AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 22, 2001
REGISTRATION NO. 333-76122
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
PRE-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
HCC INSURANCE HOLDINGS, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 76-0336636
(State or other jurisdiction of incorporation or
organization) (I.R.S. Employer Identification No.)
13403 NORTHWEST FREEWAY STEPHEN L. WAY
HOUSTON, TEXAS 77040-6094 13403 NORTHWEST FREEWAY
(713) 690-7300 HOUSTON, TEXAS 77040-6094
(Address, including zip code, and telephone number, (713) 690-7300
including area code, of Registrant's principal (Name, address including zip code, and telephone
executive offices) number,
including area code, of agent for service)
COPIES TO:
ARTHUR S. BERNER, ESQ. CHRISTOPHER L. MARTIN, ESQ.
HAYNES AND BOONE, LLP EXECUTIVE VICE PRESIDENT AND GENERAL COUNSEL
1000 LOUISIANA STREET, SUITE 4300 HCC INSURANCE HOLDINGS, INC.
HOUSTON, TEXAS 77002-5012 13403 NORTHWEST FREEWAY
(713) 547-2526 HOUSTON, TEXAS 77040-6094
(713) 690-7300
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the Registration Statement becomes effective, as determined by the
applicable Registrant.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
PURSUANT TO RULE 429 UNDER THE SECURITIES ACT OF 1933, THE PROSPECTUS
INCLUDED IN THIS REGISTRATION STATEMENT ALSO RELATES TO $427,500,000 OF UNSOLD
SECURITIES REGISTERED UNDER REGISTRATION STATEMENT NO. 333-58350 IN RESPECT OF
WHICH AN AGGREGATE REGISTRATION FEE OF $106,875 WAS PAID ON APRIL 5, 2001 AND
JULY 9, 2001.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION DATED JANUARY 22, 2002
PROSPECTUS
[HCC LOGO]
HCC INSURANCE HOLDINGS, INC.
COMMON STOCK
SENIOR DEBT SECURITIES
SUBORDINATED DEBT SECURITIES
WARRANTS
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We may offer from time to time up to $750,000,000 of any combination of the
securities described in this prospectus. We will not offer or sell any
securities under this prospectus unless accompanied by a prospectus supplement.
We may offer and sell, from time to time:
- debt securities;
- shares of our common stock; and
- warrants to purchase our debt securities or our common stock.
We will provide the specific terms of these securities in one or more
supplements to this prospectus. You should read this prospectus and any
prospectus supplement carefully before you invest in these securities.
We may sell the securities directly, or through agents designated from time
to time, or to or through underwriters or dealers. If any underwriters are
involved in the sale of any securities, their names and any applicable
commissions or discounts will be set forth in a prospectus supplement. For
additional information on the methods of sale, you should refer to the section
entitled "Plan of Distribution."
Our common stock is listed on the NYSE under the Symbol "HCC." The last
reported sale price on January 18, 2002 was $25.86 per share.
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INVESTMENT IN THESE SECURITIES INVOLVES RISK. SEE THE RISK FACTORS
SECTION BEGINNING ON PAGE 6.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OF THIS PROSPECTUS OR WHETHER IT IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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The date of this prospectus is , 2002.
TABLE OF CONTENTS
PAGE
----
About This Prospectus....................................... 2
The Company................................................. 3
Risk Factors................................................ 6
Use of Proceeds............................................. 11
Ratio of Earnings to Fixed Charges.......................... 11
Description of Our Common Stock............................. 11
Description of Senior Debt Securities and Subordinated Debt
Securities................................................ 13
Description of Warrants..................................... 18
Plan of Distribution........................................ 21
Certain Legal Matters....................................... 21
Experts..................................................... 22
About Forward-Looking Statements............................ 22
Where You Can Find More Information......................... 22
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we have filed with
the Securities and Exchange Commission using a "shelf" registration process.
Under the shelf registration process, we may offer any combination of the
securities described in this prospectus in one or more offerings with a total
offering price of up to $750,000,000. This prospectus provides you with a
general description of securities we may offer. Each time we use this prospectus
to offer securities, we will provide a prospectus supplement that will contain
specific information about the terms of that offering. The prospectus supplement
may also add, update or change information contained in this prospectus. Please
carefully read this prospectus, any prospectus supplement and the documents
incorporated by reference in the prospectus together with the additional
information described under "Where You Can Find More Information" and "Risk
Factors" before you make an investment decision.
You should rely only on the information contained in this prospectus and
the applicable prospectus supplement. We have not authorized any other person to
provide you with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not making an offer
to sell the securities in any jurisdiction where the offer or sale is not
permitted. You should assume that the information appearing in this prospectus,
together with the information we previously filed with the SEC and incorporated
by reference, is accurate only as of the date on the front cover of this
prospectus. The information included in any prospectus supplement is accurate
only as of the date of that prospectus supplement. Our business, financial
condition, results of operations and prospects may change after the date on the
front cover of this prospectus.
2
THE COMPANY
As used in this prospectus, unless otherwise required by the context, the
terms "we," "us," "our" and the "Company" refer to HCC Insurance Holdings, Inc.
and its consolidated subsidiaries, and the term "HCC" refers only to HCC
Insurance Holdings, Inc.
OVERVIEW
We provide property and casualty insurance and accident and health
insurance coverages, underwriting agency and intermediary services, and other
insurance related services both to commercial customers and individuals. We
concentrate our activities in selected narrowly defined lines of business. We
operate primarily in the United States and the United Kingdom, although some of
our operations have a broader international scope. We underwrite insurance both
on a direct basis, where we insure a risk in exchange for a premium, and on a
reinsurance basis, where we insure all or a portion of another insurance
company's risk in exchange for all or a portion of the premium. We market our
insurance products both directly to customers and through a network of
independent or affiliated agents and brokers.
Our insurance companies are risk-bearing and focus their underwriting
activities on providing insurance and/or reinsurance in the following lines of
business:
- contingency;
- disability;
- energy;
- errors and omissions;
- general aviation;
- kidnap and ransom;
- life, accident and health;
- marine;
- medical stop-loss;
- professional liability; and
- property.
In the United States, Avemco Insurance Company, U.S. Specialty Insurance
Company and HCC Life Insurance Company operate on an admitted, or licensed,
basis. Houston Casualty Company operates on a surplus lines basis as a
non-admitted, or unlicensed, insurer offering insurance coverage not otherwise
available from an admitted insurer in the relevant state.
Our underwriting agencies underwrite on behalf of our insurance companies
and other insurance companies. They receive fees for these services and do not
bear any of the insurance risk of the companies for which they underwrite. Our
underwriting agencies generate revenues based entirely on management fees and
profit commissions and specialize in contingency, disability, kidnap and ransom,
medical stop-loss, and professional liability insurance and a variety of
accident and health related insurance and reinsurance products. Our medical
stop-loss insurance provides coverages to companies, associations and public
entities that elect to self-insure their employee's medical coverage for losses
within specified levels, allowing them to manage the risk of excessive health
insurance exposure by limiting aggregate and specific losses to a predetermined
amount.
We have recently consolidated the operations of certain of our agencies
with certain of our insurance companies to improve operational efficiencies. The
operations of HCC Aviation Insurance Group, Inc., and our occupational accident
and workers' compensation underwriting agency, HCC Employer Services, Inc., were
consolidated into those of our licensed property and casualty insurance company,
U.S. Specialty
3
Insurance Company, and the operations of our London-based accident and health
underwriting agency, LDG Re (London), Ltd., were consolidated with those of the
London branch of our largest property and casualty insurance company, Houston
Casualty Company. We expect to continue consolidating certain agency operations
in the future.
Our intermediaries provide insurance and reinsurance brokerage services for
our insurance companies and our clients, and receive fees for their services.
Our intermediaries do not bear any of the insurance risks of the companies on
behalf of which they act. They earn commission income and to a lesser extent
fees for certain services, generally paid by the insurance and reinsurance
companies with whom the business is placed. These operations consist of:
- consulting on risks by providing information to clients about insurance
coverage;
- marketing risks by providing information and assistance on pricing a
particular insurance risk;
- placing risks by negotiating with insurers and reinsurers to accept an
insurance risk; and
- servicing risks by facilitating the collection of premiums and resolution
of claims on behalf of our insurance clients.
Our intermediaries specialize in developing and marketing employee benefit
plans on a retail basis and in placing reinsurance for both accident and health,
and property and casualty lines of business.
We are a Delaware corporation. Our principal executive offices are located
at 13403 Northwest Freeway, Houston, Texas 77040 and our telephone number is
(713) 690-7300. We maintain a World Wide Web-site at www.hcch.com. The reference
to our World Wide Web address does not constitute the incorporation by reference
of the information contained at this site in this prospectus supplement or the
accompanying prospectus.
OUR STRATEGY
Our business philosophy as an insurer is to maximize underwriting profits
while limiting risk in order to preserve shareholders' equity and maximize
earnings. We concentrate our insurance writings in selected, narrowly defined
lines of business where we believe we can achieve an underwriting profit. We
focus on lines of business that have relatively short lead times between the
occurrence of an insured event and the reporting of claims. We market our
insurance products both directly to customers and through independent or
affiliated agents and brokers.
