Fitch Upgrades Markel International Ratings; Affirms Corporate Ratings

November 16, 2007

Fitch ratings announced that it has upgraded the Insurer Financial Strength (IFS) rating of Markel International Insurance Company (MIICL) to ‘A’ from ‘A-.’

Fitch also announced that it has affirmed the following Issuer Default Rating (IDR) ratings of Markel Corporation: ‘BBB+’; –$97.5 million 7.0 percent senior notes due May 15, 2008 at ‘BBB’; –$250 million 6.8 percent senior notes due Feb. 15, 2013 at ‘BBB’; –$200 million 7.35 percent senior notes due Aug. 15, 2034 at ‘BBB’; –$150 million 7.5 percent senior notes due Aug. 22, 2046 at ‘BBB’.

In addition the rating agency affirmed Markel’s ‘A’ rating and positive outlook, which also includes the following companies:
— Associated International Insurance Co.
— Deerfield Insurance Company
— Essex Insurance Company
— Evanston Insurance Company
— Markel American Insurance Company
— Markel Insurance Company

“The rating upgrade equalizes MIICL with that of the operating companies of Markel North America and considers the significant progress MIICL has made in the past several years in building up a reserve buffer, bringing its reserving methodology into line with that of the group and in commuting reinsurance recoverables,” Fitch explained. ” While MIICL’s historic profitability lagged below the expected level for a company in the ‘A’-range, it is on track to reverse the trend and achieve underwriting profits in 2007, despite the challenging market conditions.

“It is expected that future reserve releases will bolster underlying performance and that a return commensurate with that of the rest of the group will be achieved in 2007-2008. Given the recent improvements in operating performance Fitch now considers MIICL as being a core and integral part of Markel, with the future rating of the two expected to move in unison.”

Fitch also indicated that the “positive outlook” on Markel “considers the insurance operation’s strong underwriting results benefiting from recent hard market conditions and benign natural catastrophe losses. Markel surpassed its target of an underwriting profit in 2006 and thus far in 2007, reporting a combined ratio of 87 percent and 88 percent, respectively.

“However, Markel now faces intense competition and rapidly declining rates across a number of products. Fitch believes Markel’s profitability will decline somewhat in the near term reflective of a soft pricing environment but Fitch believes Markel’s conservative reserving practices and focus on underwriting profitability should enable it to produce results consistent with ‘A+’ companies. Should the company outperform peers in 2008, a one-notch upgrade is likely.”

Source: Fitch Ratings –

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