UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant
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Filed by a Party other than the Registrant
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to § 240.14a-12
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ALTERRA CAPITAL HOLDINGS LIMITED
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
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No fee required.
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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(1)
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Title of each class of securities to which transaction applies:
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(2)
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Aggregate number of securities to which transaction applies:
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(3)
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on
which the filing fee is calculated and state how it was determined):
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(4)
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Proposed maximum aggregate value of transaction:
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(5)
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Total fee paid:
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¨
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously.
Identify the previous filing by registration statement number, or the form or schedule and the date of its filing.
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(1)
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Amount previously paid:
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(2)
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Form, schedule or registration statement no.:
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SUPPLEMENT NO. 1 TO DEFINITIVE JOINT PROXY STATEMENT/PROSPECTUS
The supplemental information disclosed below should be read in conjunction with the definitive joint proxy statement/prospectus on
Schedule 14A (the definitive joint proxy statement/prospectus) filed with the Securities and Exchange Commission (the SEC) by Alterra Capital Holdings Limited (Alterra or the Company) on
January 18, 2013, relating to the special meeting of stockholders of Alterra to be held on February 26, 2013 at 11:00 a.m. Atlantic time, at the Alterra House, 2 Front Street, Hamilton, HM 11, Bermuda.
At the special meeting, Alterras stockholders will be asked to vote on, among other things, proposals related to the approval
and adoption of the Agreement and Plan of Merger (the merger agreement), dated as of December 18, 2012, among Alterra, Markel Corporation (Markel) and Commonwealth Merger Subsidiary Limited, a Bermuda exempted company
and a direct, wholly owned subsidiary of Markel (Merger Sub), providing for Merger Sub to merge with and into Alterra, with Alterra surviving the merger as a wholly-owned subsidiary of Markel (the merger).
LITIGATION RELATED TO THE MERGER
Alterra stockholder Louisiana Municipal Police Employees Retirement System filed a complaint in the United States District Court for the Southern District of New York, purportedly on behalf of itself and
other stockholders of Alterra, against Alterra, Alterras board of directors, Markel, and Merger Sub. On February 15, 2013, the defendants entered into a memorandum of understanding with the plaintiff regarding the settlement of this action. In
connection with the settlement, Alterra agreed to make certain supplemental disclosures to its stockholders. The Company believes that the claims in this action are without merit and that no further disclosure is required to supplement the
definitive joint proxy statement/prospectus under applicable laws; however, to avoid the risk that the action may delay or otherwise adversely affect the consummation of the merger and to minimize the expense of defending such action, Alterra is
voluntarily making the supplemental disclosures set forth below.
The memorandum of understanding contemplates that the
parties will enter into a stipulation of settlement. The stipulation of settlement will be subject to customary conditions, including court approval following notice to Alterras stockholders. In the event that the parties enter into a
stipulation of settlement, a hearing will be scheduled at which the United States District Court for the Southern District of New York will consider the fairness, reasonableness and adequacy of the settlement. If the settlement is finally approved
by the court, it will resolve and release all claims in all actions that were or could have been brought challenging any aspect of the proposed merger, the merger agreement and any disclosure made in connection therewith (excluding claims for
dissenters rights under Bermuda Law), pursuant to terms that will be disclosed to Alterras stockholders prior to final approval of the settlement. In addition, in connection with the settlement, the parties contemplate that
plaintiffs counsel will file a petition in the United States District Court for the Southern District of New York for an award of attorneys fees and expenses to be paid by Alterra or its successor. The settlement will not affect the
consideration that Alterras stockholders are entitled to receive in the merger. There can be no assurance that the parties will enter into a stipulation of settlement, or that the court will approve any proposed settlement. In such event, the
proposed settlement as contemplated by the memorandum of understanding may be terminated.
1
SUPPLEMENTAL DISCLOSURES
This supplemental information should be read in conjunction with the definitive joint proxy statement/prospectus, which should be read in its entirety. Defined terms used but not defined herein have the
meanings set forth in the definitive joint proxy statement/prospectus. New text is underlined.
The MergerBackground of the Merger
The following disclosure supplements and restates the sixth full paragraph on page 40 of the definitive joint proxy
statement/prospectus
.
On August 28, 2012, Mike OReilly, Chairman of Alterras board of directors, and
Mr. Becker met with Messrs. Markel, Whitt, Gayner and Kirshner, at Markels offices in Richmond, Virginia, at which meeting Markel proposed a non-binding draft term sheet, which included among other things, a proposed form of transaction,
valuation, form of consideration, tax treatment of the proposed acquisition, board representation, closing conditions and certain provisions intended to address deal certainty.