The property and casualty insurance industry and individual lines of
business within the industry are cyclical in that there are times when a large
number of companies offer insurance on certain lines of business, and the
premiums tend to go down, and other times where insurance companies decide to
limit their writings in certain lines of business or suffer from excessive
losses, which tends to increase the premiums for those companies that continue
to write insurance in those lines of business. In our insurance company
operations, we believe our operational flexibility, which permits us to shift
the focus of our insurance underwriting activity among our various lines of
business and also to shift the emphasis from our insurance risk-bearing business
to our non-insurance fee-based business, as well as our experienced underwriting
personnel and access to, and expertise in, the reinsurance marketplace allow us
to implement a strategy of emphasizing more profitable lines of business during
periods of increased premium rates and de-emphasizing less profitable lines of
business during periods of severe competition. In addition, we believe that our
underwriting agencies and intermediary subsidiaries complement our insurance
underwriting activities. Our ability to utilize affiliated insurers,
underwriting agencies and intermediaries permits us to retain a greater portion
of the gross revenue derived from written premium.
We purchase reinsurance by transferring part of the risk we have assumed
through the process of ceding this risk to a reinsurance company in exchange for
part of the premium we receive in connection with the risk. We purchase
reinsurance to limit the net loss from both individual and catastrophic risks to
our insurance companies. The amount of reinsurance we purchase varies by, among
other things, the particular risks
4
inherent in the policies underwritten, the pricing of reinsurance and the
competitive conditions within the relevant line of business.
In 2000 and 2001, due to a hardening of the respective markets, premium
rates in the accident and health, energy, general aviation and medical stop-loss
lines of business increased. We anticipate continued improvements in these
markets and in all of our lines of business during 2002 as a result of the
effects from the September 11, 2001 terrorist attacks in the United States on
the insurance industry and other market conditions and market forces. In
response to these changing market conditions, we plan to continue to expand the
underwriting activities in our insurance company operations.
We also acquire or make strategic investments in companies that present an
opportunity for future profits or for enhancement of our business. We expect to
continue to seek to acquire complementary businesses with established management
and established reputations in the insurance industry. We believe that we can
enhance acquired businesses through the synergies created by our underwriting
capabilities and our other operations. However, our business plan is shaped by
our underlying business philosophy, which is to maximize underwriting profit,
while preserving shareholders' equity. As a result, our primary objective is to
increase net earnings rather than market share or gross written premium.
In our ongoing operations, we will continue to:
- emphasize the underwriting of lines of business in which premium rates,
the availability and cost of reinsurance, and market conditions warrant;
- limit our net loss exposure to our insurance company subsidiaries from a
catastrophe loss through the use of reinsurance; and
- review the potential acquisition of specialty insurance operations and
other strategic investments.
5
RISK FACTORS
Investing in our securities will provide you with an interest in, or
obligation of, our Company. As an investor, you will be subject to risks
inherent in our businesses. The performance of your investment in our Company
will reflect the performance of our business relative to, among other things,
general economic and industry conditions, market conditions and competition. The
value of your investment may increase or it may decline and could result in a
loss. You should carefully consider the following factors as well as other
information contained in this prospectus or information incorporated by
reference before deciding to make any investment in our Company.
IF WE CANNOT OBTAIN ADEQUATE REINSURANCE PROTECTION FOR THE RISKS WE HAVE
UNDERWRITTEN, WE WILL EITHER BE EXPOSED TO GREATER LOSSES FROM THESE RISKS OR WE
WILL REDUCE THE LEVEL OF BUSINESS WE UNDERWRITE, WHICH WILL REDUCE OUR REVENUES.
We purchase reinsurance for significant amounts of risk underwritten by our
insurance company subsidiaries, especially catastrophe risks. We also purchase
reinsurance on risks underwritten by others which we reinsure through a
retrocession agreement. Market conditions beyond our control determine the
availability and cost of the reinsurance protection we purchase, which may
affect the level of our business and profitability. For instance, the natural
attrition of reinsurers who exit lines of business, or who curtail their
writings, for economic or other reasons, reduces the capacity of the reinsurance
market, causing rates to rise. In addition, the historical results of
reinsurance programs and the availability of capital also affect the
availability of reinsurance. Our reinsurance facilities are generally subject to
annual renewal. We cannot assure you that we can maintain our current
reinsurance facilities or that we can obtain other reinsurance facilities in
adequate amounts and at favorable rates. Further, we cannot determine at this
time what the present and longer term effects of the September 11, 2001 attacks
will have on the reinsurance market in general and on our ability to obtain
reinsurance in adequate amounts and at favorable rates in particular. If we are
unable to renew our expiring facilities or to obtain new reinsurance facilities,
either our net exposures would increase or, if we are unwilling to bear an
increase in net exposures, we would have to reduce the level of our underwriting
commitments, especially catastrophe exposed risks. Either of these potential
developments could have a material adverse effect on our business. The lack of
available reinsurance may also adversely affect our ability to generate fee and
commission income in our underwriting agency and reinsurance intermediary
operations. A reinsurance intermediary structures and arranges reinsurance
between insurers seeking to cede insurance risks and reinsurers willing to
assume such risks.
IF THE COMPANIES THAT PROVIDE OUR REINSURANCE DO NOT PAY ALL OF OUR CLAIMS, WE
COULD INCUR SEVERE LOSSES.
We purchase reinsurance by transferring, or ceding, part of the risk we
have assumed to a reinsurance company in exchange for part of the premium we
receive in connection with the risk. Although reinsurance makes the reinsurer
liable to us to the extent the risk is transferred or ceded to the reinsurer, it
does not relieve us, the reinsured, of our liability to our policyholders.
Accordingly, we bear credit risk with respect to our reinsurers. We cannot
assure you that our reinsurers will pay all of our reinsurance claims, or that
they will pay our claims on a timely basis.
It is presently unclear what effect the attacks of September 11, 2001 will
ultimately have on the financial position of our reinsureres. At present, we can
neither determine the extent to which we will be liable, as a result of the
terrorist attacks of September 11, for risks we have ceded to reinsurers, nor
can we determine the extent to which our credit risk with respect to our
reinsurers may have increased because the reinsurers are in a weakened financial
position as a result of the September 11 attacks. If we become liable for risks
we have ceded with respect to the September 11 attacks or if our reinsurers
cease to meet their obligations to us, whether because they are in a weakened
position as a result of the September 11 attacks or otherwise, our results of
operations and financial position could be materially adversely affected.
6
IF WE ARE UNSUCCESSFUL IN COMPETING AGAINST LARGER OR MORE WELL-ESTABLISHED
BUSINESS RIVALS, OUR RESULTS OF OPERATIONS AND FINANCIAL CONDITION WILL BE
ADVERSELY AFFECTED.
In our specialty insurance operations, we compete in narrowly-defined niche
classes of business such as the insurance of private aircraft (general
aviation), and employer sponsored, self-insured medical plans (medical
stop-loss), as distinguished from such general lines of business as automobile
or homeowners insurance. We compete with a large number of other companies in
our selected lines of business, including: American International Group and U.S.
Aviation Insurance Group (a subsidiary of Berkshire Hathaway, Inc.) in our
aviation line of business; SAFECO Corporation and Hartford Life, Inc. in our
medical stop-loss line of business; and Underwriters at Lloyd's, ACE Limited and
XL Capital Ltd. in our accident and health line of business. We face competition
both from specialty insurance companies, underwriting agencies and
intermediaries as well as from diversified financial services companies that are
significantly larger than we are and that have significantly greater financial,
marketing and other resources than we do. Some of these competitors also have
longer experience and more market recognition than we do. In addition to
competition in the operation of our business, we face competition from a variety
of sources in attracting and retaining qualified employees.
We cannot assure you that we will maintain our current competitive position
in the markets in which we operate, or that we will be able to expand our
operations into new markets. If we fail to do so, our business could be
materially adversely affected.
BECAUSE WE ARE A PROPERTY AND CASUALTY INSURER, UNFORESEEN CATASTROPHIC LOSSES
MAY ADVERSELY AFFECT OUR RESULTS OF OPERATIONS, LIQUIDITY AND FINANCIAL
CONDITION.
Property and casualty insurers are subject to claims arising out of
catastrophes that may have a significant effect on their results of operations,
liquidity and financial condition. Catastrophe losses have had a significant
impact on our results. Catastrophes can be caused by various events, including
hurricanes, windstorms, earthquakes, hailstorms, explosions, severe winter
weather and fires and may include man-made events, such as the September 11,
2001 terrorist attacks on the World Trade Center. The incidence and severity of
catastrophes are inherently unpredictable. The extent of losses from a
catastrophe is a function of both the total amount of insured exposure in the
area affected by the event and the severity of the event. Most catastrophes are
restricted to small geographic areas; however, hurricanes, earthquakes and
terrorist attacks may produce significant damage in large, heavily populated
areas. Catastrophes can cause losses in a variety of our property and casualty
lines, and most of our past catastrophe-related claims have resulted from
hurricanes and earthquakes; however, as a result of the September 11, 2001
terrorist attacks, we experienced the largest single loss to our insurance
company operations in our history. Insurance companies are not permitted to
reserve for a catastrophe until it has occurred. In 2002, we expect that
approximately 10% of our current business may be affected by catastrophes. It is
therefore possible that a catastrophic event or multiple catastrophic events
could have material adverse effect upon our results of operations, liquidity and
financial condition.
BECAUSE WE OPERATE INTERNATIONALLY, FLUCTUATIONS IN CURRENCY EXCHANGE RATES MAY
AFFECT OUR RECEIVABLE AND PAYABLE BALANCES AND OUR RESERVES, WHICH MAY ADVERSELY
AFFECT OUR RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
We underwrite insurance coverages which are denominated in a number of
foreign currencies, and we establish and maintain our loss reserves with respect
to these policies in their respective currencies. Our net earnings could be
adversely affected by exchange rate fluctuations, which would adversely affect
receivable and payable balances and reserves. Our principal area of exposure
relates to fluctuations in exchange rates between the major European currencies
(particularly the British pound sterling) and the U.S. dollar. Consequently, a
change in the exchange rate between the U.S. dollar and the British pound
sterling could have an adverse effect on our net earnings.
