MOODY'S UPGRADES GUARANTEED SENIOR DEBT RATING OF TERRA NOVA (UK) HOLDINGS PLC
New York, 05-09-96 -- Moody's Investors Service has upgraded its rating on the guaranteed senior debt of Terra Nova (UK) Holdings plc to Baa3 from Ba2. This debt is guaranteed by the issuer's parent, Terra Nova (Bermuda) Holdings Ltd. The rating action follows the recent successful ordinary stock offering by Terra Nova (Bermuda) Holdings Ltd., which raised in excess of $120 million in new equity in April 1996. The rating agency added that the insurance group's good financial performance in 1995 and the first quarter of 1996, the elimination of the minority interest in subsidiaries and of the convertible preferred stock, and the holding company's completion of an equity rights offering in October 1995, which raised approximately $50 million of new equity capital, were also significant contributing factors to the rating upgrade.
Expanding on its rating decision, Moody's noted that Terra Nova continues to successfully reduce its exposure to reinsurance recoverables on business written in prior years, and that, thus far, reserves for such exposures have to date proved sufficient. Furthermore, the rating agency noted that Terra Nova's recent acquistion of Octavian Syndicate Management Limited, a manager of five Lloyd's syndicates, should provide the insurance group with additional business and economic opportunity, through both fee and underwriting income, without the burden of additional exposures from business written by Lloyd's in prior years. Moody's cautioned, however, that price softening in certain business lines in the London and global reinsurance markets could constrain group earnings growth in the intermediate term.
Terra Nova (Bermuda) Holdings Ltd., is engaged in property, casualty, marine and aviation insurance and reinsurance through its UK-based Terra Nova Insurance Company, its Bermuda-based Terra Nova (Bermuda) Insurance Company subsidiary, and Octavian Syndicate Management Limited, which manages five Lloyd's syndicates in which the company has a participation. Terra Nova (Bermuda) Holdings Ltd. reported group pre-tax operating income (excluding realized investment gains) from continuing operations of US$53 million in 1995. Adjusted for the recent common stock offering, common equity as of December 31, 1995 was US$349 million.
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