Delaware | | | 6331 | | | 84-4512647 |
(State or other jurisdiction of incorporation or organization) | | | (Primary Standard Industrial Classification Code Number) | | | (I.R.S. Employer Identification Number) |
Dwight S. Yoo Skadden, Arps, Slate, Meagher & Flom LLP One Manhattan West New York, NY 10001 (212) 735-3000 | | | Richard D. Truesdell, Jr. Shane Tintle Davis Polk & Wardwell LLP 450 Lexington Avenue New York, NY 10017 (212) 450-4000 |
Large accelerated filer | | | ☐ | | | Accelerated filer | | | ☐ |
Non-accelerated filer | | | ☒ | | | Smaller reporting company | | | ☐ |
| | | | Emerging growth company | | | ☒ |
Title of each class of securities to be registered | | | Amount to be registered(1) | | | Proposed maximum offering price per share(2) | | | Proposed maximum aggregate offering price(2) | | | Amount of registration fee |
Common stock, par value $0.01 per share | | | | | $ | | | $ | | | $ |
(1) | Includes additional shares of common stock that the underwriters have the option to purchase to cover over-allotments. |
(2) | Estimated solely for the purpose of computing the amount of registration fee pursuant to Rule 457(c) under the Securities Act of 1933, based on the average of the high and low prices of the registrant’s common stock as reported on the Nasdaq Global Select Market on , 2021. |
| | Per share | | | Total | |
Price to the public | | | $ | | | $ |
Underwriting discounts and commissions(1) | | | $ | | | $ |
Proceeds, before expenses, to the selling stockholders | | | $ | | | $ |
(1) | See “Underwriting” for a description of the compensation payable to the underwriters. |
Joint Book-Running Managers | |||
J.P. Morgan | | | Evercore ISI |
| | Page | |
| | ||
| | ||
| | ||
| | ||
| | ||
| | ||
| | ||
| | ||
| | ||
| | ||
| | ||
| |
• | We may experience disruptions related to COVID-19, including economic impacts of the COVID-19-related governmental actions; |
• | Our Program Partners or our Owned MGAs may fail to properly market, underwrite or administer policies; |
• | We depend on a limited number of Program Partners for a substantial portion of our gross written premiums; |
• | Our business is subject to significant geographic concentration; |
• | We may suffer a downgrade in the A.M. Best financial strength ratings of our insurance company subsidiaries; |
• | We may be unable to accurately underwrite risks and charge competitive yet profitable rates to our clients and policyholders; |
• | Renewals of our existing contracts may not meet expectations; |
• | We may change our underwriting guidelines or our strategy without stockholder approval; |
• | We may act based on inaccurate or incomplete information regarding the accounts we underwrite; |
• | Our employees could take excessive risks; |
• | We may be unable to access the capital markets when needed; |
• | Adverse economic factors, including recession, inflation, periods of high unemployment or lower economic activity could result in the sale of fewer policies than expected or an increase in frequency or severity of claims and premium; |
• | Negative developments in the workers’ compensation insurance industry could adversely affect our results; |
• | The insurance industry is cyclical in nature; |
• | Our failure to accurately and timely pay claims could harm our business; |
• | The effects of emerging claim and coverage issues on our business are uncertain; |
• | Our risk management policies and procedures may prove to be ineffective; |
• | If we are unable to obtain reinsurance coverage at reasonable prices or on terms that adequately protect us, we may be required to bear increased risks or reduce the level of our underwriting commitments; |
• | We are subject to reinsurance counterparty credit risk. Our reinsurers may not pay on losses in a timely fashion, or at all; |
• | Some of our issuing carrier arrangements contain limits on the reinsurer’s obligations to us; |
• | Retention of business written by our Program Partners could expose us to potential losses; |
• | Our loss reserves may be inadequate to cover our actual losses; |
• | We may not be able to manage our growth effectively; |
• | Our ability to grow our business will depend in part on the addition of new Program Partners, which may be unavailable; |
• | We could be harmed by the loss of one or more key executives or by an inability to attract and retain qualified personnel; |
• | Performance of our investment portfolio is subject to a variety of investment risks; |
• | Any shift in our investment strategy could increase the risk exposure of our investment portfolio; |
• | We could be forced to sell investments to meet our liquidity requirements; |
• | We may face increased competition in our programs market; |
• | We compete with a large number of companies in the insurance industry for underwriting premium; |
• | Our results of operations, liquidity, financial condition and FSRs are subject to the effects of natural and man-made catastrophic events; |
• | Global climate change may in the future increase the frequency and severity of weather events and resulting losses |
• | Because our business depends on insurance brokers, we are exposed to certain risks arising out of our reliance on these distribution channels; |
• | Our operating results have in the past varied from quarter to quarter and may not be indicative of our long-term prospects; |