On a limited basis, we enter into foreign currency forward contracts as a
hedge against foreign currency fluctuations. The foreign currency forward
contracts are used to convert currency at a known rate in an amount
7
that approximates average monthly expenses. Thus, the effect of these
transactions is to limit the foreign currency exchange risk of the recurring
monthly expenses. We use these foreign currency forward contracts strictly as a
hedge against existing exposure to foreign currency fluctuations rather than as
a form of speculative or trading investment.
IF WE FAIL TO COMPLY WITH EXTENSIVE STATE, FEDERAL AND FOREIGN REGULATIONS, WE
WILL BE SUBJECT TO PENALTIES, WHICH MAY INCLUDE FINES AND SUSPENSION AND WHICH
MAY ADVERSELY AFFECT OUR RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
We are subject to extensive governmental regulation and supervision. Most
insurance regulations are designed to protect the interests of policyholders
rather than shareholders and other investors. This regulation, generally
administered by a department of insurance in each state in which we do business,
relates to, among other things:
- approval of policy forms and premium rates;
- standards of solvency, including risk-based capital measurements (which
is a measure developed by the National Association of Insurance
Commissioners and used by state insurance regulators to identify
insurance companies that potentially are inadequately capitalized);
- licensing of insurers and their agents;
- restrictions on the nature, quality and concentration of investments;
- restrictions on the ability of our insurance company subsidiaries to pay
dividends to us;
- restrictions on transactions between insurance company subsidiaries and
their affiliates;
- restrictions on the size of risks insurable under a single policy;
- requiring deposits for the benefit of policyholders;
- requiring certain methods of accounting;
- periodic examinations of our operations and finances;
- prescribing the form and content of records of financial condition
required to be filed; and
- requiring reserves for unearned premium, losses and other purposes.
State insurance departments also conduct periodic examinations of the
affairs of insurance companies and require the filing of annual and other
reports relating to the financial condition of insurance companies, holding
company issues and other matters.
Recently adopted federal financial services modernization legislation is
expected to lead to additional federal regulation of the insurance industry in
the coming years. Also, foreign governments regulate our international
operations. Our business depends on compliance with applicable laws and
regulations and our ability to maintain valid licenses and approvals for our
operations.
Some regulatory authorities have relatively broad discretion to grant,
renew, or revoke licenses and approvals. Regulatory authorities may deny or
revoke licenses for various reasons, including the violation of regulations. In
some instances, we follow practices based on our interpretations of regulations,
or those that we believe may be generally followed by the industry, which may be
different from the requirements or interpretations of regulatory authorities. If
we do not have the requisite licenses and approvals and do not comply with
applicable regulatory requirements, the insurance regulatory authorities could
preclude or temporarily suspend us from carrying on some or all of our
activities or otherwise penalize us. That type of action could have a material
adverse effect on our business. Also, changes in the level of regulation of the
insurance industry (whether federal, state or foreign), or changes in laws or
regulations themselves or interpretations by regulatory authorities, could have
a material adverse effect on our business.
8
IF THE RATING AGENCIES DOWNGRADE OUR COMPANY OR OUR INSURANCE COMPANIES, OUR
RESULTS OF OPERATIONS AND COMPETITIVE POSITION IN THE INDUSTRY MAY SUFFER.
Ratings have become an increasingly important factor in establishing the
competitive position of insurance companies. Our insurance companies are rated
by A.M. Best Company and Standard & Poor's Corporation. A.M. Best and Standard &
Poor's ratings reflect their opinions of an insurance company's and insurance
holding company's financial strength, operating performance, strategic position,
and ability to meet its obligations to policyholders, and are not evaluations
directed to investors. Our ratings are subject to periodic review by A.M. Best
and Standard & Poor's and the continued retention of those ratings cannot be
assured. If our ratings are reduced from their current levels by A.M. Best
and/or Standard & Poor's, our results of operations could be adversely affected.
OUR LOSS RESERVES ARE BASED ON AN ESTIMATE OF OUR FUTURE LIABILITY. IF ACTUAL
CLAIMS PROVE TO BE GREATER THAN OUR RESERVES, OUR RESULTS OF OPERATIONS AND
FINANCIAL CONDITION MAY BE ADVERSELY AFFECTED.
We maintain loss reserves to cover our estimated liability for unpaid
losses and loss adjustment expenses, including legal and other fees as well as a
portion of our general expenses, for reported and unreported claims incurred as
of the end of each accounting period. Reserves do not represent an exact
calculation of liability. Rather, reserves represent an estimate of what we
expect the ultimate settlement and administration of claims will cost. These
estimates, which generally involve actuarial projections, are based on our
assessment of facts and circumstances then known, as well as estimates of future
trends in claims severity, frequency, judicial theories of liability and other
factors. These variables are affected by both internal and external events, such
as changes in claims handling procedures, inflation, judicial trends and
legislative changes. Many of these items are not directly quantifiable in
advance. Additionally, there may be a significant reporting lag between the
occurrence of the insured event and the time it is reported to us. The inherent
uncertainties of estimating reserves are greater for certain types of
liabilities, particularly those in which the various considerations affecting
the type of claim are subject to change and in which long periods of time may
elapse before a definitive determination of liability is made. Reserve estimates
are continually refined in a regular and ongoing process as experience develops
and further claims are reported and settled. Adjustments to reserves are
reflected in the results of the periods in which such estimates are changed.
Because setting reserves is inherently uncertain, there can be no assurance that
current reserves will prove adequate in light of subsequent events.
We have recently announced that we estimate our pre-tax gross loss related
to the terrorist attacks of September 11, 2001 to be $141.0 million and our
pre-tax net loss to be $35.0 million. We believe our estimates of gross and net
losses to be reasonable, but they may be subject to adjustment as we receive
additional information from our clients and producers. It is difficult to fully
estimate our losses from the September 11, 2001 attacks given the uncertain
nature of the damage theories related to insurance claims made in connection
with the attacks.
WE INVEST A SIGNIFICANT AMOUNT OF OUR ASSETS IN FIXED INCOME SECURITIES THAT
HAVE EXPERIENCED MARKET FLUCTUATIONS. FLUCTUATIONS IN THE FAIR MARKET VALUE OF
FIXED INCOME SECURITIES MAY GREATLY REDUCE THE VALUE OF OUR INVESTMENT
PORTFOLIO, AND AS A RESULT, OUR FINANCIAL CONDITION MAY SUFFER.
As of September 30, 2001, $489.7 million of our $911.8 million investment
portfolio was invested in fixed income securities. The fair market value of
these fixed income securities and the investment income from these fixed income
securities fluctuate depending on general economic and market conditions. With
respect to our investments in fixed income securities, the fair market value of
these investments generally increases or decreases in an inverse relationship
with fluctuations in interest rates, while net investment income realized by us
from future investments in fixed income securities will generally increase or
decrease with interest rates. In addition, actual net investment income and/or
cash flows from investments that carry prepayment risk (such as mortgage-backed
and other asset-backed securities) may differ from those anticipated at the time
of investment as a result of interest rate fluctuations. An investment has
prepayment risk when there is a risk that the timing of cash flows that result
from the repayment of principal might occur earlier than anticipated because of
declining interest rates or later than anticipated because of rising interest
rates. Historically, the
9
impact of market fluctuations has affected our financial statements. Because all
of our fixed income securities are classified as available for sale, changes in
the fair market value of our securities are reflected in our balance sheet.
Similar treatment is not available for liabilities. Therefore, interest rate
fluctuations could adversely affect our generally accepted accounting
principles, or GAAP, shareholders' equity, total comprehensive income and/or our
cash flows. Historically, the impact of market fluctuations has affected our
financial statements. Unrealized pre-tax net investment gains (losses) on
investments in fixed-income securities were $11.9 million, ($19.0 million) and
$3.6 million for the years ended 2000, 1999 and 1998, respectively.
IF STATES DRASTICALLY INCREASE THE ASSESSMENT OUR INSURANCE COMPANIES ARE
REQUIRED TO PAY, OUR RESULTS OF OPERATIONS AND FINANCIAL CONDITION WILL SUFFER.
Our insurance company subsidiaries are subject to assessments in most
states where we are licensed for the provision of funds necessary for the
settlement of covered claims under certain policies provided by impaired,
insolvent or failed insurance companies. Maximum contributions required by law
in any one year vary by state and have historically been between 1% and 2% of
annual premiums written. We cannot predict with certainty the amount of future
assessments. Significant assessments could have a material adverse effect on our
financial condition or results of operations.
IF WE ARE UNABLE TO OBTAIN DIVIDENDS IN NEEDED AMOUNTS FROM OUR INSURANCE
COMPANY SUBSIDIARIES AS A RESULT OF REGULATORY RESTRICTIONS, WE MAY NOT BE ABLE
TO MEET OUR DEBT, DIVIDEND, AND EXPENSE OBLIGATIONS.
Our principal assets are the shares of capital stock of our insurance
company subsidiaries. We may rely on dividends from our insurance company
subsidiaries to meet our obligations for paying principal and interest on
outstanding debt obligations, dividends to shareholders and corporate expenses.
The payment of dividends by our insurance company subsidiaries is subject to
regulatory restrictions and will depend on the surplus and future earnings of
these subsidiaries, as well as the regulatory restrictions. As a result, should
our other sources of funds prove to be inadequate, we may not be able to receive
dividends from our insurance company subsidiaries at times and in amounts
necessary to meet our obligations.