The August 28 Markel term sheet proposed that the consideration
payable to holders of Alterra common shares, on a fully-diluted basis, be equal to approximately 1.0x the June 30, 2012 GAAP book value of Alterra (as estimated by Alterra), and that the form of consideration would be 25-30% in cash and 70-75%
in Markel common stock. The August 28 Markel term sheet further proposed that the merger agreement would include customary deal protection and fiduciary out provisions, including no-shop and no talk covenants with a customary fiduciary out and
a break-up fee equal to 3.0% of the aggregate merger consideration. In addition, the August 28 Markel term sheet noted that two to three Alterra directors would be added to the Markel board of directors. Under this term sheet, the anticipated
merger agreement was contemplated to be signed by November 1, 2012.
The following disclosure supplements and restates the ninth
full paragraph on page 40 of the definitive joint proxy statement/prospectus
.
On September 6, 2012, Alterra, with
input from its financial and outside legal advisors, presented proposed changes to Markels non-binding term sheet, including changes to valuation and board representation.
Among other provisions, the September 6 Alterra term sheet
proposed that the consideration to be paid to the holders of Alterra common shares, on a fully diluted basis, be equal to approximately 1.2x the June 30, 2012 GAAP book value of Alterra. The September 6 Alterra term sheet indicated that a
break-up fee of up to 3.0% of the aggregate merger consideration was subject to the review of counsel. In addition, the September 6 Alterra term sheet proposed that four Alterra directors would be added to the Markel board of directors. This
term sheet also amended the anticipated signing date of the merger agreement to mid-October 2012.
The following disclosure supplements
and restates the fifth full paragraph on page 41 of the definitive joint proxy statement/prospectus
.
On November 13,
2012, Mr. Becker provided Mr. Markel with a further revised non-binding term sheet that reflected the November 12, 2012, discussions and suggested an accelerated timeline should the parties agree to proceed.
The November 13
Alterra term sheet proposed that the consideration to be paid to the holders of Alterra common shares, on a fully-diluted basis, be equal to approximately 1.1x the estimated December 31, 2012 GAAP book value of Alterra (before taking into
account any Alterra losses from Superstorm Sandy), and contemplated that the cash paid to Alterras shareholders would be $1 billion to $1.3 billion. The November 13 Alterra term sheet indicated that the break-up fee equal to 3.0% of the
aggregate merger consideration was still subject to negotiation and that three Alterra directors would be added to the Markel board of directors.
The following disclosure supplements and restates the fourth full paragraph on page 42 of the definitive joint proxy statement/prospectus
.
On December 12, 2012, the Alterra board of directors held an informational call with Alterras senior management, BofA Merrill
Lynch and Akin Gump. Mr. Becker provided an update on recent discussions and an overview of the revised term sheet. BofA Merrill Lynch provided the Alterra board of directors with certain financial analysis.
The December 12 Alterra term
sheet proposed that the consideration to be paid to the holders of Alterra common shares, on a fully-diluted basis, be equal to approximately 1.1x the estimated December 31, 2012 GAAP book value of Alterra (after taking into account
Alterras estimated net losses from Superstorm Sandy), and contemplated that the cash paid to Alterras shareholders would be $1 billion. The November 13 Alterra term sheet accepted the 3.0% break-up fee equal, and indicated two
Alterra directors would be added to the Markel board of directors.
The MergerOpinion of Merrill Lynch, Pierce, Fenner &
Smith Incorporated, Financial Advisor to AlterraAlterra Financial Analyses
The following disclosure amends and
restates the disclosure under the heading The MergerOpinion of Merrill Lynch, Pierce, Fenner & Smith Incorporated, Financial Advisor to AlterraAlterra Financial Analyses beginning on page 60 of the definitive joint
proxy statement/prospectus
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2
Alterra Financial Analyses
Selected Publicly Traded Companies Analysis.
