1
Exhibit (b)(4)
Guaranty National
Corporation
Presentation to the Special Committee of the Board of Directors
October 30, 1997
Confidential
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GUARANTY NATIONAL CORPORATION / OCTOBER 30, 1997
Disclaimer
These materials are based solely on information received from
publicly available documents and certain other information provided
by the management of Guaranty National Corporation ("Guaranty
National" or the "Company"). Salomon Brothers Inc ("Salomon") has
had discussions with certain senior officers of Guaranty, but has
not attempted independently to investigate or verify such
information, and Salomon does not assume responsibility for the
accuracy or the completeness of such information. With respect to
the projections included in these materials, Salomon has relied
solely on estimates from the management of Guaranty. Projections
involve elements of subjective judgment and analysis, and there can
be no assurance that such projections will be attained. Salomon
expresses no opinion as to and assumes no responsibility for the
accuracy of such projections or the assumptions underlying them.
These materials are being furnished and should be considered only in
connection with the opinion being provided by Salomon, and are not
to be circulated to, or used or relied upon by, any other persons,
without Salomon's prior consent.
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GUARANTY NATIONAL CORPORATION / OCTOBER 30, 1997
Contents
1. Background Information 1
2. Summary Valuation Analysis 13
3. Discounted Cash Flow Analysis 16
4. Comparable Company Analysis 21
5. M&A Transaction Analysis: Non-Standard Auto Transactions 24
6. Squeeze Out Transaction Analysis: Insurance Industry 29
7. Merger Consequences Analysis 34
Appendices
Acquisition of Unisun Insurance 43
Selected P&C Industry Merger and Acquisition Transactions 45
Selected Squeeze Out Transaction Analysis 49
GNC: Ownership Profile 53
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GUARANTY NATIONAL CORPORATION / OCTOBER 30, 1997
Background Information
1
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GUARANTY NATIONAL CORPORATION / OCTOBER 30, 1997
GNC: Price / Volume Performance
Daily Data -- 1/2/97 through 10/28/97
[GRAPHIC OMITTED]
[PLOT POINTS TO COME]
Market Statistics:
Price: $33.31
Market Cap.: 501.5
Street Estimates (a)
P / 1997E: 15.3x
P / 1998E: 13.8
Management Estimates
P / 1997E: 14.7x
P / 1998E: 12.6
P / Book Value: 1.80
E.V. / Stat. Surplus: 2.08
Shares Outstanding: 15.1
Street Estimates (a)
1997E EPS: $2.18
1998E EPS: 2.41
Management Estimates
1997E EPS: 2.26
1998E EPS: 2.65
Book Value / Share: 18.51
Statutory Surplus: 289.3
N.B. Data at or for the twelve months ended September 30, 1997. Market price as
of October 28, 1997.
(a) Based on mean First Call estimates as of October 22, 1997.
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GUARANTY NATIONAL CORPORATION / OCTOBER 30, 1997
OC: Price / Volume Performance
Daily Data -- 1/2/97 through 10/28/97
[GRAPHIC OMITTED]
[PLOT POINTS TO COME]
Market Statistics:
Price: $44.75
Market Cap.: 1,233.8
Street Estimates (a)
P / 1997E: 15.1x
P / 1998E: 13.2
Management Estimates
P / 1997E: 14.9x
P / 1998E: 12.7
P / Book Value: 1.80
E.V. / Stat. Surplus: 2.10
Shares Outstanding: 27.6
Street Estimates (a)
1997E EPS: $2.97
1998E EPS: 3.40
Management Estimates
1997E EPS: 3.00
1998E EPS: 3.51
Book Value / Share: 24.83
Statutory Surplus: 795.1
N.B. Data at or for the twelve months ended September 30, 1997. Market price as
of October 28, 1997.
(a) Based on mean First Call estimates as of October 22, 1997.
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GUARANTY NATIONAL CORPORATION / OCTOBER 30, 1997
GNC: Stock Price Performance (6/30/97 - 9/16/97)
Guaranty National Corporation
======================================================================================================================
Closing Closing
Date High Low Price Volume Date High Low Price Volume
- --------- -------- -------- -------- -------- ---------- -------- -------- ------- --------
06/30/97 $24.63 $24.00 $24.00 35,800 08/08/97 $27.69 $27.31 $27.31 8,600
07/01/97 24.56 24.13 24.56 5,800 08/11/97 27.63 27.38 27.63 1,800
07/02/97 24.69 24.31 24.31 4,500 08/12/97 28.00 27.63 27.75 3,100
07/03/97 24.38 24.19 24.31 3,200 08/13/97 27.63 27.50 27.56 2,000
07/07/97 24.63 24.19 24.25 3,500 08/14/97 28.13 27.63 27.88 7,700
07/08/97 24.50 23.94 23.94 3,900 (a) 08/15/97 28.44 27.94 28.44 6,900
07/09/97 23.94 23.56 23.75 4,900 08/18/97 28.50 28.31 28.44 2,500
07/10/97 24.19 23.75 24.19 15,600 08/19/97 28.38 27.88 28.13 19,800
07/11/97 24.13 24.06 24.13 1,000 08/20/97 28.13 27.81 28.13 5,700
07/14/97 23.94 23.38 23.50 7,800 08/21/97 28.25 28.00 28.19 2,500
07/15/97 23.50 23.13 23.38 6,000 08/22/97 28.31 28.25 28.31 1,500
07/16/97 23.31 23.00 23.25 6,800 08/25/97 28.38 28.13 28.13 36,800
07/17/97 23.56 23.25 23.56 1,600 08/26/97 28.56 28.25 28.56 9,400
07/18/97 23.69 23.56 23.56 6,300 08/27/97 28.50 27.63 28.00 4,100
07/21/97 23.75 25.56 23.69 7,000 08/28/97 28.13 27.88 28.13 13,700
07/22/97 23.88 23.75 23.75 6,500 08/29/97 28.38 28.19 28.19 5,900
07/23/97 24.00 23.88 24.00 1,400 09/02/97 29.00 27.94 29.00 15,000
07/24/97 24.63 24.25 24.63 4,500 09/03/97 28.69 28.25 28.50 14,300
07/25/97 25.25 24.75 25.13 20,400 (b) 09/04/97 28.63 26.88 26.88 17,800
07/28/97 25.56 25.38 25.50 4,000 09/05/97 27.50 26.88 27.50 3,400
07/29/97 25.88 25.38 25.38 5,900 09/08/97 28.44 27.50 28.44 7,300
07/30/97 26.06 25.50 26.06 5,800 09/09/97 28.63 28.25 28.63 2,300
07/31/97 26.75 26.31 26.63 5,300 09/10/97 28.88 28.50 28.88 20,900
08/01/97 26.94 26.50 26.75 7,200 09/11/97 29.06 29.00 29.06 1,700
08/06/97 26.75 26.56 26.63 3,800 09/12/97 30.13 29.00 30.00 17,300
08/05/97 26.88 26.69 26.75 9,200 09/15/97 31.00 30.19 31.00 14,000
08/06/97 27.50 26.63 27.38 11,300 (c) 09/16/97 32.50 31.50 32.06 20,300
08/07/97 27.50 27.38 27.44 12,900
- --------------------------------------------------------- ------------------------------------------------------
(a) OC initiates dialogue regarding the potential purchase of non-OC held GNC
shares.
(b) GNC reports second quarter earnings.
(c) S&P assigns 'A' claims paying rating to GNC.
=====================================
Summary Statistics: 6/30/97 - 9/16/97
=====================================
Average Daily Volume 8,695
Mean Price $26.60
Median Price 27.31
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=====================================
Summary Statistics: 7/25/97 - 9/16/97
=====================================
Average Daily Volume 9,516
Mean Price $27.90
Median Price 28.13
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GUARANTY NATIONAL CORPORATION / OCTOBER 30, 1997
GNC: Stock Price Performance (9/17/97 - 10/28/97)
Guaranty National Corporation
================================================================================
Closing
Date High Low Price Volume
- -------- ------- ------- ------- --------
09/17/97 32.63 32.00 32.50 9,700
09/18/97 35.25 33.25 34.56 81,300(a)
09/19/97 34.88 34.25 34.56 36,200
09/22/97 34.44 34.13 34.25 55,800
09/23/97 34.38 34.25 34.31 57,600
09/24/97 34.31 34.13 34.19 7,800
09/25/97 34.13 33.81 33.81 13,800
09/26/97 33.94 33.81 33.88 18,100
09/29/97 33.94 33.81 33.81 49,600
09/30/97 33.94 33.75 33.94 43,900
10/01/97 33.94 33.88 33.94 12,000
10/02/97 33.88 33.88 33.88 2,800
10/03/97 33.94 33.88 33.88 5,400
10/06/97 34.00 33.81 33.88 24,200
10/07/97 34.13 33.88 33.88 19,600
10/08/97 34.06 33.75 34.00 20,300
10/09/97 33.88 33.38 33.88 13,600
10/10/97 34.00 33.69 34.00 2,500
10/13/97 34.19 33.75 34.19 22,100
10/14/97 34.13 34.00 34.06 3,100
10/15/97 34.06 34.88 33.94 6,400
10/16/97 34.06 34.88 34.06 4,800
10/17/97 34.31 34.06 34.31 11,000
10/20/97 34.31 34.13 34.25 7,500
10/21/97 34.88 34.13 34.69 21,100
10/22/97 34.75 34.19 34.19 5,400
10/23/97 34.69 34.31 34.44 7,100
10/24/97 34.31 34.00 34.00 3,400
10/27/97 34.00 33.50 33.50 25,600
10/28/97 33.50 33.13 33.31 18,800
- --------------------------------------------------------------------------------
High $35.25 $34.88 $34.69 81,300
Median 34.09 33.88 34.00 13,700
Low 32.63 32.00 32.50 2,500
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(a) OC announces intention to commence tender offer at $34.00 per GNC share
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Summary Statistics (9/17/97 - 10/28/97)
=======================================
Average Daily Volume 21,394
High $34.69
Mean 33.98
Median 34.00
Low 32.50
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GUARANTY NATIONAL CORPORATION / OCTOBER 30, 1997
GNC/OC: Relative Price Performance
Daily Data -- 1/1/97 through 10/28/97
Price as a Percent of Base Period (%)
[PLOT POINTS TO COME]
Source: Salomon Brothers Inc sb69751.wmf
(a) Includes American Financial Group, Mobile America Corp., Penn-America
Group, Progressive Corp and Symons International Corp.
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GUARANTY NATIONAL CORPORATION / OCTOBER 30, 1997
Valuation Comparison: Personal Lines
May 18, 1996 October 28, 1997
-------------------------------------- ----------------------------------- Change in
Company Ticker Stock Price P/Book(a) P/1997E(b) Stock Price P/Book(c) P/1998E(d) Stock Price
================================================================================================================================
Guaranty National Corporation GNC $17.13 1.19x 9.8x $33.31 1.80x 13.8x 94.5%
Orion Capital Corporation OC 23.50 1.34 9.0 44.75 1.80 13.2 90.4
Personal Lines
Allstate Corp. (e) ALL $40.00 1.46x 8.9x $84.25 2.55x 15.0x 110.6%
SAFECO Corp. (e) SAFC 34.00 1.10 10.1 47.25 1.37 13.3 39.0
Mercury General Corp. (e) MCY 23.00 2.23 11.2 41.63 3.28 15.0 81.0
20th Century Industries TW 17.00 1.43 11.4 23.63 2.68 15.6 39.0
Horace Mann Educators Corp. HMN 32.00 1.74 9.0 55.50 2.52 13.5 73.4
Commerce Group CGI 21.13 1.40 8.0 33.19 1.97 13.8 57.1
Citzens Corp. (e) CZC 18.13 0.94 7.6 29.00 1.28 12.1 60.0
Allied Group (e) GRP 26.08 1.73 8.9 46.25 2.82 13.6 77.4
Non-Standard Auto
Progressive Corp. PGR 47.13 2.38 12.5 109.44 3.83 21.0 132.2
American Financial Group (e) AFG 29.75 1.29 7.9 36.06 1.31 10.4 21.2
Integon Corp. IN 18.50 1.84 8.6 25.50 2.35 21.6 37.8
Penn-America Group PAGI 8.75 1.60 5.3 19.13 1.92 15.1 118.6
Omni (e) OMGR 8.75 1.04 8.8 30.69 3.18 26.5 250.7
Mobile America (e) MAME 8.89 2.04 8.2 13.25 2.56 8.9 49.1
S&P 500 SPX 652.09 -- 16.2 883.37 -- 19.4 35.5
Median (f) -- 1.53x 8.9x -- 2.54x 13.7x 66.7%
Mean (f) -- 1.59x 9.0x -- 2.34x 13.9x 71.5%
GNC/Median -- 77.7% 110.7% -- 71.0% 100.6% --
GNC/Mean -- 75.0% 108.6% -- 76.9% 99.1% --
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N.B. Historical prices adjusted for stock splits and stock dividends.
(a) Book value as of March 31, 1996.
(b) Based on median IBES estimates as of May 16, 1996.
(c) Book value as of September 30, 1997, except as noted.
(d) Based on mean First Call estimates as of October 22,1997.
(e) Book value as of June 30, 1997.
(f) October 28, 1997 figures exclude Integon and Omni.
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GUARANTY NATIONAL CORPORATION / OCTOBER 30, 1997
Market Price Comparison: Specialty Commercial
May 18, 1996 October 28, 1997
-------------------------------------- ----------------------------------- Change in
Company Ticker Stock Price P/Book(a) P/1997E(b) Stock Price P/Book(c) P/1998E(d) Stock Price
================================================================================================================================
Guaranty National Corporation GNC $17.13 1.19x 9.8x $33.31 1.80x 13.8x 94.5%
Orion Capital Corporation OC 23.50 1.34 9.0 44.75 1.80 13.2 90.4
Specialty Commercial
Berkley, W.R. BKLY $28.67 1.22x 10.0x $39.25 1.42x 12.0x 36.9%
Frontier Insurance Group (e) FTR 15.39 0.95 7.5 33.94 3.38 15.0 120.5
Markel Corp. MKL 84.00 1.96 12.8 148.50 2.39 18.9 76.8
Executive Risk (e) ER 30.75 2.63 11.3 68.44 3.83 18.2 122.6
Acceptance Insurance AIF 16.88 1.40 8.0 24.50 1.52 9.6 45.2
RLI Corporation RLI 23.50 1.06 7.3 41.31 1.37 12.2 75.8
Baldwin & Lyons Inc. BWINB 16.25 0.93 13.5 20.38 0.98 18.9 25.4
S&P 500 SPX 652.09 16.2 883.37 19.4 35.5
Median -- 1.22x 10.0x -- 1.52x 15.0x 75.8%
Mean -- 1.45x 10.lx -- 2.13x 15.0x 71.9%
GNC/Median -- 97.9% 98.0% -- 118.6% 92.5% --
GNC/Mean -- 82.0% 97.4% -- 84.6% 92.4% --
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N.B. Historical prices adjusted for stock splits and stock dividends.
(a) Book value as of March 31, 1996.
(b) Based on median IBES estimates as of May 16, 1996.
(c) Book value as of June 30, 1997, unless otherwise noted.
(d) Based on mean First Call estimates as of September 30, 1997.
(e) Book value as of June 30, 1997.
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GUARANTY NATIONAL CORPORATION / OCTOBER 30, 1997
GNC: Summary of Earnings Estimates
First Call (a) I/B/E/S (b)
------------------------------------------------------------ ----------------------------------
Current Previous
---------------------------------- ----------------------
Last Last
Source 1997 1998 Confirmed 1997 1998 1997 1998 Confirmed
============================== ========== ========== ========== ========== ========== ========== ========== ==========
ABN Amro Chicago Corp. $2.20 $2.50 09/19/97 $1.90 $2.20 $2.20 $2.50 09/19/97
Branch Research -- -- -- -- -- 2.00 2.30 09/03/97
Conning & Co. 2.25 2.55 07/29/97 1.95 2.20 2.25 2.55 07/29/97
Dowling & Partners 2.15 2.40 09/17/97 1.90 2.10 2.15 2.40 09/17/97
Fox-Pitt 2.13 2.20 08/15/97 1.90 2.10 2.13 2.20 08/15/97
============================== ========== ========== ========== ========== ========== ========== ========== ==========
Median $2.18 $2.45 -- $1.90 $2.15 $2.15 $2.40 --
Mean 2.18 2.41 -- 1.91 2.15 2.15 2.39 --
Original Management Estimates 2.27 2.61 -- -- -- 2.27 2.61 --
Revised Management Estimates 2.26 2.65 -- -- -- 2.26 2.65 --
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(a) First Call estimates as of October 23, 1997.
(b) I/B/E/S estimates as of October 16, 1997.