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USE OF PROCEEDS
Except as otherwise described in the applicable prospectus supplement, we
intend to use the net proceeds from the sale of our securities for general
corporate purposes, including, but not limited to, the following purposes:
- contribute capital to insurance company subsidiaries;
- make acquisitions;
- make capital expenditures;
- provide working capital;
- purchase equity or fixed income investments;
- repay or refinance debt or other corporate obligations; or
- repurchase and redeem securities.
Pending any specific application, we may initially invest funds in
short-term marketable securities or apply them to the reduction of short-term
indebtedness.
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of our earnings to our fixed charges for the periods indicated
are as follows:
FOR THE NINE MONTHS FOR THE YEARS ENDED DECEMBER 31,
ENDED SEPTEMBER 30, ----------------------------------
2001 2000 1999 1998 1997 1996
------------------- ---- ---- ----- ----- ----
Ratio of earnings to fixed charges...... 3.69 5.13 3.58 15.42 11.10 9.31
For these ratios, earnings consist of income before interest expense,
including amortization of capitalized expenses related to indebtedness estimated
interest factor (33.3%) of rental expense, accounting changes and income taxes.
Fixed charges consist of interest expense, including amounts capitalized,
amortization of capitalized expenses related to indebtedness, and estimated
interest factor (33.3%) of rent expense.
DESCRIPTION OF OUR COMMON STOCK
Set forth below is a summary of all of the material provisions of our
organizational documents. You should read the organizational documents, which
are filed as exhibits to this registration statement, for other provisions that
may be important to you. In addition, you should be aware that the summary below
does not give full effect to the terms of the provisions of statutory or common
law which may affect your rights as a shareholder.
Pursuant to our Certificate of Incorporation, we have the authority to
issue an aggregate of 250,000,000 shares of common stock, par value $1.00 per
share. As of December 31, 2001, 61,437,555 shares of common stock were
outstanding, and 5,789,323 shares of our common stock were reserved for issuance
under our various stock option plans.
Voting rights. Each share of common stock is entitled to one vote in the
election of directors and on all other matters submitted to a vote of our
shareholders. Our shareholders do not have the right to cumulate their votes in
the election of directors.
Dividends, distributions and stock splits. Holders of our common stock are
entitled to receive dividends if, as and when such dividends are declared by our
Board of Directors out of assets legally available therefor.
Liquidation. In the event of any dissolution, liquidation, or winding up
of our affairs, whether voluntary or involuntary, after payment of our debts and
other liabilities, our remaining assets will be distributed ratably among the
holders of common stock.
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Fully Paid. All shares of common stock outstanding are fully paid and
nonassessable, and all the shares of common stock to be outstanding upon
completion of this offering will be fully paid and nonassessable.
Other Rights. Holders of our common stock have no redemption or conversion
rights and no preemptive or other rights to subscribe for our securities.
DELAWARE ANTI-TAKEOVER LAW AND CERTAIN CHARTER AND BYLAW PROVISIONS
We are a Delaware corporation. The Delaware General Corporation Law
contains certain provisions that could discourage potential takeover attempts
and make it more difficult for our shareholders to change management or receive
a premium for their shares.
Delaware Law. We are subject to Section 203 of the Delaware General
Corporation Law, an anti-takeover law. In general, the statute prohibits a
publicly-held Delaware corporation from engaging in a business combination with
an "interested shareholder" for a period of three years after the date of the
transaction in which the person became an interested shareholder, unless the
business combination is approved in a prescribed manner that includes approval
by at least 66.7% of the outstanding stock not owned by the interested
shareholder. A "business combination" includes a merger, asset sale or other
transaction resulting in a financial benefit to the shareholder. For purposes of
Section 203, an "interested shareholder" is defined to include any person that
is:
- the owner of 15% or more of the outstanding voting stock of the
corporation;
- an affiliate or associate of the corporation and was the owner of 15% or
more of the voting stock outstanding of the corporation, at any time
within three years immediately prior to the relevant date; and
- an affiliate or associate of the persons described in the foregoing
bullet points.
Shareholders may, by adopting an amendment to the corporation's Certificate
of Incorporation or Bylaws, elect for the corporation not to be governed by
Section 203, effective 12 months after adoption. Neither our Certificate of
Incorporation nor our Bylaws exempt us from the restrictions imposed under
Section 203. It is anticipated that the provisions of Section 203 may encourage
companies interested in acquiring us to negotiate in advance with our Board of
Directors because shareholder approval of the transaction, as discussed above,
would be unnecessary.
Charter and Bylaw Provisions. Our Certificate of Incorporation and Bylaws
provide that any action required or permitted to be taken by our shareholders
may be effected either at a duly called annual or special meeting of the
shareholders or by written consent of the shareholders. Special meetings of
shareholders may be called by the President, the Board of Directors or by a
majority of the shareholders entitled to vote at the special meeting.
Our Certificate of Incorporation does not provide for the division of our
Board of Directors into classes. Each year at the annual meeting of
shareholders, all directors are elected to hold office until the next succeeding
annual meeting of shareholders. The number of directors is fixed by resolution
of the Board, but is required under the Bylaws to be at least seven and not more
than fifteen. The size of the board is currently fixed at thirteen members.
Directors may be removed with the approval of the holders of a majority of
the shares entitled to vote at a meeting of shareholders. Directors may be
removed by shareholders with or without cause. Vacancies and newly-created
directorships resulting from any increase in the number of directors may be
filled by a majority of the directors then in office, a sole remaining director,
or the holders of a majority of the shares entitled to vote at a meeting of
shareholders.
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LIMITATION OF LIABILITY; INDEMNIFICATION
Our Certificate of Incorporation contains certain provisions permitted
under the Delaware General Corporation Law relating to the liability of
directors. These provisions eliminate a director's personal liability for
monetary damages resulting from a breach of fiduciary duty, except that a
director will be personally liable:
- for any breach of the director's duty of loyalty to us or our
shareholders;
- for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
- under Section 174 of the Delaware General Corporation Law relating to
unlawful stock repurchases or dividends; or
- for any transaction from which the director derives an improper personal
benefit.
These provisions do not limit or eliminate our rights or those of any
shareholder to seek non-monetary relief, such as an injunction or rescission, in
the event of a breach of a director's fiduciary duty. These provisions will not
alter a director's liability under federal securities laws.
Our Bylaws also contain provisions indemnifying our directors and officers
to the fullest extent permitted by the Delaware General Corporation Law. We have
entered into separate indemnification agreements with our directors and officers
that may, in some cases, be broader than the specific indemnification provisions
contained in our Certificate of Incorporation, Bylaws or the Delaware General
Corporation Law. The indemnification agreements may require us, among other
things, to indemnify the officers and directors against certain liabilities,
other than liabilities arising from willful misconduct, that may arise by reason
of their status or service as directors or officers. These agreements also may
require us to advance the expenses incurred by the officers and directors as a
result of any proceeding against them as to which they could be indemnified. We
believe that these indemnification arrangements are necessary to attract and
retain qualified individuals to serve as directors and officers.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the common stock is First Union
National Bank.
DESCRIPTION OF SENIOR DEBT SECURITIES AND
SUBORDINATED DEBT SECURITIES
GENERAL
The debt securities will be our general unsecured obligation and will be
issued as either senior notes and debentures, which are referred to throughout
as the senior debt securities, or subordinated notes and debentures, which are
referred to throughout as the subordinated debt securities, or both. We would
issue our debt securities under one or more separate indentures, in each case
between us, our subsidiary guarantors and the trustee, and in substantially the
form that has been filed as an exhibit to the registration statement of which
this prospectus is a part, but subject to any future amendments or supplements.
We will issue senior debt securities under a senior indenture and subordinated
debt securities under a subordinated indenture. We refer to the senior indenture
and the subordinated indenture below singularly as the indenture or together as
the indentures. We refer to the senior trustee and the subordinated trustee
below individually as a trustee and together as the trustees.
Set forth below is a summary of all of the material terms of the
indentures. The particular terms of the debt securities we might offer and the
extent to which these general provisions apply will be described in a prospectus
supplement relating to the offered debt securities. We have included the forms
of the indentures under which the offered debt securities will be issued as
exhibits to the registration statement, and you should read the indentures for
provisions that may be important to you.
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Our payment obligations under any debt securities may, if specified in any
prospectus supplement, be fully and unconditionally guaranteed by one or more of
our subsidiaries as subsidiary guarantors. If any series of debt securities is
guaranteed by one of our subsidiaries, the applicable prospectus supplement will
identify each subsidiary guarantor and describe such subsidiary guarantee,
including the circumstances in which it may be released. Unless specified
otherwise in any prospectus supplement, any guarantee of debt securities by one
or more of our subsidiaries will be on a full and unconditional basis.
Unless we provide otherwise in any prospectus supplement, the indentures do
not limit the aggregate principal amount of debt securities that we can issue.
We may issue debt securities in one or more series and in differing aggregate
principal amounts. We may issue debt securities in any currency or currency unit
that we may designate. We may issue debt securities in registered or global
form. The rights of holders of debt securities will be limited to our assets and
the assets of any subsidiary guarantors.
Except in the case of any debt securities that are guaranteed by a
subsidiary guarantor, the debt securities will not be obligations of any of our
subsidiaries. Except as may be described in any prospectus supplement, the
indentures do not limit the ability of our subsidiaries to incur debt in the
future. Our right to participate in the assets of any subsidiary (and thus the
ability of holders of the debt securities to benefit indirectly from such
assets) is generally subject to the prior claims of creditors, including trade
creditors, of that subsidiary, except to the extent that we are recognized as a
creditor of such subsidiary, in which case our claims would still be subject to
any security interest of other creditors of such subsidiary. Unless the debt
securities are guaranteed by our subsidiaries, the debt securities will be
structurally subordinated to creditors, including trade creditors, of our
subsidiaries with respect to the assets of the subsidiaries against which such
creditors have a more direct claim.
