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Markel Reports 18% 5-Year Compound Annual Growth in Book Value Per Share

RICHMOND, Va., Jan. 24 /PRNewswire-FirstCall/ -- Markel Corporation (NYSE: MKL) reported diluted net income per share of $40.64 for the year ended December 31, 2007 compared to diluted net income per share of $39.40 for 2006. The 2007 combined ratio was 88% compared to 87% in 2006. Book value per common share outstanding increased to $265.26 at December 31, 2007 from $229.78 at December 31, 2006. Over the one- and five-year periods ended December 31, 2007, compound annual growth in book value per common share outstanding was 15% and 18%, respectively.

Alan I. Kirshner, Chairman and Chief Executive Officer, commented, "Our disciplined underwriting and the consistent application of our investment philosophy resulted in a second straight year of record net income and solid book value growth. This was no small task given soft insurance market conditions and turbulent financial markets. We thank our associates for their focused commitment to building shareholder value."

    The following tables present selected financial data from 2007 and 2006.


                                                          Year Ended
                                                          December 31,
    (in thousands, except per share amounts)        2007               2006
    Net income                                   $405,669           $392,502
    Comprehensive income                         $337,047           $550,795
    Weighted average diluted shares                 9,981             10,024
    Diluted net income per share                   $40.64             $39.40


                                                 December 31,     December 31,
    (in thousands, except per share amounts)        2007               2006
    Book value per common share outstanding       $265.26            $229.78
    Common shares outstanding                       9,957              9,994

The increase in 2007 diluted net income per share was due to higher investment returns and lower interest expense, partially offset by lower underwriting profits as compared to 2006.

Comprehensive income for 2007 was $337.0 million compared to $550.8 million in 2006. The decrease in comprehensive income was primarily due to a decline in the market value of the investment portfolio during 2007 compared to an increase in the market value of the investment portfolio during 2006.


                                              - Combined Ratio Analysis -
                                                       Year Ended
                                                       December 31,
                                                 2007              2006

    Excess and Surplus Lines                     82 %              78 %
    Specialty Admitted                           92 %              91 %
    London Insurance Market                      93 %             100 %
    Other                                          NM                NM
    Consolidated                                 88 %              87 %

NM -- Ratio is not meaningful. Further discussion of Other underwriting loss follows.

The increase in the combined ratio was due to a higher expense ratio in 2007 compared to 2006, which was attributable to lower earned premiums in 2007. The combined ratio for 2007 included $197.4 million of favorable development on prior years' loss reserves compared to $132.3 million in 2006. Favorable development on prior years' loss reserves in 2007 and 2006 was partially offset by adverse development of $10.3 million and $61.1 million, respectively, on Hurricanes Katrina, Rita and Wilma ("2005 Hurricanes").

The Excess and Surplus Lines segment's combined ratio for the year ended December 31, 2007 was 82% compared to 78% in 2006. The increase in the 2007 combined ratio for the Excess and Surplus Lines segment was primarily due to a higher current accident year loss ratio than in 2006 resulting from price reductions in a softening insurance market and adverse loss experience at the Markel Re unit during 2007.

The adverse loss experience at Markel Re resulted from higher than expected average claim frequency and severity on programs within the Specialized Markel Alternative Risk Transfer (SMART) division. After non-renewing several SMART programs in 2007, a decision was made in the first quarter of 2008 to combine the remaining SMART programs, as well as the excess and umbrella and the facultative reinsurance lines previously written by Markel Re, into two of our existing operating units, Markel Specialty Program Insurance and Markel Brokered Excess and Surplus Lines.

Incurred losses and loss adjustment expenses for the Excess and Surplus Lines segment in 2007 and 2006 included favorable development of prior years' loss reserves of $154.0 million and $160.1 million, respectively. Favorable development of prior years' loss reserves in 2007 and 2006 was partially offset by unfavorable loss reserve development of $5.4 million and $16.5 million, respectively, on the 2005 Hurricanes. In both 2007 and 2006, the redundancies on prior years' loss reserves experienced within the Excess and Surplus Lines segment were primarily on our professional liability programs at the Markel Shand Professional/Products Liability unit. The redundancies on prior years' loss reserves at the Markel Shand Professional/Products Liability unit decreased in 2007 as compared to 2006 due to the softening of the insurance market. The effects of this decrease were partially offset by greater favorable development on prior years' loss reserves within the casualty programs at the Markel Essex Excess and Surplus Lines unit, which primarily resulted from better than expected case loss activity on the 2003 to 2006 accident years.