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GUARANTY NATIONAL CORPORATION / OCTOBER 30, 1997
OC: Summary of Earnings Estimates
First Call (a) I/B/E/S (b)
------------------------ ------------------------
Source 1997 1998 1997 1998
========================= ========== ========== ========== ==========
ABN Amro Chicago Corp. $2.90 $3.30 $3.00 $3.35
Branch Research -- -- 3.10 3.50
Conning & Co. 3.00 -- 3.00 3.50
Dowling & Partners 3.00 3.40 3.00 3.40
Fox-Pitt 2.96 3.32 2.96 3.32
Hoefer & Arnett 3.03 3.54 3.03 3.54
Legg Mason 2.95 3.35 2.95 3.35
Lehman Brothers 3.00 3.50 3.00 3.50
Merrill Lynch 2.95 3.35 2.95 3.35
Offutt Securities 2.95 3.40 2.95 3.40
Philo Smith 2.95 3.40 2.95 3.40
Stephens Inc. 3.00 3.40 3.00 3.40
========================= ========== ========== ========== ==========
Median $2.96 $3.40 $3.00 $3.40
Mean 2.97 3.40 2.99 3.42
Management Estimates 3.00 3.51 3.00 3.51
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(a) First Call estimates as of October 23, 1997.
(b) I/B/E/S estimates as of October 16, 1997
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GUARANTY NATIONAL CORPORATION / OCTOBER 30, 1997
GNC: Summary Historical Financial Performance
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Selected Historical Financial Data
===================================================================================================================================
At or for the nine months
At or for the year ended December 31, ended September 30,
-------------------------------------------------------- ------------------------- 1992-1996
1992 1993 1994 1995 1996 1996 1997 CAGR
================================ ======== ======== ======== ======== ======== ========== ========== ==========
Personal Lines
Gross Premiums Written $105.0 $105.9 $131.1 $197.1 $257.4 $192.6 $250.4 25.1%
% Change -- 0.8% 23.8% 50.4% 30.6% -- 30.0% --
Combined Ratio 96.4% 93.6% 96.5% 104.9% 97.6% 98.5% 95.1% --
Commercial Lines
Gross Premiums Written $137.2 $187.0 $195.0 $200.2 $201.5 $156.3 $134.9 10.1%
% Change --- 36.3% 4.3% 2.7% 0.7% -- (13.7)% --
Combined Ratio 99.5% 104.6 98.6 108.5 105.5 104.2% 105.0 --
Consolidated
Net Premiums Written $239.8 $284.0 $322.9 $397.9 $491.2 $368.7 $423.7 19.6%
% Change -- 18.5% 13.7% 23.2% 23.5% -- 14.9% --
Revenues $245.5 $286.2 $348.2 $424.3 $529.5 $390.7 $443.4 21.2
% Change -- 16.6% 21.7% 21.8% 24.8% -- 13.5% --
Net Operating Earnings (a) $18.5 $15.7 $20.3 $6.4 (b) $21.2 $16.7 $24.6 3.4
Operating EPS $1.49 $1.25 $1.67 $0.48 $1.59 $1.12 $1.62 1.7
% Change -- (15.7)% 33.4% (71.1)% 230.0% -- 45.3% --
Net EPS $1.62 $1.63 $1.86 $0.67 $1.84 $1.24 $1.98 3.2
% Change -- 0.6% 14.1% (64.0)% 174.6% -- 59.7% --
Loss Ratio 65.7% 67.4% 66.3% 75.3% 70.1% 69.4% 69.9% --
Expense Ratio 32.0 32.2 31.2 30.0 30.0 30.0 28.0 --
Combined Ratio 97.7 99.6 97.5 105.3 100.1 99.4 97.9 --
- -----------------------------------------------------------------------------------------------------------------------------------
N.B. Combined ratios are based on GAAP data.
(a) Represents net earnings excluding after-tax realized gains.
(b) Realized capital gains tax effected by the 1994 effective tax rate as a
result of income tax benefit in 1995.
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GUARANTY NATIONAL CORPORATION / OCTOBER 30, 1997
GNC/OC: Shareholder Agreement Summary
The following amendments were made to the shareholder agreement
between GNC and OC on June 18, 1996, after OC increased its
ownership in GNC from 49.5% to 80.3%:
o OC will not purchase additional shares of GNC prior to July 1, 1999,
if after such purchase OC would own more than 81% of GNC unless:
an offer is made for all the shares of GNC not held by OC; and,
this offer is accepted by the majority of the non-OC shareholders.
o If an offer is made prior to July 1, 1999, OC must offer a purchase
price of at least $18.50 per share.
o OC will support a policy of the GNC Board of Directors that any
repurchase of shares of GNC, prior to July 1, 1999, should be
approved by the majority of the non-OC Directors of GNC.
o If at any time during the five year period after July 1, 1996 OC
wishes to sell as a block 90% or more of their shareholdings, or
propose a merger or consolidation involving GNC, they will not do so
unless:
in the case of a sale 90% or more of their shareholdings, the
purchaser offers to purchase the non-OC held shares of GNC for
equivalent value; and,
in the case of merger or consolidation all shares are exchanged for
equivalent value.
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GUARANTY NATIONAL CORPORATION / OCTOBER 30, 1997
Summary Valuation Analysis
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GUARANTY NATIONAL CORPORATION / OCTOBER 30, 1997
Summary Valuation Analysis
------------------
GNC Current Market
Price: $33.31
------------------
Valuation Methodology 24.00 26.00 28.00 30.00 32.00 34.00 36.00 38.00 40.00 42.00 $44.00
- --------------------- ----------------------------------------------------------------------------------------
Discounted Cash Flow Analysis
-----------------------------
Terminal Value in 2000(a) $33.79-$40.68
-----------------------------
------------------------------------
Terminal Value in 2002(a) $33.48-$41.79
------------------------------------
--------------------------------
Dividend Discount Model: TV in 2000(b) $33.71-$40.83
--------------------------------
----------------------------------
Dividend Discount Model: TV in 2002(c) $36.08-45.15
----------------------------------
Comparable Company Analysis - Personal ------------------------------------------------
Lines (c) $32.88-47.24
------------------------------------------------
Selected M&A Transactions: Property ------------------------------------------------------
and Casualty (d) $25.66-$39-22
------------------------------------------------------
-------------
Insurance Squeeze-Out Transactions(e) $39.48-$40.74
-------------
-------------
Squeeze-Out Transactions(f) $40.12-$40.47
-------------
Implied Valuation Multiples 24.00 26.00 28.00 30.00 32.00 34.00 36.00 38.00 40.00 42.00 $44.00
- ------------------------------------------------------------------------------------------------------------------------------------
Price / 1998E EPS(g) 10.0 x 10.8 x 11.6 x 12.4 x 13.3 x 14.1 x 14.9 x 15.8 x 16.6 x 17.4 x 18.3 x
Price / 1998E EPS (Management)(h) 9.1 9.8 10.6 11.3 12.1 12.8 13.6 14.3 15.1 15.8 16.6
Price / Book Value(i) 1.30 1.40 1.51 1.62 1.73 1.84 1.94 2.05 2.16 2.27 2.38
Enterprise Value / Statutory Surplus(j) 1.60 1.70 1.81 1.91 2.02 2.12 2.22 2.33 2.43 2.54 2.64
- ------------------------------------------------------------------------------------------------------------------------------------
(a) Based on a discount rate range of 11.0% - 13.0% and terminal value multiple
of 13.0x - 15.0x final year earnings.
(b) Assumes constant dividend payout. Based on a discount rate range of 11.0% -
13.0% and a terminal value multiple of 13.0x - 15.0x final year earnings.
(c) Based on median price/book value, price/1997E and price/1998E multiples for
comparable personal lines companies.
(d) Based on median price/net operating income, price/forward earnings and
price/book value multiples.
(e) Based on median premium offered for selected insurance squeeze-out
transactions. Assumes a market price per GNC share of $33.31 as of October
28, 1997.
(f) Based on median premium offered for selected squeeze-out transactions.
Assumes a market price per GNC share of $33.31 as of October 28, 1997.
(g) Based on mean First Call estimate of $2.41 as of September 30, 1997.
(h) Based on management estimate of $2.65 provided on July 29, 1997.
(i) Based on Book value per share of $18.51 at September 30, 1997.
(j) Based on Statutory surplus of $289.3 million at September 30, 1997.
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GUARANTY NATIONAL CORPORATION / OCTOBER 30, 1997
Transaction Multiples Analysis
Dollars in millions, except per share data
Purchase Price per GNC Share:
Market Price -----------------------------------------------------
Transaction Valuation Multiples: Benchmark (a) $33.31 $35.00 $36.00 $37.00 $38.00 $39.00
- ------------------------------------------------ ------------ ------------ --------- --------- --------- --------- ---------
Market Capitalization (b) -- $ 501.5 $ 526.9 $ 542.0 $ 557.0 $ 572.1 $ 587.1
Debt Assumed -- 101.1 101.1 101.1 101.1 101.1 101.1
- ------------------------------------------------ ------------ ------------ --------- --------- --------- --------- ---------
Enterprise Value -- 602.6 628.0 643.1 658.1 673.2 688.2
Premium Over:
Closing Stock Price (c) $ 33.31 -- 5.1% 8.1% 11.1% 14.1% 17.1%
52-Week High 35.25 (5.5)% (0.7) 2.1 5.0 7.8 10.6
52-Week Low 15.38 116.7 127.6 134.1 140.7 147.2 153.7
Price / 1996A Operating Earnings 1.59 21.0 x 22.0 x 22.6 x 23.3 x 23.9 x 24.5 x
Price / LTM Operating Earnings 2.09 15.9 16.7 17.2 17.7 18.2 18.7
Price / 1997E Revised Earnings (d) 2.18 15.3 16.1 16.5 17.0 17.4 17.9
Price / 1998E Revised Earnings (d) 2.41 13.8 14.5 14.9 15.4 15.8 16.2
Price / 1997E Earnings (Management Estimates) (e) 2.27 14.7 15.4 15.9 16.3 16.7 17.2
Price / 1998E Earnings (Management Estimates) (e) 2.61 12.8 13.4 13.8 14.2 14.6 14.9
Price / 1998E Earnings (Revised Management
Estimates) (f) 2.65 12.6 13.2 13.6 14.0 14.3 14.7
Price / 1998E Earnings (Pro Forma for
Acquisition of Unisun) (f) 2.73 12.2 12.8 13.2 13.6 13.9 14.3
Price / Book Value per Share (Reflects FAS 115) 18.51 1.80 1.89 1.94 2.00 2.05 2.11
Price / Book Value per Share (Excl. FAS 115) 16.39 2.03 2.14 2.20 2.26 2.32 2.38
Enterprise Value / Statutory Surplus 289.3 2.08 2.17 2.22 2.27 2.33 2.38
- ------------------------------------------------------------------------------------------------------------------------------------
Non-Standard Auto Comparables (g)
Price / 1997E Earnings -- -- -- 14.9 x -- -- --
Price / 1998E Earnings -- -- -- 12.6 -- -- --
Price / Book Value per Share -- -- -- 2.50 -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
(a) Financial data at or for the twelve months ended September 30, 1997.
(b) Assumes 15.1 million shares outstanding.
(c) Based on share price as of October 28, 1997.
(d) Based on mean First Call estimates as of October 23, 1997.
(e) As provided by management on July 29, 1997. Excludes realized gain.
(f) As provided by management on September 24, 1997. Excludes realized gain.
(g) Represents mean of Progressive Group, American Financial Group, Symons
International Group, Penn-America Group and Mobile America.
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19
GUARANTY NATIONAL CORPORATION / OCTOBER 30, 1997
Discounted Cash Flow Analysis
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GUARANTY NATIONAL CORPORATION / OCTOBER 30, 1997
Discounted Cash Flow Analysis: TV of 2000 Earnings
Dollars m millions, except per share amounts
For the year ended December 31,
-------------------------------
1997 1998 1999 2000
=======================================================================================
GAAP Operating Earnings $ 33.9 $ 39.6 $ 42.3 $ 53.4
Shares Outstanding (millions) 15.0 15.0 15.2 15.3
GAAP Primary Earnings per Share 2.26 2.65 2.78 3.49
GAAP Book Value per Share 19.07 20.05 21.31 24.91
ROE 11.8% 13.2% 13.1% 14.0%
Distributable Free Cash Flow to Common Stockholders -- $ 26.1 $ 18.6 $ (3.5)
Distributable Free Cash Flow per Common Share -- 1.73 1.24 (0.23)
- ---------------------------------------------------------------------------------------
Valuation Summary
Terminal Value Multiple of 2000 GAAP Earnings
Discount ---------------------------------------------------
Rate 12.0 x 13.0 x 14.0 x 15.0 x 16.0 x
===============================================================
9.0% $ 34.80 $ 37.49 $ 40.19 $ 42.89 $ 45.58
523.3 563.9 604.4 644.9 685.5
11.0 $ 33.03 $ 35.58 $ 38.13 $ 40.68 $ 43.24
496.6 535.0 573.4 611.8 650.2
13.0 $ 31.37 $ 33.79 $ 36.21 $ 38.63 $ 41.05
471.8 508.2 544.6 581.0 617.3
Valuation Summary
Terminal Value Multiple of 2000 GAAP Book Value
Discount ---------------------------------------------------
Rate 1.50 x 1.75 x 2.00 x 2.25 x 2.50 x
===============================================================
9.0% $ 31.31 $ 36.12 $ 40.93 $ 45.74 $ 50.55
470.8 543.2 615.5 687.8 760.2
11.0 $ 29.72 $ 34.27 $ 38.83 $ 43.38 $ 47.94
447.0 515.4 583.9 652.4 720.9
13.0 $ 28.24 $ 32.56 $ 36.87 $ 41.19 $ 45.51
424.7 489.6 554.5 619.5 684.4
N.B. Assumes transaction date of January 1, 1998. Value below share price
represents aggregate consideration.
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21
GUARANTY NATIONAL CORPORATION / OCTOBER 30, 1997
Discounted Cash Flow Analysis: TV of 2002 Earnings
Dollars in millions, except per share amounts
For the year ended December 31,
------------------------------------------------------
1997 1998 1999 2000 2001 2002
===========================================================================================================
GAAP Operating Earnings $ 33.9 $ 39.6 $ 42.3 $ 53.4 $ 60.0 $ 68.9
Shares Outstanding (millions) 15.0 15.0 15.2 15.3 15.3 15.3
GAAP Operating Earnings per Share 2.26 2.65 2.78 3.49 3.92 4.50
GAAP Book Value per Share 19.07 20.05 21.31 24.91 29.31 34.45
ROE 11.8% 13.2% 13.1% 14.0% 13.4% 13.1%
Distributable Free Cash Flow to Common Stockholders -- $ 26.1 $ 18.6 $ (3.5) $ (6.8) $ (9.4)
Distributable Free Cash Flow per Common Share -- 1.73 1.24 (0.23) (0.45) (0.63)
Valuation Summary
Terminal Value Multiple of 2002 GAAP Earnings
Discount ---------------------------------------------------
Rate 12.0 x 13.0 x 14.0 x 15.0 x 16.0 x
===============================================================
9.0% $ 36.83 $ 39.75 $ 42.68 $ 45.60 $ 48.53
553.8 597.8 641.8 685.8 729.8
11.0 $ 33.78 $ 36.45 $ 39.12 $ 41.79 $ 44.46
508.0 548.1 588.3 628.5 668.6
13.0 $ 31.04 $ 33.48 $ 35.92 $ 38.37 $ 40.81
466.8 503.5 540.2 577.0 613.7
Valuation Summary
Terminal Value Multiple of 2002 GAAP Book Value
Discount ---------------------------------------------------
Rate 1.50 x 1.75 x 2.00 x 2.25 x 2.50 x
===============================================================
9.0% $ 35.31 $ 40.90 $ 46.50 $ 52.10 $ 57.70
531.0 615.1 699.3 783.5 867.7
11.0 $ 32.39 $ 37.50 $ 42.61 $ 47.72 $ 52.83
487.1 564.0 640.8 717.7 794.5
13.0 $ 29.77 $ 34.44 $ 39.12 $ 43.79 $ 48.47
447.7 518.0 588.3 658.6 728.9
N.B. Assumes transaction date of January 1, 1998. Value below share price
represents aggregate consideration.
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GUARANTY NATIONAL CORPORATION / OCTOBER 30, 1997
Dividend Discount Model: TV of 2000 Earnings
For the year ended December 31,
-------------------------------
1997 1998 1999 2000
=======================================================================================
GAAP Operating Earnings $ 33.9 $ 39.6 $ 43.4 $ 55.2
Shares Outstanding (millions) (a) 15.0 15.0 15.2 15.3
GAAP Operating Earnings per Share $ 2.26 $ 2.65 $ 2.85 $ 3.61
GAAP Net Earnings per Share 2.46 2.91 3.11 3.87
GAAP Book Value (b) 285.4 321.4 361.1 412.6
ROE 11.9% 12.3% 12.0% 13.4%
GAAP Book Value per Share 19.03 21.49 23.76 26.97
Dividends 7.5 7.5 7.6 7.7
Dividends Per Share 0.50 0.50 0.50 0.50
- ---------------------------------------------------------------------------------------
N.B. Based on management estimates provided on September 24, 1997.