The senior debt securities will rank equally with all of our other senior
debt, if any. As of September 30, 2001, our debt to equity ratio was 19.8:100.
If we offer subordinated debt, the subordinated debt securities will have a
junior position to all of our senior debt, if any. We currently have outstanding
$172,500,000 in 2.00% Convertible Notes Due 2021, which are unsecured
obligations that will rank equally with our existing and future unsecured senior
indebtedness. As of December 31, 2001, we have no outstanding indebtedness under
our $200,000,000 bank loan facility. Any amounts borrowed under that facility
would be senior to the subordinated debt securities. We will disclose any
material changes to such amounts in a prospectus supplement prepared in
accordance with this prospectus. Other than as may be described in a prospectus
supplement, neither indenture will contain any covenant or provision that
affords debt holders protection in the event that we enter into a highly
leveraged transaction in which we borrow a substantial amount of the monetary
requirements for such transaction. These same holders would not have any right
to require us to repurchase the debt securities, in the event that the credit
rating of any debt securities declined as a result of our involvement in a
takeover, recapitalization, similar restructuring or otherwise.
A prospectus supplement including the indentures, filed as an exhibit,
relating to any series of debt securities that we may offer will include
specific terms relating to the offering. These terms will include some or all of
the following:
- the title and type of debt securities being offered, which may include
medium term notes;
- the total principal amount of debt securities being offered;
- whether the debt securities will be issued in one or more forms of global
securities and whether such global securities are to be issuable in
temporary global form or permanent global form;
- whether the debt securities will be guaranteed by any of the subsidiaries
of the Company;
- the dates on which the principal of, and premium, if any, on the offered
debt securities is payable;
- the interest rate or the method of determining the interest rate;
- the date from which interest will accrue;
- the interest payment dates;
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- the place where the principal, premium and interest is payable;
- any optional redemption periods;
- any sinking fund or other provisions that would obligate us to repurchase
or otherwise redeem the debt securities;
- whether the debt securities will be convertible into shares of common
stock or exchangeable for other of our securities (which would be
required to be registered under the Securities Act of 1933) and if so,
the terms of conversion or exchange;
- the currency or currencies, if other than U.S. dollars, in which
principal payments or other payments will be payable;
- events causing acceleration of maturity;
- any provisions granting special rights to holders when a specified event
occurs;
- any changes to or additional events of default or covenants;
- any material United States federal income tax consequences and any
special tax implications of ownership and disposition of the debt
securities; and
- any other terms of the debt securities.
The debt securities will be issued in registered form. There will be no
service charge for any registration, transfer or exchange of debt securities. We
may, however, require payment of an amount that would be sufficient to cover any
tax or other governmental charge we may incur. We may sell debt securities at a
discount or premium (which may be substantial) below or above their stated
principal amount, either bearing no interest or bearing interest at a rate that
may be below the market rate at the time we issue the debt securities.
We will describe any material United States federal income tax consequences
and other special considerations applicable to discounted debt securities in the
prospectus supplement. If we sell any of the offered debt securities for any
foreign currency or currency unit, or if any of the principal, premium or
interest, if any, is payable on any of the offered debt securities, the
restrictions, elections, tax consequences, specific terms and other information
pertaining to the offered debt securities and such foreign currency or foreign
currency unit will be set forth in the prospectus supplement describing such
offered debt securities.
DENOMINATIONS
We will issue the debt securities in registered form of $1,000 each or
integral multiples thereof.
SUBORDINATION
Under the subordinated indenture, payment of the principal, interest and
any premium on the subordinated debt securities generally will be subordinated
and junior in right of payment to the prior payment in full of all senior
indebtedness. The subordinated indenture defines senior indebtedness to include
all notes or other unsecured evidences of indebtedness, including our guarantees
for money borrowed by us, not expressed to be subordinate or junior in right of
payment to any other of our indebtedness and all extensions of such
indebtedness. The subordinated indenture provides that no payment of principal,
interest and any premium on the subordinated debt securities may be made in the
event:
- of any insolvency, bankruptcy or similar proceeding involving us or our
property;
- we fail to pay the principal, interest, any premium or any other amounts
on any senior indebtedness when due;
- of a default (other than a payment default with respect to the senior
indebtedness) that imposes a payment blockage on the subordinated debt
securities for a maximum of 179 days at any one time, unless the event of
default has been cured or waived or shall no longer exist; or
15
- the principal and any accrued interest on any series of subordinated debt
securities has been declared due and payable upon an event of default
described in the subordinated debt indenture and such declaration has not
been rescinded.
In the event of any voluntary or involuntary bankruptcy, insolvency,
reorganization or other similar proceeding relating to us, all of our
obligations to holders of senior indebtedness will be entitled to be paid in
full before any payment shall be made on account of the principal of, or
premium, if any, or interest, if any, on the subordinated debt securities of any
series. In the event of any such bankruptcy, insolvency, reorganization or other
similar proceeding, holders of the subordinated debt securities of any series,
together with holders of indebtedness ranking equally with the subordinated debt
securities, shall be entitled, ratably, to be paid amounts that are due to them,
but only from assets remaining after we pay in full the amounts that we owe on
our senior indebtedness. We will make these payments before we make any payment
or other distribution on account of any indebtedness that ranks junior to the
subordinated debt securities. However, if we have paid in full all of the sums
that we owe with respect to our senior indebtedness and creditors in respect of
our obligations associated with such derivative products have not received
payment in full of amounts due to them, then the available remaining assets
shall be applied to payment in full of those obligations before any payment is
made on the subordinated debt securities. If we are in default on any of our
senior indebtedness or if any such default would occur as a result of certain
payments, then we may not make any payments on the subordinated debt securities
or effect any exchange or retirement of any of the subordinated debt securities
unless and until such default has been cured or waived or otherwise ceases to
exist.
No provision contained in the subordinated indenture or the subordinated
debt securities affects our absolute and unconditional obligation to pay when
due, principal of, premium, if any, and interest on the subordinated debt
securities and neither the subordinated indenture nor the subordinated debt
securities prevent the occurrence of any default or event of default under the
subordinated indenture or limit the rights of the subordinated trustee or any
holder of subordinated debt securities, subject to the three preceding
paragraphs, to pursue any other rights or remedies with respect to the
subordinated debt securities. As a result of these subordination provisions, in
the event of the liquidation, bankruptcy, reorganization, insolvency,
receivership or similar proceeding or an assignment for the benefit of our
creditors or any of our subsidiaries or a marshaling of our assets or
liabilities and our subsidiaries, holders of subordinated debt securities may
receive ratably less than other creditors.
If this prospectus is being delivered in connection with a series of
subordinated debt securities, the accompanying prospectus supplement or the
information incorporated herein by reference will set forth the approximate
amount of senior indebtedness outstanding as of the end of the most recent
fiscal quarter.
EVENTS OF DEFAULT; REMEDIES
The following are defined as events of default under each indenture:
- our failure to pay principal or any premium on any debt security when
due;
- our failure to pay any interest on any debt security when due, continued
for 30 days;
- our failure to deposit any mandatory sinking fund payment when due,
continued for 30 days;
- our failure to perform any other covenant or warranty in the Indenture
that continues for 90 days after written notice;
- our certain events of bankruptcy, insolvency or reorganization; and
- any other event of default as may be specified with respect to debt
securities of such series.
An event of default for a particular series of debt securities does not
necessarily constitute an event of default for any other series of debt
securities. The trustee may withhold notice to the holders of debt securities of
any default (except in the payment of principal or interest) if the trustee
considers withholding of notice to be in the best interest of the holders. If an
event of default occurs, either the trustee or the holders of at least 25% of
the principal amount of the outstanding debt securities may declare the
principal amount of the debt
16
securities of the applicable series to be due and payable immediately. If this
happens, subject to certain conditions, the holders of a majority of the
principal amount of the outstanding debt securities of such series can void the
declaration. These conditions include the requirement that we have paid or
deposited with the trustee a sum sufficient to pay all overdue principal and
interest payments on the series of debt securities subject to the default. If an
event of default occurs due to certain events of bankruptcy, insolvency or
reorganization, the principal amount of the outstanding debt securities of all
series will become immediately due and payable without any declaration or other
act on the part of either trustee or any holder.
Depending on the terms of our indebtedness, an event of default under an
indenture may cause a cross default on our other indebtedness. Other than its
duties in the case of default, a trustee is not obligated to exercise any of its
rights or powers under any indenture at the request, order or direction of any
holder or group of holders unless the holders offer the trustee reasonable
indemnity. If the holders provide reasonable indemnification, the holders of a
majority of the principal amount of any series of debt securities may direct the
time, method and place of conducting any proceeding for any remedy available to
the trustee, or exercising any power conferred upon the trustee for any series
of debt securities. The holders of a majority of the principal amount
outstanding of any series of debt securities may, on behalf of all holders of
such series, waive any past default under the indenture, except in the case of a
payment of principal or interest default. We are required to provide to each
trustee an annual statement reflecting the performance of our obligations under
the indenture and any statement of default, if applicable.
COVENANTS
Under the indentures, we will:
- pay the principal, interest and any premium on the debt securities when
due;
- maintain a place of payment;
- deliver a report to the trustee at the end of each fiscal year reviewing
our obligations under the indentures; and
- deposit sufficient funds with any payment agent on or before the due date
for any principal, interest or any premium.