The Specialty Admitted segment's combined ratio for the year ended December 31, 2007 was 92% compared to 91% in 2006. In 2007, a lower loss ratio was offset by a higher expense ratio as compared to 2006. Incurred losses and loss adjustment expenses for the Specialty Admitted segment in 2007 and 2006 included favorable development of prior years' loss reserves of $17.3 million and $12.8 million, respectively.

The London Insurance Market segment's combined ratio was 93% for the year ended December 31, 2007 compared to 100% in 2006. The improved underwriting performance for 2007 was primarily due to $49.4 million of favorable development on prior years' loss reserves compared to $18.5 million of adverse development on prior years' loss reserves during 2006. In 2007 and 2006, underwriting results for the London Insurance Market segment included adverse development of $4.8 million and $43.8 million, respectively, on the 2005 Hurricanes. In 2007, the favorable development of prior years' loss reserves was partially offset by a higher current accident year loss ratio due in part to softening insurance market conditions. The redundancies on prior years' loss reserves experienced within the London Insurance Market segment during 2007 were primarily on professional liability programs within the Retail and Professional and Financial Risks divisions. This favorable development on prior years' loss reserves reflects improved risk selection and the favorable rates and terms associated with the London market in recent years.

The Other segment produced an underwriting loss of $14.3 million for the year ended December 31, 2007 compared to an underwriting loss of $23.4 million in 2006. The underwriting loss in 2007 and 2006 included $34.0 million and $16.7 million, respectively, of loss reserve development on asbestos and environmental (A&E) exposures. The increase in A&E loss reserves in both years was a result of the completion of our annual review of these exposures during the third quarters of 2007 and 2006. During these reviews, we noted higher than expected settlements on existing claims, which caused us to increase our estimate of ultimate loss reserves for asbestos and environmental exposures. The increase in loss reserves for asbestos and environmental exposures during 2007 was partially offset by favorable development of loss reserves in other discontinued lines of business.


                                         - Premium Analysis -
                                        Year Ended December 31,
                                         (dollars in thousands)

                            Gross Written Premiums         Earned Premiums
                                2007        2006          2007        2006
    Excess and Surplus
     Lines                  $1,316,691  $1,465,725    $1,154,773  $1,242,184
    Specialty Admitted         346,647     340,483       320,144     317,401
    London Insurance Market    693,197     729,160       640,425     624,599
    Other                        2,404         862         1,952         197
      Total                 $2,358,939  $2,536,230    $2,117,294  $2,184,381

Gross written premiums for the year ended December 31, 2007 decreased 7% compared to 2006. The decrease was primarily the result of increased competition across many of our product lines and the decision to exit certain programs underwritten by Markel Re's SMART division that were not meeting our underwriting profit targets.

Net retention of gross premium volume was 87% for both 2007 and 2006.

Earned premiums for the year ended December 31, 2007 decreased 3% compared to 2006. The decrease in 2007 was due to lower earned premiums in the Excess and Surplus Lines segment as a result of lower gross premium volume compared to 2006.

Net investment income for the year ended December 31, 2007 was $306.5 million compared to $271.0 million in 2006. The increase in 2007 was due to having a larger investment portfolio compared to 2006.

Net realized investment gains for the year ended December 31, 2007 were $59.5 million compared to $63.6 million in 2006. Net realized investment gains in 2007 and 2006 included $19.8 million and $4.5 million, respectively, of write downs for other-than-temporary declines in the estimated fair market value of certain equity securities. The most significant write down in 2007 was for an equity security of a financial guarantor where the value had declined as a result of concerns over its potential exposure to credit defaults. The most significant write down in 2006 was for an equity security of a real estate investment trust and investment bank where the value had declined as a result of the changing interest rate environment. Variability in the timing of realized and unrealized investment gains and losses is to be expected.

Interest expense for the year ended December 31, 2007 decreased to $56.3 million from $65.2 million in 2006 due to a decrease in average debt outstanding during the year.

The effective tax rate was 29% for both 2007 and 2006. The effective tax rate in both years differs from the statutory tax rate of 35% primarily due to tax exempt investment income.

At December 31, 2007, our investment portfolio increased 3% to $7.8 billion from $7.5 billion at December 31, 2006. Net unrealized holding gains on investments, net of taxes, were $388.5 million at December 31, 2007 compared to $462.5 million at December 31, 2006. Equity securities and investments in affiliates were $1.9 billion, or 25%, of our total investment portfolio at December 31, 2007 compared to $1.8 billion, or 24%, of our total investment portfolio at December 31, 2006.

Net cash provided by operating activities was $508.3 million for the year ended December 31, 2007 compared to $518.1 million for 2006. The decrease was primarily due to lower premium volume in the Excess and Surplus Lines segment, offset in part by lower claim payments related to the 2005 Hurricanes in 2007 compared to 2006.