• | Any failure to protect our intellectual property rights could impair our ability to protect our intellectual property; proprietary technology platform and brand, or we may be sued by third parties for alleged infringement of their proprietary rights; |
• | Technology breaches, failures or service interruptions of our business partners’ systems could harm our business and/or reputation; |
• | We may be unable to maintain third-party software licenses or errors in the software; |
• | We are subject to extensive regulation; |
• | Regulators may challenge our use of fronting arrangements in states in which our Program Partners are not licensed; |
• | Regulation may become more extensive in the future; |
• | Increasing regulatory focus on privacy issues and expanding laws may impair our operations; |
• | Our ability to receive dividends and permitted payments from our subsidiaries is subject to regulatory constraints; |
• | We may have exposure to losses from acts of terrorism; |
• | Assessments and premium surcharges may reduce our profitability; |
• | Changes in federal, state or foreign tax laws could adversely affect our financial results or market conditions; |
• | The discontinuance of LIBOR may adversely affect the value of certain investments we hold, assets and liabilities; |
• | Our stock price may be volatile or may decline regardless of our operating performance; |
• | Our principal stockholders are able to exert significant influence over us and our corporate decisions; |
• | As long as our principal stockholders own a majority of our common stock, we may rely on certain exemptions from the corporate governance requirements of the Nasdaq available for “controlled companies;” |
• | Our principal stockholders could sell their interests in us to a third party in a private transaction; |
• | Sales or issuances of a substantial amount of shares of our common stock may cause the market price of our common stock to decline and make it more difficult for investors to sell; |
• | We will incur significant increased costs as a result of operating as a public company; |
• | We currently do not anticipate declaring or paying regular dividends on our common stock; |
• | Provisions in our organizational documents, Delaware corporate law, state insurance laws and certain of our contractual agreements and compensation arrangements may prevent or delay an acquisition of us; |
• | Our principal stockholders have no obligation to offer us corporate opportunities; |
• | Risks related to our status as an emerging growth company: |
• | We have elected to take advantage of reduced disclosure requirements and other exemptions; |
• | We have elected to use the extended transition period for complying with new or revised accounting standards; |
• | the impact of our “controlled company” exemptions under Nasdaq listing standards and the expected loss of such exemptions following completion of this offering, subject to applicable phase-in periods; |
• | Changes in accounting practices and future pronouncements may materially affect our reported financial results; |
• | If we are unable to achieve and maintain effective internal controls, our financial reporting could suffer; |
• | The effects of litigation on our business are uncertain; and |
• | The Court of Chancery of the State of Delaware is the exclusive forum for certain disputes which could limit our stockholders' ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees. |
• | we may present as few as two years of audited financial statements and two years of related management’s discussion and analysis of financial condition and results of operations in this prospectus; |
• | we are exempt from the requirement to obtain an attestation report from our auditors on management’s assessment of our internal control over financial reporting under the Sarbanes-Oxley Act of 2002 for up to five years or until we no longer qualify as an emerging growth company; |
• | we are permitted to provide reduced disclosure regarding our executive compensation arrangements pursuant to the rules applicable to smaller reporting companies, which means we do not have to include a compensation discussion and analysis and certain other disclosures regarding our executive compensation; and |
• | we are not required to hold non-binding advisory votes on executive compensation. |
• | is based on 51,148,782 shares of our common stock outstanding as of March 25, 2021 and excludes 4,607,750 shares of common stock reserved for future issuance under the Trean Insurance Group, Inc. 2020 Omnibus Incentive Plan; and |
• | assumes no exercise of the option granted to the underwriters to purchase up to an additional shares of common stock to cover over-allotments. |
| | Year ended December 31 | ||||
| | 2020 | | | 2019 | |
(in thousands, except share and per share data) | | | | | ||
Revenues: | | | | | ||
Gross written premiums | | | $484,249 | | | $411,401 |
Increase in gross unearned premiums | | | (52,215) | | | (13,598) |
Gross earned premiums | | | 432,034 | | | 397,803 |
Ceded earned premiums | | | (323,567) | | | (311,325) |
Net earned premiums | | | 108,467 | | | 86,478 |
Net investment income | | | 8,324 | | | 6,245 |
Gain on Revaluation of Compstar investment | | | 69,846 | | | — |
