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WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: February 18, 2000
(Date of earliest event reported)
Terra Nova (Bermuda) Holdings Ltd.
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(Exact name of registrant as specified in its charter)
Bermuda 1-13832 N/A
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(State or other (Commission File (I.R.S. Employer
jurisdiction of Number) Identification No.)
incorporation)
Richmond House, 12 Par-la-Ville Road, Hamilton, HM08, Bermuda
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(441) 292-7731
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Item 5. Other Information.
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On February 18, 2000, Terra Nova (Bermuda) Holdings Ltd. issued a press
release, a copy of which is attached as an exhibit hereto and is incorporated
herein by reference.
Item 7. Financial Statements and Exhibits.
---------------------------------
99.1 Press release of Terra Nova (Bermuda) Holdings Ltd. dated February 18,
2000.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TERRA NOVA (BERMUDA) HOLDINGS LTD.
(Registrant)
By: /s/ Jean M. Waggett
------------------------
Name: Jean M. Waggett
Title: Senior Vice President
and General Counsel
Date: February 22, 2000
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EXHIBIT INDEX
Exhibit
Number Exhibit Page
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99.1 Press release of Terra Nova (Bermuda)
Holdings Ltd. dated February 18, 2000.
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Exhibit 99.1
TERRA NOVA (BERMUDA) HOLDINGS LTD.
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REPORTS FOURTH QUARTER RESULTS
------------------------------
Hamilton, Bermuda, February 18, 2000 - Terra Nova (Bermuda) Holdings Ltd. (NYSE-
TNA) today reported unaudited operating losses for the fourth quarter and full
year ended December 31, 1999. The operating losses reflect substantial
insurance losses from natural catastrophes and the losses and costs associated
with closing and merging certain business units. As a result of these losses and
the decline in investment valuations in the first three quarters of the year,
Terra Nova's book value per share declined to $17.50 from $22.51 at December 31,
1998.
In focusing on the year to date results, John J. Dwyer, Terra Nova's Chairman,
commented, "In reviewing the year as a whole our underwriting results have been
determined by two significant events. First, 1999 was the worst year for
international catastrophe losses in recent history. Terra Nova's share of these
catastrophes and large losses for the year was $59 million, including $42
million of catastrophe losses in the fourth quarter. Secondly, we were active
in closing certain businesses, such as our decisions to exit company market
marine hull and energy business at the beginning of the year and to exit high
street motor business in the second quarter, and in re-structuring and combining
others, such as the merger of our aviation syndicate 959 into our marine
syndicate 1009. Underwriting losses in 1999 from businesses we are not
continuing in 2000, together with associated closure costs, totaled $122 million
in the year. Notwithstanding a very disappointing year, with the restructuring
behind us and assuming a more normal level of catastrophes, the Company is well
positioned to take advantage of improvements in pricing that we expect to see
continuing throughout 2000.
"Turning to the quarter, our underwriting loss is the result of three key
factors: significant catastrophe losses; additional reinsurance costs incurred
in protecting the aviation and satellite business written by our Lloyd's
Syndicate 959; and late reporting of claims relating to certain property loss
events. In the final week of the year, two intense windstorms caused severe
damage to heavily industrialized and populated areas of Western Europe. These
storms, Lothar and
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Martin, have been described as the worst in 400 years and are expected to
generate heavy losses for the insurance industry. Current industry estimates are
in the range of $5 billion to $6 billion. The storms produced the most severe
damage in France, Switzerland and Germany, countries in which Terra Nova has
important client relationships and provides related insurance and reinsurance
coverage. We expect net claims from these two storms to be approximately $30
million. Earlier in December, another severe, but unrelated storm, Anatol, hit
Denmark causing substantial property damage. We expect Terra Nova's net claims
from Anatol and from hurricanes Jose and Lenny in the Caribbean to be
approximately $12 million.
"Secondly, we took a charge in the quarter to recognize the cost of buying
additional reinsurance protection for the aviation and satellite business
written by our Lloyd's Syndicate 959, which was merged into Syndicate 1009 for
the 2000 underwriting year. Lastly, we experienced adverse development on
claims relating to certain 1999 property loss events, in large part because of
late reported losses on international proportional treaties.
"Our operational transition in contemplation of the Markel merger is proceeding
very well as we prepare for the special shareholder meetings on March 16, and
the closing scheduled for March 24, 2000," Dwyer concluded.
Fourth quarter operating losses per diluted share were $3.01 compared to
earnings of $0.72 in 1998. For the full year, operating losses were $2.13 per
diluted share compared to earnings of $2.72 per diluted share in 1998.
