating subsidiaries (the "Nobel Subsidiaries") of Nobel Insurance Limited
("Nobel Limited"), including Nobel, a Texas domiciled company licensed in all 50
states, through U.S. Holdings in exchange for approximately $54.1 million in
cash (the "Nobel Acquisition"). In addition to the cash payment to acquire the
Nobel Subsidiaries, the Company provided approximately $8.9 million of limited
recourse financing to Nobel Limited to support certain of Nobel Limited's
obligations in its contemplated liquidation. The principal businesses acquired
from Nobel Limited are the service and underwriting of commercial property and
casualty risks for specialized industries and personal lines coverage for low
value dwellings. Contemporaneously with the Nobel Acquisition, Nobel Insurance
Company entered into a
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comprehensive retrospective reinsurance agreement with respect to its casualty
business with Inter-Ocean Reinsurance Company Ltd.
For the years ended December 31, 1997, 1996, 1995 and 1994, the Company
achieved returns on average shareholders' equity of 24.3%, 30.2%, 43.3% and
44.1%, respectively, and combined ratios of 47.5%, 51.3%, 52.0% and 61.6%,
respectively. The Company achieved these results despite the occurrence of
several major catastrophes in 1996 and 1995 (which, according to industry trade
sources, had the fifth and third highest level of U.S. property catastrophe
insured losses on record, respectively) and the occurrence in January 1994 of
the Northridge, California earthquake, the second largest insured catastrophe
loss in U.S. history. The year ended December 31, 1997 was a relatively light
year for natural catastrophes worldwide, compared to historical averages.
Accordingly, the reduced level of catastrophe losses resulted in a significantly
lower loss ratio in 1997 compared to 1996 and therefore positively affected the
Company's results from operations. Because of the high severity and low
frequency of losses related to the property catastrophe insurance and
reinsurance business, there can be no assurance that the Company will experience
this reduced level of losses in future years, or that the Company will achieve
similar financial results in the future. See "Risk Factors--Volatility of
Financial Results." At June 30, 1998, the Company had total assets of
approximately $1.3 billion and total shareholders' equity of approximately
$640.5 million.
The Company's experienced management team assesses underwriting
decisions on the basis of the expected incremental return on equity of each new
reinsurance contract in relation to the Company's overall portfolio of
reinsurance contracts. To facilitate this, the Company has developed REMS(C), a
proprietary, computer-based pricing and exposure management system. The Company
utilizes REMS(C) to assess property catastrophe risks, price treaties and limit
aggregate exposure. REMS(C) was developed with consulting assistance from
Tillinghast, an actuarial consulting unit of Towers, Perrin, Forster & Crosby,
Inc., and Applied Insurance Research, Inc., the developer of the CATMAPTM
system. The Company combines the analyses generated by REMS(C) with its own
knowledge of the client submitting the proposed program to assess the premium
offered against the risk of loss that such program presents.
The Company markets its reinsurance products worldwide exclusively
through reinsurance brokers. The Company receives program submissions from a
wide variety of such brokers. The Company is highly selective in writing
reinsurance contracts. For the year ended December 31, 1997, the Company
extended reinsurance coverage for only 421 programs, or only 25.8% of the
program submissions it received.
6
RISK FACTORS
Prospective investors should consider carefully the principal risk
factors set forth below as well as the other information set forth in this
Prospectus or incorporated by reference herein in evaluating the Company and its
business before purchasing the Shares offered hereby.
Volatility of Financial Results
Because the Company primarily underwrites property catastrophe
reinsurance and has large aggregate exposure to natural and man-made disasters,
the Company's operating results have historically been, and are expected to
continue to be, largely affected by relatively few events of high magnitude.
Attachment points (the amount of loss above which excess of loss reinsurance
becomes operative) of the policies written by the Company generally require
insured industry losses in excess of several hundred million dollars for the
Company to experience significant claims, although the Company is also exposed
to smaller insured events. The occurrence of claims from catastrophic events is
likely to result in substantial volatility in the Company's financial results
for any fiscal quarter or year and could have a material adverse effect on the
Company's financial condition or results of operations and could impact its
ability to write new business. The Company expects that increases in the values
and concentrations of insured property and the effects of inflation will
increase the severity of such occurrences per year in the future.
The Company's property catastrophe reinsurance contracts cover
unpredictable events such as earthquakes, hurricanes, winter storms, freezes,
floods, fires, tornadoes and other man-made or natural disasters. The Company
seeks to diversify its reinsurance portfolio to moderate the volatility
described in the preceding paragraph. The principal means of diversification
employed by the Company are by type of reinsurance, geographic coverage,
attachment point and limit per program. The Company also has in place a
portfolio of reinsurance coverage to reduce the Company's exposure to certain
events in certain geographic zones. The Company utilizes REMS(C), a proprietary,
computer-based pricing and exposure management system, to simulate 40,000 years
of catastrophe activity to obtain a probability distribution of potential
outcomes for its entire portfolio. In addition, the Company evaluates on a
deterministic basis its exposure to individual events to estimate the impact of
such events on the Company. Nonetheless, a single event or series of events
could exceed the Company's estimates, either of which could have a material
effect on the Company's financial condition or results of operation.
