Exhibit 99.4
MARKEL REPORTS RECORD INCOME FROM CORE OPERATIONS
FOR IMMEDIATE RELEASE CONTACT: DARRELL D. MARTIN
DIRECT LINE: 804-965-1635
Richmond, VA, February 1, 2000 --- (NYSE - MKL) Markel Corporation
announced record earnings from core operations for the year ended December 31,
1999, while net income decreased to $7.20 per diluted share from $10.17 per
diluted share in 1998. The decrease in 1999 net income was primarily the result
of realized investment losses. Alan I. Kirshner, Chairman and Chief Executive
Officer, commented, "We wish to thank our associates for their hard work and
outstanding accomplishments in 1999. Our core underwriting units produced
exceptional underwriting results which exceeded their 1999 business plans,
however the year presented a difficult environment for our value-oriented
investment philosophy. We have completed the integration of Gryphon into our
organization, and we believe the pending Terra Nova acquisition will provide
additional opportunities to enhance shareholder value."
In evaluating its operating performance, the Company focuses on core
underwriting and investing results before consideration of realized investment
gains or losses and amortization expenses (these measures do not replace
operating income or net income computed in accordance with generally accepted
accounting principles as a measure of profitability). The Company acquired
Gryphon on January 15, 1999, and the Company's results reflect Gryphon's
operating results since that date. Following is a comparison of 1999 and 1998
results on a per diluted share basis.
Quarter Ended Year Ended
December 31, December 31,
-------------------- --------------------
1999 1998 1999 1998
--------- --------- --------- --------
Core operations $ 2.29 $ 2.12 $ 8.17 $ 8.10
Realized investment gains
(losses) (1.17) 1.05 (.10) 2.37
Amortization expenses (.19) (.08) (.87) (.30)
--------- -------- -------- -------
Net income .93 3.09 7.20 10.17
Net change in unrealized
gains (1.03) .67 (14.30) 1.90
--------- -------- --------- -------
Comprehensive income
(loss) $ (.10) $ 3.76 $ (7.10) $ 12.07
--------- -------- --------- ------
Fourth quarter income from core operations increased 8 percent to $2.29
per diluted share from $2.12 per diluted share in 1998. For the year, core
operating income was $8.17 per diluted share compared to $8.10 per diluted share
a year ago. The growth in both periods resulted from underwriting profits in the
Company's core underwriting units partially offset by Gryphon's losses. The
Company has completed the transfer of Gryphon's continuing programs to its three
excess and surplus lines underwriting units, and a dedicated runoff unit has
been established to aggressively manage Gryphon's discontinued programs.
Fourth quarter 1999 gross premium volume rose 41 percent to $143.8
million from $101.7 million last year. For the year, gross premium volume
increased 36 percent to $594.9 million from $437.5 million in 1998. Excluding
Gryphon, gross premium volume increased 26 percent and 12 percent for the
quarter and year ended December 31, 1999, respectively. The increase in gross
premium volume, excluding Gryphon, was due to increased submission activity and
stable pricing.
Fourth quarter 1999 earned premium volume rose 29 percent to $110.1
million from $85.2 million last year. For the year, earned premiums increased 31
percent to $437.2 million in 1999 from $333.3 million last year. Gryphon
contributed earned premiums, including earned premiums from discontinued lines,
of $10.3 million and $67.3 million for the quarter and year ended December 31,
1999, respectively.
Underwriting performance is measured by the combined ratio of losses
and expenses to earned premiums. The Company reported a combined ratio of 101
percent in 1999 compared to a combined ratio of 98 percent in 1998. The 1999
underwriting loss was the result of the Gryphon acquisition. Excluding Gryphon,
the Company's combined ratio was 96 percent in 1999. The Company remains
committed to underwriting profits as the key component of its financial
strategy.
Net investment income rose 23 percent to $87.7 million from $71.0
million in 1998. The increase was primarily the result of the Gryphon
acquisition. The Company recognized $0.9 million of net realized losses from
investment sales in 1999 compared to $20.6 million of net realized gains in
1998. As part of its tax planning strategy, the Company made the decision in the
fourth quarter of 1999 to sell fixed income securities with unrealized losses
and realize the associated tax savings. Primarily as a result, the Company
recognized $10.2 million of net realized investment losses in the fourth quarter
of 1999. Proceeds were reinvested in high quality fixed income securities at
higher yields. Variability in the timing of realized and unrealized investment
gains and losses is to be expected.
Book value per common share was $68.59 at December 31, 1999, compared
to $77.02 at December 31, 1998. All of the Company's investments are considered
available-for-sale and are recorded at estimated fair value. The Company
reported net unrealized gains, net of taxes, on its fixed maturity and equity
investments of $15.4 million at December 31, 1999, compared to net unrealized
gains, net of taxes, of $96.0 million at December 31, 1998. The fixed maturity
portfolio's market value declined $43.7 million, net of taxes, primarily as a
result of higher interest rates. The equity portfolio's market value declined
$36.9 million, net of taxes, primarily as a result of a concentration in the
financial services sector. The Company's disciplined, value-oriented approach
has generated solid results over a long period of time. Over the past five
years, the Company has grown book value at a compound annual rate of 22 percent.
