1
Exhibit (b)(3)
Confidential
Presentation to
GATHERER BOARD OF DIRECTORS
SEPTEMBER 12, 1997
Donaldson, Lufkin & Jenrette
2
GATHERER BOARD OF DIRECTORS
TABLE OF CONTENTS
1 EXECUTIVE SUMMARY
2 DISCUSSION OF THE OFFER
3 HUNTER COMMON STOCK STORY
4 APPENDIX
Donaldson, Lufkin & Jenrette
3
GATHERER BOARD OF DIRECTORS
EXECUTIVE SUMMARY
Donaldson, Lufkin & Jenrette 1
4
GATHERER BOARD OF DIRECTORS
EXECUTIVE SUMMARY
In response to the strategic need for Gatherer to grow and be acquisitive,
Hunter is proposing to purchase the remaining 19% of Gatherer shares that
it does not already own.
o Hunter is proposing to acquire the remaining minority interest of
Gatherer (approximately 19%) for a value of $30.25 per share.
o The consideration will be comprised of $20.17 in cash and $10.08 in
Hunter common stock.
o This amount represents a 26.4% premium to Gatherer's common stock
price of $23 15/16 per share on July 8, 1997, the date on which
Hunter suggested a dialogue on valuation, and a 4.8% premium to
Gatherer's closing stock price as of September 10, 1997.
o Hunter believes that the acquisition is an appropriate strategic
move, providing Gatherer, which currently has limited acquisition
capability, with a strong acquisition currency, financial
flexibility and leverage capacity through which Gatherer can become
a leader in its industry.
o This transaction provides Gatherer shareholders with a substantial
return, improved liquidity and the ability to participate in the
upside of the combined entity.
o Gatherer shareholders should be receptive to receiving Hunter shares
since almost all of Gatherer's significant shareholders are already
Hunter shareholders (See Appendix).
Donaldson, Lufkin & Jenrette 2
5
GATHERER BOARD OF DIRECTORS
TERMS OF THE OFFER
HUNTER'S OFFER TO ACQUIRE MINORITY INTEREST
- --------------------------------------------------------------------------------
Offer Price Per Share $30.25
Shares To Be Acquired All outstanding shares of Gatherer
common stock not currently owned by Hunter.
Form of Consideration $20.17 in cash and $10.08 in Hunter common stock.
Options All shares subject to Gatherer's incentive
compensation plans will be considered to be
outstanding. All outstanding options will vest.
Management will have the option to rollover options to
Hunter shares or receive transaction consideration.
Board of Directors Current Gatherer Directors will continue to serve on
Gatherer's Board of Directors through 1998.
Management Existing Gatherer management will remain in present
roles and Hunter expects that Jim Pouliot, Mike
Pautler and Phil Urban will be elected as senior
officers of Hunter.
Structure of Merger Either one-step merger or a tender offer followed by a
short-form merger.
Anticipated Closing Fourth quarter of 1997.
- --------------------------------------------------------------------------------
Donaldson, Lufkin & Jenrette 3
6
GATHERER BOARD OF DIRECTORS
OVERVIEW OF THE MARKETPLACE
How does Gatherer fit into the intensely competitive landscape of
non-standard personal auto and commercial insurance?
o Competition within the non-standard personal auto industry has
reached unprecedented heights:
- Large, national standard writers have ventured into the
non-standard arena in search of higher returning business;
- Competitors are focused on growth in premium volume over which
to spread underwriting and claims-handling costs. This growth
can be most quickly achieved through rate cutting and new
distribution platforms; and,
- Smaller, local producers are being forced to lower rates and
margins in order to fend off and remain competitive with
intruding regional and national players.
o Competitors have made and are seeking acquisitions in order to
provide quick and profitable growth in the non-standard auto market:
- In June 1997, General Motors Acceptance Corporation announced
its $520 million acquisition of Integon Corporation, and in
August 1997, USF&G announced its $240 million acquisition of
Titan Holdings;
- Acquisition activity has driven up non-standard personal auto
insurers' valuations as those companies who are not strong
sector players are looking to enter or improve their position
in the industry; and,
- Recent acquisitions have added well-capitalized competitors to
the non-standard personal auto sector.
o Extremely soft pricing is plaguing the commercial lines marketplace:
- Excess and surplus lines are realizing price pressure in part
due to increased capacity from new market entrants;
- In the first half of 1997, excess and surplus lines rates
declined between 10% and 15%(1) , even for the toughest
classes of business;
- Standard commercial property and casualty insurance rates also
continue to decline, while buyers demand improved service,
terms and conditions; and,
- Competitive advantages, other than price, will be difficult to
maintain under current market conditions.
