bottom line causing a second quarter operating loss of $7.6 million or 29 cents per share.

The insurer posted the results for the period ended June 30 last night, revealing it was burdened with the after-tax charge for its withdrawal from some UK private passenger auto, light aircraft and general aviation business.

In the same quarter a year ago the company had an operating profit of $18.1 million, or 69 cents per share.

The results posted late last night followed a release from the company earlier yesterday that it was the target of an unsolicited merger proposal.

Terra Nova targeted by merger bid And it disclosed Terra Nova was also in the final stage of talks on the possible acquisition of an unnamed US company.

Terra Nova has hired business consultants -- and affiliate -- Donaldson, Lufkin & Jenrette to review its strategic alternatives which include a possible business combination. The Bermuda holding company has five operating entities including Terra Nova Insurance Company Limited in the UK and Terra Nova Capital Limited, the company's corporate capital provider at Lloyd's.

Through the subsidiaries, Terra Nova writes specialty property, casualty, marine and aviation insurance and reinsurance business on a worldwide basis.

Last night chairman John Dwyer said: "The goal of the review is to maximise the company's and shareholders' value.

"Strategic alternatives include a possible merger, affiliation, acquisition, sale or no change from our current plans.'' But he refused to comment further on a possible transaction until the board had finished its review. Commenting on the results Mr. Dwyer said the company's commitment to achieving an underwriting profit had "never been clearer''. "While UK private passenger auto rates did increase during both 1998 and 1999, they have been accompanied by higher claim costs and structural changes in this sector, realities that led us to conclude...to withdraw.

"Certain aspects of our aviation results have also been unsatisfactory in recent quarters and, while the level of loss has been modest, we have decided to withdraw from the light aircraft and general aviation classes.

"We believe that the charges taken this quarter will cover the losses and expenses associated with running off these business lines. Through these actions we have further strengthened the company's balance sheet and continuing operations.'' The company also recorded pre-tax incurred losses of $7.5 million related to hail storms in Australia in April and tornadoes in the US in May. Net written premiums in the second quarter increased 13.6 percent to $123.9 million. But the quarter saw an underwriting loss of $31.4 million compared to a profit of $2.2 million for the same period last year.