(a) Assumes shares outstanding remains constant after 1998.
(b) Based on a beginning book value of $278.7 million at September 30, 1997.
Valuation Summary
Terminal Value Multiple of 2000 GAAP Earnings
Discount ---------------------------------------------------
Rate 12.0 x 13.0 x 14.0 x 15.0 x 16.0 x
===============================================================
9.0% $ 34.73 $ 37.51 $ 40.30 $ 43.09 $ 45.88
520.9 562.7 604.5 646.4 688.2
11.0 $ 32.91 $ 35.55 $ 38.19 $ 40.83 $ 43.47
493.6 533.2 572.8 612.4 652.0
13.0 $ 31.21 $ 33.71 $ 36.22 $ 38.72 $ 41.22
468.2 505.7 543.3 580.8 618.3
Valuation Summary
Terminal Value Multiple of 2000 GAAP Book Value
Discount ---------------------------------------------------
Rate 1.50 x 1.75 x 2.00 x 2.25 x 2.50 x
===============================================================
9.0% $ 32.50 $ 37.71 $ 42.91 $ 48.12 $ 53.33
487.5 565.6 643.7 721.8 799.9
11.0 $ 30.80 $ 35.73 $ 40.66 $ 45.59 $ 50.52
462.0 535.9 609.9 683.8 757.8
13.0 $ 29.22 $ 33.89 $ 38.56 $ 43.23 $ 47.91
438.2 508.3 578.4 648.5 718.6
N.B. Value below share amounts represents aggregate consideration.
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23
GUARANTY NATIONAL CORPORATION / OCTOBER 30, 1997
Dividend Discount Model: TV of 2002 Earnings
For the year ended December 31,
------------------------------------------------------
1997 1998 1999 2000 2001 2002
===========================================================================================================
GAAP Operating Earnings $ 33.9 $ 39.6 $ 43.4 $ 55.2 $ 64.1 $ 74.4
Shares Outstanding (millions) (a) 15.0 15.0 15.2 15.3 15.3 15.3
GAAP Operating Earnings per Share $ 2.26 $ 2.65 $ 2.85 $ 3.61 $ 4.19 $ 4.86
GAAP Net Earnings per Share 2.46 2.91 3.11 3.87 4.49 5.21
GAAP Book Value (b) 285.4 321.4 361.1 412.6 473.6 545.7
ROE 11.9% 12.3% 12.0% 13.4% 13.5% 13.6%
GAAP Book Value per Share 19.03 21.49 23.76 26.97 30.96 35.66
Dividends 7.5 7.5 7.6 7.7 7.7 7.7
Dividends Per Share 0.50 0.50 0.50 0.50 0.50 0.50
- -----------------------------------------------------------------------------------------------------------
N.B. Based on management estimates provided on September 24, 1997. Assumes a
constant dividend and earnings growth of 16.1% in 2001 and 2002 based on
1997-2000 CAGR.
(a) Assumes shares outstanding remains constant after 1998.
(b) Based on a beginning book value of $278.7 million at September 30, 1997.
Valuation Summary
Terminal Value Multiple of 2002 GAAP Earnings
Discount ---------------------------------------------------
Rate 12.0 x 13.0 x 14.0 x 15.0 x 16.0 x
===============================================================
9.0% $ 39.89 $ 43.05 $ 46.21 $ 49.37 $ 52.53
598.3 645.7 693.2 740.6 788.0
11.0 $ 36.49 $ 39.38 $ 42.27 $ 45.15 $ 48.04
547.4 590.7 634.0 677.3 720.6
13.0 $ 33.44 $ 36.08 $ 38.72 $ 41.37 $ 44.01
501.7 541.3 580.9 620.5 660.1
Valuation Summary
Terminal Value Multiple of 2002 GAAP Book Value
Discount ---------------------------------------------------
Rate 1.50 x 1.75 x 2.00 x 2.25 x 2.50 x
===============================================================
9.0% $ 36.71 $ 42.51 $ 48.30 $ 54.10 $ 59.89
550.7 637.6 724.5 811.5 898.4
11.0 $ 33.59 $ 38.89 $ 44.18 $ 49.47 $ 54.76
503.9 583.3 662.7 742.0 821.4
13.0 $ 30.79 $ 35.63 $ 40.47 $ 45.31 $ 50.15
461.9 534.5 607.1 679.7 752.3
N.B.: Value below share amounts represents aggregate consideration.
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24
GUARANTY NATIONAL CORPORATION / OCTOBER 30, 1997
Comparable Company Analysis
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GUARANTY NATIONAL CORPORATION / OCTOBER 30, 1997
Comparable Company Analysis: Personal Lines
Closing 52 Week Current
Price Market Enterprise ------------------- as % of Dividend
Company 10/28/97 Cap. Value High Low High Yield
- ------------------------------------------------------------------------------------------------------------------
Guaranty National Corporation $ 33.31 $ 501.5 $ 602.6 $ 35.25 $ 15.38 94.5% 1.50%
Guaranty National Corporation (e)
Orion Capital Corporation 44.75 1,233.8 1,669.2 51.00 26.75 87.7 1.43
Orion Capital Corporation (e)
Personal Lines
Allstate Corp. (n) $ 84.25 $36,541.5 $37,952.5 $ 86.00 $ 54.00 98.0% 1.50%
SAFECO Corp. (n) 47.25 5,969.7 7,310.9 55.38 36.50 85.3 2.71
Mercury General Corp. (h)(n) 41.63 2,293.2 2,368.2 48.13 24.31 86.5 1.39
20th Century Industries (h)(i) 23.63 1,936.3 2,111.3 26.25 14.63 90.0 0.85
Horace Mann Educators Corp. 55.50 1,251.6 1,351.2 59.44 33.63 93.4 0.97
Commerce Group (h) 33.19 1,196.3 1,196.3 36.00 21.38 92.2 3.13
Citizens Corp. (h)(n) 29.00 1,022.8 1,022.8 31.56 20.13 91.9 0.69
Allied Group (h)(n) 46.25 937.7 985.0 53.63 27.00 86.2 1.47
Mean -- $ 6,393.6 $ 6,787.3 -- -- 90.4% 1.59%
Median -- 1,594.0 1,731.3 -- -- 90.9 1.43
Non-Standard Auto
Progressive Corp. (h) 109.44 7,901.4 8,515.0 116.75 61.50 93.7 0.22
American Financial Group (n) 36.06 2,125.3 2,595.3 49.25 32.38 73.2 2.77
Symons International Group (n) 20.00 209.0 218.0 24.00 12.38 83.3 0.00
Penn-America Group 19.13 189.0 233.9 21.75 10.31 87.9 0.84
Omni (h)(j)(n) 30.69 175.1 180.8 31.00 8.88 99.0 0.00
Mobile America (h)(n) 13.25 94.7 106.7 14.75 7.63 89.8 2.64
Mean (k) -- $ 2,103.9 $ 2,333.8 -- -- 85.6% 1.62%
Median (k) -- 209.0 233.9 -- -- 87.9 1.74
- ------------------------------------------- -----------------------------------
GNC Financial Data (d) For all companies:
- ------------------------------------------- High (c) 98.0% 3.13%
NPW $ 546.2 Mean (c) 88.6 1.60
Statutory Surplus 289.3 Median (c) 89.8 1.43
1997E EPS (a) 2.18 Low (c) 73.2 0.22
1998E EPS (a) 2.41 -----------------------------------
1997E EPS (e) 2.26 -----------------------------------
1998E EPS (e) 2.65 Implied Equity Value per GNC Share:
Book Value per GNC Share 18.51 High
Number of Shares 15.1 Mean
Total Debt 101.1 Median
- ------------------------------------------- Low
-----------------------------------
-----------------------------------
Implied Equity Value per GNC Share
(Management Estimates):
High
Mean
Median
Low
-----------------------------------
Price as a Multiple of: E.V. as a multiple of:
----------------------------- ---------------------- EPS IBES
Book 1997E 1998E Net Prem. Statutory Growth 5-year
Company Value EPS (a) EPS (a) Written Surplus (b) 97-98 Growth
- ----------------------------------------------------------------------------------------------------------------
Guaranty National Corporation 1.80 x 15.3 x 13.8 x 1.10 x 2.08 x 10.6% 14.0%
Guaranty National Corporation (e) 14.7 12.6 17.3 17.8 (f)
Orion Capital Corporation 1.80 15.1 13.2 1.22 2.10 (g) 14.5 14.0
Orion Capital Corporation (e) 14.9 12.7 17.0 12.5 (f)
Personal Lines
Allstate Corp. (n) 2.55 x 16.2 x 15.0 x 1.93 x 3.08 x 8.5% 12.0%
SAFECO Corp. (n) 1.37 15.3 13.3 3.07 3.38 15.6 10.0
Mercury General Corp. (h)(n) 3.28 16.8 15.0 2.98 3.98 11.9 15.0
20th Century Industries (h)(i) 2.68 16.5 15.6 2.68 4.84 5.6 NA
Horace Mann Educators Corp. 2.52 15.5 13.5 1.81 3.34 14.5 14.0
Commerce Group (h) 1.97 15.4 13.8 1.63 2.57 11.1 13.0
Citizens Corp. (h)(n) 1.28 13.7 12.1 1.22 1.64 13.3 10.0
Allied Group (h)(n) 2.82 15.6 13.6 2.02 3.45 14.1 12.0
Mean 2.31 x 15.6 x 14.0 x 2.17 x 3.28 x 11.8% 12.3%
Median 2.54 15.5 13.7 1.97 3.36 12.6 12.0
Non-Standard Auto
Progressive Corp. (h) 3.83 24.1 21.0 1.97 6.59 14.8 15.0
American Financial Group (n) 1.31 11.2 10.4 0.92 1.56 7.4 12.0
Symons International Group (n) 2.91 11.2 7.8 0.84 2.08 44.1 20.0
Penn-America Group 1.92 17.9 15.1 2.51 2.89 18.7 20.0
Omni (h)(j)(n) 3.18 29.5 26.5 1.77 4.91 11.5 14.0
Mobile America (h)(n) 2.56 10.4 8.9 3.21 4.57 16.4 NA
Mean (k) 2.50 x 14.9 x 12.6 x 1.89 x 3.54 x 20.3% 16.8%
Median (k) 2.56 11.2 10.4 1.97 2.89 16.4 17.5
- -------------------------------------------------------------------------------------------------------------
For all companies:
High (c) 3.83 x 24.1 x 21.0 x 3.21 x 6.59 x 44.1% 20.0%
Mean (c) 2.38 15.4 13.5 2.06 3.38 15.1 13.9
Median (c) 2.55 15.5 13.6 1.97 3.34 14.1 13.0
Low (c) 1.28 10.4 7.8 0.84 1.56 5.6 10.0
- -------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
Implied Equity Value per GNC Share:
High $70.86 $52.55 $50.62 $109.93 $119.89
Mean 44.11 33.49 32.47 68.01 58.27
Median 47.24 33.80 32.88 64.68 57.46
Low 23.63 22.57 18.68 23.70 23.35
- -------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
Implied Equity Value per GNC Share (Management Estimates):
High -- $54.48 $55.66 -- --
Mean -- 34.72 35.70 -- --
Median -- 35.04 36.15 -- --
Low -- 23.39 20.54 -- --
- -------------------------------------------------------------------------------------
- ----------
N.B. Financial data at or for the twelve months ended September 30, 1997,
except as noted.
(a) Based on mean First Call estimate as of October 22, 1997.
(b) Statutory Surplus as of December 31, 1996, except as noted.
(c) Excludes GNC, OC and Omni.
(d) Financial data at or for the twelve months ended September 30, 1997.
(e) Based on revised management estimates provided on September 24, 1997 for
GNC and August 5, 1997 for OC.
(f) Based on company net income projections from 1997-2000 for GNC and
1997-2001 for OC.
(g) Based on statutory surplus of $795.1 million as of September 30, 1997.
(h) Net premiums written for the year ended December 31, 1996.
(i) Market Cap. and Book Value on a fully diluted basis based on average fully
diluted shares outstanding for the three months ended September 30, 1997
of 82.0 million shares.
(j) Hartford Financial Services Group agreed to acquire Omni Insurance Group
on October 16, 1997.
(k) Excludes Omni.
(l) Represents percentage of non-standard auto net premiums written for the
year ended December 31, 1996,
(m) Represents personal lines gross written premiums as a percentage of total
gross written premiums.
(n) Financial data at or for the twelve months ended June 30, 1997.
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GUARANTY NATIONAL CORPORATION / OCTOBER 30, 1997
Comparable Company Analysis: Specialty Commercial
Closing 52 Week Current
Price Market Enterprise ------------------- as % of Dividend
Company 10/28/97 Cap. Value High Low High Yield
- ------------------------------------------------------------------------------------------------------------------
Guaranty National Corporation $ 33.31 $ 501.5 $ 602.6 $ 35.25 $ 15.38 94.5% 1.50%
Guaranty National Corporation (d)
Orion Capital Corporation 44.75 1,233.8 1,669.2 51.00 26.75 87.7 1.43
Orion Capital Corporation (d)
Berkley, W.R $ 39.25 $ 1,159.2 $ 1,794.7 $ 46.38 $ 28.75 84.6% 1.12%
Frontier Insurance Group (f) 33.94 1,000.3 1,167.3 39.25 18.13 86.5 0.83
Markel Corp. 148.50 816.2 1,065.9 161.13 83.00 92.2 NA
Executive Risk (f) 68.44 654.9 779.9 72.75 33.88 94.1 0.12
Acceptance Insurance 24.50 375.2 444.2 28.63 17.75 85.6 NA
RLI Corporation 41.31 369.5 415.5 46.25 27.25 89.3 1.45
Baldwin & Lyons Inc. 20.38 283.7 283.7 22.63 17.38 90.1 1.96
High (b) 94.1% 1.96%
Median (b) 89.3 1.12
Mean (b) 88.9 1.10
Low (b) 84.6 0.12
- ------------------------------------------
GNC Financial Data (c)
- ------------------------------------------
NPW $ 546.2
Statutory Surplus 289.3
1997E EPS (a) 2.18
1998E EPS (a) 2.41
1997E EPS (d) 2.26
1998E EPS (d) 2.65
Book Value per GNC Share 18.51
Number of Shares 15.1
- ------------------------------------------
Price as a Multiple of:
----------------------------- EPS IBES
Book 1997E 1998E Growth 5-year
Company Value EPS (a) EPS (a) 97-98 Growth
- ----------------------------------------------------------------------------------------
Guaranty National Corporation 1.80 x 15.3 x 13.8 x 10.6% 14.0%
Guaranty National Corporation (d) 14.7 12.6 17.3 17.8 (e)
Orion Capital Corporation 1.80 15.1 x 13.2 x 14.5% 14.0%
Orion Capital Corporation (d) 14.5 12.7 17.0 12.5 (e)
Berkley, W.R 1.42 x 13.9 x 12.0 x 15.2% 14.0%
Frontier Insurance Group (f) 3.38 18.8 15.0 25.4 20.0
Markel Corp. 2.39 21.9 18.9 15.6 19.0
Executive Risk (f) 3.83 21.1 18.2 16.0 15.0
Acceptance Insurance 1.52 10.5 9.6 9.4 19.0
RLI Corporation 1.37 13.3 12.2 9.3 13.0
Baldwin & Lyons Inc. 0.98 20.4 18.9 8.0 NA
High (b) 3.83 x 21.9 x 18.9 x 25.4% 20.0%
Median (b) 1.52 18.8 15.0 15.2 17.0
Mean (b) 2.13 17.1 15.0 14.1 16.7
Low (b) 0.98 10.5 9.6 8.0 13.0
-----------------------------------------------------
Implied GNC Value Per Share:
High $70.82 $47.75 $45.65
Median 28.10 40.88 36.03
Mean 39.37 37.30 36.05
Low 18.21 22.82 23.06
-----------------------------------------------------
-----------------------------------------------------
Implied GNC Value Per Share (Management Estimates):
High -- $49.50 $50.19
Median -- 42.38 39.62
Mean -- 38.67 39.64
Low -- 23.66 25.36
-----------------------------------------------------
- ----------
N.B. Financial data at or for the twelve months ended September 30, 1997,
except as noted.
(a) Based on median First Call estimate as of October 22, 1997.
(b) Excludes GNC and OC.
(c) Financial data at or for the twelve months ended September 30, 1997.
(d) Based on management estimates provided on September 24, 1997 for GNC and
August 5, 1997 for OC.
(e) Based on company net income projections from 1997-2000 for GNC and
1997-2001 for OC.