Business Considerations
Historically, property catastrophe reinsurers have experienced
significant fluctuations in operating results due to competition, frequency of
occurrence or severity of catastrophic events, levels of capacity, general
economic conditions and other factors. Demand for reinsurance is influenced
significantly by underwriting results of primary property insurers and
prevailing general economic conditions. The supply of reinsurance is related to
prevailing prices and levels of surplus capacity that, in turn, may fluctuate in
response to changes in rates of return being realized in the reinsurance
industry.
Based on data presented in industry trade publications, reports prepared
by reinsurance industry analysts, underwriting submissions and meetings with
clients and brokers, Management believes that the high level of worldwide
property catastrophe losses in terms of both frequency and severity from 1987 to
1993 had a significant effect on the results of property insurers and property
catastrophe reinsurers and on the worldwide property catastrophe reinsurance
market, causing some reinsurers to withdraw from the market or reduce their
underwriting commitments, while also causing a substantial increase in market
demand, particularly in the United States, Japan and the United Kingdom. Based
on these sources, Management believes that these developments from 1987 to 1993
created an imbalance between the supply of and demand for property catastrophe
reinsurance worldwide in 1993 that, in turn, caused a significant increase in
premium rates and retentions for property catastrophe reinsurance during that
year. In response to this imbalance, approximately $4.0 billion of capital
entered the Bermuda-based property catastrophe reinsurance market in 1992 and
1993 and that such capital had grown to approximately $6.8 billion as of June
30, 1998. Management believes this added capital helped to balance supply and
demand and, as a result, premium rates and other terms of trade in the property
catastrophe reinsurance market stabilized in 1994-1995. In each of 1996 and
1997, according to industry trade sources, worldwide price levels decreased by
an average of 10% to 15%. Based on publicly available industry trade sources,
price levels are expected to decline at a similar pace in 1998. However, based
upon underwriting submissions, current premium rates and retention-levels
7
have remained, and in the near future are likely to remain, higher than those
that existed in 1992. There can be no assurance, however, that premium rates or
other terms and conditions of trade will not vary in the future, that the
present level of demand will continue or that the present level of supply of
reinsurance will not increase as a result of capital provided by recent or
future market entrants or by existing property catastrophe reinsurers.
Industry Developments
Management is aware of a number of new, proposed or potential
legislative or industry changes that may impact the worldwide demand for
property catastrophe reinsurance. In the United States, the states of Hawaii and
Florida have implemented arrangements whereby property insurance in catastrophe
prone areas is provided through state-sponsored entities. The California
Earthquake Authority, the first privately financed, publicly operated
residential earthquake insurance pool, provides earthquake insurance to
California homeowners. Currently before the U.S. Congress are two draft bills,
the Homeowners' Insurance Availability Act of 1997 and the Natural Disaster
Protection and Insurance Act of 1997, which would establish a federal program to
provide reinsurance for state disaster insurance programs and ensure the
availability and affordability of insurance against catastrophic natural
disasters, respectively, and could impact upon the demand for, and availability
of, traditional reinsurance. In the United Kingdom, the government has enacted a
bill to allow insurers to build claim equalization reserves that might reduce
the amount of property reinsurance necessary in the marketplace. Management is
also aware of the incorporation of additional companies and the creation of
alternative products from capital market participants that will compete with the
catastrophe reinsurance markets. Management is unable to predict the extent to
which the foregoing new, proposed or potential initiatives may affect the demand
for the Company's products or the risks that may be available for the Company to
consider underwriting.
Claim Reserves
At June 30, 1998, the Company had outstanding reserves for claims and
claim adjustment expenses of $202.8 million. The Company incurred claims and
claims adjustment expenses of approximately $50.0 million, $86.9 million, $110.6
million and $114.1 million for the years ended December 31, 1997, 1996, 1995 and
1994, respectively.
Claims reserves represent estimates involving actuarial and statistical
projections at a given point in time of the Company's expectations of the
ultimate settlement and administration costs of claims incurred. The Company
utilizes both proprietary and commercially available models as well as
historical reinsurance industry loss development patterns to assist in the
establishment of appropriate claim reserves. Reserve estimates by new property
catastrophe reinsurers, such as the Company, may be inherently less reliable
than the reserve estimates of reinsurers with a stable volume of business and an
established claim history. In contrast to casualty losses, which frequently can
be determined only through lengthy, unpredictable litigation, non-casualty
property losses tend to be reported promptly and usually are settled within a
shorter period of time. Nevertheless, actual claims and claim adjustment
expenses paid may deviate, perhaps substantially, from the reserve estimates
reflected in the Company's financial statements. If the Company's claim reserves
are subsequently determined to be inadequate, the Company will be required to
increase claim reserves with a corresponding reduction in the Company's net
income in the period in which the deficiency is identified. There can be no
assurances that claims in respect of events that have occurred will not exceed
the Company's claim reserves and have a material adverse effect on the Company's
financial condition or results of operations in a particular period.
