SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1 TO
SCHEDULE 14D-1
TENDER OFFER STATEMENT PURSUANT TO SECTION 14(D)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
AND AMENDMENT NO. 6
TO SCHEDULE 13D
UNDER SECURITIES EXCHANGE ACT OF 1934
GRYPHON HOLDINGS INC.
(NAME OF SUBJECT COMPANY)
MARKEL CORPORATION
MG ACQUISITION CORP.
(Bidders)
COMMON STOCK, PAR VALUE $0.01 PER SHARE
(INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS)
(Title of Class of Securities)
400515 10 2
(CUSIP Number of Class of Securities)
GREGORY B. NEVERS, ESQ.
CORPORATE COUNSEL
MARKEL CORPORATION
4551 COX ROAD
GLEN ALLEN, VIRGINIA 23060-3382
TELEPHONE: (804) 965-1673
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications on Behalf of Bidders)
WITH A COPY TO:
LESLIE A, GRANDIS, ESQ.
McGUIRE, WOODS, BATTLE & BOOTHE LLP
901 EAST CARY STREET.
RICHMOND, VIRGINIA 23219
TELEPHONE: (804) 775-1000
<PAGE>
This Amendment to Schedule 14D-1 filed by MG Acquisition Corp., a Delaware
corporation, a wholly owned subsidiary of Markel Corporation, a Virginia
corporation Parent, in connection with its pending tender offer for all
outstanding shares of common stock, par value $0.01 per share (the "Common
Stock") of Gryphon Holdings Inc., a Delaware corporation (the "Company"), also
constitutes an Amendment to Statement on Schedule 13D with respect to the
acquisition by Markel Corporation and MG Acquisition Corp. of beneficial
ownership of shares of Common Stock of the Company. The Schedule 14D-1 is hereby
amended as follows:
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS
(a)(9) Additional Materials used by Parent in presentations to certain
Company Shareholders.
<PAGE>
SIGNATURE
After due inquiry and to the best of its knowledge and belief, the undersigned
certifies that the information set forth in this statement is true, complete and
correct.
Dated: October 26, 1998 MARKEL CORPORATION
By: /s/ Steven A. Markel
-----------------------
Name: Steven A. Markel
Title: Vice Chairman
MG AQUISITION CORP.
By: /s/ Steven A. Markel
------------------------
Name: Steven A. Markel
Title: Vice Chairman
<PAGE>
EXHIBIT INDEX
EXHIBIT EXHIBIT NAME
(a)(9) Additional materials provided by Markel
Corporation to certain Shareholders of Gryphon
Holdings Inc. beginning on October 26, 1998
Markel Corporation
Acquisition of
Gryphon Holdings Inc.
<PAGE>
Markel Profile
o Markel Corporation markets and underwrites specialty insurance products and
programs to a variety of niche markets
o In each of these markets, we seek to provide quality products and excellent
customer service so that we can be a market leader
o Our financial goals are to earn consistent underwriting profits and superior
investment returns to build shareholder value
1
<PAGE>
Markel Overview
o Writes specialty insurance products and programs for a variety of niche
markets
[ ] Fifth largest domestic E&S writer in the U.S.
[ ] Also writes professional and product liability, specialty program
insurance, specialty personal and commercial lines and brokered excess
and surplus lines
o Consistently strong underwriting performance
[ ] Underwriting profit for the 6th consecutive year and the 11th year out
of the past 12
[ ] Positive accident year reserve development in each of the last 10 years
[ ] Historical 5 year average combined ratio of 98.4%
2
<PAGE>
Gryphon Overview
o Primarily writes specialty lines
[ ] Focuses on architects' and engineers' professional liability,
difference in conditions (primarily earthquakes), and other specialty
coverages
o Recently acquired First Reinsurance Company of Hartford
[ ] Writes professional liability, D&O and some general liability
3
<PAGE>
Gryphon Historical Financial
Performance
o Poor underwriting performance/results over the past several years
[ ] Combined ratio of 111.4% for 1997
[ ] 5 year historical average combined ratio of 106.6%
[ ] Expense ratio has increased from 31.9% in 1993 to 43.3% in 1997
o Gryphon has demonstrated consistent reserve problems over the past several
years
[ ] Added to reserves the last 4 quarters and 7 of the last 9 quarters
[ ] Most recently increased reserves by $10.6 million in 2nd Quarter 1998
4
<PAGE>
Gryphon Growth in Net Income
Per Share
o Compound growth of -5.9% over the last 5 years
o Net loss of $.98 per share for the 6 months ended June 30, 1998
o Due to poor reserving history earnings have been volatile
[GRAPH]
Net Income Per Share
1993 $1.62
1994 $0.77
1995 $1.69
1996 $0.93
1997 $1.32
5
<PAGE>
Gryphon Growth in Book Value
Per Share
o Compound annual growth of 5.9% over the last 5.5 years
[GRAPH]
Book Value Per Share
1993 $11.25
1994 $11.51
1995 $14.02
1996 $14.28
1997 $15.63
6/30/98* $14.61
* Pro Forma for the First Reinsurance Company of Hartford transaction and
excludes Convertible Preferred Stock carried at $12.507 million
6
<PAGE>
Gryphon: History of Not
Producing Results
"Gryphon President Stephen Crane acknowledges that unless the company `produces
value to shareholders, we'll be vulnerable' to a buyout... But he's confident
that `we'll produce higher results this year.' Crane says the disappointments of
1996 are behind the company: It is positioned for improved profitability in
1997."
