Attached files
| file | filename |
|---|---|
| 8-K - FORM 8-K - ALTERRA CAPITAL HOLDINGS Ltd | d455561d8k.htm |
| EX-2.1 - AGREEMENT AND PLAN OF MERGER - ALTERRA CAPITAL HOLDINGS Ltd | d455561dex21.htm |
| EX-99.1 - JOINT PRESS RELEASE - ALTERRA CAPITAL HOLDINGS Ltd | d455561dex991.htm |
| EX-10.2 - FORM OF PARENT SHAREHOLDER VOTING AGREEMENT - ALTERRA CAPITAL HOLDINGS Ltd | d455561dex102.htm |
| EX-10.1 - FORM OF COMPANY SHAREHOLDER VOTING AGREEMENT - ALTERRA CAPITAL HOLDINGS Ltd | d455561dex101.htm |
| EX-99.3 - LETTER TO BUSINESS PARTNERS - ALTERRA CAPITAL HOLDINGS Ltd | d455561dex993.htm |
| EX-99.4 - LETTER TO EMPLOYEES - ALTERRA CAPITAL HOLDINGS Ltd | d455561dex994.htm |
 A new leader in
global specialty insurance and investments
December 19, 2012
Markel Acquisition of Alterra |
 2
Information concerning forward-looking statements: This
document includes statements about future economic performance, finances, expectations, plans and prospects of Alterra and Markel, both
individually and on a combined basis, that are forward-looking statements for purposes of
the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
There are risks and uncertainties that could cause actual results to differ materially from those expressed in or suggested by such
statements. For further information regarding factors affecting future results of Alterra and
Markel, please refer to their Annual Report on Form 10-K for the year ended December
31, 2011 and Quarterly Reports on Form 10-Q and other documents filed by Alterra and Markel since March 1, 2012 with the
Securities Exchange Commission (“SEC”). These documents are also available free of
charge, in the case of Alterra, by directing a request to Alterra through Joe Roberts,
Chief Financial Officer, or Susan Spivak Bernstein, Senior Vice President, Investor Relations, at 441-295-8800 and, in the case of
Markel, by directing a request to Bruce Kay, Investor Relations, at 804-747-0136.
Neither Alterra nor Markel undertakes any obligation to update or revise publicly any
forward-looking statement whether as a result of new information, future developments or otherwise.
This document contains certain forward-looking statements within the meaning of the U.S.
federal securities laws. Statements that are not historical facts, including statements
about Alterra’s and Markel’s beliefs, plans or expectations, are forward-looking statements. These statements are based on Alterra’s
or Markel’s current plans, estimates and expectations. Some forward-looking statements
may be identified by use of terms such as “believe,” “anticipate,”
“intend,” “expect,” “project,” “plan,” “may,”
“should,” “could,” “will,” “estimate,” “predict,” “potential,” “continue,” and similar words, terms or statements
of a future or forward-looking nature. In light of the inherent risks and uncertainties in
all forward-looking statements, the inclusion of such statements in this document
should not be considered as a representation by Alterra, Markel or any other person that Alterra’s or Markel’s objectives or plans, both
individually and on a combined basis, will be achieved. A non-exclusive list of important
factors that could cause actual results to differ materially from those in such
forward-looking statements includes the following: (a) the occurrence of natural or man-made catastrophic events with a frequency or
severity exceeding expectations; (b) the adequacy of loss reserves and the need to adjust such
reserves as claims develop over time; (c) the failure of any of the loss limitation
methods the parties employ; (d) any adverse change in financial ratings of either company or their subsidiaries; (e) the effect of
competition on market trends and pricing; (f) cyclical trends, including with respect to demand
and pricing in the insurance and reinsurance markets; (g) changes in general economic
conditions, including changes in interest rates and/or equity values in the United States of America and elsewhere; and (h)
other factors set forth in Alterra’s and Markel’s recent reports on Form 10-K,
Form 10-Q and other documents filed with the SEC by Alterra and Markel.