Net realized capital gains | | | 3,365 | | | 667 |
Other revenue | | | 12,104 | | | 9,125 |
Total revenue | | | 202,106 | | | 102,515 |
| | | | |||
Expenses: | | | | | ||
Losses and loss adjustment expenses | | | 50,774 | | | 44,661 |
General and administrative expenses | | | 38,668 | | | 20,959 |
Other expenses | | | 13,427 | | | — |
Intangible asset amortization | | | 2,573 | | | 46 |
Non-cash stock compensation | | | 506 | | | — |
Interest expense | | | 1,922 | | | 2,169 |
Total expenses | | | 107,870 | | | 67,835 |
| | | | |||
Other income | | | 1,025 | | | 121 |
Income before taxes | | | 95,261 | | | 34,801 |
| | | | |||
Provision for income taxes | | | 6,825 | | | 7,074 |
Equity earnings in affiliates, net of tax | | | 2,333 | | | 3,558 |
Net income | | | $90,769 | | | $31,285 |
Adjusted net income(1) | | | $32,779 | | | $33,231 |
| | Year ended December 31, 2020 | | | Year ended December 31, 2019 | |
Per share data(2): | | | | | ||
Earnings per share: | | | | | ||
Basic | | | $2.08 | | | $0.84 |
Diluted | | | $2.07 | | | $0.84 |
Weighted average shares outstanding: | | | | | ||
Basic | | | 43,744,003 | | | 37,386,394 |
Diluted | | | 43,744,744 | | | 37,386,394 |
(1) | Adjusted net income is a non-GAAP financial measure. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Reconciliation of non-GAAP financial measures” in our Annual Report on Form 10-K for the year ended December 31, 2020 for a reconciliation of adjusted net income to net income in accordance with GAAP. |
| | At December 31, | ||||
| | 2020 | | | 2019 | |
| | (in thousands) | ||||
Balance sheet data: | | | | | ||
Investments | | | $409,610 | | | $350,873 |
Cash and Cash Equivalents | | | 153,149 | | | 74,268 |
Restricted Cash | | | 4,085 | | | 1,800 |
Accrued investment income | | | 2,458 | | | 2,468 |
Premiums and other receivables | | | 109,217 | | | 62,460 |
Income tax receivable | | | 1,322 | | | — |
Related party receivables | | | — | | | 22,221 |
Reinsurance recoverable | | | 343,213 | | | 307,338 |
Prepaid reinsurance premiums | | | 107,971 | | | 80,088 |
Deferred policy acquisition cost, net | | | 1,332 | | | 2,115 |
Property and equipment, net | | | 8,254 | | | 7,937 |
Right of use asset | | | 6,338 | | | — |
Deferred tax asset | | | — | | | 1,367 |
Goodwill | | | 140,640 | | | 2,822 |
Intangible assets, net | | | 75,316 | | | 154 |
Other assets | | | 6,878 | | | 3,123 |
Total assets | | | 1,369,783 | | | 919,034 |
Unpaid loss and loss adjustment expenses | | | 457,817 | | | 406,716 |
Unearned premiums | | | 157,987 | | | 103,789 |
Funds held under reinsurance agreements | | | 174,704 | | | 163,445 |
Reinsurance premiums payable | | | 57,069 | | | 53,620 |
Accounts payable and accrued expenses | | | 61,240 | | | 14,995 |
Lease liability | | | 6,893 | | | — |
Deferred tax liability, net | | | 12,329 | | | — |
Debt | | | 31,637 | | | 29,040 |
Income taxes payable | | | — | | | 714 |
Total liabilities | | | 959,676 | | | 772,319 |
Redeemable preferred stock | | | — | | | 5,100 |
Total stockholders’/members’ equity | | | 410,107 | | | 141,615 |
Total liabilities and stockholders’/members’ equity | | | 1,369,783 | | | 919,034 |
| | Year ended December 31, | ||||
| | 2020 | | | 2019 | |
Underwriting and other ratios: | | | | | ||
Loss ratio(1) | | | 46.8% | | | 51.6% |
Expense ratio(2) | | | 35.6% | | | 24.2% |
Combined ratio(3) | | | 82.4% | | | 75.8% |
Return on equity(4) | | | 32.9% | | | 25.5% |
Adjusted return on equity(5) | | | 11.9% | | | 27.0% |
Return on tangible equity(6) | | | 54.6% | | | 26.1% |
Adjusted return on tangible equity(7) | | | 19.7% | | | 27.7% |
(1) | The loss ratio is the ratio, expressed as a percentage, of losses and loss adjustment expenses to net earned premiums. |
(2) | The expense ratio is the ratio, expressed as a percentage, of general and administrative expenses to net earned premiums. |
(3) | The combined ratio is the sum of the loss ratio and the expense ratio. A combined ratio under 100% generally indicates an underwriting profit. A combined ratio over 100% generally indicates an underwriting loss. |
(4) | Return on equity represents net income expressed on an annualized basis as a percentage of average beginning and ending members’ equity during the period. |
(5) | Adjusted return on equity is a non-GAAP financial measure defined as adjusted net income expressed on an annualized basis as a percentage of average beginning and ending stockholders’/members’ equity during the period. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Reconciliation of non-GAAP financial measures” in our Annual Report on Form 10-K for the year ended December 31, 2020 for a reconciliation of adjusted return on equity to return on equity in accordance with GAAP. |
(6) | Return on tangible equity is a non-GAAP financial measure defined as net income expressed on an annualized basis as a percentage of average beginning and ending tangible stockholders’/members’ equity during the period. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Reconciliation of non-GAAP financial measures” in our Annual Report on Form 10-K for the year ended December 31, 2020 for a reconciliation of return on tangible equity to return on equity in accordance with GAAP. |