-Business Week
July 14, 1997
7
<PAGE>
Gryphon: History of Not
Producing Results
Stephen Crane
"I am writing to you following an eventful and tumultuous period in which we
have encountered some of the harsh realities of the insurance marketplace..."
"There are profound cyclical and secular changes occurring in the specialty
property-casualty marketplace, and a small company like Gryphon cannot afford
to be a passive observer."
-Shareholder Letter 1997 Annual Report
Mailed to shareholders on or about April 16, 1998
8
<PAGE>
MKL vs. GRYP Comparison
1993-1997
Markel Gryphon
------------------------ ---------------------------
1993 1997 CAGR 1993 1997** CAGR
------- ------ ------- ------- -------- --------
Earnings Per
Share (diluted) $4.23 $8.92 20.5% $1.62 $1.27 -5.9%
Book Value Per Share 27.83 65.18 23.7% 11.25 15.63 8.6%
Invested Assets Per Share 110.27 257.27 23.6% 29.20 46.75 12.5%
Stock Price* 38.50 141.00 38.3% 13.00 11.50 -3.0%
5 Year Avg. ROE 16.7% 7.3%
5 Year Avg. Combined Ratio 98.4% 106.6%
*Range corresponds to Gryphon IPO (12/21/93) and Markel's first offer (9/01/98)
**Before charges of $2.3 million in 1Q 1998 and $10.6 million in 2Q 1998
9
<PAGE>
Stock Price Comparison
Relative Stock Performance (Gryphon, Markel and the S&P 500)
Quarterly from 12/31/93-9/30/98
[GRAPH]
Date GRYP MKL SPX
- ---- ---- --- ---
31-DEC-93 100.0% 100.0% 100.0%
31-MAR-94 108.1% 106.7% 95.6%
30-JUNE-94 108.1% 101.0% 95.2%
30-SEP-94 108.1% 104.8% 99.2%
30-DEC-94 96.4% 105.4% 98.5%
31-MAR-95 99.1% 122.5% 107.3%
30-JUN-95 117.1% 141.6% 116.8%
29-SEP-95 115.3% 186.7% 125.3%
29-DEC-95 138.7% 191.7% 132.0%
28-MAR-96 138.7% 212.1% 139.1%
28-JUN-96 108.1% 236.2% 143.8%
30-SEP-96 99.1% 215.9% 147.3%
31-DEC-96 101.8% 228.6% 158.8%
31-MAR-97 102.7% 280.6% 162.3%
27-JUN-97 109.9% 327.6% 190.2%
30-SEP-97 118.9% 400.0% 203.1%
31-DEC-97 120.7% 396.5% 208.0%
31-MAR-98 128.8% 439.2% 236.2%
30-JUN-98 118.9% 452.1% 243.1%
30-SEP-98 100.9% 387.3% 218.0%
10
<PAGE>
Transaction Summary
Offering Price: $18.00 per share all cash
Premium: [ ] 55% over share price prior to September 1st offer
[ ] 29% over share price prior to October 1st offer
[ ] 1.23x Price/Book (6/30 - pro forma)
[ ] 13.1x Price/1999E earnings
o No financing contingency
11
<PAGE>
Specialty Industry Comparison
Price/1999E Price/Book
Company Earnings (6/30)
- ------------ ----------- ----------
Gryphon@$18.00 13.1x 1.23x
Acceptance 7.4x 1.08x
W.R. Berkley 10.7 0.94
Executive Risk 10.6 1.70
Frontier 7.6 0.82
Gainsco 12.9 1.21
HCC 11.5 2.33
Navigators 9.6 0.87
NYMAGIC 10.7 0.94
Orion Capital 9.0 1.18
Penn-America 8.3 0.85
RLI 11.2 1.22
MEDIAN 10.6x 1.08x
* Price as of 10/23/98; earnings estimates from IBES
12
<PAGE>
Markel's Transaction Rationale
o Gryphon's specialty niches in E&S lines are complementary to Markel's E&S
business
[ ] Strong underwriting capabilities in select niches
[ ] Markel can avoid certain unprofitable lines and create a culture
focused on achieving underwriting profitability
o Markel can realize value through expense savings
[ ] Elimination of corporate overhead
[ ] Reduction of administration and data processing costs
13
<PAGE>
Rationale for Gryphon's Shareholders
o Markel's all-cash $18.00 per share offer is very fair and generous
[ ] Gryphon has produced consistently poor operating results and failed to
maximize value for shareholders
[ ] In the current environment, Gryphon is highly vulnerable to losing
market share because of a lack of size and poor operating performance
[ ] Gryphon's consistently poor reserving history raises questions about
adequacy of loss reserves
o Markel provides the financial stability and leadership that few, if any,
insurance companies could offer to Gryphon's clients and employees
14