On January 26, 2000, the Company announced revised terms for its
acquisition of Terra Nova (Bermuda) Holdings Ltd. (NYSE: TNA). 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. Under the revised agreement, Terra Nova
shareholders will receive for each ordinary share, $13.00 in cash, 0.07027 of a
Markel common share and 0.07027 of a Markel contingent value right (CVR). The
CVR is intended to increase the likelihood that a Terra Nova shareholder will be
able to realize a minimum value of $185 for each Markel share received.
Pursuant to the revised terms of the merger agreement, the
consideration will consist of approximately $325 million in cash, 1.76 million
Markel common shares and 1.76 million Markel CVR's. In addition, $175 million of
Terra Nova debt will remain outstanding. The acquisition will be accounted for
as a purchase transaction. The transaction is subject to approval by the
shareholders of both Markel and Terra Nova, the receipt of necessary regulatory
approvals and other customary closing conditions.
The Company has arranged for a five year $500 million revolving credit
facility which is expected to replace its existing $250 million revolving credit
facility upon closing of the Terra Nova acquisition. Due to the revised terms of
the Terra Nova merger agreement, the Company is seeking amendments to the $500
million revolving credit facility. Alternatively, the Company has the ability to
finance the transaction through the use of its existing credit facility and
internal funding.
Markel Corporation markets and underwrites specialty insurance products
and programs to a variety of niche markets. In each of these markets, the
Company seeks to provide quality products and excellent customer service so that
it can be a market leader. The financial goals of the Company are to earn
consistent underwriting profits and superior investment returns to build
shareholder value.
This is a "Safe Harbor" statement under the Private Securities
Litigation Reform Act of 1995. Certain statements contained herein are
forward-looking statements that involve risks and uncertainties. Future actual
results may materially differ from those in these statements because of many
factors. The completion of the Terra Nova transaction is subject to the absence
of material adverse changes in the buyer's or seller's financial condition and
receipt of all necessary regulatory and shareholder approvals. Insurance
industry price competition has made it more difficult to attract and retain
adequately priced business. Changing legal and social trends and inherent
uncertainties in the loss estimation process can adversely impact the adequacy
of loss reserves. The Company's potential underwriting exposure to Year 2000
claims are difficult to predict with any certainty. State regulatory actions can
impede the Company's ability to charge adequate rates and efficiently allocate
capital. The frequency and severity of natural catastrophes are highly variable.
Economic conditions and interest rate volatility can have significant impacts on
the market value of fixed maturity and equity investments. Accordingly, the
Company's premium growth, underwriting and investment results have been and will
continue to be potentially materially affected by these factors.
MARKEL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Income and Comprehensive Income
Quarter Ended Year Ended
December 31, December 31,
------------------------ -----------------------
1999 1998 1999 1998
---- ---- ---- ----
(dollars in thousands, except per share data)
OPERATING REVENUES
Earned premiums $ 110,149 $ 85,178 $ 437,196 $ 333,267
Net investment income 21,428 17,909 87,681 71,046
Net realized gains (losses) from investment sales (10,194) 9,124 (897) 20,558
Other 51 465 341 1,130
--------- -------- -------- ---------
Total Operating Revenues 121,434 112,676 524,321 426,001
--------- -------- -------- ---------
OPERATING EXPENSES
Losses and loss adjustment expenses 72,883 46,043 283,630 203,336
Underwriting, acquisition and insurance
expenses 34,376 38,087 156,703 124,841
Amortization of intangible assets 1,214 508 5,398 2,033
--------- -------- -------- ---------
Total Operating Expenses 108,473 84,638 445,731 330,210
--------- -------- -------- ---------
Operating Income 12,961 28,038 78,590 95,791
Interest expense 6,052 5,116 25,150 20,406
--------- -------- -------- ---------
Income Before Income Taxes 6,909 22,922 53,440 75,385
Income tax expense 1,658 5,501 12,826 18,092
--------- -------- -------- --------
Net Income $ 5,251 $ 17,421 $ 40,614 $ 57,293
========= ======== ======== ========
OTHER COMPREHENSIVE INCOME (LOSS)
Unrealized gains (losses) on securities, net of
taxes
Net unrealized gains (losses) arising
during the period $ (12,419) $ 9,763 $(81,223) $ 24,112
Less reclassification adjustments for
(gains) losses included in net income 6,626 (5,931) 583 (13,363)
--------- -------- -------- ---------
Total Other Comprehensive Income (Loss) (5,793) 3,832 (80,640) 10,749
--------- -------- -------- ---------
Comprehensive Income (Loss) $ (542) $ 21,253 $(40,026) $ 68,042
========= ======== ======== =========
NET INCOME PER SHARE
Basic $ 0.94 $ 3.16 $ 7.27 $ 10.41
Diluted $ 0.93 $ 3.09 $ 7.20 $ 10.17
========= ======== ======== =========
Selected Balance Sheet Data December 31, December 31,
------------ ------------
(dollars in thousands, except per share data) 1999 1998
---- ----
Total investments, available-for-sale $ 1,623,139 $ 1,481,093
Reinsurance recoverable on unpaid losses 378,738 198,288
Total assets 2,455,305 1,921,264
Unpaid losses and loss adjustment expenses 1,343,616 933,830
Long-term debt 167,984 93,219
8.71% Capital Securities 150,000 150,000
Total shareholders' equity 383,419 425,301
Book value per share $68.59 $77.02
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