(1) Source: Business Insurance, July 7, 1997.
Donaldson, Lufkin & Jenrette 4
7
GATHERER BOARD OF DIRECTORS
PROFILE OF GATHERER
Recently, Gatherer has produced outstanding results and has a strong
operational infrastructure and personnel. However, its current ownership
structure may hinder its ability to achieve scale and grow into a national
leader in its industry.
--------------------------------------------------------------------------
Highlights
--------------------------------------------------------------------------
o Strong, profitable financial results.
o Superior management team.
o Ability to reduce expense ratios and perform as a low-cost insurance
provider.
o New product offerings and opportunistic growth strategies.
o Attractive new legislation in California.
--------------------------------------------------------------------------
Concerns
--------------------------------------------------------------------------
o Lack of currency to offer as consideration in an acquisition.
o Restricted leverage capacity and financial flexibility.
o Non-standard auto insurance is becoming a business composed of
national franchises.
o Unfavorable soft markets in non-standard personal auto and
commercial insurance.
o In their current state, Gatherer's information systems will not
support its business strategy.
Donaldson, Lufkin & Jenrette 5
8
GATHERER BOARD OF DIRECTORS
RATIONALE FOR HUNTER'S PURCHASE OF SHARES
Hunter's purchase of the remaining 19% of Gatherer's outstanding shares
will assist Gatherer in becoming a national leader in its marketplace,
while providing financial benefits to Gatherer's current shareholders.
o Generates financial flexibility for Gatherer through Hunter's
balance sheet.
o Enables Gatherer to make strategic and necessary acquisitions and
Hunter's stock provides currency options.
o Offers Gatherer a larger capital base with which to support new
business and purchase/build necessary technology.
o Provides Gatherer shareholders the ability to participate in the
upside of the combined entity.
o Rewards Gatherer shareholders with substantial return in the form of
cash and shares of Hunter.
o Provides an opportunity to eliminate redundancies, allowing
increased competitiveness of the consolidated companies.
Donaldson, Lufkin & Jenrette 6
9
GATHERER BOARD OF DIRECTORS
DISCUSSION OF THE OFFER
Donaldson, Lufkin & Jenrette 7
10
GATHERER BOARD OF DIRECTORS
FIXED VALUE VS. FIXED PRICE
Given the characteristics of the proposed transaction, a fixed value
structure may be preferable to Gatherer shareholders.
o Hunter's offer for Gatherer's shares includes a cash component and a
stock component.
o The stock component can be structured to deliver a fixed value to
Gatherer shareholders regardless of Hunter's stock price movement
prior to closing.
o Alternatively, the stock component can be structured to deliver a
fixed number of Hunter shares to Gatherer shareholders.
o The fixed value structure provides Gatherer shareholders with
certainty while the fixed share structure enables Gatherer
shareholders to participate in the upward and downward movements in
Hunter's stock price prior to closing.
o Given that the proposed offer is likely to be publicly calculated by
the investment community as dilutive to Hunter's earnings per share,
Hunter has proposed to consider a fixed value structure which would
protect Gatherer shareholders from a decline in Hunter's stock price
between announcement and closing.
Donaldson, Lufkin & Jenrette 8
11
GATHERER BOARD OF DIRECTORS
FORM OF CONSIDERATION
Hunter has proposed an offer in which the consideration consists of both
cash and stock.
o The use of cash versus stock as form of consideration can alter the
results of a transaction.