BofA Merrill Lynch reviewed publicly available financial and stock
market information for Alterra and the following nine publicly traded companies:
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Allied World Assurance Company Holdings, AG;
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Arch Capital Group Ltd.;
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Aspen Insurance Holdings Limited;
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Axis Capital Holdings Limited;
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Endurance Specialty Holdings Ltd.;
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Everest Re Group, Ltd.;
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Platinum Underwriters Holdings, Ltd.; and
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BofA Merrill Lynch reviewed, among other things, earnings per share multiples, based on closing stock prices on December 14, 2012, of the selected publicly traded companies divided by calendar year
2012 and calendar year 2013 estimated fully diluted EPS. BofA Merrill Lynch also reviewed primary book value per share multiples, based on closing stock prices on December 14, 2012 divided by December 31, 2012 estimated primary book value
per share.
The results of these analyses are summarized in the table below:
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Price/2012E
Fully-Diluted
EPS
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Price/2013E
Fully-Diluted
EPS
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Price/Primary
Book Value
per Share
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Allied World Assurance Company Holdings, AG
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11.0x
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11.4x
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0.81x
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Arch Capital Group Ltd.
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15.7x
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14.8x
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1.17x
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Aspen Insurance Holdings Limited
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8.4x
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10.9x
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0.72x
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Axis Capital Holdings Limited
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9.9x
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9.2x
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0.77x
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Endurance Specialty Holdings Ltd.
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18.4x
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9.1x
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0.71x
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Everest Re Group, Ltd.
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7.7x
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7.8x
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0.79x
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PartnerRe Ltd.
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9.0x
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10.3x
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0.80x
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Platinum Underwriters Holdings Ltd
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9.9x
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11.4x
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0.81x
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XL Group plc
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15.3x
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10.4x
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0.70x
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Based upon the multiples of the selected companies above, and BofA Merrill Lynchs professional
judgment and experience,
BofA Merrill Lynch then applied calendar year 2013 EPS multiples of 9.0x to 11.0x derived from the selected publicly traded companies to Alterras calendar year 2013 estimated fully diluted EPS based on both
Alterras management estimates and research analyst estimates and applied December 31, 2012 book value multiples of 0.75x to 0.85x derived from the selected publicly traded companies to Alterras December 31, 2012 estimated
primary book value per share. BofA Merrill Lynch also reviewed trading multiples of Alterra common shares, based on the closing stock price of Alterra common shares on December 14, 2012 compared to calendar year 2013 estimated fully diluted EPS
based on both Alterras management estimates and research analyst estimates and compared to December 31, 2012 estimated fully diluted book value per share based on Alterras management estimates. The indicated trading multiples were 8.5x
2013 estimated fully diluted EPS based on Alterras management estimates, 10.0x 2013 estimated fully diluted EPS based on research analyst estimates and 0.77x December 31, 2012 estimated fully diluted book value based on Alterras
management estimates. Estimated financial data of the selected publicly traded companies were based on publicly available research analysts estimates, and estimated financial data of Alterra were based on the Alterra management forecasts and
publicly available research analysts estimates. This analysis indicated the following approximate implied per share equity value reference ranges for Alterra, as compared to the implied merger consideration:
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Implied Per Share Equity Value Reference Ranges for
Alterra
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Implied Merger
Consideration
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2013E EPS (Alterra Estimates)
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2013E EPS
(Research Analyst Estimates)
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12/31/2012E Book Value
(Alterra
Estimates)
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$23.84 - $29.14
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$20.34 - $24.86
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$22.50 - $25.50
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$30.97
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3
No company used in this analysis is identical or directly comparable to Alterra.
Accordingly, an evaluation of the results of this analysis is not entirely mathematical. Rather, this analysis involves complex considerations and judgments concerning differences in financial and operating characteristics and other factors that
could affect the public trading or other values of the companies to which Alterra was compared.
Selected Precedent
Transactions Analysis
. BofA Merrill Lynch reviewed, to the extent publicly available, financial information relating to seven selected transactions
in the insurance and reinsurance sectors. BofA Merrill Lynch selected these transactions based
on its professional judgment and experience, considering factors such as the financial and operating characteristics of each company. No company or transaction was, however, identical to Alterra or the merger.
BofA Merrill Lynch reviewed transaction values, calculated as the equity value implied for the target company in the selected
transaction, as a multiple of the target companys one-year forward fully diluted EPS and as a multiple of the target companys fully diluted book value for the most recent quarter ending before the date on which the transaction was
announced.
The results of these analyses are summarized in the table below:
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Announcement
Date
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Acquiror
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Target
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Price/
Forward
Earnings
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Price /
Fully-
Diluted
Book Value
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8/30/12
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Validus Holdings, Ltd
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Flagstone Reinsurance Holdings, S.A.