(f) Earnings estimates based on Nelson's mean estimates as of August 21, 1997.
23
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27
GUARANTY NATIONAL CORPORATION / OCTOBER 30, 1997
M&A Transaction Analysis: Non-
Standard Auto Transactions
24
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28
GUARANTY NATIONAL CORPORATION / OCTOBER 30, 1997
M&A Transaction Analysis: Non-Standard Auto
Price as a
Multiple of:
---------------------
GAAP (a)
---------------------
Equity Price Premium Net
Announced Target Acquiror Value Per to Operating Book
(Closed) (parent) (parent) (in millions) Share Mkt. (d) Income Value
- ------------------------------------------------------------------------------------------------------------------------------------
10/16/97 Omni Insurance Grp. Inc. Hartford Fin. Svcs. Grp. Inc. $187.4 $31.75 78.9% 34.8 x 3.36 x
(Pending)
8/8/97 Titan Holdings USF&G 233.0 23.20 1.4 15.1 1.97
(Pending)
6/30/97 Integon Corp. GMAC 524.7 26.00 67.7 NM 3.04
(Pending)
11/6/96 Midland Financial Group, Inc. Progressive Corporation 49.5 9.00 7.5 NM 0.97
(3/7/97)
2/27/96 Midland Financial Group, Inc. Danielson Holding Corporation 108.1 14.50 20.8 NM 1.60
(Terminated)
4/27/95 Viking Insurance Holdings Inc. Guaranty National Corp. 102.0 -- -- 11.0 1.14
(7/18/95) (Xerox Corp.)
12/19/94 Victoria Financial Corp. USF&G 67.3 13.00 89.1 41.4 2.47
(5/22/95)
7/28/94 Bankers and Shippers Insurance Co. Integon Corp. 142.0 -- -- 11.5 1.40
(10/18/94) (Travelers Indemnity Co.)
11/15/93 American Ambassador Casualty Co. Guardian Royal Exchange Plc. 100.0 -- -- NA NA
(12/30/93 (Allianz AG Holding)
3/18/93 Leader National Insurance Co. Penn Central Corp. 38.0 -- -- NA NA
(05/21/93)
10/15/90 Atlanta Casualty Co., Windsor Ins. Penn Central Corp. 335.0 -- -- NA 1.60
(1/2/91) and Stonewall Ins. Co.
5/23/89 Integon Corp. Jupiter Industries, Inc. 225.8 7.00 (d) 5.7 NM 1.23
(8/1/90)
5/18/38 Guaranty National Corp. Orion Capital Corporation 130.7 8.75 34.6 7.0 1.45
-------------------------------------------------------- ------------------------------------------------------
GNC Financial Data (e) High 89.1% 41.4 x 3.36 x
-------------------------------------------------------- Median 27.7 13.3 1.60
Market Cap $501.5 Mean 38.2 20.1 1.84
Statutory Surplus 289.3 Low 1.4 7.0 0.97
Statutory Oper. Earnings (f) 41.3 ------------------------------------------------------
GAAP Book Value 278.7 ------------------------------------------------------
GAAP Oper. Earnings 31.7 Implied GNC Valuation based on:
Number of Shares 15.1
-------------------------------------------------------- Median $42.59 (g) $28.02 $29.62
Mean 46.09 (g) 42.43 34.04
------------------------------------------------------
E.V. as a Multiple of:
-----------------------
SAP (a)
-----------------------
Net Capital
Announced Target Operating and
(Closed) (parent) Income (b) Surplus
- ---------------------------------------------------------------------------
10/6/97 Omni Insurance Grp. Inc. 67.5 x 5.19 x
(Pending)
8/8/97 Titan Holdings 19.7 3.52
(Pending)
6/30/97 Integon Corp. NM 3.21
(Pending)
11/6/96 Midland Financial Group, Inc. NM 0.86 (c)
(3/7/97)
2/27/96 Midland Financial Group, Inc. NM 1.71 (c)
(Terminated)
4/27/95 Viking Insurance Holdings Inc. 10.1 1.24
(7/18/95) (Xerox Corp.)
12/19/94 Victoria Financial Corp. 22.7 3.26
(5/22/95)
7/28/94 Bankers and Shippers Insurance Co. 22.4 2.21
(10/18/94) (Travelers Indemnity Co.)
11/15/93 American Ambassador Casualty Co. 10.3 1.63
(12/30/93 (Allianz AG Holding)
3/18/93 Leader National Insurance Co. 14.6 1.16
(05/21/93)
10/15/90 Atlanta Casualty Co., Windsor Ins. 13.9 2.59
(1/2/91) and Stonewall Ins. Co.
5/23/89 Integon Corp. 6.3 4.21
(8/1/90)
5/18/38 Guaranty National Corp. 9.1 2.15
----------------------------------------------
High 67.5 x 5.19 x
Median 14.3 2.21
Mean 19.7 2.53
Low 6.3 0.86
----------------------------------------------
----------------------------------------------
Implied GNC Valuation based on:
Median $39.09 $42.51
Mean 53.94 48.74
----------------------------------------------
(a) Latest available data prior to announcement.
(b) After-tax income from continuing operations before net realized gains and
extraordinary and non-recurring items.
(c) Based on estimated capital and surplus at December 31, 1995.
(d) Premium to market price one day prior to announcement.
(e) At or for the twelve months ended September 30, 1997.
(f) Represents statutory earnings for the six months ended June 30, 1997,
annualized.
(g) Based on GNC price per share of $33.31 as of October 28, 1997.
N.B. NA = Not Available
N.B. NM = Not Meaningful
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GUARANTY NATIONAL CORPORATION / OCTOBER 30, 1997
Case Study: Hartford Acquisition of Omni Insurance Group
Consideration Paid
o Hartford Financial Services Group agreed to buy Omni Insurance Group on
October 16, 1997 for $31.75 per Omni share.
o The purchase price represents a 78.9% premium to Omni's market price one
day prior to the announcement of the transaction.
o 100% of the total consideration of $184.7 million will be paid in cash.
Additional Information
o The Hartford, which had no nonstandard auto line of its own, had been
looking to develop the business or to acquire one for about a year.
o Omni, the nation's 22nd largest provider of nonstandard auto insurance,
benefited from being the only remaining publicly traded "pure play" in
nonstandard auto, according to analysts.
o Omni wrote approximately $10 billion in premiums in 1996 through 3,500
agents in 11 states.
Price / Volume Performance
Daily Data -- 3/31/97 through 10/28/97
[GRAPHIC OMITTED]
[PLOT POINTS TO COME]
(a) 8/8/97: Omni announces record second quarter earnings
(b) 10/16/97: Hartford agrees to acquire Omni Insurance Group
Transaction Multiples
Price / LTM EPS ($0.91) 34.8x
Price / 1997E EPS (a) ($1.04) 30.5
Price / 1998E EPS (a) ($1.16) 27.4
Price / GAAP Book Value 3.36
Enterprise Value / LTM Stat. Earnings 67.5
Enterprise Value / Stat. Surplus 5.19
(a) Based on median IBES earnings estimates as of September 18, 1997
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GUARANTY NATIONAL CORPORATION / OCTOBER 30, 1997
Case Study: USF&G Acquisition of Titan Holdings
Consideration Paid
o USF&G Corp. Agreed to acquire Titan Holdings Inc. for $23.20 per share on
August 8, 1997.
o The total consideration of $233.0 million will consist of 50% cash and 50%
common stock.
o Any increase in USF&G's stock price is to be divided evenly between the
stock and cash consideration resulting in a floating value for the cash
and stock portion.
o The transaction is structured with a 15% collar around USF&G's stock
price.
Additional Information
o Titan had been considering strategic alternatives since it hired a
financial advisor in June.
o Titan, which generates 65% of its business from non-standard auto (LTM
total premiums earned of $171.5 million), is expected to fit well with
Victoria Financial, USF&G's non-standard subsidiary, and add geographic
diversification.
o The transaction is expected to be earnings neutral in 1998 and accretive
to EPS thereafter.
Price / Volume Performance
Daily Data -- 3/31/97 through 10/28/97
[GRAPHIC OMITTED]
[PLOT POINTS TO COME]
(a) 6/3/97: Titan announces intentions to explore strategic alternatives
(b) 8/8/97: USF&G agrees to acquire Titan Holdings
Transaction Multiples
Price / LTM EPS ($1.54) 15.1x
Price / 1997E EPS (a) ($1.68) 13.9
Price / 1998E EPS (a) ($1.97) 11.8
Price / GAAP Book Value 1.97
Enterprise Value / LTM Stat. Earnings 19.7
Enterprise Value / Stat. Surplus 3.52
(a) Based on median IBES earnings estimates as of July 17, 1997
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GUARANTY NATIONAL CORPORATION / OCTOBER 30, 1997
Case Study: GMAC Acquisition of Integon Corp.
Consideration Paid
o GMAC agreed to acquire Integon Corp. for $26.00 per share on June 23,
1997, representing a 67.7% premium to market the day prior to
announcement.
o The total consideration of $524.7 million will be in the form of cash.
Additional Information
o Integon reported consistent profits through the third quarter of 1996 but
posted losses of $16 and $35 million in the 2 subsequent quarters.
o Following the first quarter earnings release, Integon announced that they
had retained a financial advisor to consider strategic alternatives.
o The purchase price paid by GMAC is considered to be relatively rich given
Integon's financial position, financial leverage (debt/equity ratio of
93.0%) and operating leverage (premiums written/statutory surplus of
3.0x).
o GMAC currently has a presence in the insurance industry through Motors
Insurance Corp.
Price / Volume Performance
Daily Data -- 3/31/97 through 10/17/97
[GRAPHIC OMITTED]
[PLOT POINTS TO COME]
(a) 4/27/97: Integon announces intentions to explore strategic alternatives
(b) 6/23/97: GMAC agrees to acquire Integon
Transaction Multiples
Price / LTM EPS (($2.68)) NM
Price / 1997E EPS (a) (($2.05)) NM
Price / 1998E EPS (a) ($1.13) 23.0x
Price / GAAP Book Value 3.04
Enterprise Value / LTM Stat. Earnings NM
Enterprise Value / Stat. Surplus 3.21
(a) Based on median IBES earnings estimates as of June 19, 1997
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GUARANTY NATIONAL CORPORATION / OCTOBER 30, 1997
Squeeze Out Transaction Analysis:
Insurance Industry
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GUARANTY NATIONAL CORPORATION / OCTOBER 30, 1997
Summary: Premiums Paid in Squeeze Out Transactions
All Squeeze Out Transactions Insurance Squeeze Out Transaction
Premium to Market Premium to Market
---------------------------- ----------------------------------
Percentile 1 Week Prior 4 Weeks Prior 1 Week Prior 4 Weeks Prior
===================================================================================================
75th Percentile 29.9% 33.3% 23.1% 25.3%
50th Percentile 20.4 21.5 18.5 22.3
25th Percentile 13.5 8.4 15.6 12.1
- ---------------------------------------------------------------------------------------------------
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34
GUARANTY NATIONAL CORPORATION / OCTOBER 30, 1997
Squeeze Out Transaction Analysis - Insurance Only
Per Share
Date --------------- % Change
- -------------------- Initial Final Offer From
Announced Completed Price Price Amended? Offer Acquiror Name Target Name
- ------------------------------------------------------------------------------------------------------------------------------------
6/2/97 7/15/97 $40.00 $40.00 no -- Anthem Inc. Acordia Inc (Anthem Inc)
1/13/97 9/4/97 36.00 39.50 yes 9.7% Zurich Group Zurich Reinsurance Centre Holding Inc.
12/17/96 7/16/97 29.00 33.00 yes 13.8 Allmerica Financial Corporation Allmerica Property & Casualty
5/10/96 12/11/96 23.52 24.32 yes 3.4 PXRE Corp. Transnational Re Corp.
5/7/96 7/3/96 17.50 18.50 yes 5.7 Orion Capital Corp Guaranty National Corp
9/26/95 12/21/95 14.00 15.25 yes 8.9 SCOR SA SCOR SA Corp
8/25/95 1/2/96 70.00 70.00 no -- Berkshire Hathaway Inc GEICO Corp
2/27/95 Withdrawn 22.00 -- -- -- Conseco Bankers Life Holding Corp.
2/27/95 8/31/95 22.50 23.25 yes 3.3 Conseco CCP Insurance Inc
Offer Premium Percent Percent
Date Deal ----------------- Held at Owned
- -------------------- Value % % 1 Week 4 Weeks Ann Percent After
Announced Completed ($ mil) Stock Cash Prior Prior Date Sought Transaction
- -------------------------------------------------------------------------------------------------------
6/2/97 7/15/97 $172.7 0.0% 100.0% 11.5% 26.0% (b) 66.8% 33.2% 100.0%
1/13/97 9/4/97 322.5 0.0 100.0 18.5 12.1 (c) 65.7 34.3 100.0
12/17/96 7/16/97 796.9 47.0 53.0 12.8 15.3 59.5 40.5 100.0
5/10/96 12/11/96 130.5 100.0 0.0 16.5 9.9 22.3 77.7 100.0
5/7/96 7/3/96 85.1 0.0 100.0 15.6 22.3 49.5 30.7 80.2
9/26/95 12/21/95 55.4 0.0 100.0 35.6 38.6 80.0 20.0 100.0
8/25/95 1/2/96 2,347.0 0.0 100.0 23.1 25.3 52.4 47.6 100.0
2/27/95 Withdrawn 458.5 0.0 100.0 21.4 6.0 63.2 39.6 60.4
2/27/95 8/31/95 273.7 0.0 100.0 30.1 23.2 48.1 51.9 100.0
---------------------------------------------------------------------------------
Median 0.0% 100.0% 18.5% 22.3% 59.5% 39.6% 100.0%
Mean 16.3 83.7 20.6 19.9 56.4 41.7 93.4
---------------------------------------------------------------------------------
---------------------------------------------
Implied Equity Value Per GNC Share (a)
Median -- -- $39.48 $40.74
Mean -- -- 40.16 39.93
---------------------------------------------
- ----------
(a) Based on GNC share price of $33.31 on October 28, 1997.
(b) Implied premium to market one day prior to issuance of press release by
Acordia regarding a review of its relationship with Anthem is 41.7% based
on a closing price for Acordia of $27.88 on February 5, 1997.
(c) Implied premium to market one day prior to issuance of initial
announcement by Zurich Group with respect to its intentions regarding ZRC
is 30.1% based on a closing price for ZRC of $30.75 on January 10, 1997.
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GUARANTY NATIONAL CORPORATION / OCTOBER 30, 1997
Anthem Insurance Companies, Inc. / Acordia, Inc.
Transaction Summary
o On June 2, 1997 Anthem announced a cash tender offer for all the
outstanding shares of common stock of Acordia, Inc. that it did not
already own 33.2% for $40.00 per share representing a 12.7% premium to
market.
o Anthem is an Indianapolis based mutual insurance company. Acordia is an
insurance brokerage and consulting firm.
History
o Anthem completed its IPO in October 1992, diluting Anthem's ownership
interest to 63.3%.
o In September 1996, Anthem retained a financial advisor to assist
management in a review of its holdings in Acordia.
o In December 1996, Anthem's financial advisor explored a possible sale of
Acordia.
o In February 1997, Acordia publicly announced that it is reviewing its
relationship with its parent and has formed a special committee to review
and evaluate any proposals involving Anthem.
o Between February and May 1997, Anthem and Acordia had frequent discussions
regarding their business relationship and Anthem's investment in Acordia.
o Throughout May, Anthem considered both the sale and purchase of the public
shares of Acordia it did not own.
o Ultimately, Anthem decided to purchase the public shares of Acordia.
o Anthem initially offered $34.00 per share, but after negotiations with
Acordia and their financial advisor, agreed to pay $40.00 per share.
Price / Volume Performance
Daily Data -- 1/2/97 through 7/9/97
[GRAPHIC OMITTED]
[PLOT POINTS TO COME]
(a) 2/6/97:Public announcement that Acordia is conducting a strategic review
of its business
(b) 5/15/97: Anthem discusses an offer of $34.00 per share with Acordia
(c) 5/20/97:Press release issued by both companies regarding potential
transaction
(d) 6/2/97: Anthem agrees to acquire remaining interest in Acordia
Transaction Multiples
Price / LTM EPS ($1.46) 19.2x
Price / 1997E EPS (a) ($2.15) 18.6
Price / 1998E EPS (a) ($2.35) 17.0
Price / GAAP Book Value 2.57
Enterprise Value / LTM Stat. Earnings NA
Enterprise Value / Stat. Surplus NA
(a) Based on median IBES earnings estimates as of May 15, 1997
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36
GUARANTY NATIONAL CORPORATION / OCTOBER 30, 1997
Zurich Group / Zurich Reinsurance Centre Holdings, Inc.
Transaction Summary
o On April 17, 1997 Zurich Group reached an agreement to purchase for $39.50
per share in cash the 34% of interest in ZRC that it did not already own.