Competition; Non-Admitted Status
The property catastrophe reinsurance industry is highly competitive. The
Company competes, and will continue to compete, with major U.S. and non-U.S.
property catastrophe insurers, reinsurers and certain underwriting syndicates,
some of which have greater financial, marketing and management resources than
the Company. In addition, there may be established companies or new companies,
of which the Company is not aware, that may be planning to enter the property
catastrophe reinsurance market or existing property catastrophe reinsurers that
may be planning to raise additional capital. In addition, Lloyd's, in contrast
with prior practice, now allows its syndicates to accept capital from corporate
investors. Competition in the types of reinsurance business that the Company
underwrites is based on many factors, including premium charges and other terms
and conditions offered, services provided, ratings assigned by independent
rating agencies, speed of claims payment and reputation, perceived
8
financial strength and experience of the reinsurer in the line of reinsurance to
be written. Some of the reinsurers with whom the Company competes have or could
have more capital than the Company. This competition could affect the Company's
ability to attract business on terms having the potential to yield appropriate
levels of profits.
Renaissance Reinsurance is a registered Bermuda insurance company and is
not licensed or admitted as an insurer in any jurisdiction in the United States.
Because jurisdictions in the United States do not permit insurance companies to
take credit for reinsurance obtained from unlicensed or non-admitted insurers on
their statutory financial statements unless security is posted, Renaissance
Reinsurance's contracts generally require it to post a letter of credit or
provide other security after a reinsured reports a claim.
The Company does not believe that its non-admitted status in any U.S.
jurisdiction has, or should have, a material adverse effect on its ability to
compete in a large portion of the property catastrophe reinsurance market in
which it operates. However, there can be no assurances that increased
competitive pressure from current reinsurers and future market entrants, Lloyd's
decision to raise capital from corporate investors, and the Company's
non-admitted status will not adversely affect the Company.
Holding Company Structure; Limitations on Dividends
The Company is a holding company with no operations and accordingly
relies on investment income, cash dividends and other permitted payments from
its subsidiaries to make principal and interest payments on outstanding
indebtedness of the Company and to pay cash dividends, if any, to the Company's
shareholders. On June 24, 1998, in connection with the Nobel Acquisition, U.S.
Holdings borrowed $35.0 million from a syndicate of commercial lenders and
obtained a $15 million revolving credit facility from which $4 million was
borrowed on July 13, 1998 (collectively, the "U.S. Holdings Facility"), which
borrowings were guaranteed by the Company (collectively, the "Guarantee"). In
September 1997, the Company amended its credit facility with a syndicate of
commercial lenders (the "Revolving Credit Facility"). The Revolving Credit
Facility provides for borrowings thereunder of up to $200.0 million. As of June
30, 1998, $50.0 million was outstanding under the Revolving Credit Facility.
Each of the U.S. Holdings Facility, the Guarantee and the Revolving Credit
Facility contains certain covenants that restrict the ability of the Company and
its subsidiaries to pay dividends in certain instances. In March 1997, the
Company consummated an offering of $100.0 million aggregate liquidation amount
of 8.54% Capital Securities (the "Capital Securities") issued by RenaissanceRe
Capital Trust, a Delaware statutory business trust and wholly owned subsidiary
of the Company (the "Trust"). The proceeds of the Capital Securities offering
were invested by the Trust in $100.0 million aggregate principal amount of 8.54%
Junior Subordinated Debentures, due March 1, 2027 (the "Junior Subordinated
Debentures"), issued by the Company. Pursuant to its obligations with respect to
the Capital Securities and the Junior Subordinated Debentures, the Company shall
not declare or pay any dividends or distributions on, or redeem, purchase or
acquire, or make a liquidation payment with respect to, any of the Company's
capital stock if the Company shall be in default with respect to certain of its
obligations under the Capital Securities or if the Company shall have given, and
not rescinded, notice of its intention to defer its payment obligations with
respect to the Capital Securities. The payment of dividends to the Company by
its subsidiaries is limited under Bermuda law and regulations, including Bermuda
insurance law. The Insurance Act 1978 of Bermuda, amendments thereto and related
regulations require the Company's subsidiaries to maintain a minimum solvency
margin and minimum liquidity ratio, and prohibit dividends that would result in
a breach of these requirements.
Dependence on Key Employees
The Company's success has depended, and will continue to depend, in
substantial part upon the continued service of its senior management team and,
in particular, of James N. Stanard, the Company's Chairman, President and Chief
Executive Officer. The failure of the Company to retain the services of Mr.
Stanard could have a material adverse effect on the Company. Mr. Stanard serves
in his capacity with the Company pursuant to an employment agreement expiring on
July 1, 2001 or one year following a change of control. The ability of the
Company to execute its business strategy is dependent on its ability to retain a
staff of qualified underwriters and service personnel. There can be no
assurances that the Company will be successful in attracting and retaining
qualified employees. The Company does not currently maintain key man life
insurance policies with respect to any of its employees.