The net loss, which includes net realized investment gains, was $81.2 million in
the fourth quarter compared to net income of $19.2 million in the same period a
year ago. The net loss per diluted share was $3.09 in the quarter compared to
net income of $0.74 per diluted share in 1998. The net loss for the full year
was $35.0 million, or $1.34 per diluted share, compared to net income of $72.4
million, or $2.77 per diluted share, in the same period a year ago. Net
realized after-tax investment losses in the fourth quarter were $2.2 million,
compared to gains of $0.6 million in the same quarter last year. Net realized
after-tax investment gains for the full year were $20.7 million, up from $13.1
million in 1998.
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Gross written premiums were $154.7 million in the fourth quarter, compared to
$166.0 million written in the fourth quarter of 1998. The decline in gross
written premiums arises primarily from the Company writing no Lloyd's orphan
syndicate business in the fourth quarter of 1999 compared to $39.7 million in
the fourth quarter of 1998. Gross written premiums for the full year were
$864.9 million, up 13.9% from $759.4 million written a year ago. The increase
in gross written premiums in 1999 is largely attributable to Terra Nova's
increased participation in the Octavian syndicates from 60% in 1998 to
approximately 77% in 1999.
Net written premiums in the fourth quarter were $62.3 million, compared to
$139.4 million in last year's fourth quarter. The decline in net written
premiums reflects the absence of orphan syndicate business in 1999 compared to
1998, additional aviation and satellite reinsurance costs in 1999 and additional
reinsurance costs arising from the high level of catastrophe losses in the
quarter. Net written premiums for the full year were $618.4 million in 1999,
compared to $646.2 million a year ago.
The combined ratio for the fourth quarter and full year ended December 31, 1999,
was 203.2% and 129.4%, respectively, compared to a combined ratio of 99.3% and
98.8% in the same periods of 1998.
Net investment income was up 1.7% to $24.1 million for the fourth quarter of
1999 from $23.7 million in the same period a year ago. Net investment income
increased to $93.8 million for the full year compared to $93.3 million in 1998.
Total assets at December 31, 1999, were $2.6 billion compared to $2.5 billion at
year end 1998. Shareholders' equity was $444.0 million at December 31, 1999,
compared to $570.9 million at year end 1998, reflecting the operating loss and
an after tax decline of $63.6 million in the market value of the Company's
investment portfolio. Book value per share was $17.50 at December 31, 1999,
compared to $22.51 at year end 1998.
Terra Nova (Bermuda) Holdings Ltd. is the holding company for five wholly owned
operating entities - Terra Nova Insurance Company Limited in the UK, Terra Nova
(Bermuda) Insurance Company Ltd., Corifrance in Paris, Terra Nova Capital
Limited, the Company's corporate capital
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provider at Lloyd's, and Octavian Syndicate Management Limited, which manages
the six Lloyd's syndicates in which the Company has a participation. Through
these subsidiaries, the Company writes specialty property, casualty, marine and
aviation insurance and reinsurance business on a worldwide basis.
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
for forward-looking statements. Any written or oral statements made by or on
behalf of the Company may include forward-looking statements that reflect the
Company's current views with respect to future events and financial performance.
These forward-looking statements are subject to certain uncertainties and other
factors that could cause actual results to differ materially from such
statements.
The Company has identified certain factors which could cause actual plans or
results to differ substantially from those included in any forward-looking
statements. These risk factors are discussed in documents filed by the Company
with the Securities and Exchange Commission including, but not limited to, its
most recent Form 10-K. All such discussions regarding risk factors are
incorporated in this news release by reference.
For further information contact:
<TABLE>
<S> <C>
Mr. William J. Wedlake Mr. Andrew J. Davies
Senior Vice President and CFO Group Financial Controller
Terra Nova (Bermuda) Holdings Ltd. Terra Nova (Bermuda) Holdings Ltd.
c/o Terra Nova House c/o Terra Nova House
41-43 Mincing Lane 41-43 Mincing Lane
London EC3R 7SP London EC3R 7SP
England England
Tel: 011-44-171-369-5153 Tel: 011-44-171-369-5078
Fax: 011-44-171-369-5150 Fax: 011-44-171-369-5393
E-Mail: [email protected] E-Mail: [email protected]
</TABLE>
Terra Nova website: www.terra-nova.com
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TERRA NOVA (BERMUDA) HOLDINGS LTD.