(7) | Adjusted return on tangible equity is a non-GAAP financial measure defined as adjusted net income expressed on an annualized basis as a percentage of average beginning and ending tangible stockholders’/members’ equity during the period. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Reconciliation of non-GAAP financial measures” in our Annual Report on Form 10-K for the year ended December 31, 2020 for a reconciliation of adjusted return on tangible equity to return on tangible equity in accordance with GAAP. |
• | Legislative or regulatory action seeking to retroactively mandate coverage for losses, which our policies would not otherwise cover or have been priced to cover; |
• | Regulatory actions relaxing reporting requirements for claims, which may affect coverage under our claims made and reported policies; |
• | Legislative actions prohibiting us from canceling policies in accordance with our policy terms or non-renewing policies at their expiration date; |
• | Legislative orders to provide premium refunds, extend premium payment grace periods and allow time extensions for past due premium payments; |
• | We may have increased workers’ compensation loss expense and claims frequency if policyholder employees in high risk roles with essential businesses contract COVID-19 in the workplace; |
• | We may have increased workers’ compensation loss expense and claims frequency if policyholder employees experience an adverse reaction to COVID-19 vaccines due to the employer requiring or strongly encouraging vaccination for employees—a majority of case law thus far has determined adverse reactions in these situations are compensable under workers’ compensation laws; |
• | While to date we have not seen a significant increase in incurred losses due to the COVID-19 pandemic, high unemployment and low interest rates could adversely affect our profitability and declining payrolls could adversely affect our workers' compensation written premiums; |
• | Travel restrictions and quarantines leading to a lack of in-person meetings, which would hinder our ability to establish relationships or originate new business; |
• | Alternative working arrangements, including employees working remotely, which could negatively impact our business should such arrangements remain for an extended period of time; |
• | We may experience elevated frequency and severity in our workers’ compensation lines as a result of legislative or regulatory action to effectively expand workers’ compensation coverage for certain types of workers; and |
• | We may experience delayed reporting of losses, settlement negotiations and disputed claims resolution above our normal claims resolution trends. |
• | our operating and financial performance and prospects; |
• | our announcements or our competitors’ announcements regarding new products or services, enhancements, significant contracts, acquisitions or strategic investments; |
• | changes in earnings estimates or recommendations by securities analysts who cover our common stock; |
• | fluctuations in our quarterly financial results or earnings guidance or the quarterly financial results or earnings guidance of companies perceived to be similar to us; |
• | changes in our capital structure, such as future issuances of securities, sales of large blocks of common stock by our stockholders, including our principal stockholders, or the incurrence of additional debt; |
• | departure of key personnel; |
• | reputational issues; |
• | changes in general economic and market conditions; |
• | changes in industry conditions or perceptions or changes in the market outlook for the insurance industry; |
• | changes in applicable laws, rules or regulations, regulatory actions affecting us and other dynamics; and |
• | The loss of our “controlled company” exemptions under Nasdaq listing standards and applicable phase-in periods with respect thereto |
• | the ability of our board of directors to issue one or more series of preferred stock; |
• | the filling of any vacancies on our board of directors by the affirmative vote of a majority of the remaining directors, even if less than a quorum, or by a sole remaining director or by the stockholders; provided, however, that after the first time when the principal stockholders cease to beneficially own, in the aggregate, at least 50% of our outstanding common stock, any vacancy occurring in our board of directors may only be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director (and not by the stockholders); |
• | certain limitations on convening special stockholder meetings; |
• | advance notice for nominations of directors by stockholders and for stockholders to include matters to be considered at our annual meetings; and |
• | stockholder action by written consent only until the first time when our principal stockholders cease to beneficially own, in the aggregate, 50% or greater of our outstanding common stock. |
Name and Address of Beneficial Owner | | | Shares Beneficially Owned Before this Offering | | | Shares of Common Stock Offered | | | Shares Beneficially Owned After this Offering | | | Shares to be Sold Assuming Full Exercise of Over-allotment Option | | | Shares Beneficially Owned After this Offering Assuming Full Exercise of Over-allotment Option | |||||||||
| Shares | | | Percentage | | | Shares | | | Percentage | | | Shares | | | Percentage | ||||||||