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15.5x
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0.72x
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11/20/11
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Alleghany Corporation
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Transatlantic Holdings Inc.
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11.1x
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0.86x
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3/3/10
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Max Capital Group Ltd.
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Harbor Point Limited
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NA
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0.80x
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9/8/09
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Fairfax Financial Holdings Limited
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OdysseyRe
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16.7x
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1.25x
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7/9/09
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Validus Holdings, Ltd.
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IPC Holdings, Ltd.
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7.1x
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0.84x
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7/4/09
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PartnerRe Ltd.
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Paris RE Holdings Limited
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10.2x
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0.97x
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11/18/05
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Swiss Re
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GE Insurance Solutions
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NA
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0.76x
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Based on the multiples of the selected companies and BofA Merrill Lynchs professional judgment
and experience,
BofA Merrill Lynch then applied one-year forward EPS multiples of 9.0x to 11.0x derived from the selected transactions to Alterras calendar year 2013 estimated fully diluted EPS based on both Alterras management
estimates and research analyst estimates and applied book value multiples of 0.80x to 0.95x derived from the selected transactions to Alterras December 31, 2012 estimated fully diluted book value per share. Estimated financial data of the
selected transactions were based on publicly available information at the time of announcement of the relevant transaction. Estimated financial data of Alterra were based on the Alterra management forecasts and publicly available research
analysts estimates. This analysis indicated the following approximate implied per share equity value reference ranges for Alterra, as compared to the implied merger consideration:
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Implied Per Share Equity Value Reference Ranges for
Alterra
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Implied Merger
Consideration
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2013E EPS
(Alterra Estimates)
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2013E EPS
(Research Analyst Estimates)
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12/31/2012E Book Value
(Alterra
Estimates)
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$23.84 - $29.14
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$20.34 - $24.86
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$23.41 - $27.80
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$30.97
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No company, business or transaction used in this analysis is identical or directly comparable to Alterra
or the merger. Accordingly, an evaluation of the results of this analysis is not entirely mathematical. Rather, this analysis involves complex considerations and judgments concerning differences in financial and operating characteristics and other
factors that could affect the acquisition or other values of the companies, business segments or transactions to which Alterra and the merger were compared.
Discounted Cash Flow Analysis.
BofA Merrill Lynch performed a discounted cash flow analysis of Alterra to calculate the estimated present value of the standalone levered, after-tax free cash flows
that Alterra was forecasted to generate during Alterras fiscal years 2013 through 2017 based on the Alterra management forecasts.
Levered, after-tax free cash flows is defined for this purpose as the portion of cash flows
after the impact of interest expense and taxes that can be distributed to shareholders during Alterras fiscal years 2013 through 2017 based on the Alterra management forecasts.
BofA Merrill Lynch calculated terminal values for Alterra by
applying terminal multiples of 0.80x to 1.00x to Alterras December 31, 2017 estimated book value.
For purposes of its discounted cash flow analysis, BofA Merrill Lynch included the impact of the issuance of shares related to annual
expected stock-based compensation expense.
The cash flows and terminal values were then discounted to present value as of December 31, 2012 using discount rates ranging from 8% to 10%, which were based on an estimate of Alterras cost
of equity. This analysis indicated the following approximate implied per share equity value reference range for Alterra as compared to the implied merger consideration:
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Implied Per Share Equity Value
Reference Range for
Alterra
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Implied Merger Consideration
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$24.17 - $29.49
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$30.97
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4
Markel Financial Analyses
Selected Publicly Traded Companies Analysis.
BofA Merrill Lynch reviewed publicly available financial
and stock market information for Markel and the following eight publicly traded companies:
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Allied World Assurance Company Holdings, AG;
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Arch Capital Group Ltd.;
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Axis Capital Holdings Limited;
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HCC Insurance Holdings, Inc.;
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The Navigators Group, Inc.; and
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W. R. Berkley Corporation.
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BofA Merrill Lynch reviewed, among other things, earnings per share multiples, based on closing stock prices on December 14, 2012, of the selected publicly traded companies divided by calendar year
2012 and calendar year 2013 estimated fully diluted EPS. BofA Merrill Lynch also reviewed book value per share multiples based on closing stock prices on December 14, 2012 divided by December 31, 2012 estimated primary book value per
share.