* * * * *
Risks and uncertainties relating to the proposed transaction include the risks
that: (1) the parties will not obtain the requisite shareholder or regulatory approvals
for the transaction; (2) the anticipated benefits of the transaction will not be realized or the parties may experience difficulties in successfully
integrating the two companies; (3) the parties may not be able to retain key personnel; (4) the
conditions to the closing of the proposed merger may not be satisfied or waived; (5) the
outcome of any legal proceedings to the extent initiated against Alterra or Markel or its respective directors and officers
following the announcement of the proposed merger is uncertain; (6) the acquisition may involve
unexpected costs; and (7) the businesses may suffer as a result of uncertainty
surrounding the acquisition. These risks, as well as other risks of the combined company and its subsidiaries may be different from
what the companies expect, or have previously experienced, and each party’s management may
respond differently to any of the aforementioned factors. These risks, as well as other
risks associated with the merger, will be more fully discussed in the joint proxy statement/prospectus that will be included in
the Registration Statement on Form S-4 to be filed by Alterra and Markel with the SEC.
Readers are cautioned not to place undue reliance on any forward-looking statements,
which speak only as of the date on which they are made. |
 Key Transaction
Terms Transaction
Merger
under
Bermuda
law.
A
subsidiary
of
Markel
will
merge
into
Alterra,
with
Alterra
surviving
as
a
wholly-
owned subsidiary of Markel
Taxable transaction to Alterra shareholders
Consideration
Implied
offer
price
of
~$31
per
Alterra
share
(1)
$10 in cash per Alterra share
Fixed
exchange
ratio
of
0.04315
shares
of
Markel
stock
per
Alterra
share
(~$21
per
Alterra
share)
(1)
Deal value
Approximately
$3.13
billion
(1.07x
aggregate
book
value
as
of
9/30/12)
(1)
$1.0 billion of existing cash sourced equally from Markel and Alterra
$2.13
billion
in
Markel
stock
(1)
Pro forma ownership
69% by Markel shareholders
31% by Alterra shareholders
Management
Markel executive and senior management to continue in current roles
Key Alterra senior leaders and underwriters will be retained
Governance
Two additional directors to be added to Markel board
Approvals
Shareholder approvals by both Markel and Alterra
Customary regulatory approvals
Investor Support
Voting agreements and lock-up agreements from Alterra Board of Directors, management and
key shareholders Voting agreements and lock-up agreements from Markel Board of
Directors and management Expected closing
First half of 2013
3
(1)
Based
on
Markel
closing
stock
price
of
$486.05
as
of
December
18,
2012.
Includes
~$55
million
of
unvested
restricted
stock. |
 Creating a
Winning Combination Strategic
Increases diversification and creates a global franchise with attractive product depth and
reach A common culture of underwriting discipline
Creates additional size and scale, providing additional insurance and investment opportunities
and enabling expense ratio improvements
Businesses fit well together –
complementary business profiles diversify the premium base
makes each business better
Financial
Attractive financial outcome with significant book value accretion
Increases investments and gross written premiums per share by double digit percentages
Larger investment portfolio under Markel’s proven management
Operational
Gains a footprint and expertise in the global reinsurance market
and Fortune 3000 / large account
markets
Increases leadership position in E&S market
Brings together two well established Lloyd’s platforms with complementary underwriting
profiles ...Creating a strong and durable organization
4
Combination of Markel and Alterra…
Leading franchise in global specialty insurance and investments
Disciplined underwriting combined with successful investing
Diversified portfolio of business – product line, geography and distribution
Experienced management team
Positioned for long-term growth in per share value |
 Markel
– Company Profile
–
Diverse product mix for niche markets –
over 100 unique product lines
–
Underwriting discipline
–
Investment flexibility made possible by underwriting profits
–
Long-term philosophy for greater returns through equity investments
–
Extension of investment operations into Markel Ventures –
“permanent capital”
advantage
–
Superior growth over a long period of time
–
17% CAGR in book value per share from 1991-2011
–
Significant ownership by management aligns economic interest with shareholders
–
Successful track record of targeting, purchasing and integrating
acquisitions
Company overview
Key highlights
Markel Corporation is a diverse financial holding company serving a variety of niche
markets In each of its businesses, Markel seeks to provide quality products and excellent
customer service with the objective of being the market leader
Markel’s financial goals are to earn consistent underwriting and operating profits and
superior investment returns to build shareholder value
5
1
2
3
4
5
6 |
 Markel
– Long History of Producing Results
By applying its long-term focus to underwriting and investing activities, Markel achieved
consistent, sustainable value creation for its shareholders
CAGR 13%
CAGR 17%
(1)
(1) 2012 data reflects year-to-date results as of 9/30/12.