History
o ZRC completed its IPO in May 1993, reducing Zurich Group's holdings to
65.7%.
o In August 1996, Zurich Group believed that changes in the reinsurance
market place made a consolidation of ZRC more desirable.
o On January 13, 1997, Zurich Group made public its intentions to acquire
the public shares of ZRC for $36.00 per share, $1.00 above ZRC's IPO
price.
o In February 1997, after several class action lawsuits had been filed and
concern from public shareholders that the offer price was unacceptable,
ZRC informed the parent that its offer of $36.00 per share was inadequate.
o On April 10, 1997, Zurich Group proposed a revised price of $38.25 per
share which was rejected by ZRC.
o On April 17, 1997, Zurich Group offered $39.50 per share for ZRC. This
offer was ultimately accepted by ZRC.
Price / Volume Performance
Daily Data -- 9/30/96 through 8/29/97
[GRAPHIC OMITTED]
[PLOT POINTS TO COME]
(a) 1/13/97: Zurich Group makes its intentions with respect to ZRC public
(b) 4/17/97: Both parties agree to $39.50 per share
Transaction Multiples
Price / LTM EPS (a) ($1.46) 27.1x
Price / 1997E EPS (b) ($1.55) 25.5
Price / 1998E EPS (b) ($1.81) 21.8
Price / GAAP Book Value 1.32
Enterprise Value / LTM Stat. Earnings 52.6
Enterprise Value / Stat. Surplus 0.49
(a) For the twelve months ended March 31, 1997.
(b) Based on median IBES earnings estimates as of April 17, 1997
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GUARANTY NATIONAL CORPORATION / OCTOBER 30, 1997
Merger Consequences Analysis
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GUARANTY NATIONAL CORPORATION / OCTOBER 30, 1997
Summary: Merger Consequences Analysis
---------------- Purchase Price per GNC Share:
- ----------------------------------------- Market Price ---------- ------------ ------------ ----------- -----------
Acquisition Analysis: $33.31 $35.00 $36.00 $37.00 $38.00 $39.00
- ----------------------------------------- ---------------- ---------- ------------ ------------ ----------- -----------
Transaction Value (a) $96.9 $101.8 $104.7 $107.6 $110.5 $113.4
Goodwill Created 49.5 54.4 57.4 60.3 63.2 66.1
Orion Capital:
1998E EPS Dilution
Consensus Estimates (b):
100% Cash 0.9% 0.5% 0.2% (0.0)% (0.3)% (0.6)%
80% Cash 0.3 (0.2) (0.5) (0.7) (1.0) (1.3)
67% Cash (0.1) (0.6) (0.9) (1.2) (1.5) (1.8)
50% Cash (0.6) (1.1) (1.4) (1.7) (2.0) (2.3)
Revised Management Estimates (c):
100% Cash 1.6% 1.2% 0.9% 0.7% 0.4% 0.2%
80% Cash 0.9 0.5 0.2 (0.1) (0.3) (0.6)
67% Cash 0.5 0.0 (0.3) (0.5) (0.8) (1.1)
50% Cash (0.1) (0.5) (0.8) (1.1) (1.4) (1.7)
Revised Management Estimates Pro Forma (d):
100% Cash 1.9% 1.4% 1.2% 0.9% 0.7% 0.4%
80% Cash 1.2 0.7 0.5 0.2 (0.1) (0.3)
67% Cash 0.7 0.3 (0.0) (0.3) (0.6) (0.8)
50% Cash 0.2 (0.3) (0.6) (0.9) (1.2) (1.5)
Pro Forma Debt / Capitalization
100% Cash 32.0% 32.3% 32.5% 32.6% 32.8% 32.9%
80% Cash 30.5 30.7 30.8 30.9 31.0 31.2
67% Cash 29.5 29.6 29.7 29.8 29.9 30.0
50% Cash 28.2 28.3 28.4 28.4 28.5 28.5
GNC Ownership of Orion Capital
100% Cash -- -- -- -- -- --
80% Cash 1.5% 1.6% 1.7% 1.7% 1.7% 1.8%
67% Cash 2.5 2.7 2.7 2.8 2.9 2.9
50% Cash 3.7 3.9 4.0 4.1 4.3 4.4
- -----------------------------------------------------------------------------------------------------------------------------
(a) Represents the purchase of 2.9 million shares not owned by Orion.
(b) Based on First Call mean estimate as of October 22, 1997.
(c) Based on revised management estimates provided by management on September
24, 1997.
(d) Based on revised management estimates and pro forma for the acquisition of
Unisun Insurance Company.
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GUARANTY NATIONAL CORPORATION / OCTOBER 30, 1997
Merger Consequences Analysis: 100% Cash - Consensus Estimates
Dollars in millions, except per share data
------------ Purchase Price per GNC Share:
- -------------------------------------------------- ------------ Market Price -------- --------- --------- --------- ---------
Acquisition Analysis: Stand-Alone $33.31 $35.00 $36.00 $37.00 $38.00 $39.00
- -------------------------------------------------- ------------ ------------ -------- --------- --------- --------- ---------
Transaction Value(c): $96.9 $101.8 $104.7 $107.0 $110.5 $113.4
Goodwill Created -- 49.5 54.4 57.4 60.3 63.2 66.1
Orion Capital:
Stand-Alone 1998E EPS(d) $3.40 $3.40 $3.40 $3.40 $3.40 $3.40 $3.40
1998E Income(e) 94.5 94.5 94.5 94.5 94.5 94.5 94.5
Add: Minority Interest Expense(f) -- 7.0 7.0 7.0 7.0 7.0 7.0
After-Tax Interest Expense(a) -- (4.3) (4.6) (4.7) (4.8) (5.0) (5.1)
Goodwill Amortization(g) -- (2.0) (2.2) (2.3) (2.4) (2.5) (2.6)
Bond Premium Amortization(h) -- (0.1) (0.1) (0.1) (0.1) (0.1) (0.1)
After-Tax Merger Related Savings(i) -- 0.3 0.3 0.3 0.3 0.3 0.3
------------ ------------ -------- --------- --------- --------- ---------
Pro Forma Net Income $94.5 $95.4 $95.0 $94.7 $94.5 $94.2 $94.0
------------ ------------ -------- --------- --------- --------- ---------
Stand Alone Average Fully Diluted Shares 27.8 27.8 27.8 27.8 27.8 27.8 27.8
Shares Issued in Transaction -- -- -- -- -- -- --
Pro Forma Shares 27.8 27.8 27.8 27.8 27.8 27.8 27.8
- ------------------------------------------------------------------------------------------------------------------------------------
Pro Forma EPS 3.40 3.43 3.42 3.41 3.40 3.39 3.38
Percent Change from Stand-Alone EPS -- 0.9% 0.5% 0.2% (0.0%) (0.3%) (0.6%)
Required Overhead Reduction for 0% Dilution -- -- -- -- $0.0 $0.4 $0.7
As a Percent of GNC Overhead(j) -- -- -- -- 0.4% 2.8% 5.3%
- ------------------------------------------------------------------------------------------------------------------------------------
Pro Forma Debt / Capitalization 26.4% (l) 32.0% 32.3% 32.5% 32.6% 32.8% 32.9%
EBIT / Interest Expense(k) 6.6x (l) 8.6x 8.7x 8.8x 8.9x 9.0x 9.0x
EBIT / Interest Expense + Preferred Dividends(k) 4.6 (l) 5.6 5.7 5.7 5.7 5.8 5.8
GNC Ownership of Orion Capital -- 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
------------ ------------ -------- --------- --------- --------- ---------
(a) Interest expense assumes an interest rate of 6.90% (10-Year Treasury rate ------------------------------------------
of 5.945 plus 95 bps). Assumes a tax rate of 35.0%. Assumptions
------------------------------------------
(b) As of October 28, 1997. Financing Mix:
(c) Represents the purchase of 2.9 million shares not owned by Orion. Debt (a) 100.0%
(d) Based on First Call mean estimate as of October 22, 1997. Common Stock --
(e) Based on 27.8 million average fully diluted shares outstanding for the Current OC Share Price (b) $44.75
quarter ended September 30, 1997.
Current OC Ownership of GNC 80.7%
(f) Based on 19.3% public ownership and estimated GNC 1998E income of $36.2
million ($2.41 per share) based on mean First Call estimate as of October Tax Rate 35.0
22, 1997. ------------------------------------------
(g) Goodwill amortized over a 25 year period.
(h) Amortization of $5.6 million after-tax unrealized bond portfolio capital
gains over an 8 year period.
(i) Represents $500,000 pre-tax savings realized as a result of GNC becoming a
wholly owned subsidiary of Orion Capital. Assumes a tax rate of 35.0%.
(j) Based on GNC overhead expenses for the twelve months ended September 30,
1997 of $13.6 million.
(k) Stand-Alone EBIT includes minority interest expense related to GNC.
(l) At of for the three months ended September 30, 1997, annualized.
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GUARANTY NATIONAL CORPORATION / OCTOBER 30, 1997
Merger Consequences Analysis: 100% Cash - Mgmt. Estimates
Dollars in millions, except per share data
------------ Purchase Price per GNC Share:
- --------------------- ----------- Market Price ------------------------------------------------------
Acquisition Analysis: Stand-Alone $33.31 $35.00 $36.00 $37.00 $38.00 $39.00
- --------------------- ----------- ------------ ------ ------ ------ ------ ------
Transaction Value (c): $ 96.9 $101.8 $104.7 $107.6 $110.5 $113.4
Goodwill Created -- 49.5 54.4 57.4 60.3 63.2 66.1
Orion Capital:
Stand-Alone 1998E EPS (d) $ 3.51 $ 3.51 $ 3.51 $ 3.51 $ 3.51 $ 3.51 $ 3.51
1998E Income (e) 97.6 97.6 97.6 97.6 97.6 97.6 97.6
Add: Minority Interest Expense (f) -- 7.7 7.7 7.7 7.7 7.7 7.7
After-Tax Interest Expense (a) -- (4.3) (4.6) (4.7) (4.8) (5.0) (5.1)
Goodwill Amortization (g) -- (2.0) (2.2) (2.3) (2.4) (2.5) (2.6)
Bond Premium Amortization (h) -- (0.1) (0.1) (0.1) (0.1) (0.1) (0.1)
After-Tax Merger Related Savings (i) -- 0.3 0.3 0.3 0.3 0.3 0.3
------ ------ ------ ------ ------ ------ ------
Pro Forma Net Income $ 97.6 $ 99.2 $ 98.7 $ 98.5 $ 98.3 $ 98.0 $ 97.8
------ ------ ------ ------ ------ ------ ------
Stand Alone Average Fully Diluted Shares 27.8 27.8 27.8 27.8 27.8 27.8 27.8
Shares Issued in Transaction -- -- -- -- -- -- --
Pro Forma Shares 27.8 27.8 27.8 27.8 27.8 27.8 27.8
- ------------------------------------------------------------------------------------------------------------------------------------
Pro Forma EPS 3.51 3.57 3.55 3.54 3.53 3.52 3.5
Percent Change from Stand-Alone EPS -- 1.6% 1.2% 0.9% 0.7% 0.4% 0.2%
Required Overhead Reduction for 0% Dilution -- -- -- -- -- -- --
As a Percent of GNC Overhead (j) -- -- -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Pro Forma Debt/Capitalization 26.4%(l) 32.0% 32.3% 32.5% 32.6% 32.8% 32.9%
EBIT/Interest Expense (k) 6.6x(l) 8.9x 9.Ox 9.1x 9.2x 9.3x 9.3x
EBIT/Interest Expense + Preferred Dividends (k) 4.6 (l) 5.8 5.9 5.9 5.9 5.9 6.0
GNC Ownership of Orion Capital -- 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
------ ------ ------ ------ ------ ------ ------
(a) Interest expense assumes an interest rate of 6.90% (10-year Treasury rate ------------------------------------------
of 5.945 plus 95 bps). Assumes a tax rate of 35.0%. Assumptions
------------------------------------------
(b) As of October 28, 1997. Financing Mix:
Debt (a) 100.0%
(c) Represents the purchase of 2.9 million shares not owned by Orion. Common Stock --
Current OC Share Price (b) $44.75
(d) Based on management estimates. Current OC Ownership of GNC 80.7%
Tax Rate 35.0
(e) Based on 27.8 million average fully diluted shares outstanding for the ------------------------------------------
quarter ended September 30, 1997.
(f) Based on 19.3% public ownership and estimated GNC 1998E income of $36.6
million, or $2.65 per share, as per company estimates.
(g) Goodwill amortized over a 25 year period.
(h) Amortization of $5.6 million after-tax unrealized bond portfolio capital
gains over an 8 year period.
(i) Represents $500,000 pre-tax savings realized as a result of GNC becoming a
wholly owned subsidiary of Orion Capital. Assumes a tax rate of 35.0%.
(j) Based on GNC overhead expenses for the twelve months ended September 30,
1997 of $13.6 million.
(k) Stand-Alone EBIT includes minority interest expense related to GNC.
(l) At of for the three months ended September 30, 1997, annualized.
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GUARANTY NATIONAL CORPORATION / OCTOBER 30, 1997
Merger Consequences Analysis: 100% Cash - Mgmt. Est. Pro Forma
Dollars in millions, except per share data
------------ Purchase Price per GNC Share:
- --------------------- ----------- Market Price ------------------------------------------------------
Acquisition Analysis: Stand-Alone $33.31 $35.00 $36.00 $37.00 $38.00 $39.00
- --------------------- ----------- ------------ ------ ------ ------ ------ ------
Transaction Value (c): $ 96.9 $101.8 $104.7 $107.6 $110.5 $113.4
Goodwill Created -- 49.5 54.4 57.4 60.3 63.2 66.1
Orion Capital:
Stand-Alone 1998E EPS (d) $ 3.51 $ 3.51 $ 3.51 $ 3.51 $ 3.51 $ 3.51 $ 3.51
1998E Income (e) 97.6 97.6 97.6 97.6 97.6 97.6 97.6
Add: Minority Interest Expense (f) -- 8.0 8.0 8.0 8.0 8.0 8.0
After-Tax Interest Expense (a) -- (4.3) (4.6) (4.7) (4.8) (5.0) (5.1)
Goodwill Amortization (g) -- (2.0) (2.2) (2.3) (2.4) (2.5) (2.6)
Bond Premium Amortization (h) -- (0.1) (0.1) (0.1) (0.1) (0.1) (0.1)
After-Tax Merger Related Savings (i) -- 0.3 0.3 0.3 0.3 0.3 0.3
------ ------ ------ ------ ------ ------ ------
Pro Forma Net Income $ 97.6 $ 99.4 $ 99.0 $ 98.8 $ 98.5 $ 98.3 $ 98.0
------ ------ ------ ------ ------ ------ ------
Stand Alone Average Fully Diluted Shares 27.8 27.8 27.8 27.8 27.8 27.8 27.8
Shares Issued in Transaction -- -- -- -- -- -- --
Pro Forma Shares 27.8 27.8 27.8 27.8 27.8 27.8 27.8
- ------------------------------------------------------------------------------------------------------------------------------------
Pro Forma EPS 3.51 3.58 3.56 3.55 3.54 3.53 3.53
Percent Change from Stand-Alone EPS -- 1.9% 1.4% 1.2% 0.9% 0.7% 0.4%
Required Overhead Reduction for 0% Dilution -- -- -- -- -- -- --
As a Percent of GNC Overhead (j) -- -- -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Pro Forma Debt/Capitalization 26.4%(l) 32.0% 32.3% 32.5% 32.6% 32.8% 32.9%
EBIT/Interest Expense (k) 6.6x(l) 8.9x 9.Ox 9.1x 9.2x 9.3x 9.4x
EBIT/Interest Expense + Preferred Dividends (k) 4.6 (l) 5.8 5.9 5.9 5.9 6.0 6.0
GNC Ownership of Orion Capital -- 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
------ ------ ------ ------ ------ ------ ------
(a) Interest expense assumes an interest rate of 6.90% (10-year Treasury rate ------------------------------------------
of 5.945 plus 95 bps). Assumes a tax rate of 35.0%. Assumptions
------------------------------------------
(b) As of October 28, 1997. Financing Mix:
Debt (a) 100.0%
(c) Represents the purchase of 2.9 million shares not owned by Orion. Common Stock --
Current OC Share Price (b) $44.75
(d) Based on management estimates. Current OC Ownership of GNC 80.7%
Tax Rate 35.0
(e) Based on 27.8 million average fully diluted shares outstanding for the ------------------------------------------
quarter ended September 30, 1997.
(f) Based on 19.3% public ownership and estimated GNC 1998E income of $40.8
million, or $2.73 per share, as per company estimates.
(g) Goodwill amortized over a 25 year period.
(h) Amortization of $5.6 million after-tax unrealized bond portfolio capital
gains over an 8 year period.