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AND SUBSIDIARIES
----------------
Consolidated Balance Sheet
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(in thousands)
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<TABLE>
<CAPTION>
At December 31, At December 31,
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1999 1998
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Unaudited Audited
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<S> <C> <C>
ASSETS
Investments available for sale, at fair value:
Fixed maturities $ 1,306,110 $ 1,446,621
Common stocks 109,900 88,022
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Total investments 1,416,010 1,534,643
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Cash and cash equivalents 74,798 40,394
Insurance balances receivable and accrued premium income 556,778 510,097
Reinsurance recoverable on paid losses 62,162 45,882
Reinsurance recoverable on unpaid losses 346,483 226,099
Income tax recoverable and deferred income taxes 36,242 -
Other assets 139,227 122,257
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Total assets $ 2,631,700 $ 2,479,372
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LIABILITIES
Unpaid losses and loss adjustment expenses $ 1,409,968 $ 1,209,003
Unearned premiums 468,178 401,002
Insurance balances payable 53,853 23,941
Income tax payable and deferred income taxes - 31,678
Long term debt 175,000 175,000
Other liabilities 80,691 67,886
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Total liabilities 2,187,690 1,908,510
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SHAREHOLDERS' EQUITY
Common shares 151,637 150,620
Stock held in Trust (16,787) (12,900)
Deferred equity compensation 7,564 4,623
Additional capital 113,855 111,727
Unrealized (depreciation) appreciation of investments, net of taxes (3,949) 80,342
Cumulative translation adjustments (3,473) 158
Retained earnings 195,163 236,292
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Total shareholders' equity 444,010 570,862
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Total liabilities and shareholders' equity $ 2,631,700 $ 2,479,372
=========== ===========
Number of ordinary shares outstanding 25,367,809 25,362,134
Book value per share $ 17.50 $ 22.51
</TABLE>
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TERRA NOVA (BERMUDA) HOLDINGS LTD.
-----------------------------------
AND SUBSIDIARIES
----------------
Consolidated Revenue Statement
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(in thousands)
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<TABLE>
<CAPTION>
Three months ended December 31, Twelve Months ended December 31,
--------------------------------- ----------------------------------
1999 1998 1999 1998
---------------- --------------- ---------------- ----------------
(Unaudited) (Audited) (Unaudited) (Audited)
<S> <C> <C> <C> <C>
Gross written premiums $ 154,678 $ 166,017 $ 864,933 $ 759,388
Net written premiums 62,250 139,369 618,446 646,197
Net earned premiums 125,910 168,219 585,281 546,908
Net investment income 24,084 23,749 93,829 93,262
Realized (losses) gains on sales of investments (2,747) 2,031 26,879 17,963
Foreign exchange gains (losses) 2,608 (830) 3,016 (586)
Agency income 2,667 1,953 14,245 17,057
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Total revenues 152,522 195,122 723,250 674,604
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Losses and loss adjustment expenses, net 177,309 116,702 491,243 359,567
Policy acquisition costs 70,171 42,920 240,836 160,380
Other operating expenses 8,431 7,439 25,397 20,322
Interest expenses 3,100 3,100 12,400 13,697
Agency expenses 4,135 1,788 14,138 13,760
Other expenses 5,891 1,162 11,838 5,617
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Total expenses 269,037 173,111 795,852 573,343
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(Loss) income before income tax (116,515) 22,011 (72,602) 101,261
Income tax (benefit) expense (35,274) 2,765 (37,628) 17,221
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Net (loss) income before extraordinary charge $ (81,241) $ 19,246 $ (34,974) $ 84,040
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Weighted average shares
and share equivalents outstanding 26,275,311 26,008,411 26,069,011 26,097,372
Net (loss) income per share before extraordinary
charge - Diluted basis $ (3.09) $ 0.74 $ (1.34) $ 3.22
----------- ----------- ----------- -----------
Operating (losses) earnings before tax (note 1) $ (113,768) $ 19,980 $ (99,481) $ 83,298
----------- ----------- ----------- -----------
Operating (losses) earnings after tax (note 1) $ (79,031) $ 18,600 $ (55,635) $ 70,895
----------- ----------- ----------- -----------
Operating (losses) earnings per share after tax
- Diluted basis $ (3.01) $ 0.72 $ (2.13) $ 2.72
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Extraordinary charge after tax - - - 11,641
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Net (loss) income $ (81,241) $ 19,246 $ (34,974) $ 72,399
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Net (loss) income per share - Diluted basis $ (3.09) $ 0.74 $ (1.34) $ 2.77
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Losses and loss expense ratio 140.8% 69.4% 83.9% 65.8%
Expense ratio 62.4% 29.9% 45.5% 33.0%
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Combined ratio 203.2% 99.3% 129.4% 98.8%
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Operating ratio 184.1% 85.2% 113.4% 81.7%
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</TABLE>
(1) Operating (losses) earnings represent (losses) income before realized
investment gains and losses.
6