ALL CASH OFFER ALL STOCK OFFER
=======================================================================================================
Dilution Less dilutive than a stock offer More dilutive than a cash offer
- -------------------------------------------------------------------------------------------------------
Taxation Fully taxable Tax-free
- -------------------------------------------------------------------------------------------------------
Liquidity Immediate liquidity Less liquidity
- -------------------------------------------------------------------------------------------------------
Reinvestment Decision Required Not necessary
- -------------------------------------------------------------------------------------------------------
Post-Transaction No participation in upside or Value based upon success of combined entity
downside of combined entity
- -------------------------------------------------------------------------------------------------------
o An offer consisting of both cash and stock provides a blend of the
above results.
Donaldson, Lufkin & Jenrette 9
12
GATHERER BOARD OF DIRECTORS
GATHERER BUSINESS OVERVIEW
The largest portion of Gatherer's premiums and underwriting income is
derived from non-standard personal auto insurance.
[THE FOLLOWING TABLE WAS DEPICTED AS A PIE CHART IN THE PRINTED MATERIAL]
GATHERER 1996 GROSS PREMIUMS WRITTEN
Personal Lines 44.6%
Standard Commercial 6.9%
Specialty Commercial 34.9%
Collateral Protection 13.7%
[THE FOLLOWING TABLE WAS DEPICTED AS A BAR CHART IN THE PRINTED MATERIAL]
1997E PRE-TAX UNDERWRITING GAIN (LOSS)
($ in millions)
Personal Lines $15.7
Standard Commercial $ 2.2
Specialty Commercial $(8.5)
Collateral Protection $ 2.1
-----
Total $11.5
Donaldson, Lufkin & Jenrette 10
13
GATHERER BOARD OF DIRECTORS
GATHERER STOCK PRICE PERFORMANCE
[GRAPHIC OMITTED]
[PLOT POINTS TO COME]
Low Price on 1/27/97 - $16.50
High Price on 9/02/97 - $29.00
(1) 4/28/97 - Public announcement: Integon hires Goldman Sachs.
(2) 6/3/97 - Public announcement: Titan Holdings hires Furman Selz.
(3) 6/23/97 - Public announcement: GMAC acquires Integon.
(4) 7/8/97 - Valuation discussions begin between financial advisors of Hunter
and Gatherer.
(5) 8/8/97 - Public announcement: USF&G acquires Titan Holdings.
Donaldson, Lufkin & Jenrette 11
14
GATHERER BOARD OF DIRECTORS
COMPARATIVE GATHERER STOCK PRICE
PERFORMANCE
[GRAPHIC OMITTED]
[PLOT POINTS TO COME]
(1) 4/28/97 - Public announcement: Integon hires Goldman Sachs.
(2) 6/3/97 - Public announcement: Titan Holdings hires Furman Selz.
(3) 6/23/97 - Public announcement: GMAC acquires Integon.
(4) 7/8/97 - Valuation discussions begin between financial advisors of Hunter
and Gatherer.
(5) 8/8/97 - Public announcement: USF&G acquires Titan Holdings.
Donaldson, Lufkin & Jenrette 12
15
GATHERER BOARD OF DIRECTORS
GATHERER STOCK PRICE PERFORMANCE
Gatherer's stock price has outperformed comparable companies' stock prices
since the commencement of the valuation dialogue between the financial
advisors of Hunter and Gatherer.
[GRAPHIC OMITTED]
[PLOT POINTS TO COME]
(1) 7/8/97 - Valuation discussions begin.
Donaldson, Lufkin & Jenrette 13
16
GATHERER BOARD OF DIRECTORS
PREMIUM OFFERED TO MARKET PRICE
Hunter believes that the offer price provides a substantial premium over
Gatherer's true value unaffected by recent transitory external factors.
o Gatherer's stock price has appreciated 54.0% since Integon announced
that it had retained Goldman Sachs, compared to appreciation of
20.0% for the prior six months.
o The expectation by Gatherer shareholders that Hunter will inevitably
purchase the remaining 19% of Gatherer's shares or will ultimately
sell Gatherer for a premium has intensified as a result of research
analyst speculation(1) and recent merger activity.
o Three of the four publicly traded non-standard personal auto writers
enjoyed appreciation far in excess of the S&P Property & Casualty
Index following the Integon announcement.
o Gatherer's stock price may have been significantly affected by the
market's expectations of a potential merger transaction.
o The premium paid by Hunter should be based on Gatherer's unaffected
stock price, which is the price at which Gatherer's stock would
trade absent transitory external factors.
o Assuming that Gatherer had enjoyed the same appreciation since the
Integon announcement as the S&P Property & Casualty Index of 20.2%,
its unaffected stock price today would be $22.38 per share.