The results of these analyses are summarized in the table below:
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Price/2012E
Fully-Diluted
EPS
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Price/2013E
Fully-Diluted
EPS
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Price/Primary
Book
Value
per Share
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ACE Limited
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10.5x
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9.9x
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0.98x
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Allied World Assurance Company Holdings, AG
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11.0x
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11.4x
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0.81x
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Arch Capital Group Ltd.
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15.7x
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14.8x
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1.17x
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Axis Capital Holdings Limited
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9.9x
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9.2x
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0.77x
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HCC Insurance Holdings, Inc.
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10.6x
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10.8x
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1.03x
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RLI Corp.
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17.7x
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15.3x
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1.49x
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The Navigators Group, Inc.
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18.7x
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16.1x
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0.81x
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W. R. Berkley Corporation
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15.6x
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13.5x
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1.20x
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Based upon the multiples of the selected companies above, and BofA Merrill Lynchs professional
judgment and experience,
BofA Merrill Lynch then applied calendar year 2013 EPS multiples of 11.0x to 15.0x derived from the selected publicly traded companies to Markels calendar year 2013 estimated fully diluted EPS based on both
Markels management estimates
and research analyst estimates and applied December 31, 2012 book value multiples of 1.10x to 1.40x derived from the selected publicly traded companies to Markels December 31, 2012 estimated
primary book value per share. BofA Merrill Lynch also reviewed trading multiples of Markel common shares, based on the closing stock price of Markel common shares on December 14, 2012 compared to calendar year 2013 estimated fully diluted EPS based
on both Markels management estimates and research analyst estimates and compared to December 31, 2012 estimated fully diluted book value per share. The indicated trading multiples were 20.0x 2013 estimated fully diluted EPS based on
Markels management estimates, 23.8x 2013 estimated fully diluted EPS based on research analyst estimates and 1.23x December 31, 2012 estimated fully diluted book value based on Markels management estimates. Estimated financial data of
the selected publicly traded companies were based on publicly available research analysts estimates, and estimated financial data of Markel were based on the Markel management forecasts and publicly available research analysts estimates.
This analysis indicated the following approximate implied per share equity value reference ranges for Markel, as compared to the closing price of Markel common shares on December 14, 2012:
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Implied Per Share Equity Value Reference Ranges for
Markel
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Closing Trading Price of
Markel Common Stock on
December 14, 2012
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2013E EPS
(Markel Estimates)
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2013E EPS
(Research Analyst Estimates)
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12/31/2012E Book Value
(Markel
Estimates)
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$267.30 - $364.50
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$224.18 - $305.70
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$436.31 - $555.31
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$486.00
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5
No company used in this analysis is identical or directly comparable to Markel. Accordingly,
an evaluation of the results of this analysis is not entirely mathematical. Rather, this analysis involves complex considerations and judgments concerning differences in financial and operating characteristics and other factors that could affect the
public trading or other values of the companies to which Markel was compared.
Discounted Cash Flow Analysis.
BofA
Merrill Lynch performed a discounted cash flow analysis of Markel to calculate the estimated present value of the standalone levered, after-tax free cash flows
that Markel was forecasted to generate during Markels fiscal years 2013
through 2017 based on the Markel management forecasts and such forecasts as adjusted for certain changes made by Alterras management to the assumptions provided by Markels management.
Levered, after-tax free cash flows is
defined for this purpose as the portion of cash flows after the impact of interest expense and taxes that can be distributed to shareholders during Markels fiscal years 2013 through 2017 based on the Markel management forecasts and such
forecasts as adjusted for certain changes made by Alterras management to the assumptions provided by Markels management.
These changes include an increase in the assumed annual appreciation on Markels equity portfolio. BofA
Merrill Lynch calculated terminal values for Markel by applying terminal multiples of 1.10 to 1.30 to Markels December 31, 2017 estimated book value.
For purposes of its discounted cash flow analysis, BofA Merrill Lynch included the
impact of the issuance of shares related to annual expected stock-based compensation expense.
The cash flows and terminal values were then discounted to present value as of December 31, 2012 using discount rates ranging from 6.5% to 8.5%,
which were based on an estimate of Markels cost of equity. This analysis indicated the following approximate implied per share equity value reference ranges for Markel as compared to the closing price of Markel common shares on
December 14, 2012:
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|
|
|
|
Implied Per Share Equity Value
Reference Range for Markel
(Markel Forecasts)
|
|
Implied Per Share Equity Value
Reference Range for Markel
(Adjusted Markel Forecasts)
|
|
Closing Trading Price of Markel Common Stock
on
December 14, 2012
|
$408.71 - $530.06
|
|
$437.66 - $567.61
|
|
$486.00
|
6
PROJECTED FINANCIAL INFORMATION
The following disclosure supplements the definitive joint proxy statement/prospectus.