6
($ in millions, except per share)
1991
1996
2001
2006
2011
20-Year
CAGR
Total Revenue
223
367
1,397
2,576
2,630
13%
Gross Written Premium
406
414
1,774
2,536
2,291
9%
Investment Portfolio
436
1,142
3,591
7,524
8,728
16%
Portfolio Per Share
$81.77
$209.20
$365.70
$752.80
$907.20
13%
Shareholders' Equity
83
268
1,085
2,296
3,388
20%
Book Value Per Share
$15.59
$49.16
$110.50
$229.78
$352.10
17%
Portfolio Per Share
$500
$400
$300
$200
$100
$0
$1,200
$1,000
$800
$600
$400
$0
$200
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
Book Value Per Share |
 Underwriting
performance
Consistently
outperforms the P&C
industry combined
ratio
Investment
performance
Adds value through
equity investments
Markel –
Strong Underwriting and Investment
Performance
7
Average difference
favorable / (unfavorable)
Since 1992
4.8%
Since 2002
3.9%
Combined
ratio
trend
Equity
performance
Fixed
income
performance
2011 equity as a % of
portfolio
Markel
21%
P&C Industry
15%
Duration
Markel
4.1 yrs
Barclays US
Aggregate
5.1 yrs
Markel
S&P 500 (w/ dividend
reinvested)
Markel
Barclays US Agg
Total Return
(1) Source: A.M. Best.
(2) Source: SNL Financial.
(1)
(2)
80%
85%
90%
95%
100%
105%
110%
115%
120%
125%
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Markel
P&C Avg.
3.8%
1.9%
6.7%
8.1%
2.1%
(0.2%)
2.9%
7.8%
(2%)
0%
2%
4%
6%
8%
10%
2011
5Y
10Y
20Y
7.6%
5.8%
5.6%
5.9%
7.8%
6.5%
5.8%
6.5%
0%
2%
4%
6%
8%
10%
2011
5Y
10Y
20Y |
 Alterra
– Company Profile
Global underwriter of specialty insurance and reinsurance
–
Multiple operating platforms -
Bermuda, Ireland, Europe,
United States, Lloyd's and Latin America
–
Strong franchise positions across multiple specialty classes of
business
Opportunistic and disciplined underwriting strategy
–
5-year average combined ratio (including cats) of 91.9%
–
Strong culture of risk management
–
Analytical and quantitative underwriting orientation
–
Business mix shift towards shorter-tail lines
Liquid balance sheet with conservative reserving track record
–
Shareholders’
equity ~$2.9 billion at 9/30/12
–
Low financial leverage
S&P rating and AM Best ratings of “A”
Conducts operations through following segments
–
Global Insurance
–
Offers P&C excess of loss primarily to U.S.
and international Fortune 1000 companies
–
U.S. Insurance
–
Offers P&C insurance primarily to Fortune
3000 companies
–
Reinsurance
–
Offers P&C quota share and excess of loss
reinsurance to insurance and reinsurance companies globally
–
Alterra at Lloyd’s
–
Offers P&C quota share and excess of loss
insurance and reinsurance to med-to-large international clients
8
Key highlights
Premium summary
Reinsurance
U.S.