(1) Source: Orion Capital, Expanding a Successful Model, Peter Wade (Lehman
Brothers), June 24, 1997
Donaldson, Lufkin & Jenrette 14
17
GATHERER BOARD OF DIRECTORS
GATHERER VALUATION BASED ON PREMIUMS PAID IN SELECTED GOING-PRIVATE TRANSACTIONS
Stock Price Premium Prior to Announcement Date
-----------------------------------------------
1 Day 1 Week 1 Month 3 Months 6 Months
------ ------ ------- -------- -----------
9/9/97 9/9/97 9/9/97 6/9/97 3/10/97
================================================================================
Gatherer Unaffected Stock Price $22.38 $22.38 $22.38 $22.38 $17.88 (1)
- --------------------------------------------------------------------------------
Average Premium (2) 22.2% 27.9% 29.8% 29.9% 29.6%
Implied Valuation $27.30 $28.62 $29.05 $29.07 $23.17
================================================================================
(1) Gatherer's unaffected stock price for the six months prior to announcement
date is not $22.38 because six months ago was before the announcement that
Integon had hired Goldman Sachs.
(2) Source: Securities Data Corporation. Includes all going-private
transactions, excluding those involving real estate companies, since 1990
with transaction values greater than $25 million.
Donaldson, Lufkin & Jenrette 15
18
GATHERER BOARD OF DIRECTORS
M&A VALUATION
Comparable M&A transactions indicate a valuation lower than Hunter's offer
of $30.25 per share.
($ in millions, except per share data)
Multiple of Selected Non-
Standard Auto Company
Acquisitions Implied Equity Valuation Implied Price Per Share
Gatherer ------------------------- -------------------------- ------------------------
Gatherer Per Share Low Median High Low Median High Low Median High
====================================================================================================================================
GAAP
LTM Operating Earnings $26.8 $1.79 10.9x 12.2x 28.6x $292.4 $326.0 $767.3 $19.51 $21.75 $51.19
6/30/97 Shareholders' Equity 237.8 15.81 0.97 1.60 2.88 230.7 380.5 684.8 15.34 25.30 45.54
- ------------------------------------------------------------------------------------------------------------------------------------
GAAP Average $261.5 $353.2 $726.0 $17.42 $23.52 $48.37
- ------------------------------------------------------------------------------------------------------------------------------------
SAP
1996 SAP NOI $29.8 10.2x 16.9x 24.2x $202.6 $400.9 $620.0 $13.47 $26.66 $41.23
12/31/96 SAP C&S 253.8 1.16 2.59 3.27 192.9 555.9 728.5 12.83 36.97 48.44
- ------------------------------------------------------------------------------------------------------------------------------------
SAP Average $197.8 $478.4 $674.3 $13.15 $31.81 $44.84
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Total Average $229.7 $415.8 $700.2 $15.29 $27.67 $46.60
====================================================================================================================================
Donaldson, Lufkin & Jenrette 16
19
GATHERER BOARD OF DIRECTORS
PUBLIC VALUATION--NON-STANDARD PERSONAL AUTO INSURERS
($ in millions, except per share data)
Multiple of Selected Non-
Standard Auto Company
Acquisitions Implied Equity Valuation Implied Price Per Share
Gatherer ------------------------- -------------------------- ------------------------
Gatherer Per Share Low Median High Low Median High Low Median High
====================================================================================================================================
GAAP
1997E Operating Earnings $34.1 $2.27 7.5x 13.2x 22.1x $256.7 $450.3 $751.0 $17.12 $30.02 $50.07
1998E Operating Earnings 39.4 2.61 6.6 11.1 19.3 258.2 435.7 759.5 17.10 28.86 50.30
6/30/1997 Shareholders' Equity 237.8 15.81 1.43 1.84 3.99 338.9 438.4 949.9 22.54 29.15 63.16
- ------------------------------------------------------------------------------------------------------------------------------------
GAAP Average $284.6 $441.5 $820.1 $18.92 $29.34 $54.51
- ------------------------------------------------------------------------------------------------------------------------------------
o Valuation of Gatherer based on public comparables is difficult due to the
small number of publicly traded non-standard personal auto companies
(Mobile America, Omni Insurance Group, Progressive Corp. and Titan
Holdings), the wide divergence in the market value of these companies and
their different business characteristics.