MODIFICATION OR AMENDMENT OF INDENTURES
Under each indenture, all rights and obligations and the rights of the
holders may be modified or amended with the consent of the holders of a majority
in aggregate principal amount of the outstanding debt securities of each series
affected by the modification or amendment. No modification or amendment may,
however, be made without the consent of the holders of any debt securities if
the following provisions are affected:
- change in the stated maturity date of the principal payment or
installment of any principal payment;
- reduction in the principal amount or premium on, or interest on any of
the debt securities;
- reduction in the percentage required for modifications or amendment to be
effective against any holder of any debt securities.
CONSOLIDATION, MERGER AND SALE OF ASSETS
Each indenture generally permits a consolidation or merger between us and
another corporation. Each indenture also permits us to sell all or substantially
all of our property and assets. If this happens, the surviving or acquiring
company will assume all of our responsibilities and liabilities under the
indentures, including the payment of all amounts due on the debt securities and
the performance of the covenants in the indentures. We will only consolidate or
merge with or into any other company or sell all, or substantially all, of our
assets according to the terms and conditions of the indentures. The surviving or
acquiring company will be substituted for us in the Indentures with the same
effect as if it had been an original party to the indenture.
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Thereafter, the successor company may exercise our rights and powers under any
indenture, in our name or in its own name. Any act or proceeding our board of
directors or any of our officers are required or permitted to do may be done by
the board of directors or officers of the successor company. If we sell all or
substantially all of our assets, we shall be released from all our liabilities
and obligations under any Indenture and under the debt securities.
DISCHARGE AND DEFEASANCE
We will be discharged from our obligations under the debt securities of any
series at any time if we irrevocably deposit with the trustee enough cash or
U.S. government securities to pay the principal, interest, any premium and any
other sums due through the stated maturity date or redemption date of the debt
securities of the series. In this event, we will be deemed to have paid and
discharged the entire indebtedness on all outstanding debt securities of the
series. Accordingly, our obligations under the applicable indenture and the debt
securities of such series to pay any principal, premium, or interest, if any,
shall cease, terminate and be completely discharged. The holders of any debt
securities shall then only be entitled to payment out of the money or U.S.
government securities deposited with the trustee and such holders of debt
securities of such series will not be entitled to the benefits of the indenture
except as relate to the registration, transfer and exchange of debt securities
and the replacement of lost, stolen or mutilated debt securities.
PAYMENT AND PAYING AGENTS
We will pay the principal, interest and premium on fully registered
securities at designated places. We will pay by check mailed to the person in
whose name the debt securities are registered on the day specified in the
indentures or any prospectus supplement. We will make debt securities payments
in other forms at a place we designate and specify in a prospectus supplement.
FORM, EXCHANGE, REGISTRATION AND TRANSFER
Fully registered debt securities may be transferred or exchanged at the
corporate trust office of the trustee or at any other office or agency we
maintain for such purposes without the payment of any service charge except for
any tax or governmental charge. The registered securities must be duly endorsed
or accompanied by a written instrument of transfer, if required by us or the
security registrar. We will describe any procedures for the exchange of debt
securities for other debt securities of the same series in the prospectus
supplement for that offering.
GLOBAL SECURITIES
We may issue the debt securities of a series in whole or in part in the
form of one or more global certificates that will be deposited with a depositary
we identify in a prospectus supplement. We may issue global securities in
registered form and in either temporary or permanent form. Unless and until it
is exchanged in whole or part for the individual debt securities it represents,
the depositary or its nominee may not transfer a global security except as a
whole. The depositary for a global security and its nominee may only transfer
the global security between themselves or their successors. We will make
principal, premium and interest payments on global securities to the depositary
or the nominee it designates as the registered owner for such global securities.
The depositary or its nominee will be responsible for making payments to you and
other holders of interests in the global securities. We and the paying agents
will treat the persons in whose names the global securities are registered as
the owners of such global securities for all purposes. Neither we nor the paying
agents have any direct responsibility or liability for the payment of principal,
premium or interest to owners of beneficial interests in the global securities,
and such liability is that of the depositary or its variance. As a result the
beneficial interest holder may have to rely on the depositary to recover in the
event of default.
DESCRIPTION OF WARRANTS
We may issue warrants, including warrants to purchase common stock, debt
securities or other securities registered pursuant to this registration
statement and described in this prospectus. We may issue warrants
18
independently or together with other securities that may be attached to or
separate from the warrants. We will issue each series of warrants under a
separate warrant agreement that will be entered into between us and a bank or
trust company, as warrant agent, and will be described in the prospectus
supplement relating to the particular issue of warrants. The warrant agent will
act solely as our agent in connection with the warrant of such series and will
not assume any obligation or relationship of agency for or with holders or
beneficial owners of warrants. The following describes certain general terms and
provisions of the warrants we may offer. We will set forth further terms of the
warrants and the applicable warrant agreement in the applicable prospectus
supplement.
DEBT WARRANTS
The applicable prospectus supplement will describe the terms of any debt
warrants, including the following:
- the title of such debt warrants;
- the offering price for such debt warrants;
- the aggregate number of such debt warrants;
- the designation and terms of the debt securities purchasable upon
exercise of such debt warrants;
- if applicable, the designation and terms of the securities with which
such debt warrants are issued and the number of such debt warrants issued
with each security;
- if applicable, the date from and after which such debt warrants and any
securities issued therewith will be separately transferable;
- the principal amount of debt securities purchasable upon exercise of a
debt warrant and the price at which such principal amount of debt
securities may be purchased upon exercise;
- the date on which the right to exercise such debt warrants shall commence
and the date on which such right shall expire;
- if applicable, the minimum or maximum amount of such debt warrants which
may be exercised at any one time;
- whether the debt warrants represented by the debt warrant certificates or
debt securities that may be issued upon exercise of the debt warrants
will be issued in registered form;
- information with respect to book-entry procedures, if any;
- the currency, currencies or currency units in which the offering price,
if any, and the exercise price are payable;
- if applicable, a discussion of certain United States federal income tax
considerations;
- the antidilution provisions of such debt warrants, if any;
- the redemption or call provisions, if any, applicable to such debt
warrant; and
- any additional terms of the debt warrants, including terms, procedures
and limitations relating to the exchange and exercise of such debt
warrants.
COMMON STOCK WARRANTS
The applicable prospectus supplement will describe the terms of any
warrants exchangeable for common stock, including:
- the title of such warrants;
- the offering price of such warrants;
19
- the aggregate number of such warrants;
- the designation and terms of the common stock issued by us purchasable
upon exercise of such warrants;
- if applicable, the designation and terms of the securities with which
such warrants are issued and the number of such warrants issued with each
such security;
- if applicable, the date from and after which such warrants and any
securities issued therewith will be separately transferable;
- the number of shares of common stock issued by us purchasable upon
exercise of the warrants and the price at which such shares may be
purchased upon exercise;
- the date on which the right to exercise such warrants shall commence and
the date on which such right shall expire;
- if applicable, the minimum or maximum amount of such warrants which may
be exercised at any one time;
- the currency, currencies or currency units in which the offering price,
if any, and the exercise price are payable;
- if applicable, a discussion of certain United States federal income tax
considerations; and
- the antidilution provisions of the warrants, if any.
20
PLAN OF DISTRIBUTION
We may distribute the securities described in this prospectus or any
prospectus supplement from time to time in one or more transactions at a fixed
price or prices (which may be changed from time to time), at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices or at negotiated prices. Each prospectus supplement will describe the
method of distribution of the securities offered under that prospectus
supplement.
We may sell securities directly, through agents designated from time to
time, through underwriting syndicates led by one or more managing underwriters
or through one or more underwriters acting alone. Each prospectus supplement
will describe the terms of the securities to which the prospectus supplement
relates, the name or names of any underwriters or agents with whom we have
entered into arrangements with respect to the sale of such securities, the
public offering or purchase price of such securities and the net proceeds we
will receive from such sale.
In addition, each prospectus supplement will describe any underwriting
discounts and other items constituting underwriters' compensation, any discounts
and commissions allowed or paid to dealers, if any, any commissions allowed or
paid to agents, and the securities exchange or exchanges, if any, on which the
subject securities will be listed.
Any underwriter or agent participating in the distribution of the
securities may be deemed to be an underwriter, as that term is defined in the
Securities Act, of the offered securities and sold and any discounts or
commissions received by them, and any profit realized by them on the same or
resale of the securities may be deemed to be underwriting discounts and
commissions under the Securities Act. Certain of any such underwriters and
agents, including their associates, may be customers of, engage in transactions
with and perform services for us and our subsidiaries in the ordinary course of
business.
Securities may also be offered and sold, if so indicated in the prospectus
supplement, in connection with a remarketing upon their purchase, in accordance
with a redemption or repayment pursuant to their terms, by one or more firms
("remarketing firms") acting as principals for their own accounts or as agents
for either of us. Any remarketing firm will be identified and the terms of its
agreement, if any, with us and its compensation will be described in the
prospectus supplement. Remarketing firms may be deemed to be underwriters in
connection with the securities remarketed thereby.
If any underwriter or any selling group member intends to engage in
stabilizing, syndicate short covering transactions, penalty bids or any other
transaction in connection with the offering of securities that may stabilize,
maintain, or otherwise affect the price of those securities, such intention and
a description of such transactions will be described in the prospectus
supplement.
Agents and underwriters may be entitled under agreements entered into with
us to indemnification by us against certain civil liabilities, including
liabilities under the Securities Act of 1933, or to contribution with respect to
payments which the agents or underwriters may be required to make in respect
thereof. Certain of any such agents and underwriters, including their
associates, may be customers of, engage in transactions with, or perform
services for, us and our subsidiaries in the ordinary course of business.
Except as indicated in the applicable prospectus supplement, the securities
are not expected to be listed on a securities exchange, except for the common
stock, which is listed on the NYSE, and any underwriters or dealers will not be
obligated to make a market in securities. We cannot predict the activity or
liquidity of any trading in the securities.
