XL, NAC Re Confirm Intention to Merge

XL Capital Ltd. and NAC Re Corp. announced this week that the two companies have signed a definitive agreement whereby XL and NAC Re will merge in an all stock transaction. In addition, all outstanding NAC Re indebtedness will be assumed by XL.

Under the terms of the transaction, shareholders of NAC Re will receive 0.915 XL shares for each NAC Re share in a tax-free exchange of shares that will be accounted for as a pooling of interests under U.S. generally accepted accounting principles (GAAP). The transaction is subject to the approval of the NAC Re stockholders, expiration of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act, receipt of insurance, regulatory approvals and other customary closing conditions. It is expected that the merger will be completed by late second calendar quarter or early third quarter of this year.

The Boards of Directors of NAC Re and XL have each voted unanimously to approve the transaction. Based on XL's closing price of $60.50 on the New York Stock Exchange on Feb. 12, 1999, each NAC Re share would be valued at $55.36.

"NAC Re is the premier broker-market reinsurer in the United States and will be a major cornerstone of XL's business," stated Brian M. O'Hara, president and CEO of XL Capital Ltd. "NAC Re will become our platform for the United States, the largest insurance and reinsurance market in the world. Its reinsurance portfolio complements our other businesses very well, particularly XL Mid Ocean Re's existing property and specialty reinsurance operations. In terms of capital, on a combined basis we will have the world's largest broker market reinsurance activities.

"Under the leadership of Ron Bornhuetter and Nick Brown, NAC Re has become one of the most respected and successful franchises in the reinsurance business with an outstanding professional staff," He continued. "We expect this transaction to be not only accretive, but the foundation upon which significant future growth in the U.S. can be built."

Nicholas M. Brown, Jr., president and chief executive officer of NAC Re Corp., noted, "We are very pleased with this new affiliation with XL. They are a highly successful, well-respected and innovative player in the global insurance and reinsurance markets. The merger as structured will maintain the strong NAC Re franchise and enable us to better serve our clients, providing new and expanded product offerings and increasing our capacity. This is clearly a combination that will benefit both parties. I am looking forward to working with Brian O'Hara and his team at XL."

Upon completion of the transaction, Brown will serve as chairman, president and chief executive officer of NAC Re Corp., which will retain its name. Ronald L. Bornhuetter, current chairman of NAC Re, along with another member of the current NAC Re Board to be designated prior to the closing, will be invited to join the Board of Directors of XL Capital Ltd.

Brown will also become president and CEO of XL America Inc. and will serve as an executive vice president of XL Capital Ltd., with responsibility for North American operations.