Best Affirms Markel’s ‘A’ Ratings

June 24, 2008

A.M. Best Co. has affirmed the financial strength ratings (FSR) of ‘A’ (Excellent) and the issuer credit ratings (ICR) of “a+” of Virginia-based Markel North America Insurance Group and its members. Best also affirmed the ICR of “bbb+” and the debt ratings of Markel Corporation (MKL). All of the ratings [listed below] have a stable outlook. Best also affirmed its ratings on Markel International and on its Lloyd’s operations (See related articles in International).

“These rating actions recognize 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 solid risk-adjusted capitalization,” said Best. The ratings also acknowledge the group’s “excellent operating cash flow, adequate liquidity and the financial flexibility of MKL.”

“Somewhat tempering these positive factors is Markel’s elevated underwriting leverage and above average investment leverage. Markel has long held an underwriting leverage position higher than the average of the surplus lines composite, driven by its conservative loss reserving. 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 ratings.”

Best also noted that MKL’s financial leverage “remains on par with its current rating level as demonstrated by a debt-to-capital ratio of 20.7 percent as of March 31, 2008. Operating EBIT coverage of interest expense was also strong at 9.0 times as of the same date. For liquidity purposes, MKL maintains a $375.0 million revolving credit facility.”

Best listed the following details on the ratings:

The FSR of ‘A’ (Excellent) and ICR of “a+ have been affirmed 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 ICR of “bbb+” has been affirmed for Markel Corporation.

The following debt ratings have been affirmed:
Markel Corporation—
— “bbb+” on $250 million, 6.80 percent senior unsecured notes, due 2013
— “bbb+” on $200 million, 7.35 percent senior unsecured notes, due 2034
— “bbb+” on $150 million, 7.50 percent senior unsecured notes, due 2046

The following indicative ratings on securities available under the
existing shelf registration have been affirmed:
Markel Corporation—
— “bbb-” on preferred securities
— “bbb” on subordinated debt
— “bbb+” on senior unsecured debt

Source: A.M. Best –

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