- Progressive is a stand-out, well-followed company with an
exceptional and consistent growth story;
- Mobile America is a small and under-followed company; and,
- Titan Holdings has entered into a definitive agreement to be
acquired by USF&G.
Donaldson, Lufkin & Jenrette 17
20
GATHERER BOARD OF DIRECTORS
SELECTED COMPARABLE M&A TRANSACTIONS
The following non-standard acquisitions reflect the most comparable
transactions.
(Dollars in thousands)
Total Change Consid-
Acq. of eration
Acquiror Seller Date Price Control Offered
==============================================================================================
USF&G Corp. Titan Holdings 8-Aug-97 $266,000 Yes Cash
GMAC Integon Corporation 24-June- 518,000 Yes Cash
97
Orion Capital Guaranty National 2-Jul-96 85,100 No Cash
Guaranty National Viking Insurance 18-Jul-95 102,700 Yes Cash
Hldgs.
USF&G Corporation Victoria Financial Corp. 22-May- 55,300(3) Yes Stock
Corp. 95
Integon Corporation Bankers and Shippers 22-Oct-94 142,000 Yes Cash
Insurance Co.
American Premier Leader National Corp. 20-May- 38,000 Yes Cash
Underwriters 93
American Premier American Financial 31-Dec- 335,000 Yes Stock
Underwriters Corp. 90
Jupiter Industries/ Integon Corporation 1-Aug-90 269,000 Yes Cash
Head Insurance
Investors
(Dollars in thousands) Equity Purchase Total Purchase
Price as a Price as a
Seller Financial Data: Multiple to: Multiple to:
---------------------- ----------------- ---------------
Oper.
GAAP GAAP Net GAAP SAP SAP
Acquiror NOI (1) Equity (2) Income Equity NOI C&S
====================================================================================
USF&G Corp. $14,318 $118,584 15.7x 1.97x 19.1x 3.27x
GMAC NM 179,899 NM 2.88 NM 3.25
Orion Capital 5,900 203,982 NM 1.33 NM 2.75
Guaranty National 9,263 93,277 11.1x 1.10 10.2 1.25
USF&G Corporation 1,933 28,610 28.6 1.93 24.2 2.86
Integon Corporation 12,400 99,400 11.5 1.43 22.5 2.22
American Premier 3,500 39,000 10.9 0.97 14.2 1.16
Underwriters
American Premier 26,100 210,000 12.8 1.60 14.6 2.59
Underwriters
Jupiter Industries/ 400 143,500 NM 1.87 NM 2.19
Head Insurance
Investors
---------------------------------------------------------------
High 28.6x 2.88x 24.2x 3.27x
Median 12.2 1.60 16.9 2.59
Low 10.9 0.97 10.2 1.16
---------------------------------------------------------------
---------------------------------------------------------------
Hunter's Offer 16.9x 1.91x 18.7x 2.19x
---------------------------------------------------------------
(1) Excludes realized gains and losses.
(2) Excludes mark-to-market effects of FAS 115, except for Titan Holdings
transaction (unrealized gains unreported).
(3) Represents value of consideration of announcement date. Actual
consideration was $59 million due to appreciation of USF&G stock between
announcement and closing.
Donaldson, Lufkin & Jenrette 18
21
GATHERER BOARD OF DIRECTORS
NON-STANDARD AUTO INSURERS
($ in millions, except per share data)
Total
Price Total Price/ Enterprise Value/
As of Market Enterprise -----------------------------------------------------------------
Ticker 9/10/97 Shares Value Value 1996A LTM 1997E 1998E BVPS SAP NOI SAP C&S
====================================================================================================================================
Gatherer $28.88 15.0 $434.2 $535.7 18.2x. 16.1x 12.7x 11.1x 1.83x 18.0x 2.11x
- ------------------------------------------------------------------------------------------------------------------------------------
Mobile America MAME 9.50 7.1 67.9 79.9 8.2 8.0 7.5 6.6 1.85 NM 3.42
Omni OMGR 13.75 5.7 78.4 78.4 16.3 15.5 13.3 11.9 1.43 27.5 2.13
Progressive PGR 99.25 72.1 7,154.9 7,930.8 24.3 22.8 22.1 19.3 3.99 28.5 6.14
Corp.
