<PAGE>

                                 UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                   FORM 10-Q

                                   (Mark One)

  [X]             QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
                    OF THE SECURITIES EXCHANGE ACT OF 1934

               For the quarterly period ended September 30, 1999

                                      OR

  [ ]             TRANSITION REPORT UNDER SECTION 13 OR 15(d)
                    OF THE SECURITIES EXCHANGE ACT OF 1934


            For the transition period from _________ to __________


                        Commission File number  1-13832


                      TERRA NOVA (BERMUDA) HOLDINGS LTD.
            (Exact name of registrant as specified in its charter)

               Bermuda                                    N/A
               -------                                    ---
     (State or other jurisdiction of                (I.R.S. Employer
      incorporation or organisation)               Identification No)

                                Richmond House
                             12 Par La Ville Road
                                 Hamilton HM08
                                    Bermuda
             -----------------------------------------------------
                   (Address of principal executive offices)

                           Telephone: (441) 292 7731
             -----------------------------------------------------
              (Registrants telephone number, including area code)

                                      N/A
       (Former name, former address and former fiscal year, if changed
                              since last report)


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.


                        YES        X             NO
                            ----------------        -----------------

The number of registrant's ordinary shares ($5.80 par value) outstanding on
November 15, 1999 was 25,367,809.
<PAGE>

                      TERRA NOVA (BERMUDA) HOLDINGS LTD.
                               AND SUBSIDIARIES

                              INDEX TO FORM 10-Q
<TABLE>
<CAPTION>

                                                                                                                      Page No.
                                                                                                                      --------
<S>                                                                                                                   <C>
Part I - FINANCIAL INFORMATION
------------------------------

 Item 1.              Financial Statements:

                      Consolidated Balance Sheets
                         September 30, 1999 (Unaudited) and December 31, 1998 (Audited)                                1

                      Consolidated Statements of Operations (Unaudited)
                         Three Months Ended September 30, 1999 and 1998
                         Nine Months Ended September 30, 1999 and 1998                                                 2

                      Consolidated Statements of Comprehensive Income (Unaudited)
                         Three Months Ended September 30, 1999 and 1998
                         Nine Months Ended September 30, 1999 and 1998                                                 3

                      Consolidated Statements of Shareholders' Equity (Unaudited)
                         Nine Months Ended September 30, 1999 and 1998                                                 4

                      Consolidated Statements of Cash Flows (Unaudited)
                         Nine Months Ended September 30, 1999 and 1998                                                 5

                      Notes to the Interim Consolidated Financial Statements (Unaudited)                               6


 Item 2.              Management's Discussion and Analysis of Financial Condition
                      and Results of Operations                                                                       11


 Item 2A.             Quantitative and Qualitative Disclosure about Market Risk                                       19


Part II - OTHER INFORMATION
---------------------------

 Item 6.              Exhibits and Reports on Form 8-K                                                                20

 Signatures                                                                                                           21
</TABLE>
<PAGE>

                      TERRA NOVA (BERMUDA) HOLDINGS LTD.
                               AND SUBSIDIARIES
                          Consolidated Balance Sheets
                            (dollars in thousands)
<TABLE>
<CAPTION>
                                                                                At September 30,     At December 31,
                                                                                     1999                 1998
                                                                                ---------------      ----------------
                                                                                 (Unaudited)            (Audited)
<S>                                                                             <C>                  <C>
                                  ASSETS
Investments, available for sale, at fair value:
      Fixed maturities:
           Bonds (amortized cost $1,324,177 and $1,374,272, respectively)           $1,313,815            $1,446,621
      Common stocks (cost $91,024 and $56,924, respectively)                            96,035                88,022
                                                                                ---------------      ----------------
           Total investments                                                         1,409,850             1,534,643
Cash and cash equivalents                                                               87,486                40,394
Accrued investment income                                                               27,397                30,015
Insurance balances receivable                                                          151,329                81,634
Reinsurance recoverable on paid losses                                                  53,650                45,882
Reinsurance recoverable on unpaid losses                                               248,583               226,099
Accrued premium income                                                                 302,877               283,383
Prepaid reinsurance premiums                                                            93,150                37,472
Deferred acquisition costs                                                             133,386               107,607
Deferred income taxes                                                                    5,339                     -
Other assets                                                                            94,695                92,243
                                                                                ---------------      ----------------
           Total assets                                                             $2,607,742            $2,479,372
                                                                                ===============      ================

                               LIABILITIES
Unpaid losses and loss adjustment expenses                                          $1,216,494            $1,209,003
Unearned premiums                                                                      537,235               401,002
Insurance balances payable                                                              61,442                23,941
Income taxes payable                                                                    12,489                 4,228
Deferred income taxes                                                                        -                27,450
Long-term debt                                                                         175,000               175,000
Other liabilities                                                                       79,068                67,886
                                                                                ---------------      ----------------
           Total liabilities                                                         2,081,728             1,908,510
                                                                                ===============      ================

                           SHAREHOLDERS' EQUITY
Common shares
"A" ordinary shares, 75,000,000 authorized, $5.80 par value
      (24,348,192 issued and outstanding; 1998: 24,172,717)                            141,218               140,202
"B" ordinary shares, convertible, 10,000,000 authorized, $5.80 par value
      (1,796,217 issued and outstanding; 1998: 1,796,217)                               10,418                10,418
Stock held in Trust, at cost                                                           (16,787)              (12,900)
Deferred equity compensation                                                             7,698                 4,623
Additional capital                                                                     113,856               111,727
Retained earnings                                                                      277,866               236,292
Accumulated other comprehensive income                                                  (8,255)               80,500
                                                                                ---------------      ----------------
           Total shareholders' equity                                                  526,014               570,862
                                                                                ---------------      ----------------

                                                                                ---------------      ----------------
           Total liabilities and shareholders' equity                               $2,607,742            $2,479,372
                                                                                ===============      ================

</TABLE>
   See accompanying notes to the interim consolidated financial statements.

                                       1
<PAGE>

                      TERRA NOVA (BERMUDA) HOLDINGS LTD.
                               AND SUBSIDIARIES
                     Consolidated Statements of Operations
                                  (Unaudited)
                  (dollars in thousands except share amounts)
<TABLE>
<CAPTION>
                                                                          Three Months Ended             Nine Months Ended
                                                                             September 30,                  September 30,
                                                                      ---------------------------   ---------------------------
                                                                         1999           1998           1999           1998
                                                                      -----------    ------------   ------------   ------------
<S>                                                                   <C>            <C>            <C>            <C>
Revenues
        Net written premiums                                            $125,091        $115,879       $556,196       $506,828
        Decrease (increase) in unearned premiums                          37,882          13,518        (96,825)      (128,139)
                                                                      ===========    ============   ============   ============
        Net earned premiums                                              162,973         129,397        459,371        378,689
        Net investment income                                             23,289          23,250         69,745         69,513
        Realized net capital (losses) gains on sales of investments       (1,654)          1,374         29,626         15,932
        Foreign exchange gains (losses)                                      989             (62)           408            244
        Agency income                                                      2,095           4,620         11,577         15,104
                                                                      -----------    ------------   ------------   ------------
                     Total revenues                                      187,692         158,579        570,727        479,482
                                                                      -----------    ------------   ------------   ------------

Expenses
        Losses and loss adjustment expenses, net                         112,063          80,743        313,934        242,865
        Acquisition costs                                                 55,597          42,295        170,665        117,460
        Other operating expenses                                           4,444           3,757         16,966         12,883
        Interest expense                                                   3,100           3,100          9,300         10,597
        Agency expense                                                       770           3,507         10,003         11,972
        Other expenses                                                     1,566           1,232          5,947          4,455
                                                                      -----------    ------------   ------------   ------------
                     Total expenses                                      177,540         134,634        526,815        400,232
                                                                      ===========    ============   ============   ============