(i) Represents $500,000 pre-tax savings realized as a result of GNC becoming a
wholly owned subsidiary of Orion Capital. Assumes a tax rate of 35.0%.
(j) Based on GNC overhead expenses for the twelve months ended September 30,
1997 of $13.6 million.
(k) Stand-Alone EBIT includes minority interest expense related to GNC.
(l) At of for the three months ended September 30, 1997, annualized.
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42
GUARANTY NATIONAL CORPORATION / OCTOBER 30, 1997
Merger Consequences Analysis: 80% Cash - Consensus Estimates
Dollars in millions, except per share data
------------ Purchase Price per GNC Share:
- --------------------- ----------- Market Price -----------------------------------------------------
Acquisition Analysis: Stand-Alone $33.31 $35.00 $36.00 $37.00 $38.00 $39.00
- --------------------- ----------- ------------ ------ ------ ------ ------ ------
Transaction Value (c): $ 96.9 $101.8 $104.7 $107.6 $110.5 $113.4
Goodwill Created -- 49.5 54.4 57.4 60.3 63.2 66.1
Orion Capital:
Stand-Alone 1098E EPS (d) $ 3.40 $ 3.40 $ 3.40 $ 3.40 $ 3.40 $ 3.40 $ 3.40
1998E Income (e) 94.5 94.5 94.5 94.5 94.5 94.5 94.5
Add: Minority Interest Expense (f) -- 7.0 7.0 7.0 7.0 7.0 7.0
After-Tax Interest Expense (a) -- (3.5) (3.6) (3.8) (3.9) (4.0) (4.1)
Goodwill Amortization (g) -- (2.0) (2.2) (2.3) (2.4) (2.5) (2.6)
Bond Premium Amortization (h) -- (0.1) (0.1) (0.1) (0.1) (0.1) (0.1)
After-Tax Merger Related Savings (i) -- 0.3 0.3 0.3 0.3 0.3 0.3
------ ------ ------ ------ ------ ------ ------
Pro Forma Net Income $ 94.5 $ 96.3 $ 95.9 $ 95.7 $ 95.5 $ 95.2 $ 95.0
------ ------ ------ ------ ------ ------ ------
Stand Alone Average Fully Diluted Shares 27.8 27.8 27.8 27.8 27.8 27.8 27 8
Shares Issued in Transaction -- 0.4 0.5 0.5 0.5 0.5 0.5
Pro Forma Shares 27.8 28.2 28.3 28.3 28.3 28.3 28.3
- ------------------------------------------------------------------------------------------------------------------------------------
Pro Forma EPS 3.40 3.41 3.39 3.38 3.38 3.37 3.36
Percent Change from Stand-Alone EPS -- 0.3% (0.2%) (0.5%) (0.7%) (1.0%) (1.3%)
Required Overhead Reduction for 0% Dilution -- -- $ 0.2 $ 0.6 $ 0.9 $ 1.5 $ 1.6
As a Percent of GNC Overhead (j) -- -- 1.7% 4.3% 6.9% 9.5% 12.1%
- ------------------------------------------------------------------------------------------------------------------------------------
Pro Forma Debt/Capitalization 26.4%(l) 30.5% 30.7% 30.8% 30.9% 31.0% 31.2%
EBIT/Interest Expense (k) 6.6x(l) 8.2x 8.2x 8.3x 8.3x 8.4x 8.4x
EBIT/Interest Expense + Preferred Dividends (k) 4.6 (l) 5.5 5.5 5.5 5.5 5.5 5.5
GNC Ownership of Orion Capital -- 1.5% 1.6% 1.7% 1.7% 1.7% 1.8%
------ ------ ------ ------ ------ ------ ------
(a) Interest expense assumes an interest rate of 6.90% (10-year Treasury rate ------------------------------------------
of 5.945 plus 95 bps). Assumes a tax rate of 35.0%. Assumptions
------------------------------------------
(b) As of October 28, 1997. Financing Mix:
Debt (a) 80.0%
(c) Represents the purchase of 2.9 million shares not owned by Orion. Common Stock 20.0%
Current OC Share Price (b) $44.75
(d) Based on First Call mean estimate as of October 22, 1997. Current OC Ownership of GNC 80.7%
Tax Rate 35.0
(e) Based on 27.8 million average fully diluted shares outstanding for the ------------------------------------------
quarter ended September 30, 1997.
(f) Based on 19.3% public ownership and estimated GNC 1998E income of $36.2
million (or $2.41 per share) as per company estimates.
(g) Goodwill amortized over a 25 year period.
(h) Amortization of $5.6 million after-tax unrealized bond portfolio capital
gains over an 8 year period.
(i) Represents $500,000 pre-tax savings realized as a result of GNC becoming a
wholly owned subsidiary of Orion Capital. Assumes a tax rate of 35.0%.
(j) Based on GNC overhead expenses for the twelve months ended September 30,
1997 of $13.6 million.
(k) Stand-Alone EBIT includes minority interest expense related to GNC.
(l) At of for the three months ended September 30, 1997, annualized.
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43
GUARANTY NATIONAL CORPORATION / OCTOBER 30, 1997
Merger Consequences Analysis: 80% Cash - Mgmt. Estimates
Dollars in millions, except per share data
------------ Purchase Price per GNC Share:
- --------------------- ----------- Market Price -----------------------------------------------------
Acquisition Analysis: Stand-Alone $33.31 $35.00 $36.00 $37.00 $38.00 $39.00
- --------------------- ----------- ------------ ------ ------ ------ ------ ------
Transaction Value (c): $ 96.9 $101.8 $104.7 $107.6 $110.5 $113.4
Goodwill Created -- 49.5 54.4 57.4 60.3 63.2 66.1
Orion Capital:
Stand-Alone 1998E EPS (d) $ 3.51 $ 3.51 $ 3.51 $ 3.51 $ 3.51 $ 3.51 $ 3.51
1998E Income (e) 97.6 97.6 97.6 97.6 97.6 97.6 97.6
Add: Minority Interest Expense (f) -- 7.7 7.7 7.7 7.7 7.7 7.7
After-Tax Interest Expense (a) -- (3.5) (3.6) (3.8) (3.9) (4.0) (5.1)
Goodwill Amortization (g) -- (2.0) (2.2) (2.3) (2.4) (2.5) (2.6)
Bond Premium Amortization (h) -- (0.1) (0.1) (0.1) (0.1) (0.1) (0.1)
After-Tax Merger Related Savings (i) -- 0.3 0.3 0.3 0.3 0.3 0.3
------ ------ ------ ------ ------ ------ ------
Pro Forma Net Income $ 97.6 $100.0 $ 99.7 $ 99.4 $ 99.2 $ 99.0 $ 98.8
------ ------ ------ ------ ------ ------ ------
Stand Alone Average Fully Diluted Shares 27.8 27.8 27.8 27.8 27.8 27.8 27.8
Shares Issued in Transaction -- 0.4 0.5 0.5 0.5 0.5 0.5
Pro Forma Shares 27.8 28.2 28.3 28.3 28.3 28.3 28.3
- ------------------------------------------------------------------------------------------------------------------------------------
Pro Forma EPS 3.51 3.54 3.53 3.52 3.51 3.50 3.49
Percent Change from Stand-Alone EPS -- 0.9% 0.5% 0.2% (0.1%) (0.3%) (0.6%)
Required Overhead Reduction for 0% Dilution -- -- -- -- $ 0.1 $ 0.4 $ 0.8
As a Percent of GNC Overhead (j) -- -- -- -- 0.6% 3.2% 5.8%
- ------------------------------------------------------------------------------------------------------------------------------------
Pro Forma Debt/Capitalization 26.4%(l) 30.5% 30.7% 30.8% 30.9% 31.0% 31.2%
EBIT/Interest Expense (k) 6.6x(l) 8.4x 8.5x 8.6x 8.6x 8.7x 8.7x
EBIT/Interest Expense + Preferred Dividends (k) 4.6 (l) 5.7 5.7 5.7 5.7 5.7 5.7
GNC Ownership of Orion Capital -- 1.5% 1.6% 1.7% 1.7% 1.7% 1.8%
------ ------ ------ ------ ------ ------ ------
(a) Interest expense assumes an interest rate of 6.90% (10-year Treasury rate ------------------------------------------
of 5.945 plus 95 bps). Assumes a tax rate of 35.0%. Assumptions
------------------------------------------
(b) As of October 28, 1997. Financing Mix:
Debt (a) 80.0%
(c) Represents the purchase of 2.9 million shares not owned by Orion. Common Stock 20.0%
Current OC Share Price (b) $44.75
(d) Based on management estimates. Current OC Ownership of GNC 80.7%
Tax Rate 35.0
(e) Based on 27.8 million average fully diluted shares outstanding for the ------------------------------------------
quarter ended September 30, 1997.
(f) Based on 19.3% public ownership and estimated GNC 1998E income of $36.6
million, or $2.65 per share, as per company estimates.
(g) Goodwill amortized over a 25 year period.
(h) Amortization of $5.6 million after-tax unrealized bond portfolio capital
gains over an 8 year period.
(i) Represents $500,000 pre-tax savings realized as a result of GNC becoming a
wholly owned subsidiary of Orion Capital. Assumes a tax rate of 35.0%.
(j) Based on GNC overhead expenses for the twelve months ended September 30,
1997 of $13.6 million.
(k) Stand-Alone EBIT includes minority interest expense related to GNC.
(l) At of for the three months ended September 30, 1997, annualized.
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44
GUARANTY NATIONAL CORPORATION / OCTOBER 30, 1997
Merger Consequences Analysis: 80% Cash - Mgmt. Est. Pro Forma
Dollars in millions, except per share data
------------ Purchase Price per GNC Share:
- --------------------- ----------- Market Price -----------------------------------------------------
Acquisition Analysis: Stand-Alone $33.31 $35.00 $36.00 $37.00 $38.00 $39.00
- --------------------- ----------- ------------ ------ ------ ------ ------ ------
Transaction Value (c): $ 96.9 $101.8 $104.7 $107.6 $110.5 $113.4
Goodwill Created -- 49.5 54.4 57.4 60.3 63.2 66.1
Orion Capital:
Stand-Alone 1998E EPS (d) $ 3.51 $ 3.51 $ 3.51 $ 3.51 $ 3.51 $ 3.51 $ 3.51
1998E Income (e) 97.6 97.6 97.6 97.6 97.6 97.6 97.6
Add: Minority Interest Expense (f) -- 8.0 8.0 8.0 8.0 8.0 8.0
After-Tax Interest Expense (a) -- (3.5) (3.6) (3.8) (3.9) (4.0) (4.1)
Goodwill Amortization (g) -- (2.0) (2.2) (2.3) (2.4) (2.5) (2.6)
Bond Premium Amortization (h) -- (0.1) (0.1) (0.1) (0.1) (0.1) (0.1)
After-Tax Merger Related Savings (i) -- 0.3 0.3 0.3 0.3 0.3 0.3
------ ------ ------ ------ ------ ------ ------
Pro Forma Net Income $ 97.6 $100.3 $ 99.9 $ 99.7 $ 99.5 $ 99.3 $ 99.0
------ ------ ------ ------ ------ ------ ------
Stand Alone Average Fully Diluted Shares 27.8 27.8 27.8 27.8 27.8 27.8 27.8
Shares Issued in Transaction -- 0.4 0.5 0.5 0.5 0.5 0.5
Pro Forma Shares 27.8 28.2 28.3 28.3 28.3 28.3 28.3
- ------------------------------------------------------------------------------------------------------------------------------------
Pro Forma EPS 3.51 3.55 3.54 3.53 3.52 3.51 3.50
Percent Change from Stand-Alone EPS -- 1.2% 0.7% 0.5% 0.2% (0.1%) (0.3%)
Required Overhead Reduction for 0% Dilution -- -- -- -- -- $ 0.1 $ 0.4
As a Percent of GNC Overhead (j) -- -- -- -- -- 0.7% 3.3%
- ------------------------------------------------------------------------------------------------------------------------------------
Pro Forma Debt/Capitalization 26.4%(l) 30.5% 30.7% 30.8% 30.9% 31.0% 31.2%
EBIT/Interest Expense (k) 6.6x(l) 8.4x 8.5x 8.6x 8.6x 8.7x 8.7x
EBIT/Interest Expense + Preferred Dividends (k) 4.6 (l) 5.7 5.7 5.7 5.7 5.7 5.8
GNC Ownership of Orion Capital -- 1.5% 1.6% 1.7% 1.7% 1.7% 1.8%
------ ------ ------ ------ ------ ------ ------
(a) Interest expense assumes an interest rate of 6.90% (10-year Treasury rate ------------------------------------------
of 5.945 plus 95 bps). Assumes a tax rate of 35.0%. Assumptions
------------------------------------------
(b) As of October 28, 1997. Financing Mix:
Debt (a) 80.0%
(c) Represents the purchase of 2.9 million shares not owned by Orion. Common Stock 20.0%
Current OC Share Price (b) $44.75
(d) Based on management estimates. Current OC Ownership of GNC 80.7%
Tax Rate 35.0
(e) Based on 27.8 million average fully diluted shares outstanding for the ------------------------------------------
quarter ended September 30, 1997.
(f) Based on 19.3% public ownership and estimated GNC 1998E income of $40.8
million, or $2.73 per share, as per company estimates.
(g) Goodwill amortized over a 25 year period.
(h) Amortization of $5.6 million after-tax unrealized bond portfolio capital
gains over an 8 year period.
(i) Represents $500,000 pre-tax savings realized as a result of GNC becoming a
wholly owned subsidiary of Orion Capital. Assumes a tax rate of 35.0%.
(j) Based on GNC overhead expenses for the twelve months ended September 30,
1997 of $13.6 million.
(k) Stand-Alone EBIT includes minority interest expense related to GNC.
(l) At of for the three months ended September 30, 1997, annualized.
41
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45
GUARANTY NATIONAL CORPORATION / OCTOBER 30, 1997
Appendices
42
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46
GUARANTY NATIONAL CORPORATION / OCTOBER 30, 1997
Acquisition of Unisun Insurance
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47
GUARANTY NATIONAL CORPORATION / OCTOBER 30, 1997
GNC: Acquisition of Unisun Insurance Company
Transaction Summary
o On October 20, 1997, GNC agreed to acquire Unisun Insurance Company
("Unisun") for $26 million in cash.
o The transaction is expected to be immediately accretive to earnings,
and is expected to add $0.08, $0.13 and $0.19 per share in 1998,
1999 and 2000, respectively.
Company Overview
o Unisun is a leading writer of private passenger automobile liability
insurance in South Carolina and ranks as a leading service carrier
for both the North Carolina and South Carolina reinsurance facility.
o A large portion of the company's business is ceded to the facility,
enabling the company to act primarily as a servicer for these
policies.
Transaction Benefits
o Recent legislation in South Carolina will result in the creation of
a significant voluntary nonstandard automobile market in March 1999.
o There is significant opportunity to realize cost savings.
o This acquisition provides GNC with a Southeast market presence and
provides a platform for further market expansion in that region.
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48
GUARANTY NATIONAL CORPORATION / OCTOBER 30, 1997
Selected P&C Industry Merger and
Acquisition Transactions
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49
GUARANTY NATIONAL CORPORATION / OCTOBER 30, 1997
M&A Transaction Analysis: Property & Casualty
Description Total
Announced Target Acquiror of Consideration
(Closed) (parent) (parent) Target in millions)
- -----------------------------------------------------------------------------------------------------------------------------
10/16/97 Omni Insurance Grp. Inc. Hartford Fin. Svcs. Grp. Inc. Nonstandard auto insurance $ 187.4
(Pending)
9/18/97 Westchester Specialty Group Ace Ltd. Commercial Property and 333.0
(Pending) (Talegen Holdings Inc.) Umbrella Liability
8/21/97 Cmwlth Land Title/Transnation Title Lawyers Title Corp. Title Insurance 458.2
(Pending) (Reliance Group Holdings)
8/15/97 Physicians Protective Trust Professionals Ins. Co. Mgt. Grp. Malpractice Insurance 126.8
(Pending)
8/8/97 Titan Holdings USF&G Nonstandard 233.0
(Pending) Automobile
7/3/97 Colonial Penn GECC Personal Lines 950.0
(Pending)
6/25/97 Unionamerica Holdings PLC MMI Cos. Medical malpractice 179.5
(Pending) reinsurance
6/23/97 Sphere Drake Holdings Ltd. Fairfax Financial Holdings Ltd. Reinsurance 137.9
(Pending)
6/23/97 Integon Corp. GMAC Nonstandard 550.0
(Pending) Automobile
6/9/97 American States Financial Corp. Safeco Corp. Small commercial; 2,822.4
(Pending) personal lines
6/2/97 Anthem Inc. Acordia Inc Insurance Broking 172.7
7/15/97
5/8/97 OCR Holdings. Ltd. EXEL, Ltd. Reinsurance 668.7
(Pending)
4/30/97 Anthem Casualty Ins. Group, Inc. (c) Vesta Insurance Group, Inc. Auto and Homeowners' 238.8
6/30/97 Insurance
5/19/97 Industrial Indemnity Fremont General Corp. Workers' Compensation 365.0
(Pending) (Talegen Holdings Inc.)