Certain financial projections prepared by, or as directed by, Markels management and Alterras management were considered by Alterras board of directors in connection with its approval
of, and entry into, the merger agreement. Those financial projections, which we refer to as the
financial projections,
reflect numerous judgments, estimates and assumptions with respect to industry performance, general business,
economic, regulatory, market and financial conditions and other future events, as well as matters specific to Markels and Alterras businesses, all of which are difficult to predict and many of which are beyond the control of Markel or
Alterra. The financial projections are subjective in many respects and are susceptible to multiple interpretations and periodic revisions based on actual experience and business developments. As such, the financial projections constitute
forward-looking information and are subject to risks and uncertainties that could cause actual results to differ materially from the results forecasted in such projections, including the various risks set forth in Markels and Alterras
respective periodic reports and in the
Risk Factors
section of this joint proxy statement/prospectus. See also
Forward-Looking Statements
. There can be no assurance that the projected results will be realized or
that actual results will not be significantly higher or lower than projected. The financial projections cannot be considered a reliable predictor of future results and should not be relied upon as such. The financial projections cover multiple years
and such information by its nature becomes less reliable with each successive year.
The financial projections do not take
into account any circumstances or events occurring after the date they were prepared, including the announcement of the proposed merger. The financial projections do not take into account the effect of any failure to occur of the proposed merger and
should not be viewed as accurate or continuing in that context. See
Risk FactorsRisks Related to the mergerFailure to complete the merger or the fact that the merger is pending could negatively impact the share price of Markel
and Alterra and the future business and financial results of Markel and Alterra
.
The financial projections were
prepared solely for use in connection with assisting in the evaluation of the potential merger and not with a view toward public disclosure or toward complying with generally accepted accounting principles, the published guidelines of the SEC
regarding financial projections or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information. Neither Markels or Alterras independent
registered public accounting firm, nor any other independent accountants, have compiled, examined or performed any procedures with respect to the financial projections included below, nor have they expressed any opinion or any other form of
assurance on such information or its achievability, and they assume no responsibility for, and disclaim any association with, the financial projections.
The inclusion of the financial projections in this supplemental disclosure is not deemed an admission or representation by Alterra that they are viewed by Alterra as material information of Markel or
Alterra or of Markel following the merger. These financial projections are not included in this supplemental disclosure in order to induce any holder of Alterra common shares to vote to approve and adopt the merger agreement and the merger. Neither
Markel nor Alterra intends to update or otherwise revise these financial projections to reflect circumstances existing since their preparation, to reflect the occurrence of unanticipated events even in the event that any or all of the underlying
assumptions are shown to be in error, or to reflect changes in general economic or industry conditions.
In addition, the
Markel financial projections were further adjusted by Alterras management. These adjustments included an increase in the assumed annual appreciation on Markels equity portfolio.
7
Projections Reviewed
. Subject to the foregoing qualifications, among other items, the
net premiums written, total revenues, net operating income and total combined ratio reflected below by fiscal year through the year 2017 for Markel (as adjusted by Alterras management) and Alterra were reviewed by Alterras board of
directors.
Certain Projected Financial Information for Markel
. In addition to the foregoing qualifications, the
following Markel financial projections (as adjusted by Alterras management) include certain judgments by management in how they expect to operate the business. These projections are for illustration purposes and should not be considered an
indication of what Markel may do in the future.