Under Bermuda law, non-Bermudians may not engage in any gainful
occupation in Bermuda without the specific permission of the appropriate
government authority. Such permission or a work permit for a specific period
9
of time may be extended upon showing that, after proper public advertisement, no
Bermudian (or spouse of a Bermudian) is available who meets the minimum
standards for the advertised position. Mr. Stanard's work permit expires in
1998. All of the Company's executive officers, each of whom is a United States
citizen, as well as fourteen other employees, are working in Bermuda under work
permits that expire in 1998, 1999 or 2000. The Company is not aware of any
difficulties in connection with renewing the work permits for these officers and
employees. However, there can be no assurance that these work permits will be
extended.
Reinsurance Brokers
The Company markets its reinsurance products worldwide exclusively
through reinsurance brokers. Five brokerage firms accounted for 70.1%, 58.5%,
47.9% and 53.9% of the Company's net premiums written for the years ended
December 31, 1997, 1996, 1995 and 1994, respectively. Loss of all or a
substantial portion of the business provided by such intermediaries could have a
material adverse effect on the Company.
In accordance with industry practice, the Company frequently pays
amounts owing in respect of claims under its policies to reinsurance brokers,
for payment over to the ceding insurers. In the event that a broker failed to
make such a payment, depending on the jurisdiction, the Company might remain
liable to the ceding insurer for the deficiency. Conversely, in certain
jurisdictions, when premiums for such policies are paid to reinsurance brokers
for payment over to the Company, such premiums will be deemed to have been paid
and the ceding insurer will no longer be liable to the Company for those
amounts, whether or not actually received by the Company. Consequently, in
connection with the settlement of reinsurance balances, the Company assumes a
degree of credit risk associated with brokers around the world.
Regulation
Renaissance Reinsurance is not licensed or admitted to do business in
any jurisdiction except Bermuda. The insurance laws of each state in the United
States and of many other countries regulate the sale of insurance and
reinsurance within their jurisdiction by alien insurers, such as Renaissance
Reinsurance, which is not admitted to do business within such jurisdiction.
Renaissance Reinsurance conducts its business from its office in Bermuda. There
can be no assurances that inquiries or challenges relating to the activities of
Renaissance Reinsurance will not be raised in the future or that Renaissance
Reinsurance's location, regulatory status or restrictions on its activities
resulting therefrom will not adversely affect its ability to conduct its
business.
Recently, the insurance and reinsurance regulatory framework has been
subject to increased scrutiny in many jurisdictions, including the United States
and various states in the United States. It is not possible to predict the
future impact of changing law or regulation on the Company's operations of
Renaissance Reinsurance; such changes could have a material adverse effect on
the Company or the insurance industry in general.
Glencoe is a licensed, non-admitted insurer in 29 states and is subject
to the regulation and reporting requirements of these states. In accordance with
certain requirements of the National Association of Insurance Commissioners,
Glencoe has established, and is required to maintain, a trust funded with a
minimum of $15.0 million as a condition of its status as a licensed,
non-admitted insurer in the U.S.
The Company's strategy to expand into additional insurance markets could
cause Glencoe or other U.S.-based subsidiaries to become subject to regulation
in additional jurisdictions. However, the Company intends to conduct its
operations so as to minimize the likelihood that RenaissanceRe Holdings Ltd. or
Renaissance Reinsurance will be subject to U.S. regulation.
In general, the Bermuda statutes and regulations applicable to
Renaissance Reinsurance and Glencoe are less restrictive than those that would
be applicable to Renaissance Reinsurance and Glencoe were they subject to the
insurance laws of any state in the United States applicable to admitted
insurers. No assurances can be given that if Renaissance Reinsurance or Glencoe
were to become subject to any such laws of the United States or any state
thereof or of any other country at any time in the future, it would be in
compliance with such laws.
10
Foreign Currency Fluctuations
The Company's functional currency is the U.S. dollar. A substantial
portion of the Company's premium is written in currencies other than the U.S.
dollar and the Company maintains a portion of its cash equivalent investments
and equity securities investments in currencies other than the U.S. dollar. In
the future, the Company may increase or decrease the portion of its investments
denominated in currencies other than the U.S. dollar. The Company may, from time
to time, experience exchange gains and losses and incur underwriting losses in
currencies other than the U.S. dollar, that will in turn affect the Company's
operating results.
Tax Matters
The Company believes that, to date, Renaissance Reinsurance and Glencoe
have operated and, in the future, will continue to operate their businesses in a
manner that will not cause either to be treated as being engaged in a trade or
business in the United States ("U.S. trade or business"). On this basis, the
Company does not expect Renaissance Reinsurance or Glencoe to be required to pay
U.S. corporate income tax. However, whether a corporation is engaged in a U.S.
trade or business is considered a factual question. Because there are no
definitive standards provided by the Internal Revenue Code of 1986, as amended
(the "Code"), existing or proposed regulations thereunder or judicial precedent,
and as the determination is inherently factual and not a legal issue on which
counsel can opine, there is considerable uncertainty as to activities that
constitute being engaged in a U.S. trade or business. As a result, there can be
no assurance that the United States Internal Revenue Service (the "IRS") could
not successfully contend that Renaissance Reinsurance or Glencoe is engaged in
such a trade or business. If the IRS did so contend, Renaissance Reinsurance or
Glencoe would, unless exempted from tax by the United States-Bermuda income tax
treaty (the "Treaty"), be subject to U.S. corporate income tax on that portion
of its net income treated as effectively connected with a U.S. trade or
business, as well as the U.S. corporate branch profits tax. The U.S. corporate
income tax is currently imposed at the rate of 35% on net corporate profits and
the U.S. corporate branch profits tax is imposed at the rate of 30% on a
corporation's after-tax profits deemed distributed as a dividend.