3/31/97 Lyndon Property Insurance Co. (c) Frontier Insurance Group, Inc. Credit Insurance 92.0
6/4/97 (Mercury Finance)
3/6/97 Crop Growers Corp. Fireman's Fund Insurance Co. Crop-insurance 81.7
(Pending)
2/21/97 Allmerica Property & Casualty Cos. Allmerica Financial Corporation Commercial and 797.0
(7/16/97) personal lines
1/23/97 Coregis Group Inc. (c) General Electric Specialty P&C 375.0
(6/2/97)
1/17/97 AVEMCO Corporation HCC Insurance Holdings, Inc. Aviation 227.3
(Pending)
Price as a Multiple of E.V. as a Multiple of
---------------------------------- ---------------------
GAAP SAP
---------------------------------- ---------------------
Price Premium LTM Net LTM Net Capital
Announced Per to Operating Forward Book Operating and
(Closed) Share Mkt. (a) Income Earnings (b) Value Income Surplus
- ----------------------------------------------------------------------------------------------
10/16/97 $31.75 130.9% 34.8 x 27.4 x 3.36 x 67.5 x 5.19 x
(Pending)
9/18/97 NM NM NA NA NA 7.6 0.97
(Pending)
8/21/97 NM NM NA NA NA NA NA
(Pending)
8/15/97 NM NM NA NA NA NA NA
(Pending)
8/8/97 23.20 1.4 15.1 11.8 1.97 19.7 3.52
(Pending)
7/3/97 NA NA 19.1 NA 2.90 17.9 2.79
(Pending)
6/25/97 21.27 28.9 9.9 9.0 1.72 8.7 1.08
(Pending)
6/23/97 7.50 (d) (13.0) 7.1 6.0 0.55 NM NM
(Pending)
6/23/97 26.00 67.7 NM 23.0 3.04 NM 3.21
(Pending)
6/9/97 47.00 30.6 16.0 14.8 2.13 16.3 2.76
(Pending)
6/2/97 39.50 12.7 19.2 17.0 2.57 NA NA
7/15/97
5/8/97 27.00 20.7 8.2 8.2 1.57 NA NA
(Pending)
4/30/97 NA NA NM NA 2.20 17.9 1.53
6/30/97
5/19/97 NA NA NA NA NA NM 1.60
(Pending)
3/31/97 NA NA 4.5 NA 0.78 3.4 1.29
6/4/97
3/6/97 10.25 41.4 NM 10.0 2.42 NA NA
(Pending)
2/21/97 33.00 5.2 16.8 NA 1.22 14.2 NA
(7/16/97)
1/23/97 NA NA NA NA NA 14.1 1.50
(6/2/97)
1/17/97 27.50 83.3 29.9 18.0 3.75 19.2 3.12
(Pending)
(a) Premium to market one month prior to public announcement.
(b) Based on the following year's median IBES estimate as of announcement date.
(c) Represents a private transaction.
(d) Excludes contingent payment of $9.86 per share, or an aggregate of $181.2
million, payable in 2007.
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50
M&A Transaction Analysis: Property & Casualty
Description Total
Announced Target Acquiror of Consideration
(Closed) (parent) (parent) Target (in millions)
- -----------------------------------------------------------------------------------------------------------------------------
1/13/97 Zurich Reinsurance Centre Hold. Zurich Group Reinsurance $ 322.5
(Pending)
11/21/96 American Fidelity Ins. Co. (c) Mercury General Corp. Automobile/casualty 34.8
(Pending)
9/17/96 Pac Rim Holding Corporation Superior National Insurance Worker's compensation 53.9
(4/11/97)
9/16/96 Allstate Reinsurance Scor U.S. Corp. Reinsurance 500.0
(10/8/96)
8/14/96 American Re Corporation Munich Re Reinsurance 3,300.0
(11/25/96)
8/14/96 Guardian Royal Exchange (c) Transatlantic Reinsurance Co. Reinsurance 105.0
(8/14/96)
7/1/96 National Reinsurance General Reinsurance Property/Casualty Rein. 940.0
(10/3/96)
6/21/96 Vik Brothers (c) Highlands Insurance Grp, Inc. Com. P&C for small 110.0
(4/30/97) to medium sized co's.
6/20/96 Northbrook Group (c) St. Paul Fire and Marine Ins. Comm. auto, workers' 180.0
(8/1/96) (Allstate) comp. and inland marine
5/10/96 Transnational Reins. Corp PXRE Corp. Retr. reins. in brokered 124.9
(12/11/96) prop., marine, & aviation
3/4/96 Citation Insurance Group Physicians Ins. Co. of Ohio Workers' comps and 30.7
(11/21/96) commercial P&C
2/21/96 Skandia America Rein. Corp. (c) Fairfax Financial Holdings Limit P&C Reinsurance 230.0
(5/31/96) (Skandia Insurance Co., Ltd. Sweeden)
2/19/96 Financial Institions Ins. Grp. Castle Harlan Prtnr's II LP Reinsurance and 48.6
(9/9/96) Specialty Line P&C
2/9/96 Tempest Re (c) Ace Limited Property Catastrophe 743.9
(5/22/96) Reinsurance
11/29/93 Aetna Property & Casualty (c) Travelers Group National P&C Co. 4,000.0
(4/2/1996) (Aetna Life & Casualty)
9/26/95 Scor U.S. Scor S.A. Reinsurance 50.9
(12/21/95)
9/14/95 Midwest Employer Casualty Co. (c) W.R. Berkley Workers' Comp. Co. 138.0
(11/8/95) (MECC Inc.)
8/25/95 GEICO Berkshire Hathaway Multi-line P&C 2,322.8
(1/2/96)
6/19/95 Milwaukee Insurance Grp. Inc. Unitrin Inc. P&C Insurance 94.0
(10/3/95)
4/27/95 Viking Insurance Holdings Inc. (c) Guaranty National Corp. Regional P&C Company 102.0
(7/18/95) (Xerox Corp.)
Price as a Multiple of E.V. as a Multiple of:
---------------------------------- ----------------------
GAAP SAP
---------------------------------- ----------------------
Price Premium Net Net Capital
Announced Per to Operating Forward Book Operating and
(Closed) Share Mkt. (a) Income Earnings (b) Value Income Surplus
- ----------------------------------------------------------------------------------------------
1/13/97 $36.00 12.1% 27.1 x 21.8 x 1.32 x 52.6 x 0.49 x
(Pending)
11/21/96 NA NA NA NA NA NM 0.94
(Pending)
9/17/96 3.00 26.3 NM NA 0.91 NM 1.15
(4/11/97)
9/16/96 NA NA NA NA NA NA NA
(10/8/96)
8/14/96 65.00 53.4 NM 14.4 3.58 NM 2.87
(11/25/96)
8/14/96 NA NA NA NA NA NA NA
(8/14/96)
7/1/96 53.00 60.6 18.5 15.1 2.30 18.6 2.07
(10/3/96)
6/21/96 NA NA NA NA 0.93 NM 0.70
(4/30/97)
6/20/96 NA NA NA NA 1.38 11.1 0.73
(8/1/96)
5/10/96 23.28 4.0 5.8 6.1 0.96 5.9 1.05
(12/11/96)
3/4/96 5.03 15.0 9.1 20.1 0.68 20.6 1.03
(11/21/96)
2/21/96 NA NA NA NA NA NM 0.81
(5/31/96)
2/19/96 16.00 15.3 13.7 NA 1.06 84.0 1.15
(9/9/96)
2/9/96 NA NA 7.0 NA 1.01 NA NA
(5/22/96)
11/29/95 NA NA NM NA 1.03 NM 1.71
(4/2/1996)
9/26/95 14.00 21.7 NM 14.7 0.93 NM 1.01
(12/21/95)
9/14/95 NA NA 5.0 NA 1.09 7.8 1.96
(11/8/95)
8/25/95 70.00 25.8 24.0 18.8 2.86 23.6 4.56
(1/2/96)
6/19/95 22.00 91.3 27.1 17.6 1.22 NM 1.85
(10/3/95)
4/27/95 NA NA NA NA NA 10.1 1.24
(7/18/95)
(a) Premium to market one month prior to public announcement.
(b) Based on the following year's median IBES estimate as of announcement
date.
(c) Represents a private transaction.
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51
GUARANTY NATIONAL CORPORATION / OCTOBER 30, 1997
M&A Transaction Analysis: Property & Casualty
Description Total
Announced Target Acquiror of Consideration
(Closed) (parent) (parent) Target (in millions)
- -------------------------------------------------------------------------------------------------------------------------
1/12/95 Re Capital Corp. Zurich Reinsurance Co. Reinsurance $ 203.5
(4/26/95)
12/19/94 Victoria Financial Corp. USF&G Regional P&C 55.3
(5/22/95)
12/19/94 Constitution Re Corporation (c) EXOR America, Inc. Specialty Reinsurance 421.0
(4/26/95) (Talegen Holdings / Xerox)
12/6/94 Continental Corp. CNA Financial Corp. Regional P&C 1,107.3
(5/10/95)
7/28/94 Bankers and Shippers Ins. Co. (c) Integon Corp. Regional P&C Company 142.0
(10/18/94) (Travelers Indemnity Co.)
11/23/93 Federal Kemper Insurance Co. (c) Anthem P&C Holdings Regional P&C Company 105.0
(1/03/94) (Kemper Corp) (Associated Insurance Co.)
10/29/93 Ranger Insurance Co. (c) Fairfax Financial Hold. Ltd. Regional P&C Company 135.0
(1/06/94)
-------------------------------------------------------
GNC Financial Data (d)
-------------------------------------------------------
Enterprise Value $602.6
Market Cap 501.5
Statutory Surplus 289.3
Statutory Oper. Earnings (e) 41.3
GAAP Book Value 278.7
GAAP Oper. Earnings 31.7
Number of Shares 15.1
1997E EPS (f) $ 2.26
1998E EPS (f) 2.65
-------------------------------------------------------
Price as a Multiple of E.V. as a Multiple of:
---------------------------------- ----------------------
GAAP SAP
---------------------------------- ----------------------
Price Premium Net Net Capital
Announced Per to Operating Forward Book Operating and
(Closed) Share Mkt. (a) Income Earnings (b) Value Income Surplus
- --------------------------------------------------------------------------------------------------------
1/12/95 $18.50 49.5% 15.0 x 13.2 x 1.O8 x NA 1.23 x
(4/26/95)
12/19/94 13.00 89.1 34.1 13.0 2.03 18.6 x 2.68
(5/22/95)
12/19/94 NA NA 10.8 19.0 1.19 12.3 1.41
(4/26/95)
12/6/94 20.00 35.6 NM NA 0.80 9.9 0.61
(5/10/95)
7/28/94 NA NA NA NA NA 22.4 2.21
(10/18/94)
11/23/93 NA NA NA NA 1.20 11.5 1.62
(1/03/94)
10/29/93 NA NA NA NA NA 16.5 1.41
(1/06/94)
-------------------------------------------------------------------------------------------------
Median 27.6% 15.1 x 14.8 x 1.38 x 17.9 x 1.50 x
Mean 37.9 16.4 15.2 1.75 21.3 1.87
75th Percentile 55.2 21.6 18.8 2.28 19.6 2.18
25th Percentile 14.4 8.6 11.8 1.01 10.3 1.04
------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------
Implied Equity Value per GNC Share
Median -- $31.82 $39.22 $25.66 -- --
Mean -- 34.61 40.25 32.44 -- --
75th Percentile -- 45.54 49.82 42.16 -- --
25th Percentile -- 18.21 31.27 18.78 -- --
------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------
Implied Enterprise Value per GNC Share
Median -- -- -- -- $49.06 $28.77
Mean -- -- -- -- 58.45 35.97
75th Percentile -- -- -- -- 53.65 41.83
25th Percentile -- -- -- -- 28.36 19.98
------------------------------------------------------------------------------------------------
(a) Premium to market one month prior to public announcement.
(b) Based on the following year's median IBES estimate as of announcement
date.
(c) Represents a private transaction.
(d) Financial data at or for the twelve months ended September 30, 1997.
(e) For the six months ended June 30, 1997, annualized.
N.B. NA = Not Available
NM = Not Meaningful
48
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52
GUARANTY NATIONAL CORPORATION / OCTOBER 30, 1997
Selected Squeeze Out Transaction
Analysis
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53
GUARANTY NATIONAL CORPORATION / OCTOBER 30, 1997
Squeeze Out Transaction Analysis
Per Share % Change
Date --------------- From Deal
- -------------------- Initial Final Offer Initial Value
Announced Completed Price Price Amended? Offer Acquiror Name Target Name ($ mil)
- ------------------------------------------------------------------------------------------------------------------------------------
10/20/97 (pending) $25.00 -- -- -- HSN Inc. Ticketmaster Group Inc $340.8
9/11/97 (pending) 48.00 -- -- -- Investor Group BET Holdings Inc. 288.0
8/29/97 (pending) 19.50 -- -- -- Rexel SA (Pinault-Printemps) Rexel Inc. 250.8
7/9/97 (pending) 24.00 -- -- -- Investor Group Seaman Furniture Co 31.6
6/26/97 (pending) 97.00 -- -- -- Rhone-Poulenc SA (France) Rhone-Poulenc Rorer Inc 4,000.6
6/20/97 (pending) 15.00 -- -- -- Waste Management Inc. Wheelabrator Technologies Inc 774.7
6/13/97 (pending) 52.75 -- -- -- Hilton Hotels Corp Bally's Grand Inc 42.6
6/2/97 7/15/97 40.00 $40.00 no -- Anthem Inc. Acordia Inc (Anthem Inc) 172.7
5/22/97 (pending) 15.50 -- -- -- Texas Industries Inc. Chaparral Steel Co 65.9
5/14/97 (pending) 35.10 -- -- -- Enron Corp. Enron Global Power & Pipelines 403.9
5/5/97 (pending) 10.00 -- -- -- St Joe Paper Co Florida East Coast Inds Inc 428.4
3/3/97 (pending) 37.00 -- -- -- American Financial Group Inc American Finl Entps Inc 83.6
2/25/97 (pending) 60.00 -- -- -- Petrofina SA Fina Inc 257.0
1/28/97 5/21/97 7.25 8.00 yes 10.3% Monsanto Co Calgene Inc (Monsanto Co) 242.6
1/21/97 7/9/97 38.50 33.50 yes (13.0) Mafco Holdings Mafco Consolidated Grp (Mafco) 116.8
1/13/97 9/4/97 36.00 39.50 yes 9.7 Zurich Group Zurich Reinsurance Centre Holding 322.5
Inc.