Fiscal year ending December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013E
|
|
|
2014E
|
|
|
2015E
|
|
|
2016E
|
|
|
2017E
|
|
Net premiums written
|
|
$
|
2,526.0
|
|
|
$
|
2,702.8
|
|
|
$
|
2,845.7
|
|
|
$
|
2,999.9
|
|
|
$
|
3,162.5
|
|
|
|
|
|
|
|
Total revenues
|
|
$
|
3,162.7
|
|
|
$
|
3,498.4
|
|
|
$
|
3,690.2
|
|
|
$
|
3,910.2
|
|
|
$
|
4,132.5
|
|
Net operating income
|
|
$
|
235.3
|
|
|
$
|
280.7
|
|
|
$
|
312.0
|
|
|
$
|
359.5
|
|
|
$
|
404.7
|
|
Total combined ratio
|
|
|
95.5
|
%
|
|
|
95.7
|
%
|
|
|
95.1
|
%
|
|
|
94.8
|
%
|
|
|
94.5
|
%
|
Share repurchases/dividends
|
|
$
|
0.0
|
|
|
$
|
0.0
|
|
|
$
|
0.0
|
|
|
$
|
0.0
|
|
|
$
|
0.0
|
|
Stockholders equity
|
|
$
|
4,053.1
|
|
|
$
|
4,333.8
|
|
|
$
|
4,645.7
|
|
|
$
|
5,005.2
|
|
|
$
|
5,409.9
|
|
Certain Projected Financial Information for Alterra
. In addition to the foregoing qualifications,
the following financial projections developed by Alterra include certain judgments by management in how they expect to operate the business. These projections are for illustration purposes and should not be considered an indication of what Alterra
may do in the future.
Fiscal year ending December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013E
|
|
|
2014E
|
|
|
2015E
|
|
|
2016E
|
|
|
2017E
|
|
Net premiums written
|
|
$
|
1,349.9
|
|
|
$
|
1,474.5
|
|
|
$
|
1,540.4
|
|
|
$
|
1,609.2
|
|
|
$
|
1,681.2
|
|
|
|
|
|
|
|
Total revenues
|
|
$
|
1600.1
|
|
|
$
|
1705.6
|
|
|
$
|
1816.4
|
|
|
$
|
1897.4
|
|
|
$
|
1,982.0
|
|
Net operating income
|
|
$
|
253.2
|
|
|
$
|
280.8
|
|
|
$
|
305.5
|
|
|
$
|
326.0
|
|
|
$
|
344.3
|
|
Total combined ratio
|
|
|
89.6
|
%
|
|
|
89.8
|
%
|
|
|
90.1
|
%
|
|
|
90.2
|
%
|
|
|
90.5
|
%
|
Share repurchases/dividends
|
|
$
|
261.1
|
|
|
$
|
263.5
|
|
|
$
|
265.5
|
|
|
$
|
267.1
|
|
|
$
|
268.3
|
|
Stockholders equity
|
|
$
|
2,896.3
|
|
|
$
|
2,937.8
|
|
|
$
|
3,003.2
|
|
|
$
|
3,088.8
|
|
|
$
|
3,192.9
|
|
INFORMATION CONCERNING FORWARD-LOOKING STATEMENTS
This filing 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 respective 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 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.
8
This filing contains certain forward-looking statements within the meaning of the U.S.
federal securities laws. Statements that are not historical facts, including statements about Alterras and Markels beliefs, plans or expectations, are forward-looking statements. These statements are based on Alterras or
Markels 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 filing should not be considered as a representation by Alterra, Markel or any other person that Alterras or
Markels 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 Alterras and Markels 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 partys management may respond differently to any of the aforementioned factors. These risks, as well as other risks associated with the merger, are more fully discussed in the joint proxy statement/prospectus
of Markel and Alterra that has been filed 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.
ADDITIONAL INFORMATION ABOUT THE PROPOSED MERGER AND WHERE TO FIND IT:
This filing relates to a proposed merger between Alterra and Markel. On December 27, 2012, Markel filed with the SEC a registration statement on Form S-4, and on January 18, 2013, Markel and
Alterra each filed the definitive joint proxy statement/prospectus. This filing is not a substitute for the definitive joint proxy statement/prospectus or any other document that Markel or Alterra filed or may file with the SEC or send to its
shareholders in connection with the proposed merger. INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE DEFINITIVE JOINT PROXY STATEMENT/PROSPECTUS AND ALL OTHER RELEVANT DOCUMENTS FILED OR THAT MAY BE FILED WITH THE SEC OR SENT TO SHAREHOLDERS AS
THEY BECOME AVAILABLE BECAUSE THEY CONTAIN OR WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED MERGER. All documents, when filed, will be available free of charge at the SECs website (www.sec.gov) or, in the case of Alterra, by directing
a request to 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.
9
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 Alterras and Markels shareholders in favor of the proposed transaction. Information about Alterras directors and executive officers and their ownership in Alterra common stock is available in the proxy statement dated
March 26, 2012 for Alterras 2012 annual general meeting of shareholders. Information about Markels directors and executive officers and their ownership of Markel common stock is available in the proxy statement dated March 16,
2012 for Markels 2012 annual meeting of shareholders.
10
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