Income from operations before income tax                                  10,152          23,945         43,912         79,250
Income tax (benefit) expense                                              (1,816)          4,174         (2,355)        14,456
                                                                      -----------    ------------   ------------   ------------
Net income before extraordinary charge                                   $11,968         $19,771        $46,267        $64,794
                                                                      ===========    ============   ============   ============

Extraordinary charge after tax                                                 -               -              -         11,641
                                                                      -----------    ------------   ------------   ------------
Net income                                                               $11,968         $19,771        $46,267        $53,153
                                                                      ===========    ============   ============   ============

Basic earnings per common share
        Net income before extraordinary charge                             $0.47           $0.78          $1.83          $2.55
        Extraordinary charge                                                   -               -              -          (0.46)
                                                                      -----------    ------------   ------------   ------------
        Net income                                                         $0.47           $0.78          $1.83          $2.09
                                                                      ===========    ============   ============   ============

Diluted earnings per common share
        Net income before extraordinary charge                             $0.45           $0.75          $1.77          $2.48
        Extraordinary charge                                                   -               -              -          (0.45)
                                                                      -----------    ------------   ------------   ------------
        Net income                                                         $0.45           $0.75          $1.77          $2.03
                                                                      ===========    ============   ============   ============
</TABLE>

   See accompanying notes to the interim consolidated financial statements.

                                       2
<PAGE>

                      TERRA NOVA (BERMUDA) HOLDINGS LTD.
                               AND SUBSIDIARIES
                Consolidated Statements of Comprehensive Income
                                  (Unaudited)
                            (dollars in thousands)
<TABLE>
<CAPTION>
                                                                          Three Months Ended             Nine Months Ended
                                                                             September 30,                  September 30,
                                                                      ---------------------------   ---------------------------
                                                                         1999           1998           1999           1998
                                                                      -----------    ------------   ------------   ------------
<S>                                                                   <C>            <C>            <C>            <C>
Net income                                                               $11,968         $19,771        $46,267        $53,153
                                                                      -----------    ------------   ------------   ------------

Other comprehensive (loss) income:

Unrealized (depreciation) appreciation of investments before tax         (23,499)         28,151        (79,172)        44,807
Tax benefit (expense)                                                      3,271          (4,569)        14,766         (7,948)
                                                                      -----------    ------------   ------------   ------------
Unrealized (depreciation) appreciation of investments after tax          (20,228)         23,582        (64,406)        36,859
                                                                      -----------    ------------   ------------   ------------

Less:   Reclassification adjustment for gains included
        in net income before tax                                           1,654          (1,374)       (29,626)       (15,932)
        Tax expense                                                         (248)           (208)         6,755          3,433
                                                                      -----------    ------------   ------------   ------------
        Reclassification adjustment for gains included
        in net income after tax                                            1,406          (1,582)       (22,871)       (12,499)
                                                                      -----------    ------------   ------------   ------------

Currency translation adjustments                                          (1,188)            111         (1,478)           176

                                                                      -----------    ------------   ------------   ------------
Other comprehensive (loss) income:                                       (20,010)         22,111        (88,755)        24,536
                                                                      -----------    ------------   ------------   ------------

                                                                      -----------    ------------   ------------   ------------
Comprehensive (loss) income                                              $(8,042)        $41,882       $(42,488)       $77,689
                                                                      ===========    ============   ============   ============
</TABLE>

   See accompanying notes to the interim consolidated financial statements.

                                       3
<PAGE>

                      TERRA NOVA (BERMUDA) HOLDINGS LTD.
                               AND SUBSIDIARIES
                Consolidated Statements of Shareholders' Equity
                                  (Unaudited)
                            (dollars in thousands)
<TABLE>
<CAPTION>
                                                                                       Nine Months Ended
                                                                                         September 30,
                                                                               -----------------------------------
                                                                                   1999                 1998
                                                                               --------------      ---------------
<S>                                                                            <C>                 <C>
Common "A" shares:
              Balance, beginning of period                                          $140,202             $139,724
              Exercise of stock options                                                1,016                  460
                                                                               --------------      ---------------
                          Balance, end of period                                     141,218              140,184
                                                                               --------------      ---------------

Common "B" shares:
              Balance, beginning and end of period                                    10,418               10,418
                                                                               --------------      ---------------

Stock held in Trust, at cost:
              Balance, beginning of period                                           (12,900)              (9,500)
              Repurchased during the period                                           (3,887)                   -
                                                                               --------------      ---------------
                          Balance, end of period                                     (16,787)              (9,500)
                                                                               --------------      ---------------

Deferred equity compensation:
              Balance, beginning of period                                             4,623                3,275
              Stock option compensation expense                                        3,075                3,075
                                                                               --------------      ---------------
                          Balance, end of period                                       7,698                6,350
                                                                               --------------      ---------------

Additional capital:
              Balance, beginning of period                                           111,727              111,568
              Options exercised during period                                          2,129                  158
                                                                               --------------      ---------------
                          Balance, end of period                                     113,856              111,726
                                                                               --------------      ---------------

Retained earnings:
              Balance, beginning of period                                           236,292              169,861
              Net income                                                              46,267               53,153
              Dividends paid on ordinary shares                                       (4,693)              (4,424)
                                                                               --------------      ---------------
                          Balance, end of period                                     277,866              218,590
                                                                               --------------      ---------------

Accumulated other comprehensive income:
              Balance, beginning of period                                            80,500               56,542
              Unrealized depreciation of investments, net of tax                     (87,277)              24,360
              Currency translation adjustments                                        (1,478)                 176
                                                                               --------------      ---------------
                          Balance, end of period                                      (8,255)              81,078
                                                                               --------------      ---------------

                                                                               --------------      ---------------
                          Total shareholders' equity                                $526,014             $558,846
                                                                               ==============      ===============
</TABLE>
   See accompanying notes to the interim consolidated financial statements.

                                       4
<PAGE>

                      TERRA NOVA (BERMUDA) HOLDINGS LTD.
                               AND SUBSIDIARIES
                     Consolidated Statements of Cash Flows
                                  (Unaudited)
                            (dollars in thousands)
<TABLE>
<CAPTION>
                                                                                                      Nine Months Ended
                                                                                                        September 30,
                                                                                             -------------------------------------
                                                                                                  1999                  1998
                                                                                             ---------------       ---------------
<S>                                                                                          <C>                   <C>
Cash flows from operating activities:
            Net income                                                                              $46,267               $53,153