CERTAIN LEGAL MATTERS
Unless otherwise indicated in the applicable prospectus supplements, the
validity of the securities offered by this prospectus will be passed upon for us
by Haynes and Boone, LLP, our legal counsel.
21
EXPERTS
The financial statements incorporated in this Prospectus by reference to
the Annual Report on Form 10-K of HCC Insurance Holdings, Inc. for the year
ended December 31, 2000 and to the Current Report on Form 8-K dated June 14,
2001 of HCC Insurance Holdings, Inc. have been so incorporated in reliance on
the reports of PricewaterhouseCoopers LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
ABOUT FORWARD-LOOKING STATEMENTS
This prospectus contains certain "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, and Section 21E of the
Securities Exchange Act of 1934, which are intended to be covered by the safe
harbors created by those laws. These forward-looking statements include
information about possible or assumed future results of our operations. All
statements, other than statements of historical facts, included or incorporated
by reference in this prospectus that address activities, events or developments
that we expect or anticipate may occur in the future, including, such things as
future capital expenditures, business strategy, competitive strengths, goals,
growth of our business and operations, plans, and references to future success
may be considered forward-looking statements. Also, when we use words such as
"anticipate," "believe," "estimate," "expect," "intend," "plan," "probably" or
similar expressions, we are making forward-looking statements.
Many risks and uncertainties may impact the matters addressed in these
forward-looking statements. Many possible events or factors could affect our
future financial results and performance. These could cause our results or
performance to differ materially from those we express in our forward-looking
statements. Although we believe that the assumptions underlying our
forward-looking statements are reasonable, any of these assumptions, and
therefore also the forward-looking statements based on these assumptions, could
themselves prove to be inaccurate. In light of the significant uncertainties
inherent in the forward-looking statements included in this prospectus,
particularly in light of the terrorist attacks on September 11, 2001 and the
global war on terrorism, our inclusion of this information is not a
representation by us or any other person that our objectives and plans will be
achieved. You should consider these risks and those we set out in the Risk
Factors section of this prospectus before you purchase our securities.
Our forward-looking statements speak only as of the date made and we will
not update these forward-looking statements unless the securities laws require
us to do so. In light of these risks, uncertainties and assumptions, the
forward-looking events discussed in this prospectus may not occur.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other
information with the SEC. The SEC maintains an internet site http://www.sec.gov
that contains reports, proxy and information statements, and other information
regarding issuers (including us) that file documents with the SEC
electronically. Our SEC filings may be obtained from that web site. Please call
the SEC at 1-800-SEC-0330 for further information on the public reference
facilities. You may also read and copy any document we file with the SEC at the
following SEC public reference facilities:
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 233 Broadway Citicorp Center
Room 1024 New York, New York 10279 500 West Madison Street
Washington, D.C. 20549 Suite 1400
Chicago, Illinois 60661-2511
You may also obtain copies of the documents at prescribed rates by writing
to the Public Reference Room of the SEC at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549.
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated
22
by reference is considered to be part of this prospectus, and later information
that we file with the SEC will automatically update and supersede this
information. We incorporate by reference the documents listed below and any
future filings we make with the SEC under Sections 13(a), 13(c), 14, or 15(d) of
the Securities Exchange Act of 1934 until we terminate the offering:
- Our Annual Report on Form 10-K for the year ended December 31, 2000;
- Our Current Report on Form 8-K dated February 23, 2001;
- Our Current Report on Form 8-K dated March 2, 2001;
- Our Current Report on Form 8-K dated May 11, 2001 (to the extent these
items were "filed" with the SEC and not "furnished" to the SEC pursuant
to Regulation FD);
- Our Current Report on Form 8-K dated June 14, 2001;
- Our Current Report on Form 8-K dated July 27, 2001;
- Our Current Report on Form 8-K dated August 10, 2001 (to the extent these
items were "filed" with the SEC and not "furnished" to the SEC pursuant
to Regulation FD);
- Our Current Report on Form 8-K dated August 24, 2001;
- Our Current Report on Form 8-K dated September 14, 2001;
- Our Current Report on Form 8-K dated October 10, 2001;
- Our Current Report on Form 8-K dated November 8, 2001 (to the extent
these items were "filed" with the SEC and not "furnished" to the SEC
pursuant to Regulation FD);
- Our Current Report on Form 8-K dated November 13, 2001 (to the extent
these items were "filed" with the SEC and not "furnished" to the SEC
pursuant to Regulation FD);
- Our Quarterly Report on Form 10-Q for the quarter ended March 31, 2001;
- Our Quarterly Report on Form 10-Q for the quarter ended June 30, 2001;
and
- Our Quarterly Report on Form 10-Q for the quarter ended September 30,
2001.
Any person, including any beneficial owner, may request a copy of these
filings, at no cost, by writing or telephoning us at the following address:
Investor Relations
HCC Insurance Holdings, Inc.
13403 Northwest Freeway
Houston, TX 77040
713-690-7300
23
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[HCC LOGO]
HCC INSURANCE HOLDINGS, INC.
COMMON STOCK
SENIOR DEBT SECURITIES
SUBORDINATED DEBT SECURITIES
WARRANTS
-------------------------
PROSPECTUS
-------------------------
[ ], 2002
--------------------------------------------------------------------------------
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
SEC Registration Fee........................................ $ 77,078
Printing.................................................... $100,000*
Accounting Fees and Expenses................................ $ 50,000*
Legal Fees and Expenses..................................... $ 75,000*
Transfer Agent Fees......................................... $ 5,000*
Transfer Fees and Expenses.................................. $ 30,000*
Rating Agency Fees and Expenses............................. $100,000*
Blue Sky Fees and Expenses.................................. $ 10,000*
Miscellaneous............................................... $ 17,922*
--------
Total............................................. $465,000*
========
---------------
* Estimated.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company is incorporated under the laws of the State of Delaware.
Subsection (b)(7) of Section 102 of the Delaware General Corporation Law (the
"DGCL"), enables a corporation in its original certificate of incorporation or
an amendment thereto to eliminate or limit the personal liability of a director
to the corporation or its shareholders for monetary damages for breach of the
director's fiduciary duty, except (i) for any breach of the director's duty of
loyalty to the corporation or its shareholders, (ii) for any acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of law, (iii) pursuant to Section 174 of the DGCL (providing for liability of
directors for unlawful payment of dividends or unlawful stock purchases or
redemptions) or (iv) for any transaction from which the director derived an
improper personal benefit.
Section 145 of the General Corporation Law of the state of Delaware
("Section 145") provides that a Delaware corporation may indemnify any persons
who are, or are threatened to be made, parties to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of such corporation), by
reason of the fact that such person is or was an officer, director, employee or
agent of such corporation, or is or was serving at the request of such
corporation as a director, officer, employee or agent of another corporation or
enterprise. The indemnity may include expenses (including attorneys' fees),
judgment, fines and amounts paid in settlement actually and reasonably incurred
by such person in connection with such action, suit or proceeding, provided such
person acted in good faith and in a manner he reasonably believed to be in or
not opposed to the corporation's bests interests and, with respect to any
criminal action or proceeding, had no reasonable cause to believe that his
conduct was unlawful. A Delaware corporation may indemnify any persons who were
or are parties, or are threatened to be made a party to any threatened, pending
or completed, action or suit by or in the right of the corporation by reason of
the fact that such person is or was a director, officer, employee or agent of
such corporation, or enterprise. The indemnity may include expenses (including
attorneys' fees) actually and reasonably incurred by such person in connection
with the defense or settlement of such action or suit, provided such person
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the corporation's best interest except that no indemnification is
permitted without judicial approval if the officer is adjudge to be liable to
the corporation. Where an officer or director is successful on the merits or
otherwise in the defense of any action referred to above, the corporation must
indemnify him against the expenses which such officer or director has actually
and reasonably incurred.
II-1
Article 11 of the Company's certificate of incorporation, as amended,
requires the Company to indemnify the Company's directors and officers to the
extent permitted under Section 145.
Article VIII of the Company's bylaws provides that the Company shall
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending, or completed action, suit, or proceeding whether
civil, criminal, administrative, or investigative (other than action by or in
the right of the Company), by reason of the fact that he is or was a director or
officer of the Company, or is or was serving at the request of the Company as a
director or officer of the Company, or is or was serving at the request of the
Company as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust, or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit, or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Company and, with respect to
any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The determination of whether an incumbent or former
director or officer is entitled to indemnification because it has met the
applicable standards of conduct set forth above is to be made, unless ordered by
a court: (i) by a majority vote of a quorum consisting of directors who at the
time of the vote are not parties to the proceeding; (ii) if such quorum cannot
be obtained, or even if obtainable a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion; or (iii) by a vote
of Shareholders of the Company. The bylaws further provide that the expenses
(including attorneys' fees) incurred in any such action by a director or officer
of the Company may be paid or reimbursed by the Company in advance of the final
disposition of such action, suit or proceeding upon receipt of a written
undertaking by or on behalf of the director or officer to repay the amount paid
or reimbursed if it is ultimately determined that he is not entitled to be
indemnified by the Company as authorized therein.
The Company's bylaws also provide that the Company may indemnify to the
extent of the provisions set forth therein, any person, other than an officer or
director, who was or is a party or is threatened to be made a party to any
threatened, pending, or completed action, suit or proceeding, whether civil,
criminal, administrative, or investigative, by reason of the fact that he is or
was an employee or agent of the Company, or was serving at the request of the
Company as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust, or other enterprise, if such person makes
written application for such indemnification to the Board of Directors and the
Board of Directors so determines that indemnification is appropriate and the
extent thereof.