Even though the Company will take the position that neither Renaissance
Reinsurance nor Glencoe is engaged in a U.S. trade or business, Renaissance
Reinsurance has filed, and Glencoe intends to file, U.S. federal income tax
returns to avoid having all deductions disallowed in the event that either
Renaissance Reinsurance or Glencoe were held to be engaged in a U.S. trade or
business. In addition, filing U.S. tax returns will allow Renaissance
Reinsurance and Glencoe to claim benefits under the Treaty without penalty.
Even if the IRS were to contend successfully that Renaissance
Reinsurance or Glencoe was engaged in a U.S. trade or business, the Treaty could
preclude the United States from taxing Renaissance Reinsurance or Glencoe on its
net premium income except to the extent that such income were attributable to a
permanent establishment maintained by Renaissance Reinsurance or Glencoe in the
United States. Although the Company believes that neither Renaissance
Reinsurance nor Glencoe has a permanent establishment in the United States,
there can be no assurance that the IRS will not successfully contend that
Renaissance Reinsurance or Glencoe has such an establishment and therefore is
subject to taxation.
If Renaissance Reinsurance or Glencoe were considered to be engaged in a
U.S. trade or business and it were considered not to be entitled to the benefits
of the permanent establishment clause of the Treaty, and, thus, subject to U.S.
income tax, the Company's results of operations and cash flows could be
materially adversely affected.
Control by Principal Shareholders and Management
As of July 31, 1998, Warburg, Pincus Investors, L.P. ("Warburg"), GE
Investment Private Placement Partners I-Insurance, Limited Partnership, PT
Investments, Inc., and United States Fidelity and Guaranty Company
(collectively, the "Principal Shareholders") and executive officers of the
Company ("Management") owned 12.9%, 1.4%, 11.0%, 10.9% and 6.2%, respectively,
of the Common Shares, representing approximately 13.4%, 0.5%, 8.4%, 11.3% and
6.4 %, respectively, of the Company's outstanding voting power. The Principal
Shareholders are parties to a shareholders agreement among themselves and the
Company providing the Principal Shareholders (other than the Selling Shareholder
if all of the Shares are sold in the Offering) with the ability, if they act in
concert, to nominate a majority of the Board and to exert effective control over
certain actions requiring shareholder approval, including electing the Board of
Directors, adopting amendments to the Company's Memorandum of Association and
11
the Bye-Laws and approving a merger or consolidation, liquidation or sale of all
or substantially all of the assets of the Company.
Shares Eligible for Future Sale; Registration Rights
No prediction can be made as to the effect, if any, that future sales of
Common Shares, or the availability of Common Shares for future sale, will have
on the market price of the Common Shares prevailing from time to time. Public or
private sales of substantial amounts of the Common Shares following the
Offering, or the perception that such sales could occur, could adversely affect
the market price of the Common Shares as well as the ability of the Company to
raise additional capital in the public equity markets at a desirable time and
price. The Shares sold in the Offering will be freely tradable without
restriction or further registration under the Securities Act by persons other
than "affiliates" of the Company within the meaning of Rule 144 promulgated
under the Securities Act. Following the consummation of the Offering, the
Principal Shareholders and Management will hold an aggregate of 9,122,890 Common
Shares, all of which will be eligible for sale in the public market, subject to
compliance with Rule 144. Additionally, the Principal Shareholders and
Management have the right pursuant to a registration rights agreement with the
Company to cause the Company to register any Common Shares held by them under
the Securities Act. The Company may also provide for the registration of shares
currently held or acquired in the future by employees pursuant to compensation
arrangements, thereby permitting such shares to be sold in the public market
from time to time. Sales of substantial amounts of the Common Shares in the
public market following the Offering, or the perception that such sales could
occur, could adversely affect the market price of the Common Shares and may make
it more difficult for the Company to sell its equity securities in the future at
a time and price that it deems appropriate. In addition, Warburg may transfer
Common Shares held by it to its limited partners from time to time in
transactions not subject to the Securities Act, certain of which Common Shares
will thereafter be freely tradable without restriction or further registration
under the Securities Act. Since December 31, 1997, Warburg has transferred
1,000,000 Common Shares to its limited partners.