Adjustments to reconcile net income to net cash and cash equivalents provided
            by operating activities:
            Amortization of goodwill                                                                  3,184                   695
            Extraordinary charge                                                                          -                16,871
            Stock option compensation expense                                                         2,756                 3,075
            Realized net capital gains                                                              (29,627)              (15,932)
            Change in unpaid losses and loss adjustment expenses                                     19,824                 1,717
            Change in unearned premiums and prepaid reinsurance                                      80,555               128,144
            Change in insurance balances payable                                                     37,501                13,439
            Change in insurance balances receivable, accrued premium income and
                reinsurance recoverable on paid and unpaid losses                                  (118,824)             (123,615)
            Change in deferred acquisition costs                                                    (25,781)              (43,275)
            Change in accrued investment income                                                       2,617                (3,673)
            Change in current and deferred income taxes                                              (5,856)                2,125
            Change in other assets and liabilities, net                                              (1,786)              (21,041)
                                                                                             ---------------       ---------------
                    Total adjustments                                                               (35,437)              (41,470)
                                                                                             ---------------       ---------------
                    Net cash and cash equivalents provided by operating activities                   10,830                11,683
                                                                                             ---------------       ---------------
Cash flows from investing activities:
            Proceeds of fixed maturities matured                                                      9,170                37,057
            Proceeds of fixed maturities sold                                                       274,831               339,000
            Proceeds of equity securities sold                                                      152,533               114,041
            Purchase of fixed maturities                                                           (240,684)             (439,698)
            Purchase of equity securities                                                          (154,134)              (94,612)
                                                                                             ---------------       ---------------
                    Net cash and cash equivalents provided by (used in) operating activities         41,716               (44,212)
                                                                                             ---------------       ---------------
Cash flows from financing activities:
            Ordinary dividends paid to stockholders                                                  (4,694)               (4,412)
            Redemption of public debt                                                                     -              (113,053)
            Proceeds from public debt offering                                                            -                99,899
            Payment of fees for financing public debt offering                                            -                  (913)
            Repurchases of stock                                                                     (3,887)                    -
            Proceeds from exercise of stock options                                                   3,145                   618
                                                                                             ---------------       ---------------
                    Net cash and cash equivalents used in financing activities                       (5,436)              (17,861)
                                                                                             ---------------       ---------------
Change in cash and cash equivalents                                                                  47,110               (50,390)
Exchange on foreign currency cash balances                                                              (18)                  653
Cash and cash equivalents at beginning of period                                                     40,394               109,864
                                                                                             ---------------       ---------------
Cash and cash equivalents at end of period                                                          $87,486               $60,127
                                                                                             ===============       ===============

Supplemental disclosure of cash flow information
            Income taxes (refunded) paid                                                              $(250)               $4,389
                                                                                             ===============       ===============
            Interest paid                                                                            $8,900               $14,638
                                                                                             ===============       ===============
</TABLE>
   See accompanying notes to the interim consolidated financial statements.

                                       5
<PAGE>

                       TERRA NOVA (BERMUDA) HOLDINGS LTD.
                                AND SUBSIDIARIES

             Notes to the Interim Consolidated Financial Statements
                                  (Unaudited)

1. Basis of Presentation

  The accompanying interim consolidated financial statements ("Statements")
present information about Terra Nova (Bermuda) Holdings Ltd. (the "Company") and
have been prepared on the basis of United States generally accepted accounting
principles.  All material intercompany transactions and balances have been
eliminated.  In the opinion of management, these unaudited Statements reflect
all adjustments (consisting of normal recurring accruals) necessary for a fair
presentation of the financial position, results of operations and cash flows of
the Company.  The results of operations for interim periods do not necessarily
indicate the results to be expected for the full year.

  These Statements should be read with the audited consolidated financial
statements as of December 31, 1998.


2. Contingencies

  The Company is involved regularly, directly or indirectly, in litigation in
the ordinary course of conducting its insurance and reinsurance business.  In
some cases, plaintiffs seek to establish coverage for liability under
environmental protection laws.  While the nature and extent of insurance and
reinsurance coverage for environmental liability has widened since 1980, in
management's judgment, none of these cases, individually or collectively, is
likely to result in judgments for amounts which, net of losses and loss
adjustment expense liabilities previously established and reinsurance
recoverables which management believes are probable of realization, would have a
material effect on the financial position of the Company, although there is no
assurance as to whether or not such losses will materially affect the Company's
results of operations for any period.


3.  Earnings per Common Share and Common Share Equivalent

  The following earnings per share ("EPS") have been calculated using SFAS
No.128 "Earnings per Share":
<TABLE>
<CAPTION>
                                                                                    Nine Months Ended
                                                                                      September 30,
                                                                           -------------------------------------
                                                                                1999                 1998
                                                                           ---------------      ----------------
                                                                                  (dollars in thousands
                                                                                  except share amounts)
<S>                                                                        <C>                  <C>
Income available to common stockholders                                           $46,267               $53,153
                                                                           ---------------      ----------------

Shares outstanding for basic EPS calculation                                   25,285,940            25,473,657
                                                                           ---------------      ----------------

Basic EPS                                                                           $1.83                 $2.09
                                                                           ===============      ================

Shares added for diluted EPS calculation to reflect the effect of:
    Stock options                                                                 826,488               727,601
                                                                           ---------------      ----------------

Shares outstanding for diluted EPS calculation                                 26,112,428            26,201,258
                                                                           ---------------      ----------------

Diluted EPS                                                                         $1.77                 $2.03
                                                                           ===============      ================
</TABLE>

                                       6
<PAGE>

                       TERRA NOVA (BERMUDA) HOLDINGS LTD.
                                AND SUBSIDIARIES

             Notes to the Interim Consolidated Financial Statements
                                  (Unaudited)

4. Reinsurance

  In the ordinary course of business, the Company cedes reinsurance to other
insurance companies.  Ceded reinsurance arrangements provide greater
diversification of business and limit the net loss potential arising from large
risks.  Certain of these arrangements consist of excess of loss contracts which
protect against losses over stipulated amounts.  Reinsurance is effected under
reinsurance treaties and by negotiation on individual risks.

  The Company cedes reinsurance to and assumes reinsurance from Lloyd's of
London ("Lloyd's") syndicates.  At September 30, 1999, the aggregate exposure on
reinsurance ceded to Lloyd's syndicates for continuing operations, including
estimated reinsurance recoveries for losses incurred but not reported, was about
$75.0 million.

(a)   Net written premiums are comprised of the following:
<TABLE>
<CAPTION>
                                                                                       Nine Months Ended
                                                                                         September 30,
                                                                             --------------------------------------
                                                                                  1999                  1998
                                                                             ----------------      ----------------
                                                                                    (dollars in thousands)
<S>                                                                          <C>                   <C>
Direct business                                                                     $453,430              $296,426
Reinsurance assumed                                                                  256,825               296,945
Reinsurance ceded                                                                   (154,059)              (86,543)
                                                                             ----------------      ----------------
Net written premiums                                                                $556,196              $506,828
                                                                             ================      ================
</TABLE>

(b)   Net earned premiums are comprised of the following:
<TABLE>
<CAPTION>
                                                                                       Nine Months Ended
                                                                                         September 30,
                                                                             --------------------------------------
                                                                                  1999                  1998
                                                                             ----------------      ----------------
                                                                                    (dollars in thousands)
<S>                                                                          <C>                   <C>
Direct business                                                                     $335,599              $205,347
Reinsurance assumed                                                                  237,137               232,416
Reinsurance ceded                                                                   (113,365)              (59,074)
                                                                             ----------------      ----------------
Net earned premiums                                                                 $459,371              $378,689
                                                                             ================      ================
</TABLE>

(c)   Losses and loss adjustment expenses, net, are comprised of the following:
<TABLE>
<CAPTION>
                                                                                       Nine Months Ended
                                                                                         September 30,
                                                                             --------------------------------------
                                                                                  1999                  1998
                                                                             ----------------      ----------------
                                                                                    (dollars in thousands)
<S>                                                                          <C>                   <C>
Losses and loss adjustment expenses                                                 $411,488              $298,046
Reinsurance ceded                                                                    (97,554)              (55,181)
                                                                             ----------------      ----------------
Losses and loss adjustment expenses, net                                            $313,934              $242,865
                                                                             ================      ================
</TABLE>

