-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WA8/DDlk/w98W0ZhVI/gLLb+vN6Uj77/si8K2veCtQ6RRGXEhd46x+GVzOjzsZFW 9wHbg4I+Nm64MUa205wj3g== 0000916641-98-001137.txt : 19981027 0000916641-98-001137.hdr.sgml : 19981027 ACCESSION NUMBER: 0000916641-98-001137 CONFORMED SUBMISSION TYPE: SC 14D1/A PUBLIC DOCUMENT COUNT: 2 FILED AS OF DATE: 19981026 SROS: NYSE SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: GRYPHON HOLDINGS INC CENTRAL INDEX KEY: 0000912558 STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY INSURANCE [6331] IRS NUMBER: 133287060 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: SEC FILE NUMBER: 005-43193 FILM NUMBER: 98730844 BUSINESS ADDRESS: STREET 1: 30 WALL ST STREET 2: 6TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10005 BUSINESS PHONE: 2128251200 MAIL ADDRESS: STREET 1: 30 WALL ST STREET 2: 6TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10005 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: GRYPHON HOLDINGS INC CENTRAL INDEX KEY: 0000912558 STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY INSURANCE [6331] IRS NUMBER: 133287060 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D1/A SEC ACT: SEC FILE NUMBER: 005-43193 FILM NUMBER: 98730845 BUSINESS ADDRESS: STREET 1: 30 WALL ST STREET 2: 6TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10005 BUSINESS PHONE: 2128251200 MAIL ADDRESS: STREET 1: 30 WALL ST STREET 2: 6TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10005 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: MARKEL CORP CENTRAL INDEX KEY: 0000803509 STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY INSURANCE [6331] IRS NUMBER: 540292420 STATE OF INCORPORATION: VA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D1/A BUSINESS ADDRESS: STREET 1: 4551 COX RD CITY: GLEN ALLEN STATE: VA ZIP: 23060-3382 BUSINESS PHONE: 8047470136 MAIL ADDRESS: STREET 1: P O BOX 2009 CITY: GLEN ALLEN STATE: VA ZIP: 23058-2009 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: MARKEL CORP CENTRAL INDEX KEY: 0000803509 STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY INSURANCE [6331] IRS NUMBER: 540292420 STATE OF INCORPORATION: VA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D1/A BUSINESS ADDRESS: STREET 1: 4551 COX RD CITY: GLEN ALLEN STATE: VA ZIP: 23060-3382 BUSINESS PHONE: 8047470136 MAIL ADDRESS: STREET 1: P O BOX 2009 CITY: GLEN ALLEN STATE: VA ZIP: 23058-2009 SC 14D1/A 1 MARKEL AMENDMENT TO SCHEDULE 14D SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 AMENDMENT NO. 1 TO SCHEDULE 14D-1 TENDER OFFER STATEMENT PURSUANT TO SECTION 14(D)(1) OF THE SECURITIES EXCHANGE ACT OF 1934 AND AMENDMENT NO. 6 TO SCHEDULE 13D UNDER SECURITIES EXCHANGE ACT OF 1934 GRYPHON HOLDINGS INC. (NAME OF SUBJECT COMPANY) MARKEL CORPORATION MG ACQUISITION CORP. (Bidders) COMMON STOCK, PAR VALUE $0.01 PER SHARE (INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS) (Title of Class of Securities) 400515 10 2 (CUSIP Number of Class of Securities) GREGORY B. NEVERS, ESQ. CORPORATE COUNSEL MARKEL CORPORATION 4551 COX ROAD GLEN ALLEN, VIRGINIA 23060-3382 TELEPHONE: (804) 965-1673 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications on Behalf of Bidders) WITH A COPY TO: LESLIE A, GRANDIS, ESQ. McGUIRE, WOODS, BATTLE & BOOTHE LLP 901 EAST CARY STREET. RICHMOND, VIRGINIA 23219 TELEPHONE: (804) 775-1000 This Amendment to Schedule 14D-1 filed by MG Acquisition Corp., a Delaware corporation, a wholly owned subsidiary of Markel Corporation, a Virginia corporation Parent, in connection with its pending tender offer for all outstanding shares of common stock, par value $0.01 per share (the "Common Stock") of Gryphon Holdings Inc., a Delaware corporation (the "Company"), also constitutes an Amendment to Statement on