Insurance
Global
Insurance
Alterra at
Lloyd’s
Reinsurance
Insurance
Q3 YTD 2012 GPW: ~$1.6bn
By Segment
By Product
48%
19%
17%
16%
59%
41%
1
2
4
5
3 |
 A Strong
Platform for Growth Combination expands Markel’s insurance platform from three to five
key segments Enhances Markel’s E&S, Specialty and London Insurance Market
segments 9
2012E Gross Premiums Written
($ in millions)
Pro Forma
Excess & Surplus
$935
$230
$1,165
Specialty Admitted
655
155
810
London Insurance Market
890
305
1,195
Global Insurance
0
375
375
Global Reinsurance
0
870
870
Total
~$2.5bn
~$1.9bn
~$4.4bn
Markel
Alterra |
 Well Positioned
Operating Profile Scale
and
diversification
will
create
the
opportunity
to
improve
the
already
strong
operating
performance
10
Source: Company filings.
(1) Combined ratio for Alterra and Pro Forma Markel excludes unallocated Alterra corporate
G&A expense of ~$44mm. (2) Per
share
calculations
based
upon
shares
outstanding
excluding
any
dilutive
impact
of
options.
Based
on
Markel
closing
stock
price
of
$486.05
as
of
December
18,
2012.
(3) Excludes purchase accounting adjustments.
Year-to-date 9/30/12
($ in millions, except per share)
Pro Forma
Gross premiums written
$1,906
$1,614
$3,520
Net premiums written
1,687
1,077
2,764
Combined ratio
96%
93%
95%
Comprehensive investment income (pre-tax)
$535
$270
$805
Comprehensive income to shareholders
427
294
721
Book value per share
$395
$30
$424
(3)
(1)
(2) |
 Strong
Capitalization Ratios 11
As of 9/30/12
($ in millions)
Pro Forma
Total debt
$1,511
$441
$1,951
Total shareholders’
equity
3,806
2,923
5,952
Total capitalization
5,317
3,364
7,903
Total debt / total capitalization
28%
13%
25%
LTM net premiums written / equity
0.57x
0.44x
0.58x
Source: Company filings.
(1) Excludes purchase accounting adjustments. Based on Markel closing stock price of $486.05 as
of December 18, 2012. (2) Markel Pro Forma equity equals Markel equity as of 9/30/12 plus
the value of new shares issued in the transaction. (2)
(1) |
 Diversified
Premium Mix Property
Prof / Prod
Liability
Workers
Comp
Other
North America
International
North America
International
North America
International
General
Casualty
Property
Prof / Prod
Liability
Workers
Comp
Other
General
Casualty
Property
Prof / Prod
Liability
Workers
Comp
Other
General
Casualty
Source: Company filings.
Gross premiums written
12
6%
Fiscal year 2011
($ in millions)
Pro Forma
$2.3bn
$1.9bn
$4.2bn
Line of
business
Geography
25%
23%
26%
10%
16%
35%
22%
20%
21%
29%
22%
23%
19%
75%
25%
74%
26%
74%
26% |
 Underwriting
with Global Reach Headquarters
Alterra
Hamilton, Bermuda
Largest Offices:
Bermuda – 102
London – 87
Richmond – 78
U.S. Offices
South American Offices
New York, NY (3)
Rio de Janeiro, Brazil (2)
Alpharetta, GA
Bogota, Colombia
Richmond, VA (5)
Buenos Aires, Argentina
Summit, NJ
Windsor, CT
International Offices
Dallas, TX
London, U.K. (4)
Sebastopol, CA
Kusnacht, Switzerland
San Francisco, CA (2)
Zurich, Switzerland
Chicago, IL
Dublin, Ireland (3)
Hamburg, Germany
Tokyo, Japan
Employees: 490
GWP / Headcount: $3.9M
# of Offices: 31
Headquarters Markel
Glen Allen, VA Largest Offices:
Glen Allen – 851
London – 372
Omaha – 250
U.S. Offices
Alameda, CA
Blair, NE
Chicago, IL
Deerfield, IL
Glen Allen, VA
Henderson, NV
Kennesaw, GA
Lexington, KY
New York, NY
Omaha, NE
Ontario, CA
Plano, TX
Red Bank, NJ
Richmond, VA
Scottsdale, AZ
Stilwell, KS
Tampa, FL
Warwick, RI
Waukesha, WI
Woodland Hills, CA
International Offices
Barcelona, Spain
Birmingham, U.K.
