Filed by CII Financial, Inc. Pursuant to Rule 425 under the Securities Act of 1933 For: CII Financial, Inc. Commission File No.: 333-52726 CII FINANCIAL, INC. California Indemnity Insurance Company Commercial Casualty Insurance Company subsidiaries of Sierra Health Services, Inc. P.O.Box 15645, Las Vegas, Nevada 89114-5645 April 23, 2001 To Holders of CII Financial 7 1/2% Convertible Subordinated Debentures Due September 15, 2001: You have only a few days left to participate in our offer to acquire our outstanding $47,059,000 of 7 1/2% Convertible Subordinated Debentures Due September 15, 2001 (CUSIP No. 12551LAB7). As of this time, we have received tenders or have reached agreement with holders or their representatives representing approximately 85% of the outstanding old debentures. However, our offer is conditioned on receiving tenders from at least 90% of the outstanding old debentures. Therefore, we need your participation in order to complete the offer. The offer will expire at 11:59 p.m., New York City time, on Tuesday, May 1, 2001. Accordingly, you have only a short time left to tender your old debentures. The final terms of the offer include the following: - We are offering to pay a cash purchase price of $739.12 per $1,000 principal amount of old debentures for up to a total of $27,059,000 principal amount of old debentures. - We are also offering to issue $1,000 principal amount of new 9 1/2% senior debentures due September 15, 2004, for each $1,000 principal amount of old debentures, up to a total of $20,000,000 principal amount of old debentures. - Accrued interest on the old debentures will be paid in cash. If holders of more than $27,059,000 total principal amount of old debentures elect to tender their debentures for cash, we will purchase a total of $27,059,000 principal amount of old debentures for cash and we will exchange the balance of the tendered debentures for new 9 1/2% senior debentures. All holders who elect to receive cash will be treated equally in this process. It is a condition of the offer that at least $27,059,000 principal amount of old debentures be tendered for cash and that no more than $20,000,000 total principal amount of old debentures be tendered for new 9 1/2% senior debentures. If you want to participate in the offer, you must make the necessary arrangements promptly. In particular, if your old debentures are held through a broker, dealer, bank, trust company or other nominee, you will need to instruct that firm to tender the old debentures on your behalf. Since this procedure may take a considerable amount of time, you should give these instructions immediately. If the exchange offer is unsuccessful, we will have no available source of funds to pay your old debentures when they mature. Although our insurance subsidiaries are solvent, CII Financial is a holding company with no significant operating assets of our own. Our insurance subsidiaries are regulated insurance companies, which are restricted from providing us with dividends or other funds. Accordingly, if the offer is unsuccessful, we expect that owners of our old debentures would only receive repayment of little or none of the principal amount of their old debentures. If the exchange offer is successful, but you do not tender your old debentures prior to the expiration of the offer, you may be unable to recover your investment in the old debentures for several reasons. You may be unable to sell any old debentures that remain outstanding after completion of the offer because the old debentures are not listed on any securities exchange and there is no active trading market for the old debentures. In addition, we may not have sufficient funds to repay any remaining old debentures when they mature. If we default on the old debentures, we will be unable to repay any remaining old debentures until all of our senior debt has first been paid in full. Any remaining old debentures will rank junior in right of payment to more than $164 million of our senior debt, including our guaranty of the $135 million credit facility of our parent, Sierra Health Services, Inc., and approximately $20 million of new 9 1/2% senior debentures. The complete terms of the offer are contained in our Preliminary Prospectus and Exchange Offer dated April 18, 2001, which was sent to you previously. If you need a copy of this prospectus or need assistance in making arrangements to tender your old debentures, please call the Information Agent for the offer, D.F. King & Co., at (800) 735-3591. If you have any questions about the offer, please call the Dealer Manager for the offer, Banc of America Securities LLC, at (888) 292-0070. We appreciate your consideration of our offer. Sincerely, [GRAPHIC OMITTED][GRAPHIC OMITTED] Kathleen M. Marlon Chairman, President, and Chief Executive Officer Additional Information and Where to Find It: CII Financial, Inc. has filed a Registration Statement with the Securities and Exchange Commission on Form S-4 registering the new debentures to be issued in the exchange offer. The Registration Statement and the preliminary prospectus contained therein contain important information about CII Financial, the exchange offer and related matters. Security holders are urged to read the Registration Statement and the preliminary prospectus contained therein, CII Financial's Schedule TO and any other relevant documents filed by CII Financial with the SEC. The Registration Statement has not yet become effective. The new debentures may not be sold and, although you may tender your old debentures, tenders may not be accepted prior to the time the Registration Statement becomes effective. This shall not constitute an offer to sell or an offer to buy nor shall there be any sale of the new debentures in any State in which such offer, solicitation or sale would be unlawful. Security holders are able to obtain copies of the Registration Statement on Form S-4 and the preliminary prospectus, CII Financial's Schedule TO and any other relevant documents for free through the Web site maintained by the SEC at http://www.sec.gov. In addition, these documents are available free of charge by contacting the Information Agent for the offer, D.F. King & Co., at (800) 735-3591. If you have any questions about the offer, please call the Dealer Manager for the offer, Banc of America Securities LLC, at (888) 292-0070.
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425 Filing
Cii Financial Inactive 425Business combination disclosure
Filed: 24 Apr 01, 12:00am