Titan Holdings TH 21.75 10.1 219.1 238.8 15.3 14.9 13.1 10.3 1.84 17.3 2.97
- ------------------------------------------------------------------------------------------------------------------------------------
High 22.8x 22.1x 19.3x 3.99x 28.5x 6.14x
Median 15.2 13.2 11.1 1.84 27.5 3.20
Low 8.0 7.5 6.6 1.43 17.3 2.13
====================================================================================================================================
Projected Projected
ROE EPS Growth
======================================
Gatherer 14.4% 15.0%
- --------------------------------------
Mobile America 24.5 15.1
Omni 10.7 12.6
Progressive 18.1 14.4
Corp.
Titan Holdings 14.0 27.7
- --------------------------------------
High 24.5% 27.7%
Median 16.1 14.8
Low 10.7 12.6
======================================
Donaldson, Lufkin & Jenrette 19
22
GATHERER BOARD OF DIRECTORS
HUNTER COMMON STOCK STORY
Donaldson, Lufkin & Jenrette 20
23
GATHERER BOARD OF DIRECTORS
HUNTER FINANCIAL AND OPERATIONAL HIGHLIGHTS
Hunter's past year has been highlighted by strong financial results and
positive business developments.
o In September 1996, the market applauded Hunter's decision to divest
of Security Re in order to focus on its specialty niche segmentation
strategy.
o Hunter's operating earnings increased 22% to $73 million in 1996
from $60 million in 1995 and increased 21% in the first six months
of 1997 versus the same period in 1996.
o Hunter boosted its dividend 14% in June 1997 to 16 cents per share
and announced a 2-for-1 stock split, creating increased liquidity
for Hunter shareholders.
o Hunter's EBI and DPIC units have been continually improving their
reputation and are currently acknowledged as the top performers in
their respective business sectors.
o Hunter completed a seamless management transition.
o Additional research analysts picked up coverage on Hunter over the
past year, helping to disseminate Hunter's story to the investment
community.
Donaldson, Lufkin & Jenrette 21
24
GATHERER BOARD OF DIRECTORS
HUNTER STOCK PRICE PERFORMANCE
As a result of these positive developments, Hunter's stock has appreciated
dramatically, providing investors with a 70.1% appreciation over the past
year.
[GRAPHIC OMITTED]
[PLOT POINTS TO COME]
Low Price on 9/06/96 - $25.25
High Price on 9/03/97 - $44.63
Donaldson, Lufkin & Jenrette 22
25
GATHERER BOARD OF DIRECTORS
HUNTER STOCK PRICE PERFORMANCE
Over the past year, Hunter's stock price has outperformed both comparable
specialty insurers' stock prices and the S&P Property & Casualty Index.
[GRAPHIC OMITTED]
[PLOT POINTS TO COME]
* Peer Group includes: BKLY, CB, ER, FOM, FTR, HCC, HSB, MIG, MKL, OCAS, SPC,
ZNT.
Indexed prices are market cap. weighted.
Donaldson, Lufkin & Jenrette 23
26
GATHERER BOARD OF DIRECTORS
PUBLIC VALUATION -- SPECIALTY INSURERS
Despite its strong performance, at $43.38 per share, Hunter's stock
continues to be undervalued relative to comparable specialty insurers.
