EXHIBIT 3
[LETTERHEAD OF
ADVEST, INC.]
February 7, 1996
Confidential
Board of Directors
The Seibels Xxxxx Group, Inc.
0000 Xxxx Xxxxxx
Xxxxxxxx, Xxxxx Xxxxxxxx 00000
Members of the Board:
The Seibels Xxxxx Group, Inc. ("Seibels" or the Company") and Xxxxxxx X. Xxxxxx,
and his son, Xxxxxx X. Xxxxxx ("the Xxxxxx"), entered into an agreement dated as
of January 30, 1996 ("the Agreement"), under which the Powers will invest
$6,250,000 in Seibels through the purchase of 6,250,000 shares of newly issued
registered Common Stock at a price of $1.00 per share.
The transaction will be completed pursuant to the following structure: the
Powers will purchase 6,250,000 shares of newly issued Common Stock of Seibels
for $1.00 per share for a total consideration of $6,250,000. The cash
consideration will be contributed by Seibels directly to its subsidiary South
Carolina Insurance Company ("SCIC"), to increase SCIC's statutory surplus from
$5,895,603 as of September 30, 1995 to $12,145,603. The transaction will
increase the GAAP accounting basis surplus of Seibels from $7,536,134, or $ 0.45
per currently outstanding common share, at September 30, 1995 to $13,786,134 or
$ 0.60 per share, based on the pro-forma number of shares outstanding.
These shares purchased by the Powers will represent a 27.15% ownership interest
in the Company.
The Powers, at closing, will also be issued options to purchase additional
shares on the following basis.
(i) 2,500,000 shares at a price of the greater of per share common book
value, or $1.50 per share, at any time until December 31, 1998, and;
(ii) 2,500,000 shares at a price of the greater per share common book value
or $2.00 per share, at any time until December 31, 2000.
For the issuance in (ii) an increase in the number of authorized shares of
common stock issuable by Seibels would need approval from the appropriate
constituencies.
The rights and privileges of shares issuable to the Powers, currently and
ultimately, under the transaction would not be constrained in any way by the
Stock Purchase Agreement, or any other accord, except that the transfer or
resale of the shares would be limited by Rule 144 of the Securities and Exchange
Act. In consideration for their investment The Powers would be given permission
to appoint two nominees to the Seibels Board of Directors, of a total of twelve
members to be seated.
The Powers proposal comes after a period of six months during which the Company
received a number of investment and acquisition offers, and has been accepted by
the Seibels Board of Directors as being preferable to each and all of these
other proposals.
You have asked us whether, in our opinion, the financial terms of the
transaction, taken as a whole, are fair from a financial point of view to the
Company and its shareholders.
In arriving at the opinion set forth below, we have, among other things:
reviewed the Agreement; reviewed audited financial information for the four
years ended December 31, 1994, as well as unaudited financial information for
the quarter and nine months ended September 30, 1995 for Seibels; reviewed the
loss and claims reserves analyses of Seibels by independent actuarial consulting
firms; reviewed Seibels' securities and investments; reviewed the Stock Purchase
Agreement and the documents relating to the investment of Xxxxxxxxxx Xxx Xxxxxx
Est. and Xxxx X. Xxxxxx in Xxxxxxx; personally attended several meetings of the
Seibels Board of Directors; reviewed summary personal business and financial
information of the Powers; discussed a prospective investment in or purchase of
Seibels with some 25 insurance, financial services and investment companies
during a six month period commencing in April, 1995; analyzed and reviewed each
of the various offers Seibels received from other insurers, financial companies,
and investors to purchase stock, insert assets, or in other manner achieve
ownership in, or acquire, Seibels; reviewed comparative financial and operating
data in the insurance industry and other institutions which were deemed to be
reasonably similar to the Company; reviewed certain insurance company mergers
and acquisitions on both a regional and nationwide basis, and compared the
proposed cash investment with the financial terms of certain other mergers and
acquisitions; conducted discussions with senior management of the company
concerning its business, problems, prospects, and financial needs; independently
analyzed the financial condition and needs of the company; and reviewed such
other financial information, studies and analyses, and performed such other
investigations and took into account such other matters as we deemed necessary.
In preparing this opinion we have relied on the accuracy and completeness of all
information supplied or otherwise made available to us by the Company and
others, and we have not independently verified such information nor have we
undertaken an independent appraisal of the assets or liabilities of the Company
as part of our engagement. The Company has agreed to pay Advest a fee for
delivery of this opinion letter. This opinion is necessarily based upon
circumstances and conditions as they exist and can be evaluated by us as of the
date of this letter. We have assumed for purposes of this opinion that there has
been no material changes in the financial condition of the Company from that
existing on September 30, 1995.
In reliance upon and subject to the foregoing it is our opinion that, as of the
date hereof the financial terms of the investment, taken as a whole, are fair
from a financial point of view to the Company and its shareholders.
Very truly yours,
Xxxxxxxxx X. Xxxxx
Managing Director