Bristol, U.K.
Cambridge, U.K.
Hong Kong
Leeds, U.K.
London, U.K.
Madrid, Spain
Montreal, QC
Munich, Germany
Reigate, U.K.
Rotterdam, Netherlands
Singapore, Singapore
Stockholm, Sweden
Toronto, ON
Vancouver, BC
Employees: 2,666
GWP / Headcount: $0.9M
# of Offices: 37
(1)
13
A combined underwriting platform with the breadth and scope necessary to compete globally
(1) Excludes Markel Ventures offices. |
 High Quality
Investment Portfolio Total Portfolio of $9.2bn
Investments per Markel share: $954
Total Portfolio of $8.2bn
Investments per Alterra share: $85
(3)
14
Equities
$2,341
Fixed
$5,281
Cash & ST
$1,564
(1) Per
share
calculations
based
upon
shares
outstanding
excluding
any
dilutive
impact
of
options.
Based
on
Markel
closing
stock
price
of
$486.05
as
of
December
18,
2012.
(2) Excludes purchase accounting adjustments.
(3) Excludes $1.0bn of cash used in transaction.
Other
$377
Fixed
$7,137
Cash & ST
$652
Total Portfolio of $16.4bn
Investments per Markel share: $1,165
Fixed
$12,418
Cash & ST
$1,216
Other
$377
Equities
$2,341
2%
(1,2)
(1)
(1)
As of 9/30/12
Pro Forma 9/30/12
62% of
shareholders
equity
No direct
equity
investments
39% of pro
forma
shareholders
equity
25%
57%
17%
87%
8%
5%
14%
76%
7% |
 A Winning
Combination Leading franchise in global specialty insurance and investments
Disciplined underwriting combined with successful investing
Cultural fit dedicated to underwriting excellence
Successful track record of managing investments on total return basis
Diversified
portfolio
of
business
–
product line, geography and distribution
Enhanced market position
Experienced management team
Long-term growth in per share value
15 |
 16
Additional information about the proposed merger and where to find it:
This document relates to a proposed transaction between Markel and Alterra that will become the
subject of a registration statement, which will include a joint proxy
statement/prospectus, to be filed by Markel with the SEC. This document is not a substitute for the joint proxy
statement/prospectus that Markel will file with the SEC or any other document that Markel or
Alterra may file with the SEC or Markel or Alterra may send to its shareholders in
connection with the proposed transaction. INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE JOINT
PROXY
STATEMENT/PROSPECTUS
AND
ALL
OTHER
RELEVANT
DOCUMENTS
THAT
MAY BE FILED WITH THE SEC OR SENT TO SHAREHOLDERS,
INCLUDING THE DEFINITIVE JOINT PROXY STATEMENT/PROSPECTUS THAT WILL BE PART OF THE REGISTRATION
STATEMENT ON FORM S-4, AS THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION ABOUT THE PROPOSED TRANSACTION. All documents, when filed, will be available
free of charge at the SEC's website (www.sec.gov) or by directing a request to Markel through Bruce Kay, Investor
Relations, at 804-747-0136 and, in the case of Alterra, by directing a request to
Alterra through Joe Roberts, Chief Financial Officer, or Susan Spivak Bernstein, Senior
Vice President, Investor Relations, at 441-295-8800. Participants in the
solicitation: Alterra
and
Markel
and
their
respective
directors
and
executive
officers
may
be
deemed
to
be
participants
in
any
solicitation
of
proxies from both
Alterra’s
and
Markel’s
shareholders
in
favor
of
the
proposed
transaction.
Information
about Alterra’s directors and executive officers and their
ownership in Alterra common stock is available in the proxy statement dated March 26, 2012 for
Alterra’s 2012 annual general meeting of shareholders.
Information
about
Markel’s
directors
and
executive
officers
and
their
ownership
of
Markel
common
stock is available in the proxy
statement dated March 16, 2012 for Markel’s 2012 annual general meeting of
shareholders. |