The Company's bylaws further provide that the indemnification described
therein is not exclusive, and shall not exclude any other rights to which those
seeking to be indemnified may be entitled under statute, any bylaw, agreement,
vote of Shareholders or disinterested directors, or otherwise, both as to action
in his official capacity and to his action in another capacity while holding
such office.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
Items denoted by a letter are incorporated by reference to other documents
previously filed with the Securities and Exchange Commission as set forth at the
end of this table. Items not denoted by a letter but denoted with an * are being
filed herewith. Items designated with ** are to be filed by amendment. Items
marked with *** have been previously filed with this Registration Statement.
EXHIBIT
NUMBER
-------
a1.1 -- Form of Underwriting Agreement (Common Stock HCC Insurance
Holdings, Inc.).
a1.2 -- Form of Underwriting Agreement (Senior Debt Securities and
Junior Subordinated Debt Securities of HCC Insurance
Holdings, Inc.).
**1.4 -- Form of Underwriting Agreement (Warrants of HCC Insurance
Holdings, Inc.).
b3.1 -- Bylaws of HCC Insurance Holdings, Inc., as amended
c3.2 -- Restated Certificate of Incorporation and Amendment thereto
of HCC Insurance Holdings, Inc
II-2
EXHIBIT
NUMBER
-------
d4.1 -- Form of Indenture for Senior Debt Securities issued by HCC
Insurance Holdings, Inc.
d4.2 -- Form of Subordinated Indenture for Junior Subordinated Debt
Securities issued by HCC Insurance Holdings, Inc.
**4.4 -- Forms of Senior Debt Security issued by HCC Insurance
Holdings, Inc.
**4.5 -- Form of Junior Subordinated Debt Security issued by HCC
Insurance Holdings, Inc.
b4.12 -- Specimen of Common Stock certificate, $1.00 par value, of
HCC Insurance Holdings, Inc.
***5.1 -- Opinion of Haynes and Boone, L.L.P., counsel for HCC
Insurance Holdings, Inc.
***12.1 -- Computation of Statement of Ratios of Earnings to Fixed
Charges.
*23.1 -- Consent of PricewaterhouseCoopers LLP.
***23.2 -- Consent of Haynes and Boone, L.L.P. (included in Exhibit
5.1).
***24.1 -- Powers of Attorney.
d25.1 -- Statement of Eligibility on Form T-1 under the Trust
Indenture Act of 1939 of First Union National Bank, as
Trustee under the Indenture (Senior Debt Securities issued
by HCC Insurance Holdings, Inc.).
d25.2 -- Statement of Eligibility on Form T-1 under the Trust
Indenture Act of 1939 of First Union National Bank, as
Trustee under the Subordinated Indenture (Junior
Subordinated Debt Securities issued by HCC Insurance
Holdings, Inc.).
---------------
(a) Incorporated by reference to the Exhibits to HCC Insurance Holdings, Inc.'s
Registration Statement (Registration No. 333-58350 filed July 24, 2001).
(b) Incorporated by reference to the Exhibits to HCC Insurance Holdings, Inc.'s
Registration Statement (Registration No. 33-48737) filed October 27, 1992.
(c) Incorporated by reference to the Exhibits to HCC Insurance Holdings, Inc.'s
Registration Statement on Form S-8 (Registration No. 333-61687) filed on
August 17, 1998.
(d) Incorporated by reference to the Exhibits to HCC Insurance Holdings, Inc.'s
Registration Statement (Registration No. 333-46432) filed September 22,
2000.
ITEM 17. UNDERTAKINGS
The undersigned registrants hereby undertake:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement: (i) to
include any prospectus required by Section 10(a)(3) of the Securities Act;
(ii) to reflect in the prospectus any facts or events arising after the
effective date of the registration statement, or the most recent
post-effective amendment thereof, which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement; and (iii) to include any material information with
respect to the plan of distribution not previously disclosed in the
Registration Statement or any material change to such information in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) In the event securities are offered under this prospectus by a
non-reporting registrant, to provide to the underwriter at the closing
specified in the underwriting agreements certificates in such denominations
and registered in such names as required by the underwriter to permit
prompt delivery to each purchaser.
II-3
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions or otherwise, the registrant has
been advised that in the opinion of the SEC such indemnification is against
public policy as expressed in the Securities Act and therefore is unenforceable.
In the event that a claim for indemnification against such liabilities, other
than the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of any
action, suit or proceeding is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act, and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act, that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Houston,
Texas, on the 22nd day of January, 2002.
HCC INSURANCE HOLDINGS, INC.
By: /s/ STEPHEN L. WAY
------------------------------------
Stephen L. Way
Chairman of the Board
and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ STEPHEN L. WAY Chairman of the Board January 22, 2002
------------------------------------------------ of Directors and
Stephen L. Way Chief Executive Officer
(Principal Executive Officer)
/s/ EDWARD H. ELLIS, JR. Director and Executive January 22, 2002
------------------------------------------------ Vice President and Chief
Edward H. Ellis, Jr. Financial Officer
(Chief Accounting Officer)
/s/ FRANK J. BRAMANTI* Director January 22, 2002
------------------------------------------------
Frank J. Bramanti
/s/ MARVIN P. BUSH* Director January 22, 2002
------------------------------------------------
Marvin P. Bush
/s/ PATRICK B. COLLINS* Director January 22, 2002
------------------------------------------------
Patrick B. Collins
/s/ JAMES R. CRANE* Director January 22, 2002
------------------------------------------------
James R. Crane
/s/ J. ROBERT DICKERSON* Director January 22, 2002
------------------------------------------------
J. Robert Dickerson
/s/ JAMES C. FLAGG* Director January 22, 2002
------------------------------------------------
James C. Flagg, Ph.D.
/s/ EDWIN H. FRANK, III* Director January 22, 2002
------------------------------------------------
Edwin H. Frank, III
II-5
SIGNATURE TITLE DATE
--------- ----- ----
/s/ ALLAN W. FULKERSON* Director January 22, 2002
------------------------------------------------
Allan W. Fulkerson
/s/ WALTER J. LACK* Director January 22, 2002
------------------------------------------------
Walter J. Lack
/s/ STEPHEN J. LOCKWOOD* Director and Vice Chairman January 22, 2002
------------------------------------------------
Stephen J. Lockwood
/s/ JOHN N. MOLBECK, JR. Director, President and January 22, 2002
------------------------------------------------ Chief Operating Officer
John N. Molbeck, Jr.
*By: /s/ CHRISTOPHER L. MARTIN January 22, 2002
-----------------------------------------
Christopher L. Martin,
Attorney-in-fact
II-6
EXHIBIT INDEX
Items denoted by a letter are incorporated by reference to other documents
previously filed with the Securities and Exchange Commission as set forth at the
end of this table. Items not denoted by a letter but denoted with an * are being
filed herewith. Items designated with ** are to be filed by amendment. Items
marked with *** have been previously filed with this Registration Statement.
EXHIBIT
NUMBER
-------
a1.1 -- Form of Underwriting Agreement (Common Stock HCC Insurance
Holdings, Inc.).
a1.2 -- Form of Underwriting Agreement (Senior Debt Securities and
Junior Subordinated Debt Securities of HCC Insurance
Holdings, Inc.).
**1.4 -- Form of Underwriting Agreement (Warrants of HCC Insurance
Holdings, Inc.).
b3.1 -- Bylaws of HCC Insurance Holdings, Inc., as amended
c3.2 -- Restated Certificate of Incorporation and Amendment thereto
of HCC Insurance Holdings, Inc
d4.1 -- Form of Indenture for Senior Debt Securities issued by HCC
Insurance Holdings, Inc.
d4.2 -- Form of Subordinated Indenture for Junior Subordinated Debt
Securities issued by HCC Insurance Holdings, Inc.
**4.4 -- Forms of Senior Debt Security issued by HCC Insurance
Holdings, Inc.
**4.5 -- Form of Junior Subordinated Debt Security issued by HCC
Insurance Holdings, Inc.
b4.12 -- Specimen of Common Stock certificate, $1.00 par value, of
HCC Insurance Holdings, Inc.
***5.1 -- Opinion of Haynes and Boone, L.L.P., counsel for HCC
Insurance Holdings, Inc.
***12.1 -- Computation of Statement of Ratios of Earnings to Fixed
Charges.
*23.1 -- Consent of PricewaterhouseCoopers LLP.
***23.2 -- Consent of Haynes and Boone, L.L.P. (included in Exhibit
5.1).
***24.1 -- Powers of Attorney.
d25.1 -- Statement of Eligibility on Form T-1 under the Trust
Indenture Act of 1939 of First Union National Bank, as
Trustee under the Indenture (Senior Debt Securities issued
by HCC Insurance Holdings, Inc.).
d25.2 -- Statement of Eligibility on Form T-1 under the Trust
Indenture Act of 1939 of First Union National Bank, as
Trustee under the Subordinated Indenture (Junior
Subordinated Debt Securities issued by HCC Insurance
Holdings, Inc.).
---------------
(a) Incorporated by reference to the Exhibits to HCC Insurance Holdings, Inc.'s
Registration Statement (Registration No. 333-58350 filed July 24, 2001).
(b) Incorporated by reference to the Exhibits to HCC Insurance Holdings, Inc.'s
Registration Statement (Registration No. 33-48737) filed October 27, 1992.
(c) Incorporated by reference to the Exhibits to HCC Insurance Holdings, Inc.'s
Registration Statement on Form S-8 (Registration No. 333-61687) filed on
August 17, 1998.
(d) Incorporated by reference to the Exhibits to HCC Insurance Holdings, Inc.'s
Registration Statement (Registration No. 333-46432) filed September 22,
2000.