                                       7
<PAGE>

                       TERRA NOVA (BERMUDA) HOLDINGS LTD.
                                AND SUBSIDIARIES

             Notes to the Interim Consolidated Financial Statements
                                  (Unaudited)

5.  Business Segments

  The Company's core operations are conducted through four reportable segments:
Terra Nova Insurance Company Limited ("Terra Nova"); Terra Nova (Bermuda)
Insurance Company Ltd. ("Terra Nova (Bermuda)"); Terra Nova Capital Limited
("Terra Nova Capital") and Compagnie de Reassurance d'Ile de France
("Corifrance").  The segments are strategic business units that operate in
different markets.
<TABLE>
<CAPTION>
                                                       Three months ended September 30, 1999
                           -----------------------------------------------------------------------------------------------
                             Terra Nova           Terra Nova         Terra Nova         Corifrance             Total
                                                  (Bermuda)            Capital
                                                                (dollars in thousands)
<S>                        <C>                  <C>                <C>                <C>                 <C>
Net earned premiums                $58,518             $10,928             $88,523             $5,004            $162,973
                           ----------------     ---------------    ----------------   ----------------    ----------------
Segment profit (loss)                4,968              14,902             (10,430)               881              10,321
                           ----------------     ---------------    ----------------   ----------------    ----------------
Segment assets                   1,317,307             754,385             634,005             91,675           2,797,372
                           ----------------     ---------------    ----------------   ----------------    ----------------
<CAPTION>
                                                       Three months ended September 30, 1999
                           -----------------------------------------------------------------------------------------------
                             Terra Nova           Terra Nova         Terra Nova         Corifrance             Total
                                                  (Bermuda)            Capital
                                                                (dollars in thousands)
<S>                        <C>                  <C>                <C>                <C>                 <C>

Net earned premiums                $68,468              $9,469             $45,762             $5,698            $129,397
                           ----------------     ---------------    ----------------   ----------------    ----------------
Segment profit (loss)               12,203              12,986              (2,926)             3,246              25,509
                           ----------------     ---------------    ----------------   ----------------    ----------------
Segment assets                   1,472,708             624,180             379,008            115,684           2,591,580
                           ----------------     ---------------    ----------------   ----------------    ----------------

<CAPTION>
                                                       Three months ended September 30, 1999
                           -----------------------------------------------------------------------------------------------
                             Terra Nova           Terra Nova         Terra Nova         Corifrance             Total
                                                  (Bermuda)            Capital
                                                                (dollars in thousands)
<S>                        <C>                  <C>                <C>                <C>                 <C>

Net earned premiums               $204,135             $34,165            $207,303            $13,768            $459,371
                           ----------------     ---------------    ----------------   ----------------    ----------------
Segment profit (loss)               56,570              58,385             (60,144)             5,521              60,332
                           ----------------     ---------------    ----------------   ----------------    ----------------
Segment assets                   1,317,307             754,385             634,005             91,675           2,797,372
                           ----------------     ---------------    ----------------   ----------------    ----------------

<CAPTION>
                                                       Three months ended September 30, 1999
                           -----------------------------------------------------------------------------------------------
                             Terra Nova           Terra Nova         Terra Nova         Corifrance             Total
                                                  (Bermuda)            Capital
                                                                (dollars in thousands)
<S>                        <C>                  <C>                <C>                <C>                 <C>

Net earned premiums               $198,980             $39,592            $124,618            $15,499            $378,689
                           ----------------     ---------------    ----------------   ----------------    ----------------
Segment profit                      41,826              34,578               2,539              6,834              85,777
                           ----------------     ---------------    ----------------   ----------------    ----------------
Segment assets                   1,472,708             624,180             379,008            115,684           2,591,580
                           ----------------     ---------------    ----------------   ----------------    ----------------
</TABLE>

  Segment profit or loss is measured by income from operations before income
tax.  All inter-segment revenues have been eliminated on consolidation.

  The Company has changed its basis of segmentation from that used in the 1998
Annual Report on Form 10-K.  The four segments reported in the 1998 Form 10-K
were as follows:

    a)  Marine & Aviation;
    b)  Non-Marine;
    c)  Agency; and
    d)  Corporate.

                                       8
<PAGE>

                       TERRA NOVA (BERMUDA) HOLDINGS LTD.
                                AND SUBSIDIARIES

             Notes to the Interim Consolidated Financial Statements
                                  (Unaudited)

  Management believes the new basis of segmentation most accurately reflects the
Company's operating segments under the definition provided by SFAS No.131.

  A reconciliation of the total reportable segments' profit to the Company's
consolidated income from operations before tax and extraordinary charge is
provided below:

<TABLE>
<CAPTION>
                                                      Three months ended September 30,         Nine months ended September 30,
                                                    --------------------------------------   -------------------------------------
                                                          1999                 1998                1999                1998
                                                                                 (dollars in thousands)
<S>                                                 <C>                  <C>                 <C>                  <C>
Segment profit                                               $10,321              $25,509             $60,332             $85,777
Reconciling item                                                (169)              (1,564)            (16,420)             (6,527)
                                                    -----------------    -----------------   -----------------    ----------------
Income from operations before income tax
    and extraordinary charge                                 $10,152              $23,945             $43,912             $79,250
                                                    =================    =================   =================    ================
</TABLE>

6. Summarized Financial Information for Terra Nova Insurance (UK) Holdings plc
  ("UK Holdings")

  UK Holdings is the issuer of $75 million 7.2% Senior Notes due 2007 and $100
million 7.0% Senior Notes due 2008.  The Notes are guaranteed fully and
unconditionally by the Company.

  Summarized consolidated balance sheet information for UK Holdings as at
September 30, 1999, and December 31, 1998, and summarized consolidated statement
of operations information for the nine months ended September 30, 1999, and
1998, about UK Holdings is set out below.
<TABLE>
<CAPTION>
                                                                                September 30,          December 31,
                                                                                    1999                  1998
                                                                               ----------------      ----------------
                                                                                      (dollars in thousands)
<S>                                                                            <C>                   <C>
Investments and cash                                                                  $845,276              $900,442
Reinsurance recoverable on unpaid losses                                               438,071               459,497
Accrued premium income                                                                 270,926               236,885
Other assets                                                                           521,494               364,172
                                                                               ----------------      ----------------
              Total assets                                                          $2,075,767            $1,960,996
                                                                               ================      ================

Unpaid losses and loss adjustment expenses                                          $1,100,356            $1,093,082
Unearned premiums                                                                      508,257               375,574
Long-term debt                                                                         175,000               175,000
Other liabilities                                                                      139,111               108,250
                                                                               ----------------      ----------------
              Total liabilities                                                      1,922,724             1,751,906
                                                                               ----------------      ----------------
              Total shareholders' equity                                               153,043               209,090
                                                                               ----------------      ----------------
              Total liabilities and shareholders' equity                            $2,075,767            $1,960,996
                                                                               ================      ================
</TABLE>

                                       9
<PAGE>

                       TERRA NOVA (BERMUDA) HOLDINGS LTD.
                                AND SUBSIDIARIES

             Notes to the Interim Consolidated Financial Statements
                                  (Unaudited)
<TABLE>
<CAPTION>
                                                                                 Nine Months Ended September 30,
                                                                                   1999                  1998
                                                                              ---------------       ---------------
                                                                                     (dollars in thousands)
<S>                                                                           <C>                   <C>
Net earned premiums                                                                 $413,690              $327,165
Net investment income                                                                 40,763                43,188
Realized investment gains                                                             22,108                11,074
Foreign exchange (losses) gains                                                          450                   194
Agency income                                                                          9,702                15,104
                                                                              ---------------       ---------------
Total revenues                                                                       486,713               396,725
Underwriting costs and expenses                                                     (499,657)             (352,049)
                                                                              ---------------       ---------------
(Loss) income from operations before income tax                                      (12,944)               44,676
                                                                              ---------------       ---------------
Net (loss) income before extraordinary charge                                       $(10,589)              $30,220
                                                                              ===============       ===============
Extraordinary charge after tax                                                             -               (11,641)
                                                                              ---------------       ---------------
Net income                                                                          $(10,589)              $18,579
                                                                              ===============       ===============
</TABLE>

