Best Upgrades Markel International’s Issuer Credit Rating

A.M. Best Co. has upgraded the issuer credit rating to “a+” from “a” and affirmed the financial strength rating of ‘A’ (Excellent) of UK-based Markel International Insurance Company Limited (MIICL), both with stable outlooks.

Best said the rating upgrade reflects MIICL’s “excellent stand-alone risk-adjusted capitalization, recent record of good underwriting performance and good management of loss reserves. Since the acquisition by its publicly listed ultimate parent company, Markel Corporation (Markel), MIICL has followed a conservative approach to reserving each year, resulting in favorable development of prior years’ reserves.

“Additionally, the risk of further deterioration in the reserves for business written before 2002 continues to diminish. The ratings also take into consideration the implicit and explicit financial support provided by Markel and the company’s strategic importance to the Markel group.

Best also indicated that it expects MIICL to “maintain excellent stand-alone risk-adjusted capitalization in 2010 and into 2011, supported by solid operating performance and taking into account planned dividend payments to its parent company. In addition, MIICL benefits from the explicit support and financial flexibility of Markel, which has contributed capital of approximately $200 million since acquiring the company.”

The rating analysis also pointed out that “MIICL and Lloyd’s Syndicate 3000 account for over one-third of the Markel group’s gross premium income and provide the group with access to UK, London market and international business.

MIICL is expected to report a good pre-tax profit for 2010, supported by solid underwriting and investment earnings. In 2009 the company reported a pre-tax profit of $90.5 million as a result of a strong underwriting performance, assisted by significant favorable development of prior years’ loss reserves, and substantial unrealized investment gains.

“Underwriting performance in 2010 is likely to be weaker, given the challenging conditions in the company’s core UK market. However, a combined ratio below 100 percent is anticipated (2009: 90 percent), reflecting the likely availability of good, albeit reduced, prior year reserve releases and the company’s prudent approach to cycle management.

“MIICL has a good position as a specialist underwriter of professional liability and property insurance in the UK and London market. In addition, almost 7 percent of gross written premium is derived from Europe through branch offices in Spain and Sweden. MIICL underwrites a well-diversified portfolio and leads approximately 75 percent of its business. Retail business is expected to represent 26 percent of gross written premium in 2010, professional and financial risks 24 percent, property 20 percent, specialty 12 percent and marine 12 percent.”

Source: A.M. Best