($ in millions, except per share data)
Multiple of Selected
Specialty Insurance Companies Hunter Implied Valuation
Hunter ----------------------------- ----------------------------------
Hunter Per Share Low Median High Low Median High
========================================================================================================================
GAAP
1997E Operating Earnings (1) $81.8 $2.97 13.6x 17.2x 21.2x $1,108.5 $1,409.1 $1,730.6
1998E Operating Earnings (1) 93.9 3.41 11.8 15.1 18.3 1,109.1 1,414.9 1,715.3
6/30/1997 Shareholders' 550.6 20.00 1.33 2.40 3.69 733.2 1,323.6 2,029.3
Equity
- ------------------------------------------------------------------------------------------------------------------------
GAAP Average $983.6 $1,382.6 $1,825.1
========================================================================================================================
Implied Price Per Share
----------------------------
Low Median High
===============================================================
GAAP
1997E Operating Earnings (1) $40.25 $51.17 $62.85
1998E Operating Earnings (1) 40.28 51.38 62.29
6/30/1997 Shareholders' 26.63 48.07 73.69
Equity
- ---------------------------------------------------------------
GAAP Average $35.72 $50.21 $66.28
===============================================================
(1) Hunter projected operating earnings estimated by multiplying IBES
estimates by the shares outstanding at July 29, 1997.
Donaldson, Lufkin & Jenrette 24
27
GATHERER BOARD OF DIRECTORS
SPECIALTY INSURERS
($ in millions, except per share data)
Price Price/
As of Market Enterprise ---------------------------
Ticker 9/10/97 Shares Value Value 1997E 1998E BVPS
==================================================================================================================
Hunter $43.38 27.5 $1,194.4 $1,630.0 14.6x 12.7x 2.17x
- ------------------------------------------------------------------------------------------------------------------
W.R. Berkley BKLY 57.88 19.7 1,138.6 1,736.8 13.6 11.8 1.33
Chubb Corp. CB 68.13 172.5 11,749.3 12,810.1 16.5 14.7 2.22
Executive Risk ER 62.31 10.6 659.1 784.1 19.4 16.6 3.25
Foremost FOM 58.38 9.2 539.0 638.3 16.4 13.7 2.59
Frontier Insurance Group FTR 35.56 29.5 1,048.2 1,215.2 20.1 16.2 2.86
Hartford Steam Boiler HSB 54.69 19.8 1,080.7 1,100.7 18.2 15.4 2.78
HCC Insurance Holdings HCC 26.63 45.9 1,223.0 1,302.5 19.3 15.4 3.69
Markel Corp. MKL 144.31 5.5 792.3 1,035.4 21.2 18.3 3.26
Meadowbrook Insurance Group MIG 24.13 8.7 208.9 212.8 15.3 13.0 1.96
Ohio Casualty OCAS 45.63 34.1 1,555.0 1,600.0 14.5 13.0 1.85
St. Paul Cos. SPC 76.75 83.9 6,436.6 7,367.3 13.7 12.6 1.75
Zenith National Corp. ZNT 28.50 17.7 504.4 591.9 17.9 16.4 1.46
- ------------------------------------------------------------------------------------------------------------------
High 21.2x 18.3x 3.69x
Median 17.2 15.1 2.40
Low 13.6 11.8 1.33
==================================================================================================================
Enterprise Value/
------------------ Projected Projected
SAP NOI SAP C&S ROE EPS Growth
=======================================================================
Hunter 15.1x 2.43x 14.9% 14.8%
- -----------------------------------------------------------------------
W.R. Berkley 20.6 1.97 9.8 14.8
Chubb Corp. 21.6 4.51 13.4 12.1
Executive Risk 51.6 5.67 16.8 16.8
Foremost 20.7 3.17 15.7 19.7
Frontier Insurance Group 42.1 4.53 14.2 24.3
Hartford Steam Boiler 34.3 3.76 15.3 17.6
HCC Insurance Holdings 37.6 6.14 19.1 25.4
Markel Corp. 37.8 3.66 15.4 15.8
Meadowbrook Insurance Group 18.6 2.49 12.8 17.7
Ohio Casualty 14.7 1.53 12.8 11.4
St. Paul Cos. 12.6 2.46 12.8 8.9
Zenith National Corp. 17.7 2.23 8.2 9.4
- -----------------------------------------------------------------------
High 51.6x 6.14x 19.1% 25.4%
Median 21.1 3.42 13.8 16.3
Low 12.6 1.53 8.2 8.9
=======================================================================
Donaldson, Lufkin & Jenrette 25
28
GATHERER BOARD OF DIRECTORS
APPENDIX
Donaldson, Lufkin & Jenrette 26