                                       10
<PAGE>

                       TERRA NOVA (BERMUDA) HOLDINGS LTD.
                                AND SUBSIDIARIES

               Management's discussion and analysis of Financial
                      Condition and Results of Operations

Safe Harbor Disclosure

  The Private Securities Litigation Reform Act of 1995 provides a statutory
"safe harbor" for forward-looking statements.  Any written or oral statements
made by or on behalf of the Company reflect the Company's current views with
respect to future events and financial performance.  These forward-looking
statements are subject to uncertainties and inherent risks that could cause
actual results to differ materially from those contained in any forward-looking
statement.

  The Company has identified certain factors that could cause actual plans or
results to differ substantially from those included in any forward-looking
statements.  These risk factors include, but are not limited to, the following:
(i) uncertainties and changes in government policy and law (both statute and
case law) with respect to the Company, its brokers or customers (for example,
the Company is subjected to taxation in an additional jurisdiction, there is a
change in the way insurance contracts are interpreted by a court of law, etc.);
(ii) uncertainties and changes in regulatory policy and law (for example, the
Company is subjected to insurance regulation in an additional jurisdiction);
(iii) the occurrence of man-made or natural catastrophic events with a frequency
or severity exceeding the estimates of the Company; (iv) the uncertainties of
the reserving process; (v) loss of the services of any of the Company's
executive officers; (vi) the competitive environment in which the Company
operates and related pricing weaknesses in some lines of business; (vii)
changing rates of inflation and other economic conditions; (viii) losses due to
foreign currency exchange rate fluctuations; (ix) ability to collect reinsurance
recoverables; (x) changes in the availability, cost or quality of reinsurance;
(xi) developments in global financial markets that could affect the Company's
investment portfolio; (xii) risks associated with the introduction of new
products and services; (xiii) increased competition on the basis of pricing,
capacity, coverage terms or other factors; (xiv) changes in the distribution or
placement of risks due to increased consolidation of insurance and reinsurance
brokers; (xv) the impact of Year 2000 related issues (for example, the impact on
the Company's technology systems and underwriting exposures);  (xvi) the effects
of mergers, acquisitions and divestitures; (xvii) ineffectiveness or
obsolescence of the Company's business strategy due to changes in present or
future market conditions; and (xviii) the legal environment.

  The Company undertakes no obligation to publicly update or revise any
forward-looking statement, whether as a result of new information, future events
or otherwise. Readers are cautioned not to place undue reliance on any
forward-looking statements, which speak only as at their dates.


The Company

  The following is a discussion of the Company's results of operations,
financial condition, liquidity and capital resources.  All references to the
"Company" are to Terra Nova (Bermuda) Holdings Ltd. (the "Company") and all of
its direct and indirect subsidiaries, including Terra Nova Insurance (UK)
Holdings plc ("UK Holdings"), Terra Nova Insurance Company Limited ("Terra
Nova"), Terra Nova (Bermuda) Insurance Company Ltd. ("Terra Nova (Bermuda)"),
Compagnie de Reassurance d'Ile de France ("Corifrance"), Octavian Syndicate
Management Limited ("Octavian") and Terra Nova Capital Limited ("Terra Nova
Capital").  This discussion should be read with the audited consolidated
financial statements of the Company as of December 31, 1998.


Business Operations

  The Company writes specialty property, casualty, marine and aviation insurance
and reinsurance business through its subsidiaries on a worldwide basis.

                                       11
<PAGE>

                       TERRA NOVA (BERMUDA) HOLDINGS LTD.
                                AND SUBSIDIARIES

               Management's discussion and analysis of Financial
                      Condition and Results of Operations

  The Company has changed its basis of segmentation from that used last year.
The four reportable segments are Terra Nova, Terra Nova (Bermuda), Terra Nova
Capital and Corifrance.  The segments are strategic business units that operate
in different markets.  Terra Nova and the Lloyd's syndicates in which Terra Nova
Capital participates are based in the London Market.  The London Market is
comprised of Lloyd's and companies with underwriting offices close to Lloyd's.
Terra Nova (Bermuda) operates in the Bermuda Market which consists of both
captive and independent companies.  Corifrance is a French reinsurer
specializing in property reinsurance in the European Market.

  The Company's premiums by segment for the three and nine months ended
September 30, 1999, and 1998, and the combined ratio are set out in the
following table:
<TABLE>
<CAPTION>
                                    Three Months Ended September 30,                    Nine Months Ended September 30,
                            ----------------------------------------------     ----------------------------------------------
                               1999                      1998                      1999                     1998
                              Amount      Percent       Amount     Percent        Amount      Percent      Amount     Percent
                            -----------  --------   -----------   --------     -----------  ---------   -----------  --------
                                         (Dollars in thousands)                             (Dollars in thousands)
<S>                         <C>          <C>        <C>           <C>          <C>          <C>         <C>          <C>
Gross Written Premiums
       Terra Nova               $32,916      21.1%      $49,106       39.1%       $240,275       33.8%     $271,010      45.7%
       Terra Nova (Bermuda)       5,202       3.3         4,430        3.5          39,748        5.6        46,576       7.8
       Terra Nova Capital       115,525      74.0        69,209       55.1         409,660       57.7       254,246      42.9
       Corifrance                 2,559       1.6         2,831        2.3          20,572        2.9        21,538       3.6
                            -----------  --------   -----------   --------     -----------  ---------   -----------  --------
                    Total      $156,202     100.0%     $125,576      100.0%       $710,255      100.0%     $593,370     100.0%
                            ===========  ========   ===========   ========     ===========  =========   ===========  ========

Net Written Premiums
       Terra Nova               $31,804      25.4%      $48,321       41.7%       $199,123       35.8%     $245,947      48.5%
       Terra Nova (Bermuda)       7,852       6.3         5,509        4.7          34,932        6.3        44,125       8.7
       Terra Nova Capital        83,088      66.4        59,658       51.5         303,461       54.5       197,762      39.0
       Corifrance                 2,347       1.9         2,392        2.1          18,680        3.4        18,995       3.8
                            -----------  --------   -----------   --------     -----------  ---------   -----------  --------
                    Total      $125,091     100.0%     $115,880      100.0%       $556,196      100.0%     $506,829     100.0%
                            ===========  ========   ===========   ========     ===========  =========   ===========  ========


Net Earned Premiums
       Terra Nova               $58,518      35.9%      $68,468       52.9%       $204,135       44.5%     $198,981      52.5%
       Terra Nova (Bermuda)      10,928       6.7         9,469        7.3          34,165        7.4        39,592      10.5
       Terra Nova Capital        88,523      54.3        45,762       35.4         207,303       45.1       124,618      32.9
       Corifrance                 5,004       3.1         5,698        4.4          13,768        3.0        15,499       4.1
                            -----------  --------   -----------   --------     -----------  ---------   -----------  --------
                    Total      $162,973     100.0%     $129,397      100.0%       $459,371      100.0%     $378,690     100.0%
                            ===========  ========   ===========   ========     ===========  =========   ===========  ========




Combined Ratio
       Loss ratio (including LAE)            68.8                     62.4%                      68.3%                   64.1%
       Expense ratio                         36.8                     35.6                       40.9                    34.4
                                         --------                 --------                  ---------                --------
       Combined Ratio                       105.6%                    98.0%                     109.2%                   98.5%
                                         ========                 ========                  =========                ========
</TABLE>


Results of Operations

  Gross written premiums increased 24.4% to $156.2 million in the third quarter
of 1999, up from $125.6 million written in the third quarter of 1998.  Gross
written premiums for the nine months were $710.3 million, up 19.7% from $593.4
million written in the same period a year ago.