Anti-Takeover Considerations
On May 5, 1998, the Company conducted its Annual General Meeting of
Shareholders, at which each proposal to be considered by the shareholders
described in the Company's Proxy Statement relating to the Annual Meeting (the
"Proxy Statement") was adopted. Accordingly, the Memorandum of Association and
Bye-laws of the Company have been amended pursuant to such shareholder approval,
as described more fully in the Proxy Statement. As a result of these amendments,
certain provisions of the Company's Memorandum of Association and Bye-Laws have
the effect of rendering more difficult or discouraging unsolicited takeover bids
from third parties to a greater degree than would be the case without these
provisions. While these provisions have the effect of encouraging persons
seeking to acquire control of the Company to negotiate with the Board, they
could have the effect of discouraging a prospective acquirer from making a
tender offer or otherwise attempting to attain control of the Company.
The Company indirectly owns DeSoto, a Florida domiciled special purpose
insurance company, and Nobel, a Texas domiciled insurance company. The Company's
ownership of DeSoto and Nobel can, under applicable state insurance company laws
and regulations, delay or impede a change of control of the Company. Generally,
each of the Florida and Texas insurance codes provides that a domestic insurer
may merge or consolidate with or acquire control of another insurer, or a person
may acquire control of a domestic insurance company, only if the plan of merger
or consolidation or acquisition of control is submitted to and receives the
prior approval of the respective state's superintendent of insurance.
Accordingly, under applicable Florida and Texas regulations, any change of
control of the Company (which term includes for this purpose a purchase of 10%
or more of the Company's voting securities under the applicable legislation)
will require the prior notification to and approval of the Florida and Texas
insurance regulatory authorities.
Risks Relating to the Year 2000 Issue
Certain computer programs or software may recognize a date using "00" as
the year 1900 rather than the year 2000, which could result in miscalculations
or system failures. The Company has completed an assessment of its business
applications and computer systems, and believes that all critical business
applications and systems will function properly with respect to dates in the
Year 2000 and thereafter. However, a failure of such applications and systems to
function properly with respect to dates in the Year 2000 and thereafter could
adversely affect the
12
Company. The Company is in the process of evaluating its potential exposures
from the non-compliance, if any, of its vendors' and customers' systems with the
Year 2000. There can be no assurance that the systems of its vendors and
customers, on which the Company relies on for supporting information, will be
timely converted and would not have an adverse effect on the Company's business
operations. Currently, none of the Company's reinsurance or insurance policies
specifically provides coverage for Year 2000 losses, and the Company does not
intend to provide coverage for these losses. However, in the future, it is
possible that the Company may elect to provide such coverage, or that certain of
the Company's policies could be held to cover such losses. If so, there can be
no assurance that such losses would not have a material adverse effect on the
Company's future results of operations. The Company anticipates completing its
Year 2000 evaluation prior to December 31, 1998 and it is anticipated that
future costs anticipated with the Year 2000 project will not be material;
however, there can be no assurance that potential costs or losses associated
with the Year 2000 issue would not have an adverse effect on the Company's
future results of operations.
Service of Process and Enforcement of Judgments
The Company is a Bermuda company and certain of its officers and
directors are residents of various jurisdictions outside the United States. All
or a substantial portion of the assets of such officers and directors and of the
Company are or may be located in jurisdictions outside the United States.
Although the Company has irrevocably agreed that it may be served with process
in New York, New York with respect to actions based on offers and sales of the
Common Shares made hereby, it could be difficult for investors to effect service
of process within the United States on directors and officers of the Company who
reside outside the United States or to recover against the Company or such
directors and officers on judgments of United States courts predicated upon
civil liabilities under the United States federal securities laws. See
"Enforceability of Civil Liabilities Under United States Federal Securities
Laws."
13
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Shares.
All proceeds will be received by the Selling Shareholder. See "Selling
Shareholder."
14
SELECTED FINANCIAL DATA
(in thousands, except per share data)
The following table sets forth selected financial data and other
financial information of the Company as of December 31, 1997, 1996, 1995, 1994
and 1993, and for the years ended December 31, 1997, 1996, 1995, 1994 and the
period June 7, 1993 (date of incorporation) through December 31, 1993. The
balance sheet data as of December 31, 1997, 1996, 1995, 1994 and 1993 and the
statement of income data for the years ended December 31, 1997, 1996, 1995 and
1994 and for the period June 7, 1993 through December 31, 1993 were derived from
the Company's audited Consolidated Financial Statements, which have been audited
by Ernst & Young, the Company's independent auditors. The balance sheet data as
of June 30, 1998 and the statement of income data for the period January 1, 1998
through June 30, 1998 were derived from the unaudited interim financial
statements of the Company. The unaudited interim financial statements include
all adjustments, consisting of normal recurring accruals that the Company
considers necessary for a fair presentation of the financial position and
results of operations for that period. The results of operations for any interim
period are not necessarily indicative of results for the full fiscal year. The
selected financial data should be read in conjunction with the Consolidated
Financial Statements of the Company and related Notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in the
1997 10-K and the Forms 10-Q incorporated herein by reference and all other
information appearing elsewhere in this Prospectus. See "Available Information"
and "Documents Incorporated by Reference."
15
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(1) Net income per share was calculated by dividing net income available to
common shareholders by the number of weighted average Common Shares and
Common Share equivalents outstanding. Common Share equivalents are
calculated on the basis of the treasury stock method.
