OLDWICK, N.J., Feb 26, 2003 (BUSINESS WIRE) -- A.M. Best Co. has assigned a
"bbb" senior debt rating to Markel Corporation's (Markel) (NYSE: MKL) (Glenn
Allen, VA) issue of $200 million senior notes due in 2013.
The notes carry an interest rate of 6.80%. The proceeds from the notes will be
used to retire outstanding bank indebtedness and to partially pre-fund its 7.25%
senior notes maturing in November 2003. The new debt is being issued under
Markel's existing $475 million shelf registration. Presently, the financial
strength ratings of Markel's subsidiaries and its other debt ratings remain
unchanged. A.M. Best plans to complete its annual review of Markel and all its
related ratings by the end of first quarter 2003. The outlook for all ratings is
Markel's debt ratings incorporate a reduction of financial leverage over the
past few years, and management is committed to continuing this trend. Given that
the proceeds from the current debt offering will be used to repay existing debt
in 2003, financial leverage remains approximately the same at 35.6% (including
trust preferreds). A.M. Best supports management's intention to eliminate its
short-term bank debt for a longer-term capital structure.
Proceeds from previous debt and equity offerings have been and are continuing to
repay outstanding debt, restructure capital and provide additional capital to
the U.S. subsidiaries to support growth, re-capitalize Markel International and
fortify the holding company cash position. Holding company cash flow and
existing liquid securities are sufficient to pay obligations in 2003 without
subsidiary dividends leaving a $300 million untapped bank facility for
alternative liquidity. Given the voluntary pay down of the bank facility,
management is looking to re-build its cash cushion throughout 2003, potentially
through the return of excess capital from various subsidiaries.
From the perspective of Markel's insurance company operations, the 2002 year
brought continued strong underwriting performance and revenue production from
Markel's North American operations. Markel International Insurance Company
Limited (formerly known as Terra Nova Insurance Company Limited) and Markel
Syndicate 3000 at Lloyd's produced improved underwriting results that indicate
management is continuing to focus on instilling its core operational values into
the company. Strategically, operations are focused on the specific lines of
business with proven track records of profitability and/or excellent profit
potential. Writings in the London Market met with the company's expectations in
terms of volume and more importantly, price increases. However, the application
of the company's stricter underwriting guidelines, reduced policy limits and
re-underwriting of some business produced lower gross premiums written. Markel
International will likely continue to present somewhat of a drag on the overall
corporate results. Considering the consolidated underwriting profit produced in
the fourth quarter 2002--the first such quarterly result since the purchase of
Terra Nova Insurance Company--A.M. Best anticipates 2003 will be a good year for
Markel overall. Profitability should produce capital that will combine with any
funds downstreamed from the holding company to support growth. The positive full
year North American and International results were produced despite the $44
million in pre-tax reserve increases in the third quarter of 2002, which
affected both the domestic and overseas operations.
A.M. Best Co., established in 1899, is the world's oldest and most authoritative
insurance rating and information source. For more information, visit A.M. Best's
Web site at www.ambest.com.
CONTACT: A.M. Best Co.
Jim Peavy, 908/439-2200, ext. 5644
Rachelle Striegel, 908/439-2200, ext. 5378
David Blades, 908/439-2200, ext. 5422
Joyce Sharaf, 908/439-2200, ext. 5046
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