This release may contain forward-looking statements. This is a "Safe Harbor" statement under the Private Securities Litigation Reform Act of 1995 concerning forward-looking statements. It also contains general cautionary statements regarding our business, estimates and management assumptions. Future actual results may materially differ from those in any forward-looking statements because of many factors, including:

    --  our anticipated premium volume is based on current knowledge and
        assumes no significant man-made or natural catastrophes, no
        significant changes in products or personnel and no adverse changes in
        market conditions;
    --  loss estimates related to the 2005 Hurricanes are based on currently
        available information related to covered exposures and assumptions
        about how coverage applies. As actual losses are reported, claims are
        adjusted and coverage issues are resolved, losses for the 2005
        Hurricanes may change significantly;
    --  we are legally required in certain instances to offer terrorism
        insurance and have attempted to manage our exposure; however, if there
        is a covered terrorist attack, we could sustain material losses;
    --  the impact of the events of September 11, 2001 will depend on the
        number of insureds and reinsureds affected by the events, the amount
        and timing of losses incurred and reported and questions of how
        coverage applies, all of which are still being resolved;
    --  the frequency and severity of catastrophic events is unpredictable and
        may be exacerbated if, as many forecast, conditions in the ocean and
        atmosphere result in increased hurricane or other adverse weather
        related activity;
    --  changing legal and social trends and inherent uncertainties (including
        but not limited to those uncertainties associated with our asbestos
        and environmental reserves) in the loss estimation process can
        adversely impact the adequacy of loss reserves and the allowance for
        reinsurance recoverables;
    --  adverse developments in insurance coverage litigation could result in
        material increases in our estimates of loss reserves;
    --  the costs and availability of reinsurance may impact our ability to
        write certain lines of business;
    --  industry and economic conditions can affect the ability and/or
        willingness of reinsurers to pay balances due;
    --  after the commutation of ceded reinsurance contracts, any subsequent
        adverse development in the re-assumed loss reserves will result in a
        charge to earnings;
    --  regulatory actions can impede our ability to charge adequate rates and
        efficiently allocate capital; and
    --  economic conditions, volatility in interest and foreign exchange rates
        and concentration of investments can have a significant impact on the
        market value of fixed maturity and equity investments as well as the
        carrying value of other assets and liabilities.

Our premium volume and underwriting and investment results have been and will continue to be potentially materially affected by these factors. Additional factors that could affect our business are discussed in our most recent reports on Forms 10-Q and 10-K under the headings "Risk Factors" and "Safe Harbor and Cautionary Statement." By making forward-looking statements, we do not intend to become obligated to publicly update or revise any such statements whether as a result of new information, future events or other changes. Readers are cautioned not to place undue reliance on any forward-looking statements, which speak only as at their dates.

Our previously announced conference call, which will involve discussion of our financial results and business developments and may include forward-looking information, will be held Friday, January 25, 2008, beginning at 10:30 a.m. (Eastern Standard Time). Any person interested in listening to the call, or a replay of the call, which will be available from approximately two hours after the conclusion of the call until Monday, February 4, 2008, should contact Markel's Investor Relations Department at 804-747-0136. Investors, analysts and the general public may also listen to the call free over the Internet through Markel Corporation's web site, www.markelcorp.com. A replay of the call will also be available on this web site until Monday, February 4, 2008.

Markel Corporation markets and underwrites specialty insurance products and programs to a variety of niche markets. In each of these markets, the Company seeks to provide quality products and excellent customer service so that it can be a market leader. The financial goals of the Company are to earn consistent underwriting profits and superior investment returns to build shareholder value.



                       MARKEL CORPORATION AND SUBSIDIARIES

            Consolidated Statements of Income and Comprehensive Income

                                Quarter Ended             Year Ended
                                 December 31,             December 31,
                                2007      2006       2007            2006
                              (dollars in thousands, except per share data)
    OPERATING REVENUES
    Earned premiums           $519,202  $558,750  $2,117,294     $2,184,381
    Net investment income       70,971    67,665     306,458        271,016
    Net realized investment
     gains (losses)             (5,226)   23,758      59,504         63,608
      Total Operating Revenues 584,947   650,173   2,483,256      2,519,005

    OPERATING EXPENSES
    Losses and loss adjustment
     expenses                  257,095   250,601   1,096,203      1,132,579
    Underwriting, acquisition
     and insurance expenses    195,605   216,520     756,699        767,853
    Amortization of intangible
     assets                        950         -       2,145              -
      Total Operating Expenses 453,650   467,121   1,855,047      1,900,432
      Operating Income         131,297   183,052     628,209        618,573
    Interest expense            12,866    17,364      56,251         65,172
      Income Before Income
       Taxes                   118,431   165,688     571,958        553,401
    Income tax expense          24,990    44,306     166,289        160,899
      Net Income               $93,441  $121,382    $405,669       $392,502