(2) Return on average shareholders' equity for a period of less than a full year
is calculated by annualizing the net income available to Common Shareholders
for such period and dividing it by beginning shareholders' equity; plus
one-half of such annualized net income; less one-half of the dividends paid
or payable as of the balance sheet date adjusted by one-half of the dollar
value of the year-to-date capital transactions (i.e., share issuances or
repurchases).
(3) This item reflects $100.0 million aggregate liquidation amount of the
Capital Securities issued by a subsidiary trust. The sole assets of the
trust are $103.1 million aggregate principal amount of 8.54% Junior
Subordinated Debentures due March 1, 2027 issued by the Company.
(4) Book value per Common Share was computed by dividing total shareholders'
equity by the number of outstanding Common Shares.
16
SELLING SHAREHOLDER
The following table provides certain information with respect to the
Common Shares beneficially owned by the Selling Shareholder as of August 17,
1998, and the amount of Shares offered hereunder. Because the Selling
Shareholder may offer some or all of the Shares in an offering that is not
underwritten on a firm commitment basis, no estimate can be given as to the
amount of securities that will be held by the Selling Shareholder after
completion of the Offering. See "Plan Of Distribution." To the extent required,
the specific securities to be sold, the name of the Selling Shareholder
effecting such sale, the names of any agent, dealer or underwriter participating
in such sale, and any applicable commission or discount with respect to the sale
will be set forth in a supplement to this Prospectus. The nature of the
positions, offices or other material relationships that certain Shareholders
have had with the Company or any of its predecessors or affiliates within the
past three years are set forth in documents incorporated herein by reference.
The securities offered by means of this Prospectus may be offered from time to
time by the Selling Shareholder named below:
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(1) Each named person is deemed to be the beneficial owner of securities that
may be acquired within 60 days through the exercise of options, warrants
or other rights, if any.
(2) Consists solely of DVII Shares. DVII Shares entitle the holder thereof to
one-third of a vote for each DVII Share; provided, that in no event shall
a holder of DVII Shares have greater than 9.9% of all outstanding voting
rights attached to the full voting Common Shares, inclusive of the
percentage interest in the Company represented by full voting Common
Shares owned directly, indirectly, or constructively by such holder
within the meaning of Section 958 of the Code and applicable rules and
regulations thereunder. The DVII Shares are convertible into an equal
number of the Company's Full Voting Common Shares on a one-for-one basis
at the option of the holder thereof upon two days prior written notice to
the Company.
PLAN OF DISTRIBUTION
All of the shares owned by the Selling Shareholder as of the date hereof
are DVII Shares, which are convertible into an equal number of the Company's
Full Voting Common Shares on a one-for-one basis at the option of the holder
thereof upon two days prior written notice to the Company. The Company and the
Selling Shareholder have agreed, pursuant to the Amended and Restated
Registration Rights Agreement between the Company and the Investors party
thereto, dated as of December 27, 1996, that it shall be a condition to the
delivery of the DVII Shares that, immediately following the sale thereof by the
Selling Shareholder, such shares be converted into Full Voting Common Shares.
The Selling Shareholder has informed the Company that it will sell the
Shares through one or more brokers or dealers in transactions in which the
broker or dealer so engaged will purchase the DVII Shares, convert them, and
resell full voting Common Shares as principal to facilitate the transaction.
Accordingly, all of the Shares to be resold by a broker or dealer acting as a
principal will consist solely of Full Voting Common Shares. Alternatively, any
Shares to be otherwise purchased for the account of any party hereunder shall be
required to be so converted. The Selling Shareholder has advised the Company
that the Shares may be sold from time to time, upon compliance with applicable
"Blue Sky" law, in transactions effected on the NYSE or through the facilities
of any national securities association on which any of the Shares are then
listed, admitted to unlisted trading privileges or included for quotation, in
the over-the-counter market or otherwise. The Company has not been advised of
any definitive selling arrangement as of the date of this Prospectus between the
Selling Shareholder and any broker-dealer or agent. The Company will not receive
any of the proceeds from the sale of the Shares by the Selling Shareholder.
17
Alternatively, the Selling Shareholder may from time to time offer the
securities offered hereby (a) through underwriters, dealers or agents, who may
receive compensation in the form of underwriting discounts, concessions of
commissions from the Selling Shareholder and/or the purchasers of securities for
whom they may act as agents or (b) directly to one or more purchasers.
The Selling Shareholder and any underwriters, dealers or agents that
participate in the distribution of securities offered hereby may be deemed to be
underwriters, and any profit on the sale of such securities by them and any
discounts, commissions or concessions received by any such underwriters, dealers
or agents might be deemed to be underwriting discounts and commissions under the
Securities Act. At the time a particular underwritten offer of securities is
made, to the extent required, a supplement to this Prospectus will be
distributed that will set forth the aggregate amount of securities being offered
and the terms of the offering, including the name or names of any underwriters,
dealers or agents, and discounts, commissions and other items constituting
compensation from the Selling Shareholder and any discounts, commissions or
concessions allowed or reallowed or paid to dealers.
The securities offered hereby may be sold from time to time in one or
more transactions at market prices prevailing at the time of sale, at a fixed
offering price, which may be changed, at varying prices determined at the time
of sale or at negotiated prices.