12/17/96 7/16/97 29.00 33.00 yes 13.8 Allmerica Financial Allmerica Property & Casualty 796.9
Corporation
11/27/96 3/27/97 14.25 14.25 no -- JW Childs Equity Partners LP Central Tractor Farm & Country 53.6
11/20/96 Withdrawn 19.00 22.50 yes 18.4 Andrews Group Inc. Toy Biz Inc. 206.0
10/10/96 11/27/96 10.00 10.00 no -- Renco Group Inc WCI Steel Inc 56.5
9/9/96 9/23/96 -- -- no -- Highwoods Property Crocker Realty Trust Inc. 73.7
8/8/96 9/17/96 41.00 41.00 no -- Chemed Corp Roto-Rooter Inc 88.3
7/31/96 11/13/96 8.00 8.00 no -- Monsanto Co. Calgene 50.0
5/27/96 2/16/97 17.00 19.50 no --- Sandoz Ltd SyStemix Inc 76.2
5/10/96 12/11/96 23.52 24.32 yes 3.4 PXRE Corp. Transnational Re Corp. 130.5
5/7/96 7/3/96 17.50 18.50 yes 5.7 Orion Capital Corp Guaranty National Corp 85.1
4/8/96 8/16/96 55.00 55.00 no -- AirTouch Communications Cellular Communications Inc 1,606.5
- ------------------------------------------------------------------------------------------------------------------------------------
Offer Premium Percent Percent
Date ---------------- Held at Owned
- -------------------- % % 1 Week 4 Weeks Ann Percent After
Announced Completed Stock Cash Prior Prior Date Sought Transaction
- --------------------------------------------------------------------------------------------
10/20/97 (pending) 50.0%(a) 50.0%(a) 8.1% 31.6% 44.6% 55.4% --
9/11/97 (pending) 0.0 100.0 20.8 20.6 61.2 38.8 --
8/29/97 (pending) 0.0 100.0 3.3 5.4 50.6 49.4 --
7/9/97 (pending) 0.0 100.0 21.5 21.5 66.9 33.1 --
6/26/97 (pending) 0.0 100.0 16.5 22.7 31.4 34.3 65.7%
6/20/97 (pending) 0.0 100.0 16.5 18.8 34.0 33.0 --
6/13/97 (pending) 0.0 100.0 29.8 31.1 86.2 6.9 --
6/2/97 7/15/97 0.0 100.0 11.5 26.0 66.8 33.2 100.0
5/22/97 (pending) 0.0 100.0 15.2 18.8 60.0 18.7 --
5/14/97 (pending) 100.0 0.0 7.6 13.3 41.6 49.4 --
5/5/97 (pending) 0.0 100.0 16.6 9.7 81.0 46.0 --
3/3/97 (pending) 0.0 100.0 0.0 0.0 66.0 17.0 --
2/25/97 (pending) 0.0 100.0 18.5 21.5 70.6 14.7 --
1/28/97 5/21/97 0.0 100.0 60.0 60.0 44.6 43.7 100.0
1/21/97 7/9/97 0.0 100.0 23.5 27.6 85.0 15.0 100.0
1/13/97 9/4/97 0.0 100.0 18.5 12.1 65.7 34.3 100.0
12/17/96 7/16/97 47.0 53.0 12.8 15.3 59.5 40.5 100.0
11/27/96 3/27/97 0.0 100.0 21.3 26.7 64.5 35.5 100.0
11/20/96 Withdrawn 0.0 100.0 25.9 20.0 67.0 33.0 --
10/10/96 11/27/96 0.0 100.0 29.0 77.8 84.5 15.5 100.0
9/9/96 9/23/96 0.0 100.0 NA NA 77.0 23.0 100.0
8/8/96 9/17/96 0.0 100.0 20.6 19.7 54.9 45.1 94.5
7/31/96 11/13/96 0.0 100.0 80.3 39.1 49.9 4.7 54.6
5/27/96 2/16/97 0.0 100.0 69.5 59.2 73.0 27.0 100.0
5/10/96 12/11/96 100.0 0.0 16.5 9.9 22.3 77.7 100.0
5/7/96 7/3/96 0.0 100.0 15.6 22.3 49.5 30.7 80.2
4/8/96 8/16/96 0.0 100.0 7.8 6.3 40.0 60.0 100.0
- --------------------------------------------------------------------------------------------
(a) Ticketmaster Group Inc. shareholders have the right to choose between 1
HSBI share or $25 in cash.
50
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54
GUARANTY NATIONAL CORPORATION / OCTOBER 30, 1997
Squeeze Out Transaction Analysis
Per Share % Change
Date --------------- From Deal
- -------------------- Initial Final Offer Initial Value
Announced Completed Price Price Amended? Offer Acquiror Name Target Name ($ mil)
- ------------------------------------------------------------------------------------------------------------------------------------
3/29/96 4/26/96 $50.00 $50.00 no -- Equity Holdings Ltd. Great American Mgmt & Invt. Inc $55.6
1/26/96 5/31/96 25.80 25.80 no -- NationsBank Corp. Charter Bancshares Inc 94.7
11/6/95 Withdrawn 9.00 -- -- -- Investor Group NPC International Inc 82.1
10/18/95 11/28/95 11.75 11.75 no -- Rhone-Poulenc Rover Inc Applied Immune Sciences Inc 84.6
9/27/95 Withdrawn 25.00 -- -- -- Varity Corp. Hayes Wheels International Inc 235.9
9/26/95 12/21/95 14.00 15.25 yes 8.9 SCOR SA SCOR SA Corp 55.4
8/25/95 1/2/96 70.00 70.00 no -- Berkshire Hathaway Inc GEICO Corp 2,347.0
7/14/95 12/11/95 18.00 20.00 yes 11.1 COBE Laboratories (Gambro AB) REN Corp-USA 177.7
5/19/95 12/6/95 36.50 40.50 yes 11.0 BICSA Bic Corp 212.6
4/7/95 10/3/95 127.50 129.90 yes 1.9 McCaw Cellular Commun (AT&T) LIN Bdcstg 3,323.4
4/5/95 8/2/95 26.25 32.00 yes 21.9 Club Mediterranee SA Club Med Inc 153.4
3/27/95 Withdrawn 30.00 -- -- -- Terra Industries Inc Terra Nitrogen Co LP 229.1
2/27/95 Withdrawn 22.00 -- -- -- Conseco Bankers Life Holding Corp. 458.5
2/27/95 8/31/95 22.50 23.25 yes 3.3 Conseco CCP Insurance Inc 273.7
2/7/95 7/12/95 14.00 16.35 yes 16.8 WMX Technologies Inc Rust International Inc 50.5
1/31/95 2/1/95 -- 69.54 yes NA Sandoz AG SyStemix Inc 80.0
1/18/95 8/9/95 26.00 29.00 yes 11.5 Arcadian Corp Arcadian Partners LP 428.4
12/28/94 4/28/95 20.00 20.00 no -- Fleet Financial Group Inc Fleet Mortgage Group Inc 188.1
11/2/94 9/27/95 28.00 30.00 yes 7.1 PacifiCorp Pacific Telecom 159.0
9/8/94 5/12/95 22.50 25.50 yes 13.3 GTE Corp Contel Cellular Inc (Contel) 254.3
8/24/94 3/24/95 14.00 15.75 yes 12.5 Dole Food Co Inc Castle & Cooke Homes Inc 81.5
8/9/94 Withdrawn 7.50 -- -- -- Minorco SA (Anglo American) Terra Industries Inc 99.8
7/29/94 11/1/94 65.00 65.00 no -- Foundation Health Corp Intergroup Healthcare Corp 255.7
7/28/94 1/24/95 7.80 8.85 yes 13.5 WMX Technologies Inc Chemical Waste Management Inc 397.4
6/6/94 12/29/94 18.38 18.38 no -- OgdenCorp Ogden Projects Inc 110.3
4/28/94 Withdrawn 17.50 -- -- -- Investor Group Enquirer/Star Group Inc 315.0
4/26/94 7/26/94 4.48 4.48 no -- Burlington Resources Inc Diamond ShamrocO Offshore 42.6
3/14/94 8/9/94 2.68 2.68 no -- Sea Containers Ltd Orient-Express Hotels Inc 75.2
2/17/94 9/15/94 84.75 84.75 no -- EW Scripps (Edward Scripps Tr) Scripps Howard Broadcasting Co 115.9
- ------------------------------------------------------------------------------------------------------------------------------------
Offer Premium Percent Percent
Date ---------------- Held at Owned
- -------------------- % % 1 Week 4 Weeks Ann Percent After
Announced Completed Stock Cash Prior Prior Date Sought Transaction
- --------------------------------------------------------------------------------------------
3/29/96 4/26/96 0.0% 100.0% 4.2% 3.6% 87.9% 12.1% 100.0%
1/26/96 5/31/96 100.0 0.0 15.9 22.8 42.0 58.0 42.0
11/6/95 Withdrawn 0.0 100.0 44.0 33.3 62.0 38.0 62.0
10/18/95 11/28/95 0.0 100.0 51.6 38.2 46.0 54.0 99.0
9/27/95 Withdrawn 0.0 100.0 19.0 19.8 46.3 53.7 46.3
9/26/95 12/21/95 0.0 100.0 35.6 38.6 80.0 20.0 100.0
8/25/95 1/2/96 0.0 100.0 23.1 25.3 52.4 47.6 100.0
7/14/95 12/11/95 0.0 100.0 20.3 26.0 53.0 47.0 100.0
5/19/95 12/6/95 0.0 100.0 12.5 28.6 78.0 22.0 100.0
4/7/95 10/3/95 0.0 100.0 6.7 1.3 52.0 48.0 100.0
4/5/95 8/2/95 0.0 100.0 39.9 44.6 67.0 33.0 100.0
3/27/95 Withdrawn 0.0 100.0 11.1 8.6 59.4 40.6 59.4
2/27/95 Withdrawn 0.0 100.0 21.4 6.0 63.2 39.6 100.0
2/27/95 8/31/95 0.0 100.0 30.1 23.2 48.1 51.9 100.0
2/7/95 7/12/95 0.0 100.0 39.1 39.1 96.3 3.7 100.0
1/31/95 2/1/95 0.0 100.0 315.2 303.1 60.0 11.6 71.6
1/18/95 8/9/95 0.0 50.0 21.5 26.1 45.0 55.0 100.0
12/28/94 4/28/95 0.0 100.0 18.5 18.5 81.0 19.0 100.0
11/2/94 9/27/95 0.0 100.0 23.7 23.7 86.6 13.4 100.0
9/8/94 5/12/95 0.0 100.0 37.8 36.0 90.0 10.0 100.0
8/24/94 3/24/95 0.0 100.0 41.6 55.6 81.7 18.3 100.0
8/9/94 Withdrawn 0.0 100.0 25.0 (4.8) 44.6 15.9 44.6
7/29/94 11/1/94 91.5 0.0 71.1 71.1 62.6 37.4 100.0
7/28/94 1/24/95 NA NA 8.9 1.1 78.5 21.5 100.0
6/6/94 12/29/94 100.0 0.0 17.6 20.5 84.2 15.8 100.0
4/28/94 Withdrawn 0.0 100.0 20.7 7.7 56.8 43.2 56.8
4/26/94 7/26/94 0.0 100.0 (0.4) 5.4 87.1 12.9 100.0
3/14/94 8/9/94 20.2 0.0 64.8 53.0 41.9 58.1 100.0
2/17/94 9/15/94 100.0 0.0 13.0 13.0 86.0 14.0 100.0
- --------------------------------------------------------------------------------------------
N.B. Includes transactions over $40 million in which acquirer owns 40% or more
of target before announcement date. Includes acquisitions of public U.S.targets
only. "Offer" represents public announcement of offer to purchase.
Source: Securities Data Corporation.
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55
GUARANTY NATIONAL CORPORATION / NOVEMBER 24, 1997
Squeeze Out Transaction Analysis
Per Share % Change
Date --------------- From Deal
- -------------------- Initial Final Offer Initial Value
Announced Completed Price Price Amended? Offer Acquiror Name Target Name ($ mil)
- -----------------------------------------------------------------------------------------------------------------------------------
1/7/94 2/23/94 $7.65 $7.65 no --- Holderbank Financiere Glarus Holnam Inc (Holdernam Inc) $51.7
10/22/93 10/22/93 14.70 14.70 no --- Manville Corp Riverwood International Corp 50.0
10/14/93 5/31/94 11.00 12.10 yes 10.0% Valero Energy Corp Valero Natural Gas Partners LP 117.4
10/13/93 4/6/94 27.25 27.75 yes 1.8 Medco Containment Services Inc Medical Marketing Group Inc 122.5
9/20/93 12/10/93 48.00 46.00 yes (4.2) Valley Fashions Corp West Point-Pepperell Inc 66.3
9/13/93 10/5/93 13.00 7.56 yes (41.8) Blockbuster Entertainment Corp Spelling Entertainment Inc 101.3
3/22/93 5/7/93 25.00 30.00 yes 20.0 New Marvel Holdings Inc Marvel Entertainment Group Inc 300.0
11/13/92 5/7/93 17.88 18.75 yes 4.9 Rust International Inc Brand Cas Inc 185.0
9/9/92 2/26/93 21.04 25.50 yes 21.2 American Maize-Products Co American Fructose Corp 130.3
8/19/92 11/19/92 13.50 13.50 no --- Investor Group FoxMeyer Corp (Natl Intergroup) 44.6
8/17/92 12/31/92 14.72 25.78 yes 75.1 Leucadia National Corp PHLCORP Inc 139.9
6/25/92 Withdrawn 22.00 --- -- 17.0 Oaty Holdings Oaty Holdings Inc 111.8
3/2/92 7/14/92 16.50 19.00 yes 15.2 WR Grace & Co Grace Energy Corp 77.3
2/6/92 7/30/92 6.00 7.25 yes 20.8 Charter Co (American Financial) Spelling Entertainment Inc 43.0
- -----------------------------------------------------------------------------------------------------------------------------------
Offer Premium Percent Percent
---------------- Held at Owned
% % 1 Week 4 Weeks Ann Percent After
Acquiror Name Stock Cash Prior Prior Date Sought Transaction
- -----------------------------------------------------------------------------------------------
Holderbank Financiere Glarus 0.0% 100.0% 15.5% 7.4% 95.0% 5.0% 100.0%
Manville Corp 0.0 100.0 12.0 8.9 80.5 1.0 81.5
Valero Energy Corp 0.0 100.0 29.1 36.3 49.0 51.0 100.0
Medco Containment Services Inc 0.0 100.0 NA (5.9) 51.5 48.5 100.0
Valley Fashions Corp 0.0 100.0 (19.8) (19.8) 95.1 4.9 100.0
Blockbuster Entertainment Corp 100.0 0.0 (5.5) 0.8 50.3 20.9 71.2
New Marvel Holdings Inc 0.0 100.0 42.9 58.9 59.6 20.7 80.3
Rust International Inc 30.0 70.0 13.6 4.9 55.8 44.2 100.0
American Maize-Products Co 100.0 0.0 23.6 29.1 42.7 57.3 100.0
Investor Group 0.0 100.0 18.7 1.9 66.5 10.4 76.9
Leucadia National Corp 100.0 0.0 15.2 28.9 63.1 36.9 100.0
Oaty Holdings 0.0 100.0 51.5 46.1 51.9 48.1 51.9
WR Grace & Co 0.0 100.0 21.6 7.8 83.4 16.6 100.0
Charter Co (American Financial) 0.0 0.0 45.0 45.0 82.3 17.7 100.0
- -----------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------
For all Transactions (b): Median 0.0% 100.0% 20.4% 21.5% 62.3% 13.1% 100.0%
Mean 15.1 81.5 28.0 27.2 63.5 31.6 90.3
High 100.0 100.0 315.2 303.1 96.3 77.7 100.0
Low 0.0 0.0 (19.8) (19.8) 22.3 1.0 42.0
25th Percentile 0.0 100.0 13.5 8.6 50.0 16.1 84.8
75th Percentile 0.0 100.0 29.9 33.3 80.4 46.8 100.0
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Excluding Withdrawn Offers (b): Median 0.0% 100.0% 18.7% 22.5% 64.5% 33.0% 100.0%
Mean 16.8 79.4 28.1 28.4 64.5 30.7 94.5
High 100.0 100.0 315.2 303.1 96.3 77.7 100.0
Low 0.0 0.0 (19.8) (19.8) 22.3 1.0 42.0
-----------------------------------------------------------------------------
--------------------------------------------------
Implied Equity Value Per GNC Share (a)
---------------------------------------
Median -- -- $40.12 $40.47
Mean -- -- 42.64 42.37
--------------------------------------------------
N.B Includes transactions over $40 million in which acquiror owns 40% or more of
target before announcement date. Includes acquisitions of public U.S. targets
only. "Offer" represents public announcement of offer to purchase.
Source: Securities Data Corporation
(a) Bared on GNC share price of $33.31 on October 28, 1997.
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56
GUARANTY NATIONAL CORPORATION / NOVEMBER 24, 1997
GNC: Ownership Profile
53
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57
GUARANTY NATIONAL CORPORATION / NOVEMBER 24, 1997
Guaranty National Corporation Ownership Profile
% of Non-Orion
Institutional Holders (a) Shares % of Total (b) Shares (c)
- ------------------------- ------ -------------- ----------
Orion Capital Corporation 12,129.9 80.7% --
Dimensional Fund Advs 219.3 1.5 7.5 %
Wachovia Corporation 186.8 1.2 6.4
Grace & White Inc. 183.5 1.2 6.3
Barclay's Bank PLC 152.1 1.0 5.2
Wilshire Assoc. Inc. 146.7 1.0 5.0
Franklin Resources Inc. 141.9 0.9 4.9
Mellon Bank Corp. 116.5 0.8 4.0
Citicorp 103.0 0.7 3.5
First Manhattan Co. 89.8 0.6 3.1
Other Institutional Holders 825.9 5.5 28.4
- --------------------------- -------- -------- --------
Total Institutional 14,295.5 95.1 74.5
Officers and Directors (d) 254.2 1.7 8.7
- --------------------------- -------- -------- --------
Total Visible Ownership 14,549.6 96.7 83.2
"Retail Holdings" 488.8 3.3 16.8
- --------------------------- -------- -------- --------
Total Ownership 15,038.4 100.0 % 100.0 %
Non-Orion Owned Shares 2,908.5 19.3 % 100.0 %
- --------------------------------------------------------------------------------
(a) Source: CDA Spectrum. Holdings as of June 30, 1997. September 30, 1997
data not yet available.
(b) Based on 15,038,433 common shares outstanding as of June 30,1997. There
are 15,054,433 shares outstanding as of September 30,1997.
(c) Based on Orion Capital's ownership position of 12,129,942 common shares.
(d) Source: Guaranty National Corporation proxy dated April 3, 1997.
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