    OTHER COMPREHENSIVE INCOME (LOSS)
    Net unrealized gains
     (losses) on investments,
     net of taxes:
      Net holding gains
       (losses) arising
       during the period      $(19,608) $133,480    $(33,638)      $202,580
      Less reclassification
       adjustments for net
       gains (losses) included
       in net income             4,763   (15,442)    (40,323)       (42,607)
      Net unrealized gains
       (losses)                (14,845)  118,038     (73,961)       159,973
    Currency translation
     adjustments, net of taxes    (576)   (2,482)      3,793         (1,680)
    Net actuarial pension loss,
     net of taxes                  606         -       1,546              -
      Total Other Comprehensive
       Income (Loss)           (14,815)  115,556     (68,622)       158,293
      Comprehensive Income     $78,626  $236,938    $337,047       $550,795

    NET INCOME PER SHARE
      Basic                      $9.38    $12.41      $40.73         $40.43
      Diluted                    $9.36    $12.17      $40.64         $39.40



    Selected Data
    (dollars and shares in thousands,             December 31,    December 31,
     except per share data)                           2007            2006
    Total investments and cash and cash
     equivalents                                  $7,788,206       $7,535,295
    Reinsurance recoverable on paid and
     unpaid losses                                 1,151,224        1,362,456
    Goodwill and intangible assets                   344,911          339,717
    Total assets                                  10,134,419       10,088,131
    Unpaid losses and loss adjustment
     expenses                                      5,525,573        5,583,879
    Unearned premiums                                940,309        1,007,801
    Senior long-term debt                            680,698          751,978
    Junior Subordinated Deferrable
     Interest Debentures                                   -          106,379
    Total shareholders' equity                     2,641,162        2,296,393
    Book value per share                             $265.26          $229.78
    Common shares outstanding                          9,957            9,994



                              Markel Corporation
                        Segment Reporting Disclosures
         For the Quarters and Years Ended December 31, 2007 and 2006

                        Segment Gross Written Premiums

    Quarter Ended December 31,                       Year Ended December 31,
       2007       2006     (dollars in thousands)       2007         2006
    $296,005   $346,264   Excess and Surplus Lines   $1,316,691   $1,465,725
      73,859     70,391   Specialty Admitted            346,647      340,483
     131,014    147,743   London Insurance Market       693,197      729,160
         542        261   Other                           2,404          862
    $501,420   $564,659       Consolidated           $2,358,939   $2,536,230


                         Segment Net Written Premiums

    Quarter Ended December 31,                       Year Ended December 31,
       2007       2006     (dollars in thousands)       2007         2006
    $256,543   $293,116   Excess and Surplus Lines   $1,121,373   $1,228,797
      67,861     65,158   Specialty Admitted            322,461      322,466
     109,287    137,776   London Insurance Market       601,976      643,485
         371         15   Other                           1,952          197
    $434,062   $496,065       Consolidated           $2,047,762   $2,194,945


                               Segment Revenues

    Quarter Ended December 31,                       Year Ended December 31,
       2007       2006     (dollars in thousands)       2007         2006
    $279,102   $309,528   Excess and Surplus Lines   $1,154,773   $1,242,184
      80,891     80,125   Specialty Admitted            320,144      317,401
     158,838    169,082   London Insurance Market       640,425      624,599
      65,745     91,423   Investing                     365,962      334,624
         371         15   Other                           1,952          197
    $584,947   $650,173       Consolidated           $2,483,256   $2,519,005


                   Reconciliation of Segment Profit (Loss)
                       to Consolidated Operating Income

    Quarter Ended December 31,                       Year Ended December 31,
       2007       2006     (dollars in thousands)       2007         2006
     $42,723    $62,130   Excess and Surplus Lines     $205,417     $279,315
       8,160      8,652   Specialty Admitted             26,887       28,096
      14,132     21,389   London Insurance Market        46,370          (24)
      65,745     91,423   Investing                     365,962      334,624
       1,487       (542)  Other                         (14,282)     (23,438)
                          Amortization of Intangible
        (950)       -      Assets                        (2,145)         -
    $131,297   $183,052       Consolidated             $628,209     $618,573


                               Combined Ratios

    Quarter Ended December 31,                        Year Ended December 31,
       2007       2006                                    2007         2006
         85%        80%   Excess and Surplus Lines          82%          78%
         90%        89%   Specialty Admitted                92%          91%
         91%        87%   London Insurance Market           93%         100%
         87%        84%       Consolidated                  88%          87%

SOURCE Markel Corporation

CONTACT: Bruce Kay of Markel Corporation, +1-804-747-0136