  Terra Nova's gross written premiums were $32.9 million in the third quarter
compared to $49.1 million in the third quarter of 1998.  Gross written premiums
for the nine months were $240.3 million compared to $271.0 million in the same
period last year.  Terra Nova's premium writings reflect lower premium rates on
most classes of business in which it participates and its exit from marine hull
and energy business in December 1998.

  Terra Nova (Bermuda)'s gross written premiums increased 18.2% to $5.2 million
in the third quarter from $4.4 million last year.  Gross written premiums for
the nine months were $39.7 million compared to $46.6 million in 1998.  The prior
year figure includes $11.9 million of orphan syndicate business.  No orphan
syndicate business has been written during the current year.  Excluding orphan
syndicate business, Terra Nova (Bermuda)'s gross written premiums are up

                                       12
<PAGE>

                       TERRA NOVA (BERMUDA) HOLDINGS LTD.
                                AND SUBSIDIARIES

               MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                      CONDITION AND RESULTS OF OPERATIONS

14.4% on last year. The segment traditionally writes little business in the
third quarter as it writes mainly property reinsurance in the first quarter of
the year.

  Terra Nova Capital's gross written premiums increased by 66.9% to $115.5
million from $69.2 million in the third quarter and by 61.2% to $409.7 million
from $254.2 million in the first nine months.  The rise is due to an increased
participation in the Octavian syndicates from about 60% of capacity in 1998 to
about 77% in 1999 and an increase in premium writings at the Octavian
syndicates.  The increase also reflects higher writings at syndicates 702
(benefiting from the newly opened Australian office and other initiatives put in
place last year), 1227 (expansion of property writings) and 1228 (more overseas
auto business).  The segment has written no orphan syndicate business in the
year so far compared to $16.0 million last year.

  Corifrance writes a large part of its business in the first quarter of each
year.  Gross written premiums in the first nine months of 1999 were $20.6
million compared to $21.5 million in 1998.

  The Company's combined ratio was 109.2% in the first nine months against 98.5%
in the same period of 1998.  Excluding the charge in the second quarter of 1999
associated with the Company's withdrawal from UK private passenger auto, light
aircraft and general aviation businesses, the combined ratio was 101.3%.

  The Company's underwriting results reflect the ongoing effects of price
erosion over the past several years, the late reporting of losses from last
year's hurricanes Georges and Mitch and a significant number of large
catastrophe losses in the United States and the rest of the world.  The third
quarter results included $9.0 million of property losses associated with the
various catastrophes, most significantly, Hurricane Floyd and the earthquakes in
Turkey.

  Net investment income was $23.3 million for the third quarter of 1999 in line
with the same period a year ago.  Net investment income increased to $69.7
million for the first nine months compared to $69.5 million in 1998.  This
reflects the decision taken last year to increase the equity component of the
investment portfolio by $20.0 million consistent with the Company's longer term
focus on growing the book value of the Company.  The average annualized
investment yield was 6.0% and 6.2% in the first nine months of 1999 and 1998,
respectively.

  Realized net capital gains on sales of investments were $22.9 million in the
first nine months of 1999, up from  $12.5 million last year.  The majority of
gains in each period arose from sales of equity securities.

  The net contribution from agency income was $1.6 million for the nine months
compared to $3.1 million last year.  The movement is due to lower profit
commission from the syndicates managed by Octavian and to a change in the stock
option compensation expense estimate for the Octavian Stock Option Plan.  The
Plan provides for the grant of options based on profit commissions received by
Octavian for the 1996 to 2000 Lloyd's underwriting years.  The compensation
expense is calculated using APB No.25 and is dependent on both the share price
at the grant date for each underwriting year and the projected number of options
to be granted.  Any change in these variables gives rise to a change in the
compensation expense.

  Interest expense in 1999 relates to interest on the $100 million 7.0% Senior
Notes issued on May 18, 1998 and interest on the $75 million or 7.2% Senior
Notes issued on August 26, 1997.  The interest expense in 1998 related to the
$100 million and $75 million Senior Notes issues and the $100 million 10.75%
Senior Notes extinguished in the second quarter of that year.

  Other expenses increased in 1999 because of a higher level of corporate
activity.

                                       13
<PAGE>

                       TERRA NOVA (BERMUDA) HOLDINGS LTD.
                                AND SUBSIDIARIES

               MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                      CONDITION AND RESULTS OF OPERATIONS

Liquidity and Capital Resources

  The Company's assets consist mainly of the capital stock of UK Holdings and
Terra Nova (Bermuda).  UK Holdings' assets consist mostly of the capital stock
of Terra Nova, Terra Nova Capital and Octavian.  The Company's ability to pay
dividends on its capital stock and to meet its obligations depends on dividends
or other payments from Terra Nova, Terra Nova (Bermuda), Terra Nova Capital,
Octavian and Corifrance.  Dividend and other payments by Terra Nova, Terra Nova
Capital and Octavian are subject to restrictions under UK law.  Similarly,
dividend and other payments by Terra Nova (Bermuda) and Corifrance are subject
to restrictions under Bermudian law and French law, respectively.

  The sources of funds for the Company's subsidiaries consist mostly of net
premiums, investment income and proceeds from sales and redemptions of
investments.  The funds are used to pay claims and operating expenses and to buy
investments, largely fixed income securities.

  For the nine months ended September 30, 1999, the cashflow provided by
operating activities of the Company was $10.8 million compared to $11.7 million
in 1998.

  Shareholders' equity of the Company declined to $526.0 million at September
30, 1999, from $570.9 million at year end 1998 reflecting the decline in market
value of the Company's investment portfolio and share repurchases, partly offset
by growth in retained earnings.  Book value per share was $20.74 at September
30, 1999, compared to $22.51 at year end 1998.

  Total investments and cash were $1,497.3 million at September 30, 1999.  At
September 30, 1999, 87.8%, 6.4% and 5.8% of total investments and cash were held
in fixed maturities, common stocks and cash and cash equivalents, respectively.
At September 30, 1999, around 93% of the Company's fixed income investments were
rated "A" or better by Moody's or S&P.  The Company's investment portfolio
earned interest and dividend income, net of investment management fees, of 6.0%
and 6.2% in the nine months ended September 30, 1999, and 1998, respectively.
The Company's realized investment gains were $29.6 million and $15.9 million in
the nine months ended September 30, 1999, and 1998, respectively.

  On August 5, 1999, the Company announced that it had received an unsolicited
merger proposal and that the Board of Directors had engaged Donaldson, Lufkin
and Jenrette to assist the Company in conducting a review of its strategic
alternatives, including a possible business combination.

  On August 16, 1999, Markel Corporation ("Markel") and the Company announced
that they had signed  an agreement providing for Markel's acquisition of the
Company for cash and stock valued at $905 million, or $34.00 per share, based on
the closing price of Markel's stock on August 13, 1999.  In addition, Markel
would assume $175 million of the Company's debt.  The transaction, which is
subject to approval by the shareholders of both companies, the receipt of
necessary regulatory approvals and other customary closing conditions, is
expected to be completed early in 2000.