Greater than 5% and Selling Stockholders: | | | | | | | | | | | | | | | | | ||||||||
Altaris Funds(1) | | | 28,274,417 | | | 55.3% | | | [•] | | | [•] | | | [•]% | | | [•] | | | [•] | | | [•]% |
Blake Enterprises entities(2) | | | 5,109,171 | | | 10.0% | | | [•] | | | [•] | | | [•]% | | | [•] | | | [•] | | | [•]% |
Named executive officers and directors: | | | | | | | | | | | | | | | | | ||||||||
Andrew M. O’Brien(3) | | | 4,100,558 | | | 8.0% | | | [•] | | | [•} | | | [•]% | | | [•] | | | [•] | | | [•]% |
Julie A. Baron | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — |
David G. Ellison | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — |
Randall D. Jones | | | 130,192 | | | * | | | — | | | 130,192 | | | * | | | — | | | 130,192 | | | * |
Steven B. Lee(4) | | | 1,151,035 | | | 2.3% | | | [•] | | | [•] | | | [•] | | | [•] | | | [•] | | | [•] |
Daniel G. Tully(1) | | | 28,274,417 | | | 55.3% | | | [•] | | | [•] | | | [•]% | | | [•] | | | [•] | | | [•]% |
Mary Chaput | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — |
Terry P. Mayotte | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — |
All executive officers and directors as a group (13 persons)(5) | | | [•] | | | [•]% | | | [•] | | | [•] | | | [•]% | | | [•] | | | [•] | | | [•]% |
* | Less than 1% |
(1) | Prior to this offering, consists of (i) 23,003,209 shares of our common stock held by AHP-BHC LLC and 317 shares of our common stock held by AHP-TH LLC and (ii) 5,270,818 shares of our common stock held by ACP-BHC LLC and 73 shares of our common stock held by ACP-TH LLC (collectively, the “Altaris Funds”). After this offering, consists of (i) [•] shares of our common stock held by AHP-BHC LLC and [•]shares of our common stock held by AHP-TH LLC and (ii) [•] shares of our common stock held by ACP-BHC LLC and [•] shares of our common stock held by ACP-TH LLC. Daniel G. Tully and George E. Aitken-Davies are members of the board of managers of Altaris Partners, LLC, which has investment and voting control over the shares held by the Altaris Funds. The address of the Altaris Funds is 10 East 53rd Street, 31st floor, New York, NY 10022. |
(2) | Prior to this offering, consists of (i) 3,251,291 shares of our common stock held by Blake Baker Enterprises I, Inc., (ii) 928,940 shares of our common stock held by Blake Baker Enterprises II, Inc. and (iii) 928,940 shares of our common stock held by Blake Baker Enterprises III, Inc. After this offering, consists of (i) [•] shares of our common stock held by Blake Baker Enterprises I, Inc., (ii) [•] shares of our common stock held by Blake Baker Enterprises II, Inc. and (iii) [•] shares of our common stock held by Blake Baker Enterprises III, Inc. The Blake Enterprises entities are owned by The Baker Family Trust, dated July 8, 2019, of which Blake Baker is the sole settlor and trustee. The address of the Blake Enterprises entities is 26650 The Old Road, Suite 110, Valencia, CA 91381. |
(3) | Prior to this offering, consists of 4,100,558 shares of our common stock held by the Andrew M. O’Brien Premarital Trust, of which Mr. O’Brien is the trustee. After this offering, consists of [•] shares of our common stock held by the Andrew M. O’Brien Premarital Trust, of which Mr. O’Brien is the trustee. |
(4) | Consists of (i) 805,724 shares owned by the Lee 2020 GST Dynasty Trust, of which Steven B. Lee is investment trustee, (ii) 253,228 shares by the Steven B. Lee 2020 GRAT, of which Mr. Lee is trustee, and (iii) 92,083 shares owned by Mr. Lee. |
(5) | Numbers in the columns include shares beneficially owned by the Blake Enterprises entities. |
• | dividend rates; |
• | conversion rights; |
• | voting rights; |
• | terms of redemption and liquidation preferences; and |
• | the number of shares constituting each series. |
• | before the stockholder became interested, the board of directors approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder; |
• | upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the voting stock outstanding, shares owned by persons who are directors and officers; or |
• | at or after the time the stockholder became interested, the business combination was approved by the board of directors of the corporation and authorized at an annual or special meeting of the stockholders by the affirmative vote of at least two-thirds of the outstanding voting stock which is not owned by the interested stockholder. |
• | a citizen or individual resident of the United States; |
• | a corporation, or other entity taxable as a corporation for U.S. federal tax purposes, created or organized in the United States or under the laws of the United States, any state thereof or the District of Columbia; |
• | an estate, the income of which is includible in gross income for U.S. federal income tax purposes regardless of its source; |
• | a trust if (i) a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust or (ii) it has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person for U.S. federal income tax purposes; or |
• | an entity or arrangement treated as a partnership for U.S. federal tax purposes. |
• | the gain is effectively connected with a trade or business carried on by the non-U.S. holder within the United States and, if required by an applicable income tax treaty, is attributable to a U.S. permanent establishment of the non-U.S. holder; |
