cut its $905 million takeover offer for Bermuda-based Terra Nova Holdings Ltd.

by about 25 percent after learning Terra Nova will report a large fourth-quarter loss and after a sharp drop in the price of its own stock.

Richmond, Virginia-based Markel agreed to buy Bermuda-based Terra Nova in August for $34 a share, or 0.184 share of Markel common stock for each Terra Nova share, for a total value of $905 million.

Under the new terms, Markel will pay $13 a share in cash, 0.07027 Markel shares and 0.07027 of a contingent value right, which were valued at about $30 based on Markel's closing price yesterday.

Those terms now value Terra Nova at about $26 a share, or about $680 million, based on Markel's closing stock price yesterday and on 26.14 million Terra Nova shares outstanding.

Shareholder meetings scheduled for February 10 have been postponed to an unspecified later date, the companies said.

Tom Gayner, vice president of equity investments at Markel, said the company hopes to close the deal by mid to late March.

Shares of Terra Nova fell 6-7/8, or about 24 percent, to close at 21-5/16.

Markel's shares had been under heavy selling pressure in recent months, falling about 30 percent from their 52-week high. But the shares rebounded sharply on Wednesday, gaining 20-5/16, or about 15 percent, to close at 155.

Terra Nova said it expected to report a 1999 after-tax loss of up to $2.13 a share. Analysts had estimated a profit of $1.66 a share, according to First Call/Thomson Financial. For the first nine months of the year, Terra Nova had a diluted operating profit of $1.86 and a diluted net profit of $1.77 a share.

Terra Nova declined to estimate the amount of its expected fourth-quarter loss, but said it resulted from several factors.

Those factors included significant catastrophe losses in the quarter, primarily from European storms, a one-time charge for reinsurance in connection with the company's decision to close some operations and exit some lines of business, and adverse claim development in the company's international property reinsurance business.

Terra Nova said its year-end book value was expected to be not less than $445 million, or $17.57 per share.

Markel Vice Chairman Steve Markel and Terra Nova Chairman John Dwyer said they believed that the reasons that led the two companies to the merger agreement in August were still as valid as they were then.

"We are very happy that we have satisfactorily adjusted the transaction in a manner which is good for all parties,'' Markel said.

Gayner said the new terms were intended to take into account any additional risk associated with Terra Nova's earnings outlook.

The revised terms are subject to negotiation and execution of definitive documentation and the approval of the boards and shareholders of each of the companies.

Markel markets and underwrites specialty insurance products and programmes to a variety of niche markets.

Terra Nova (Bermuda) Holdings Ltd. is the holding company for five wholly owned operating entities.

Through these companies, Terra Nova underwrites a diverse property, casualty, marine and aviation insurance and reinsurance business on a worldwide basis.