The Selling Shareholder will pay the commissions and discounts of
underwriters, dealers or agents, if any, incurred in connection with the sale of
the Shares. Pursuant to the terms of the Registration Rights Agreement entered
into between the Company and the Selling Shareholder, the Company has agreed to
pay all expenses incident to the offering and sale of the Shares to the public.
The Registration Rights Agreement provides for reciprocal indemnification
between the Company on the one hand, and the Selling Shareholder, on the other
hand, against certain liabilities in connection with the Registration Statement,
of which this Prospectus is a part, including liabilities under the Securities
Act.
LEGAL MATTERS
Certain legal matters relating to the Shares offered hereby will be
passed upon for the Company by Conyers Dill & Pearman, Hamilton, Bermuda.
Certain Bermuda tax matters will be passed upon by Conyers Dill & Pearman. The
description of United States tax laws will be passed upon by Willkie Farr &
Gallagher.
EXPERTS
The consolidated financial statements of the Company incorporated by
reference in the Company's Annual Report on Form 10-K for the year ended
December 31, 1997 have beem audited by Ernst & Young, independent auditors, as
set forth in their report thereon incorporated by reference therein and
incorporated herein by reference. Such consolidated financial statements are
incorporated by reference in reliance upon such report given on the authority of
that firm as experts in accounting and auditing.
18
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following sets forth the estimated expenses and costs in connection
with the issuance and distribution of the securities being registered hereby.
All such expenses will be borne by the Company.
Item 15. Indemnification of Directors and Officers.
Section 98 of the Companies Act of 1981 of Bermuda (the "Act") provides
generally that a Bermuda company may indemnify its directors, officers and
auditors against any liability that by virtue of Bermuda law otherwise would be
imposed on them, except in cases where such liability arises from fraud or
dishonesty of which such director, officer or auditor may be guilty in relation
to the company. Section 98 further provides that a Bermudian company may
indemnify its directors, officers and auditors against any liability incurred by
them in defending any proceedings, whether civil or criminal, in which judgment
is awarded in their favor or in which they are acquitted or granted relief by
the Supreme Court of Bermuda in certain proceedings arising under Section 281 of
the Act.
The Company has adopted provisions in its Bye-Laws that provide that the
Company shall indemnify its officers and directors to the maximum extent
permitted under the Act, except where such liability arises from willful
negligence or default.
The Company has entered into employment agreements with all of its
executive officers which each contain provisions pursuant to which the Company
has agreed to indemnify the executive as required by the Bye-Laws and maintain
customary insurance policies providing for indemnification.
The Company has purchased insurance on behalf of its officers and
directors for liabilities arising out of their capacities as such.
II-1
Item 16. Exhibits.
(a) Exhibits
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* Incorporated by reference to the Company's Quarterly Report on Form 10-Q
for the fiscal period ended June 30, 1998 (Commission File No.
34-0-26512).
** Incorporated herein by reference to the identically numbered exhibit to
the Company's Registration Statement on Form S-1 (Registration No.
33-70008), which was declared effective by the Commission on July 26,
1995.
*** Incorporated by reference to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1996 (Commission File No.
34-0-26512).
II-2
Item 17. Undertakings.
The Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent
post-effective amendment thereof) that, individually or in the aggregate,
represent a fundamental change in the information set forth in the registration
statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed pursuant to Section 13 or
Section 15(d) of the Exchange Act;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered that remain unsold at the termination of
the offering.
The Registrant also hereby undertakes that, for purposes of determining
any liability under the Securities Act of 1933, each filing of the registrant's
annual report pursuant to section 13(a) or section 15(d) of the Exchange Act and
each filing of an employee benefit plan's annual report pursuant to section
15(d) of the Exchange Act that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions, described under Item 14 above, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission, such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the questions of
whether such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
RenaissanceRe Holdings Ltd. certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on Form S-3 and has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, on the 17th day of August, 1998.
RENAISSANCERE HOLDINGS LTD.
By: /s/ James N. Stanard
--------------------------------------
James N. Stanard
President, Chief Executive Officer and
Chairman of the Board of Directors
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature
appears below constitutes and appoints each of John M. Lummis and John D.
Nichols, Jr., and each of them, as his true and lawful attorneys-in-fact and
agents for the undersigned, with full power of substitution, for and in the
name, place and stead of the undersigned to sign and file with the Securities
and Exchange Commission under the Securities Act of 1933, as amended, (i) any
and all pre-effective and post-effective amendments to this registration
statement, (ii) any registration statement relating to this offering that is be
effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933,
as amended, (iii) any exhibits to any such registration statement or
pre-effective or post-effective amendments or (iv) any and all applications and
other documents in connection with any such registration statement or
pre-effective or post-effective amendments, and generally to do all things and
perform any and all acts and things whatsoever requisite and necessary or
desirable to enable the Registrant to comply with the provisions of the
Securities Act of 1933, as amended, and all requirements of the Securities and
Exchange Commission.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons on behalf of the
Registrant in the capacities and on the dates indicated.