• | the non-U.S. holder is an individual and is present in the United States for 183 days or more in the taxable year of disposition and certain other conditions are satisfied; or |
• | we are or have been a U.S. real property holding corporation for U.S. federal income tax purposes at any time within the shorter of the five-year period ending on the date of the disposition and the non-U.S. holder’s holding period and certain other conditions are satisfied. |
Name | | | Number of Shares |
J.P. Morgan Securities LLC | | | |
Evercore Group L.L.C. | | | |
Total | | |
| | Without option to purchase additional shares exercise | | | With full option to purchase additional shares exercise | |
Per Share | | | $ | | | $ |
Total | | | $ | | | $ |
(A) | transfers pursuant to the terms of this offering; |
(B) | transfers of shares of common stock: |
(i) | as a bona fide gift or gifts, |
(ii) | by will, testamentary document or intestate succession, |
(iii) | to any trust, family limited partnership or other entity for the direct or indirect benefit of the lock-up party or the immediate family of the lock-up party (for purposes of the lock-up agreements, “immediate family” shall mean any relationship by blood, marriage or adoption, not more remote than first cousin), |
(iv) | to partners, members, stockholders, trust beneficiaries or other equity owners of the lock-up party (including any subsequent in-kind distributions to or by the lock-up party’s transferees), |
(v) | if the lock-up party is a corporation, partnership, limited liability company, trust or other entity, to any direct or indirect affiliate (as defined in Rule 405 under the Securities Act of |
(vi) | solely by operation of law, pursuant to a qualified domestic order or in connection with a divorce settlement, and |
(vii) | pursuant to a bona fide third-party tender offer, merger, consolidation or other similar transaction approved by the Company’s board of directors and made to all holders of the Company’s securities involving a Change of Control of the Company, provided that in the event that such tender offer, merger, consolidation or other such transaction is not completed, the common stock owned by the lock-up party shall remain subject to the lock-up restrictions, provided, further, that for purposes of this clause (vii), “Change of Control” shall mean the transfer (whether by tender offer, merger, consolidation, spin-off or other such transaction), in one transaction or a series of related transactions, to a person or group of affiliated persons (other than an Underwriter pursuant to this offering), of the Company’s voting securities if, after such transfer, such person or group of affiliated persons would hold more than 50% of the outstanding voting securities of the Company (or the surviving entity), and provided, further, that any common stock transferred in connection with the tender offer, merger, consolidation or other such transaction shall remain subject to the lock-up restrictions; |
(C) | transfers of common stock or any security convertible into or exercisable or exchangeable for common stock in connection with any of the reorganization transactions as described in this prospectus; |
(D) | common stock acquired by the lock-up party in this offering or in open market transactions subsequent to the closing of this offering, provided that no filing under the Exchange Act or other public announcement shall be required or voluntarily made by the lock-up party regarding such acquisition of common stock; |
(E) | the establishment of a written plan for trading securities pursuant to and in accordance with Rule 10b5-1(c) (a “Rule 10b5-1 Plan”) under the Exchange Act, provided that (i) such Rule 10b5-1 Plan does not provide for the transfer of common stock (and no sales of common stock pursuant to such Rule 10b5-1 Plan shall be made) during the Restricted Period and (ii) no filing under the Exchange Act, or other public announcement shall be required or voluntarily made by the Company regarding the establishment of such Rule 10b5-1 Plan during the lock-up period; |
(F) | transfers of common stock to the Company (or the withholding of common stock by the Company) (i) as payment for the exercise price of any options granted in the ordinary course pursuant to any of the Company’s current or future stock option, equity incentive or benefit plans described in this prospectus or (ii) to satisfy any tax withholding obligations upon the exercise of any such option or the vesting of any restricted common stock or other equity awards granted under any such plan, with any common stock received as contemplated by any transaction described in this clause (E) remaining subject to the lock-up restrictions; provided that any shares of common stock received upon such exercise shall be subject to the restrictions set forth in the lock-up agreements; and provided, further, that any filing required under Section 16(a) of the Exchange Act shall clearly indicate in the footnotes thereto and the transaction codes that any such disposition was made in connection with a “cashless” exercise solely to the Company; and |