Schedule 13D with respect to the acquisition by Markel Corporation and MG Acquisition Corp. of beneficial ownership of shares of Common Stock of the Company. The Schedule 14D-1 is hereby amended as follows: ITEM 11. MATERIAL TO BE FILED AS EXHIBITS (a)(9) Additional Materials used by Parent in presentations to certain Company Shareholders. SIGNATURE After due inquiry and to the best of its knowledge and belief, the undersigned certifies that the information set forth in this statement is true, complete and correct. Dated: October 26, 1998 MARKEL CORPORATION By: /s/ Steven A. Markel ----------------------- Name: Steven A. Markel Title: Vice Chairman MG AQUISITION CORP. By: /s/ Steven A. Markel ------------------------ Name: Steven A. Markel Title: Vice Chairman EXHIBIT INDEX EXHIBIT EXHIBIT NAME (a)(9) Additional materials provided by Markel Corporation to certain Shareholders of Gryphon Holdings Inc. beginning on October 26, 1998 EX-99 2 EXHIBIT 99 (A)(9) Markel Corporation Acquisition of Gryphon Holdings Inc. Markel Profile o Markel Corporation markets and underwrites specialty insurance products and programs to a variety of niche markets o In each of these markets, we seek to provide quality products and excellent customer service so that we can be a market leader o Our financial goals are to earn consistent underwriting profits and superior investment returns to build shareholder value 1 Markel Overview o Writes specialty insurance products and programs for a variety of niche markets [ ] Fifth largest domestic E&S writer in the U.S. [ ] Also writes professional and product liability, specialty program insurance, specialty personal and commercial lines and brokered excess and surplus lines o Consistently strong underwriting performance [ ] Underwriting profit for the 6th consecutive year and the 11th year out of the past 12 [ ] Positive accident year reserve development in each of the last 10 years [ ] Historical 5 year average combined ratio of 98.4% 2 Gryphon Overview o Primarily writes specialty lines [ ] Focuses on architects' and engineers' professional liability, difference in conditions (primarily earthquakes), and other specialty coverages o Recently acquired First Reinsurance Company of Hartford [ ] Writes professional liability, D&O and some general liability 3 Gryphon Historical Financial Performance o Poor underwriting performance/results over the past several years [ ] Combined ratio of 111.4% for 1997 [ ] 5 year historical average combined ratio of 106.6% [ ] Expense ratio has increased from 31.9% in 1993 to 43.3% in 1997 o Gryphon has demonstrated consistent reserve problems over the past several years [ ] Added to reserves the last 4 quarters and 7 of the last 9 quarters [ ] Most recently increased reserves by $10.6 million in 2nd Quarter 1998 4 Gryphon Growth in Net Income Per Share o Compound growth of -5.9% over the last 5 years o Net loss of $.98 per share for the 6 months ended June 30, 1998 o Due to poor reserving history earnings have been volatile [GRAPH] Net Income Per Share 1993 $1.62 1994 $0.77 1995 $1.69 1996 $0.93 1997 $1.32 5 Gryphon Growth in Book Value Per Share o Compound annual growth of 5.9% over the last 5.5 years [GRAPH] Book Value Per Share 1993 $11.25 1994 $11.51 1995 $14.02 1996 $14.28 1997 $15.63 6/30/98* $14.61 * Pro Forma for the First Reinsurance Company of Hartford transaction and excludes Convertible Preferred Stock carried at $12.507 million 6 Gryphon: History of Not Producing Results "Gryphon President Stephen Crane acknowledges that unless the company `produces value to shareholders, we'll be vulnerable' to a buyout... But he's confident that `we'll produce higher results this year.' Crane says the disappointments of 1996 are behind the company: It is