  Terra Nova Capital's participation in the Lloyd's Capacity Auctions for the
2000 underwriting year resulted in the acquisition of additional capacity in the
syndicates managed by Octavian.  This will bring the Company's share of
aggregate capacity on the Octavian syndicates to about 90% for the 2000
underwriting year, up from about 77% for the 1999 underwriting year.

  Certain information included here is based on management's estimates,
assumptions and projections.  Important factors that could cause actual results
to differ materially from those estimated by management include, among other
things, an unexpected increase in competition, unfavorable government
regulation, the pricing environment and other industry developments.

                                       14
<PAGE>

                       TERRA NOVA (BERMUDA) HOLDINGS LTD.
                                AND SUBSIDIARIES

               MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                      CONDITION AND RESULTS OF OPERATIONS

Foreign Currency

  The Company's assets, liabilities, revenues and expenses, except for most
corporate overheads which are paid in British pounds, are chiefly in U.S.
dollars.  Therefore, the Company's principal functional currency is the U.S.
dollar.  Certain other net translation adjustments are shown as a separate item
of accumulated other comprehensive income.


The Euro

  On January 1, 1999, the Economic and Monetary Union ("EMU") and a new
currency, the "euro", were adopted by eleven of the fifteen member states of the
European Union ("EU").  Other member states, including the United Kingdom,
currently remain outside the EMU, but may join in the future.  Today, Corifrance
and the Brussels branch of Terra Nova are the Company's only operations in EMU
countries.

  When the eleven participating EMU countries adopted the euro as their national
currency, the European Central Bank (ECB) established a fixed conversion rate
between each participant's existing currency and the euro as from that date.
The euro is now traded on foreign currency exchanges and fluctuates in value
against currencies of non-participating countries.  The euro can be used for
non-cash transactions throughout the three year transition period which ends on
December 31, 2001.  On January 1, 2002, the ECB will begin to issue bills and
coins denominated in euro for use in cash transactions.

  The Company identified relevant issues and established a strategy to deal with
each phase of the euro's implementation.  The Company has the capability to
process and account for current transactions in the euro, and as needs are
identified, will modify its information technology and other systems in response
to changed or expanded exposures to euro transactions.

  The competitive impact of the euro is not expected to be significant because
less than 10% of the Company's business is conducted within EMU member states.
Management believes that future costs of modifying information systems software
will not be material to the Company's results, operations, financial condition
or liquidity.


Year 2000

General

  The Year 2000 issue arises from the fact that historically many computers and
computer programs used two digits rather than four to represent the year portion
of a date.  The faulty interpretation or the misinterpretation of these two
digits could result in system failure or miscalculation causing disruption to
business processes.

  The Year 2000 date change problem is widely recognized as the biggest single
issue to have faced the information technology ("IT") industry.  Its impact is
likely to extend into all areas of business and commerce.  Therefore, the
Company is addressing Year 2000 as both an IT issue and a business issue.  The
Company has established a Year 2000 Project team composed of representatives
from all IT and business areas in order to ensure a co-ordinated approach.  The
Project team reports directly to senior management who, in turn, report
regularly to the Board of Directors on the status of the Company's Year 2000
compliance.

                                       15
<PAGE>

                       TERRA NOVA (BERMUDA) HOLDINGS LTD.
                                AND SUBSIDIARIES

               MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                      CONDITION AND RESULTS OF OPERATIONS

The Company's State of Readiness

  The Company has divided the Year 2000 Project into three major areas of focus:
IT, underwriting and third parties.  Each section addresses unique risks, but
shares a common approach to the Project, which includes five phases: (1)
assessing the nature and scope of the Company's exposure to the Year 2000 issue;
(2) identifying the business critical areas of exposure; (3) developing
solutions for Year 2000-related problems; (4) testing the solutions; and (5)
implementing the solutions.  Business critical systems were defined as those
that could have a material impact on the financial condition and results of
operations of the Company should they malfunction or fail.

  IT
  --
  The Company initiated the IT section of the Year 2000 Project in March 1997
with the objective of bringing all business critical systems into Year 2000
compliance by September 30, 1998 and all other systems into compliance by
December 31, 1998.  These key milestones have been met.  Market testing with the
main processing bureaus, the London Processing Centre, the Lloyd's Policy
Signing Office and the Lloyd's Claims Office, has also been completed
successfully.  Internal certification on compliance has been received from
Lloyd's.

  The assessment phase for the IT section of the Project consisted of an
inventory and high level analysis of all hardware, software and embedded
systems.  Embedded systems include non-IT items such as facsimile machines,
photocopiers and elevators.  As a result of the assessment phase, the Company
identified five business critical systems.  All five were judged compliant by
December 31, 1998, following completion of testing and implementation work.

  Compliance statements for the Company's telephone systems have been received
and the necessary upgrades have been implemented.  In addition, a testing
program has been commissioned to validate the manufacturers' statements.

  Other internally-supported software not identified as business critical was
judged compliant by December 31, 1998, after testing and implementation work.
Externally supported packages and services were assessed.  All suppliers and
manufacturers were contacted for their compliance status.  Where possible, all
essential packages have been tested and judged compliant.

  Remediation of non-business critical systems with embedded chips has been
challenging.  Work has targeted systems within the Company's control.
Developers of old systems have been reluctant to reply to questions concerning
their Year 2000 compliance status, or are no longer trading.  After assessing
this area of the Project for criticality, the Project team determined that only
a few systems were at risk.  Most of these are now considered to be compliant.
There are no outstanding systems that would result in a significant negative
impact on the Company's operations in the event of failure.

  An IT contingency plan, covering all aspects of IT, has been developed in line
with the Lloyd's timescale of  June 30, 1999.  This plan has been designed to
offer a workable alternative in event of failure of a business critical system.
The IT contingency plan has been incorporated into the Company's Year 2000
contingency plan discussed below.

  Underwriting
  ------------
  The Underwriting section of the Project is managed by a committee comprised of
senior representatives from the Company's major underwriting units and support
units, covering a broad spectrum of business classes.  The committee is: (1) co-
ordinating and reviewing the evaluation of the Company's current and ongoing
underwriting exposure to the Year 2000 and other date-related issues; (2)
developing and producing relevant Company underwriting guidelines and monitoring
procedures, where practicable; (3) identifying business opportunities; and

                                       16
<PAGE>

                       TERRA NOVA (BERMUDA) HOLDINGS LTD.
                                AND SUBSIDIARIES

               MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                      CONDITION AND RESULTS OF OPERATIONS

(4) communicating and raising awareness of date-related underwriting issues
within the Company.  Among its responsibilities, the committee discusses and
disseminates information, research and policy language about the Year 2000
issue.  A central database for this information has been established and made
accessible by all Company employees.

  By June 30, 1999, the Company had completed an initial assessment of risks
already written.  This initial assessment has formed the basis for more detailed
ongoing reviews.  At Terra Nova, the in-force portfolio of insurance and
reinsurance contracts was broken down into those risks that currently provide no
cover beyond December 31, 1999, those that might provide cover beyond December
31, 1999 (by virtue of run-off provisions or extended reporting clauses) and
those risks that run beyond the millennium.  A matrix coding system was
developed to numerically quantify the class exposure and effect of the
underwriting action taken at the insurance or reinsurance level.  The matrix is
applied on a risk by risk basis.  The matrix multiplies a "class exposure"
coding by an "underwriting action" coding to give a geometric weighting.  This
geometric weighting, combined with the potential in-force analysis, and overlaid
by "likelihood of loss factors", enables a calculation to be made of Terra
Nova's probable maximum loss ("PML").  To support the matrix, a detailed
commentary was prepared by each class underwriter of the potential exposure on a
class by class basis, together with the current underwriting approach, based on
individual judgment and experience.  This work was reviewed by the underwriting
committee and the senior underwriter of each underwriting unit for commonality
of approach.  Terra Nova (Bermuda) is applying the matrix coding system in the
same way as Terra Nova.