(G) | any demands or requests for, exercise any right with respect to, or take any action in preparation of, the registration by the Company under the Securities Act of 1933 of the lock-up party’s shares of common stock, provided that no transfer of the lock-up party’s shares of common stock registered pursuant to the exercise of any such right and no registration statement shall be filed under the Securities Act of 1933 with respect to any of the lock-up party’s shares of common stock during the lock-up period; |
(a) | to any legal entity which is a qualified investor as defined under the Prospectus Regulation; |
(b) | to fewer than 150 natural or legal persons (other than qualified investors as defined under the Prospectus Regulation), subject to obtaining the prior consent of the underwriters; or |
(c) | in any other circumstances falling within Article 1(4) of the Prospectus Regulation, |
(a) | to any legal entity which is a qualified investor as defined under Article 2 of the U.K. Prospectus Regulation; |
(b) | to fewer than 150 natural or legal persons (other than qualified investors as defined under Article 2 of the U.K. Prospectus Regulation), subject to obtaining the prior consent of the Representatives for any such offer; or |
(c) | in any other circumstances falling within Section 86 of the FSMA; |
(a) | to an institutional investor (as defined in Section 4A of the Securities and Futures Act (Chapter 289) of Singapore, as modified or amended from time to time (the “SFA”)) pursuant to Section 274 of the SFA; |
(b) | to a relevant person (as defined in Section 275(2) of the SFA) pursuant to Section 275(1) of the SFA, or any person pursuant to Section 275(1A) of the SFA, and in accordance with the conditions specified in Section 275 of the SFA; or |
(c) | otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA. |
(a) | a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or |
(b) | a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an accredited investor, |
(i) | to an institutional investor or to a relevant person, or to any person arising from an offer referred to in Section 275(1A) or Section 276(4)(i)(B) of the SFA; |
(ii) | where no consideration is or will be given for the transfer; |
(iii) | where the transfer is by operation of law; |
(iv) | as specified in Section 276(7) of the SFA; or |
(v) | as specified in Regulation 37A of the Securities and Futures (Offers of Investments) (Securities and Securities-based Derivatives Contracts) Regulations 2018. |
• | our Annual Report on Form 10-K for the year ended December 31, 2020 that we filed with the SEC on March 26, 2021, and |
• | the description of our common stock in our Registration Statement on Form 8-A filed on July 16, 2020, and any amendment or report filed for the purpose of updating that description. |
Item 13. | Other expenses of issuance and distribution |
| | Amount to be paid | |
SEC registration fee | | | $* |
FINRA filing fee | | | * |
Stock exchange listing fee | | | * |
Printing expenses | | | * |
Legal fees and expenses | | | * |
Accounting fees and expenses | | | * |
Miscellaneous expenses | | | * |
Total | | | $ * |
* | To be completed by amendment. |
Item 14. | Indemnification of directors and officers |
Item 15. | Recent sales of unregistered securities |
• | 37,236,915 shares of our common stock to Trean Holdings LLC (“Trean Holdings”) and BIC Holdings LLC (“BIC Holdings”) in exchange for their contribution of all of their respective assets and liabilities to Trean Insurance Group, Inc.; |
• | 6,613,606 million shares of our common stock to Blake Baker Enterprises I, Inc., Blake Baker Enterprises II, Inc. and Blake Baker Enterprises III, Inc. in exchange for their 55% equity interest in Compstar Holding Company LLC; and |
• | 149,479 shares of our common stock to Randall D. Jones in exchange for his Class C units in Trean Holdings and BIC Holdings that became fully vested in connection with the IPO. |
Item 16. | Exhibits and financial statement schedules |
Exhibit Number | | | Description |
1.1* | | | Form of Underwriting Agreement |
3.1 | | | Amended and Restated Certificate of Incorporation of Trean Insurance Group, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q filed on August 28, 2020 (File No. 001-39392)) |
3.2 | | | Amended and Restated By-Laws of Trean Insurance Group, Inc. (incorporated by reference to Exhibit 3.2 to the Company’s Quarterly Report on Form 10-Q filed on August 28, 2020 (File No. 001-39392)) |
5.1* | | | Opinion of Skadden, Arps, Slate, Meagher & Flom LLP |
10.1 | | | Registration Rights Agreement, dated as of July 20, 2020, among Trean Insurance Group, Inc. and the parties named therein (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed on August 28, 2020 (File No. 001-39392)) |
10.2 | | | Reorganization Agreement, dated as of July 16, 2020, among Trean Insurance Group, Inc. and the parties named therein (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed on August 28, 2020 (File No. 001-39392)) |
10.3 | | | Contribution Agreement, dated as of July 16, 2020, among Trean Insurance Group, Inc., BIC Holdings LLC and Trean Holdings LLC (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q filed on August 28, 2020 (File No. 001-39392)) |
10.4 | | | Contribution Agreement, dated as of July 16, 2020, between Trean Insurance Group, Inc. and Trean Compstar Holdings LLC (incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q filed on August 28, 2020 (File No. 001-39392)) |
