Alan L. Hunte, Vice President, Chief Financial Officer and Treasurer,
Trenwick Group Inc., (NASDAQ National Market: TREN)
(203) 353-5500
Steven J. Bensinger, President, Chartwell Re Corporation
(NYSE: CWL) (203) 705-2520; 011-44-171-369-3000
TRENWICK GROUP INC. TO ACQUIRE CHARTWELL RE CORPORATION THROUGH A MERGER
Stamford Connecticut, June 22, 1999 . . .
Trenwick Group Inc. ("Trenwick") and Chartwell Re Corporation
("Chartwell") announced today that they have signed a definitive agreement
for Trenwick to acquire Chartwell. James F. Billett, Jr. will continue as
Chairman, President and Chief Executive Officer of Trenwick, and Richard E.
Cole, Chartwell's Chairman and Chief Executive Officer, will join Trenwick
as Vice Chairman and a member of its Board of Directors. Three of
Chartwell's independent directors will be invited to join Trenwick's Board.
Under the terms of the merger agreement, shareholders of Chartwell will
receive 0.825 Trenwick shares for each Chartwell share in a tax-free
transaction. Based on Trenwick's closing price of $28.88 per share on
Monday, June 21, each Chartwell share would be valued at $23.82, and the
total consideration for the acquisition, including the assumption of
Chartwell's debt and the planned purchase by Chartwell of reserve
protection, would be approximately $368 million. The equity consideration
plus the cost of the reserve protection is approximately equal to 0.9 times
Chartwell's book value at March 31, 1999.
The transaction is subject to the approval of the respective companies'
shareholders, expiration of the applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act, regulatory approvals and
other customary closing conditions.
On a combined basis, the new Trenwick would have had assets in excess of $3
billion, shareholders' equity of $517 million and total capitalization of
$806 million as of March 31, 1999. Based on current projections, combined
gross written premiums for 1999 are expected to approximate $891 million.
At closing, the combination of Trenwick and Chartwell will result in the
second largest independent reinsurer in the U.S., as measured by surplus.
The company would have placed within the top ten domestic reinsurers as
ranked by surplus on the Reinsurance Association of America's March 31,
1999 report.
The companies believe that the transaction provides a cost-effective means
of augmenting capital, accelerating premium growth and adding structural
platforms for further expansion. The addition of Chartwell's U.S.
reinsurance business, its admitted and non-admitted U.S. insurance
companies and its operations at Lloyd's continues
Trenwick's strategy of entering new markets and product lines that began
with Trenwick's acquisition of Trenwick International (formerly Sorema
U.K.) in 1998. Trenwick expects that consolidating the two companies will
generate substantial economies and financial benefits and will produce a
transaction that will be immediately accretive to Trenwick's shareholders.
The combination is expected to produce $15 million and $25 million in
expense savings in 2000 and 2001, respectively.
As part of the transaction, Chartwell will purchase $100 million in reserve
protection. The coverage will apply to all of Chartwell's business,
including its operations at Lloyd's, underwritten prior to closing. This
reinsurance insulates the future results of the combined companies from any
unanticipated problems which may arise from Chartwell's past operations.
Trenwick Group Inc. is a holding company with two principal operating
subsidiaries, Trenwick America Re, which provides treaty and facultative
reinsurance to insurers of property and casualty risks in the United
States, and Trenwick International, which underwrites treaty and
facultative reinsurance as well as specialty insurance on a worldwide
basis. Trenwick America Re is rated A+ (Superior) by A.M. Best Company and
is assigned a claims-paying ability rating of A+ by Standard & Poor's.
Trenwick International is rated A (Excellent) by A.M. Best Company and has
also been assigned a claims-paying ability rating of A+ by Standard &
Poor's.
Chartwell is an insurance holding company with global underwriting and
service operations, conducting its business in the United States and in the
Lloyd's market through its principal operating subsidiaries, Chartwell
Reinsurance Company, INSCORP and Chartwell Managing Agents Limited ("CMA").
Chartwell Reinsurance Company underwrites treaty reinsurance through
reinsurance brokers for casualty and, to a lesser extent, property risks as
well as for marine and aviation risks. INSCORP writes property and casualty
insurance through specialty program administrators. Chartwell Reinsurance
Company and INSCORP are rated A (Excellent) and A- (Excellent),
respectively, by A.M. Best Company and are assigned an A- claims-paying
ability rating by Standard & Poor's. CMA manages seven Lloyd's syndicates
with a total underwriting capacity for 1999 of approximately (pound)300
million ($500 million). All of CMA's syndicates enjoy the benefit of the
ratings of Lloyd's, which is rated "A" (Excellent) by A.M. Best Company and
has an A+ claims-paying ability rating from Standard & Poor's.
Donaldson, Lufkin & Jenrette Securities Corporation acted as financial
advisor to Trenwick for the transaction and Goldman, Sachs & Co. acted as
financial advisor to Chartwell.
* * *
This press release contains forward looking statements of management's
beliefs, estimates, projections and assumptions for the financial
condition, results of operations business and prospects of Trenwick after
the transaction, including anticipated cost savings and potential for
premium growth and business expansion that will result. These forward
looking statements involve certain risks and uncertainties, including those
detailed from time to time in Trenwick's and Chartwell's reports and
filings with the Securities and Exchange Commission. Additional factors
that may cause actual results to differ materially from those contemplated
by such forward looking statements include, among others, that expected
cost savings may not be fully realized within the anticipated time frame,
that difficulties related to the integration of the businesses of Trenwick
and Chartwell are greater than expected or that expectations for growth may
not be realizable.
June 22, 1999