Best Affirms Markel’s ‘A’ Ratings; Upgrades Debt Instruments

June 4, 2007

A.M. Best Co. has upgraded the issuer credit ratings (ICR) to “a+” from “a” and affirmed the financial strength rating (FSR) of “A” (Excellent) of Markel North America Insurance Group and its members. Best also upgraded the ICR and debt ratings to “bbb+” from “bbb” of Markel Corporation (MKL) and the ratings of its existing senior unsecured notes. All ratings have a stable outlook.

Best cited Markel’s “well-established market position as one of the leading excess and surplus lines organizations in the United States, the sustained profitability reported in recent years and the group’s improved risk-adjusted capitalization,” as backing the ratings decisions. The ratings also “acknowledge the group’s excellent operating cash flow, adequate liquidity and the financial flexibility of MKL.”

However, Best indicated that Markel’s “elevated underwriting leverage and above average investment leverage,” should be seen as moderating factors. Best explained that in its view “Markel has long held an underwriting leverage position higher than the average of the surplus lines composite, driven by a net premium level that has grown in recent years, and the impact of conservative loss reserving.”

The rating agency added that “despite the elevated underwriting leverage, the group’s excellent operating performance has fueled surplus appreciation and led to improved capitalization that is comfortably supportive of the group’s current rating. Somewhat tempering these positive factors is

“MKL’s financial leverage remains on par with its current rating level as demonstrated by a debt-to-capital ratio of 24.1percent as of March 31, 2007. Fixed charge coverage was also strong at 10.2 times as of the same date. For liquidity purposes, MKL maintains a $375.0 million revolving credit facility.”

Best gave the following details:
The FSR of A (Excellent) has been affirmed and the ICR of “a” has been upgraded to “a+” for Markel North America Insurance Group and its following members:
— Associated International Insurance Company
— Deerfield Insurance Company
— Essex Insurance Company
— Evanston Insurance Company
— Markel American Insurance Company
— Markel Insurance Company

The following debt ratings have been upgraded to “bbb+” from “bbb”:
Markel Corporation– — “bbb+” on $75 million, 7.20% senior unsecured notes, due 2007 — “bbb+” on $100 million

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