10.5a | | | Agreement, dated as of June 3, 2020, among Blake Baker Enterprises I, Inc., Blake Baker Enterprises II, Inc., Blake Baker Enterprises III, Inc., Blake Baker, Compstar Holding Company LLC, Trean Holdings LLC and Trean Compstar Holdings LLC (incorporated by reference to Exhibit 10.5 to the Company’s Registration Statement on Form S-1 filed on June 19, 2020 (File No. 333-239291)) |
10.5b | | | Amendment No. 1 to Agreement, dated as of July 6, 2020, among Blake Baker Enterprises I, Inc., Blake Baker Enterprises II, Inc., Blake Baker Enterprises III, Inc., Blake Baker, Compstar Holding Company LLC, Trean Holdings LLC and Trean Compstar Holdings LLC (incorporated by reference to Exhibit 10.5b to the Company’s Registration Statement on Form S-1 filed on July 9, 2020 (File No. 333-239291)) |
10.6 | | | Director Nomination Agreement, dated as of July 16, 2020, among Trean Insurance Group, Inc., AHP-BHC LLC, AHP-TH LLC, ACP-BHC LLC and ACP-TH LLC (incorporated by reference to Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q filed on August 28, 2020 (File No. 001-39392)) |
10.7† | | | Trean Insurance Group, Inc. 2020 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.6 to the Company’s Quarterly Report on Form 10-Q filed on August 28, 2020 (File No. 001-39392)) |
10.8† | | | Form of Restricted Stock Unit Award Agreement (incorporated by reference to Exhibit 10.8 to the Company’s Registration Statement on Form S-1 filed on July 9, 2020 (File No. 333-239291)) |
10.9† | | | Form of Non-Qualified Stock Option Award Agreement (incorporated by reference to Exhibit 10.9 to the Company’s Registration Statement on Form S-1 filed on July 9, 2020 (File No. 333-239291)) |
10.10 | | | Form of Indemnification Agreement between Trean Insurance Group, Inc. and each of its directors and executive officers (incorporated by reference to Exhibit 10.8 to the Company’s Registration Statement on Form S-1 filed on June 19, 2020 (File No. 333-239291)) |
Exhibit Number | | | Description |
10.11 | | | Second Amended and Restated Credit Agreement, dated as of July 16, 2020, among Trean Insurance Group, Inc., Trean Corporation, Trean Compstar Holdings LLC, Benchmark Administrators, LLC and First Horizon Bank, N.A. (incorporated by reference to Exhibit 10.15 to the Company’s Annual Report on Form 10-K filed on March 26, 2021 (File No. 001-39392)) |
21.1 | | | List of subsidiaries of Trean Insurance Group, Inc. (incorporated by reference to Exhibit 21.1 to the Company’s Annual Report on Form 10-K filed on March 26, 2021 (File No. 001-39392)) |
23.1* | | | Consent of Deloitte & Touche LLP, independent registered public accounting firm |
23.2* | | | Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in Exhibit 5.1) |
24.1* | | | Power of Attorney (included on signature page) |
* | To be filed by amendment. |
† | Compensatory plan or arrangement. |
Item 17. | Undertakings |
(a) | The undersigned registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement, certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser. |
(b) | Insofar as indemnification for liabilities arising under the Securities Act of 1933 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 Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, 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 hereunder, 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 of whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. |
(c) | The undersigned registrant hereby undertakes that: |
(1) | For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this Registration Statement as of the time it was declared effective. |
(2) | For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus 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. |
| | TREAN INSURANCE GROUP, INC. | |||||||
| | | | | | ||||
| | By: | | | |||||
| | | | Name: | | | Andrew M. O’Brien | ||
| | | | Title: | | | President and Chief Executive Officer |
Signature and Name | | | Title | | | Date |
| | | | |||
| | President, Chief Executive Officer and Director (principal executive officer) | | | , 2021 | |
Andrew M. O’Brien | | |||||
| | | | |||
| | Chief Financial Officer, Treasurer and Secretary (principal financial officer) | | | , 2021 | |
Julie A. Baron | | |||||
| | | | |||
| | Chief Accounting Officer (principal accounting officer) | | | , 2021 | |
Nicholas J. Vassallo | | |||||
| | | | |||
| | Chairman of the Board | | | , 2021 | |
Daniel G. Tully | | |||||
| | | | |||
| | Director | | | , 2021 | |
Mary A. Chaput | | |||||
| | | | |||
| | Director | | | , 2021 | |
David G. Ellison | | |||||
| | | | |||
| | Director | | | , 2021 | |
Randall D. Jones | |
'0 0V]P>7)I9VAT($AE=VQE='0@
M4&%C:V%R9"P@,C P- !S9C,R !#$0 7?___S)@ !Y0 /V/___[
MH?___:( /; # =?_; $, 0$! 0$! 0$! 0$! 0$! 0$! 0$! 0$! 0$!
M 0$! 0$! 0$! 0$! 0$! 0$! 0$! 0$! 0$! 0$! 0$! 0$! ?_; $,! 0$!
M 0$! 0$! 0$! 0$! 0$! 0$! 0$! 0$! 0$! 0$! 0$! 0$! 0$! 0$! 0$!
M 0$! 0$! 0$! 0$! 0$! ?_ !$( (8" ,!(@ "$0$#$0'_Q ? !!0$!
M 0$! 0 0(#! 4&!P@)"@O_Q "U$ " 0,# @0#!04$! 7T!
M @, !!$%$B$Q008346$'(G$4,H&1H0@C0K'!%5+1\"0S8G*""0H6%Q@9&B4F
M)R@I*C0U-C +:NKGA<1\/8#B?*<3E&81;I5X\U*M%+VN%Q$+NCB:+>TZ/\ X::U;^)/ASXX
M\7^ ?$-JZR6VN^"_$FL^%]7@=3E6BU+1+VQO(R/]F8<<'BO4G_9*_:KC4O)^
MS+^T'&BC+._P8^(ZJHZ9+-X; SQR:O6?[&_[7FH<6/[*_[1MYDJH^S?!'XE
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M&NP#%^Q5^TZF55A]J^"WCZR.&Z B\T.W(8?Q*<,O5@!733Q&)I62