  Remediation work within the Underwriting section of the Project is ongoing.
The described underwriting approach is regularly monitored and re-evaluated with
reference to external factors and market position.  Exclusionary contract
language is being used where it is considered appropriate.  Equally, the method
of calculating the PML, the weightings applied for the individual factors and
likelihood of loss factors, are subject to review and revision, as considered
necessary.  At September 30, 1999,  management believes the PML reflects a
reasonable level of risk for contracts currently in force.  All new business
opportunities are assessed using the PML calculation.  No new contracts are
written where the Year 2000 exposure is unsatisfactory.

  The Octavian syndicates are also represented on the underwriting committee.
However, the senior underwriters on the Octavian syndicates have adopted a
different approach from that of their colleagues at Terra Nova, reflecting the
different regulatory environment in which they operate.  The syndicate
underwriters have analyzed the Year 2000 exposure on each class of business that
they write.  They have then drawn up a course of action for dealing with the
exposure, using the results of their analysis.  The regulatory department at
Lloyd's requests detailed Year 2000 returns from each syndicate.  This is to aid
the Corporation of Lloyd's' analysis of whether each syndicate is taking
appropriate action to address the issue.

  Overall, management believes reliance on the combined experience of the
Company's underwriters who contribute to the ongoing assessment has enabled the
Company to make prudent judgments about exposures and to react accordingly.

  Third Parties
  -------------
  The Third Parties section of the Year 2000 Project includes identifying
critical suppliers, customers and trading partners who deal directly with the
Company and discovering their plans and progress in addressing Year 2000 issues.
The Company receives most of its underwriting data from bureaus, most notably,
the London Processing Centre and Lloyd's.  Market testing has been performed to
insure continuous and reliable connectivity to, and the ongoing provision of
effective services from, these organizations and has been successfully
completed.

  The Company provides IT services to third party customers.  The related IT
systems have been assessed, remedied, tested and re-implemented.

                                       17
<PAGE>

                       TERRA NOVA (BERMUDA) HOLDINGS LTD.
                                AND SUBSIDIARIES

               MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                      CONDITION AND RESULTS OF OPERATIONS

  Material trading partners at all business levels have been contacted and asked
to respond with an assessment of the Year 2000 compliance status of their own
businesses.  The responses from trading partners have been considered when
developing the Year 2000 contingency plan.

Year 2000 Contingency Plan

  The Company has developed a contingency plan to mitigate the effect of
business disruption caused by Year 2000 problems.  Each of the Company's
individual business units has reviewed the risk they face and completed a year
2000 risk register.  The register records material risks, their impact and
importance.  An action plan has also been developed by the business units to
respond to the occurrence of each risk event.

  These registers have been reviewed centrally and compiled into a single
Company-wide risk register.  The register documents responsibility for ensuring
that adequate plans are in place and, if necessary, acted on.

Costs

  The total cost of the Year 2000 Project is not expected to be material to the
Company's financial position.  The estimated total cost of analyzing and
implementing required modifications to bring the Company to Year 2000 compliance
is $3.0 million, which is being funded from operating cash flows.  The Company
chiefly used internal human resources for work on the Year 2000 Project. The
total amount spent on the Project through September 30, 1999, was $2.9 million
of which $2.7 million related to the cost to repair or replace software and
resolve related hardware problems and $0.2 million related to the cost of
identifying and communicating with third parties. The estimated future cost of
completing the Year 2000 Project is $0.1 million.

Risks

  From an IT perspective, the Year 2000 risks have been reduced significantly by
bringing business critical systems into compliance.  Therefore, the ability of
the Company to trade through the Year 2000 should not be materially impaired.
The Company's reliance on compliance adequacy of outside suppliers and trading
partners can only be addressed through questionnaires and compliance statements.
Even with seemingly thorough third parties' responses, the Company cannot
guarantee their Year 2000 readiness.  The inability of such third parties to
complete their Year 2000 remediation could materially affect the Company.

  From an underwriting perspective, management expects an increase in the
frequency of certain kinds of claims because of software malfunction causing or
otherwise contributing to losses related to normally insured perils, such as
fire and theft.  The Company is taking steps to make its own reinsurance and
retrocession programs as responsive as possible to such circumstances.

  While there remains a degree of uncertainty about the Year 2000 readiness of
third party suppliers, customers and trading partners, the Company believes it
has taken all reasonable steps to ensure the consequences of Year 2000 failure
will not have a material impact on its future results of operations, liquidity
or financial condition.


Dividend Policy

  On February 10, 1999, the Company declared a dividend of $0.06 per share
payable on March 26, 1999 to shareholders of record as of March 5, 1999.

  On May 5, 1999, the Company declared a dividend of $0.06 per share payable on
June 25, 1999, to shareholders of record as of June 4, 1999.

                                       18
<PAGE>

                       TERRA NOVA (BERMUDA) HOLDINGS LTD.
                                AND SUBSIDIARIES

               MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                      CONDITION AND RESULTS OF OPERATIONS

  On August 5, 1999, the Company declared a dividend of $0.06 per share payable
on September 27, 1999, to shareholders of record as of September 3, 1999.

  On November 3, 1999, the Company declared a dividend of $0.06 per share
payable on December 27, 1999, to shareholders of record as of December 3, 1999.

  The declaration and payment of dividends is at the discretion of the Board of
Directors of the Company and will depend on the Company's results of operations,
the financial position and capital requirements of the Company's operating
subsidiaries, general business conditions, legal, tax and regulatory
restrictions on the payment of dividends and other factors the Board of
Directors of the Company views relevant.  While the Company is not itself
subject to any contractual restrictions or significant legal prohibitions on
dividend payments, the Company's subsidiaries are subject to regulatory and
legal constraints on their respective abilities to pay dividends.  Therefore,
there is no assurance that dividends will be declared or paid in the future.


Quantitative and Qualitative Disclosure about Market Risk

  The Company presented a discussion about its risk management activities in its
Form 10-K for the year ended December 31, 1998.  The Company believes there have
been no material changes regarding its market risks during the nine months ended
September 30, 1999.

                                       19
<PAGE>

                       TERRA NOVA (BERMUDA) HOLDINGS LTD.
                                AND SUBSIDIARIES


PART II - OTHER INFORMATION
---------------------------



ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

a)  Exhibits    27 - Financial Data Schedule

b)  Form 8-K    None

                                       20
<PAGE>

                      TERRA NOVA (BERMUDA) HOLDINGS LTD.
                               AND SUBSIDIARIES

                                  SIGNATURES
                                  ----------

Under the requirements of the Securities Exchange Act of 1934, the registrant
has had this report signed on its behalf by the undersigned who are so
authorized.





Date:      November 15, 1999                By:  /s/JOHN J. DWYER
           -----------------                     ----------------

                                                 John J. Dwyer
                                                 Chairman



Date:      November 15, 1999                By:  /s/WILLIAM J. WEDLAKE
           -----------------                     ---------------------

                                                 William J. Wedlake
                                                 Chief Financial Officer,
                                                 Senior Vice President and
                                                 Principal Accounting Officer

                                       21