Markel, Terra Nova Merger Terms Changed

Markel Corporation and Terra Nova (Bermuda) Holdings have agreed to revised terms for their previously announced merger (see Markel Corp. to Buy Bermuda's Terra Nova). The new agreement was reached after preliminary information indicated that Terra Nova will report a loss for the fourth quarter and for the full year of 1999 and after taking into account the decline in the market price of Markel shares since the merger agreement was signed in August 1999.

Terra Nova's losses end several years of very strong profitability and raise doubts about its future level and quality of earnings. Standard & Poor's says Terra Nova's 1999 may reduce its book value by about $81 million to $445 million.

Still, Steve Markel, Markel's vice-chairman and John Dwyer, Terra Nova's chairman, each stated that they believe that the reasons that led the two companies to the merger agreement in August are as valid today as they were then. Markel said, "We are very happy that we have satisfactorily adjusted the transaction in a manner which is good for all parties. We will continue to work diligently with Terra Nova associates to consummate the transaction and together continue to build shareholder value over the long term."

Terra Nova stated that the fourth quarter loss results from several factors including significant catastrophe losses in the quarter, primarily from European storms, a one time charge for reinsurance in connection with the company's decision to close certain operations and exit certain lines of business and adverse claim development in the company's international property reinsurance business. The full-year, after-tax loss should not exceed $2.13 a share and Terra Nova's year-end book value should be at least $445 million or $17.57 per share, the companies say.

The revised terms are subject to negotiation and execution of definitive documentation and the approval of the boards and shareholders of each of the companies. Shareholder Meetings, currently scheduled for February 10, 2000, will be moved to a later date, which is unannounced, to consider the revised transaction.