positioned for improved profitability in 1997." -Business Week July 14, 1997 7 Gryphon: History of Not Producing Results Stephen Crane "I am writing to you following an eventful and tumultuous period in which we have encountered some of the harsh realities of the insurance marketplace..." "There are profound cyclical and secular changes occurring in the specialty property-casualty marketplace, and a small company like Gryphon cannot afford to be a passive observer." -Shareholder Letter 1997 Annual Report Mailed to shareholders on or about April 16, 1998 8 MKL vs. GRYP Comparison 1993-1997 Markel Gryphon ------------------------ --------------------------- 1993 1997 CAGR 1993 1997** CAGR ------- ------ ------- ------- -------- -------- Earnings Per Share (diluted) $4.23 $8.92 20.5% $1.62 $1.27 -5.9% Book Value Per Share 27.83 65.18 23.7% 11.25 15.63 8.6% Invested Assets Per Share 110.27 257.27 23.6% 29.20 46.75 12.5% Stock Price* 38.50 141.00 38.3% 13.00 11.50 -3.0% 5 Year Avg. ROE 16.7% 7.3% 5 Year Avg. Combined Ratio 98.4% 106.6% *Range corresponds to Gryphon IPO (12/21/93) and Markel's first offer (9/01/98) **Before charges of $2.3 million in 1Q 1998 and $10.6 million in 2Q 1998 9 Stock Price Comparison Relative Stock Performance (Gryphon, Markel and the S&P 500) Quarterly from 12/31/93-9/30/98 [GRAPH] Date GRYP MKL SPX - ---- ---- --- --- 31-DEC-93 100.0% 100.0% 100.0% 31-MAR-94 108.1% 106.7% 95.6% 30-JUNE-94 108.1% 101.0% 95.2% 30-SEP-94 108.1% 104.8% 99.2% 30-DEC-94 96.4% 105.4% 98.5% 31-MAR-95 99.1% 122.5% 107.3% 30-JUN-95 117.1% 141.6% 116.8% 29-SEP-95 115.3% 186.7% 125.3% 29-DEC-95 138.7% 191.7% 132.0% 28-MAR-96 138.7% 212.1% 139.1% 28-JUN-96 108.1% 236.2% 143.8% 30-SEP-96 99.1% 215.9% 147.3% 31-DEC-96 101.8% 228.6% 158.8% 31-MAR-97 102.7% 280.6% 162.3% 27-JUN-97 109.9% 327.6% 190.2% 30-SEP-97 118.9% 400.0% 203.1% 31-DEC-97 120.7% 396.5% 208.0% 31-MAR-98 128.8% 439.2% 236.2% 30-JUN-98 118.9% 452.1% 243.1% 30-SEP-98 100.9% 387.3% 218.0% 10 Transaction Summary Offering Price: $18.00 per share all cash Premium: [ ] 55% over share price prior to September 1st offer [ ] 29% over share price prior to October 1st offer [ ] 1.23x Price/Book (6/30 - pro forma) [ ] 13.1x Price/1999E earnings o No financing contingency 11 Specialty Industry Comparison Price/1999E Price/Book Company Earnings (6/30) - ------------ ----------- ---------- Gryphon@$18.00 13.1x 1.23x Acceptance 7.4x 1.08x W.R. Berkley 10.7 0.94 Executive Risk 10.6 1.70 Frontier 7.6 0.82 Gainsco 12.9 1.21 HCC 11.5 2.33 Navigators 9.6 0.87 NYMAGIC 10.7 0.94 Orion Capital 9.0 1.18 Penn-America 8.3 0.85 RLI 11.2 1.22 MEDIAN 10.6x 1.08x * Price as of 10/23/98; earnings estimates from IBES 12 Markel's Transaction Rationale o Gryphon's specialty niches in E&S lines are complementary to Markel's E&S business [ ] Strong underwriting capabilities in select niches [ ] Markel can avoid certain unprofitable lines and create a culture focused on achieving underwriting profitability o Markel can realize value through expense savings [ ] Elimination of corporate overhead [ ] Reduction of administration and data processing costs 13 Rationale for Gryphon's Shareholders o Markel's all-cash $18.00 per share offer is very fair and generous [ ] Gryphon has produced consistently poor operating results and failed to maximize value for shareholders [ ] In the current environment, Gryphon is highly vulnerable to losing market share because of a lack of size and poor operating performance [ ] Gryphon's consistently poor reserving history raises questions about adequacy of loss reserves o Markel provides the financial stability and leadership that few, if any, insurance companies could offer to Gryphon's clients and employees 14 -----END PRIVACY-ENHANCED MESSAGE-----