Primary Banner Beige

Markel Reports 32% Growth in Book Value Per Share

RICHMOND, Va., Jan 24, 2007 /PRNewswire-FirstCall via COMTEX News Network/ -- Markel Corporation (NYSE: MKL) reported diluted net income per share of $39.40 for the year ended December 31, 2006 compared to diluted net income per share of $14.80 for 2005. The 2006 combined ratio was 87% compared to 101% in 2005. Book value per common share outstanding increased 32% to $229.78 at December 31, 2006 due to comprehensive income of $525.8 million.

Alan I. Kirshner, Chairman and Chief Executive Officer, commented, "2006 was an exceptional year. While part of our success can be attributed to a benign hurricane season, good weather does not deserve all of the credit. Our associates deserve the real credit as their combined energy and discipline produced strong underwriting performance, outstanding investment returns and another year of record earnings."

The following table presents selected financial data from 2006 and 2005 (amounts in thousands, except per share amounts).


                                                         Year Ended
                                                         December 31,
                                                    2006             2005

    Net income                                   $ 392,502        $ 147,915
    Comprehensive income                         $ 525,782        $  63,641
    Weighted average diluted shares                 10,024           10,171
    Diluted net income per share                 $   39.40        $   14.80


                                                December 31,     December 31,
                                                    2006             2005

    Book value per common share outstanding      $  229.78        $  174.04
    Common shares outstanding                        9,994            9,799


The 2006 increase in diluted net income per share was due to improved underwriting performance and higher investment returns in 2006 compared to 2005.

Comprehensive income for 2006 was $525.8 million compared to $63.6 million in 2005. The increase in comprehensive income was primarily due to higher 2006 net income and an increase in the market value of the investment portfolio during 2006.

    Over the one- and five-year periods ended December 31, 2006, compound
annual growth in book value per common share outstanding was 32% and 16%,
respectively.


                                            -Combined Ratio Analysis-
                                                   Year Ended
                                                  December 31,
                                              2006            2005

    Excess and Surplus Lines                   78%             92%
    Specialty Admitted                         91%             83%
    London Insurance Market                   100%            126%
    Other                                       NM              NM
    Consolidated                               87%            101%

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


The combined ratio for 2006 included $54.9 million, or 3 points, of underwriting losses related to Hurricanes Katrina, Rita and Wilma ("2005 Hurricanes") compared to $246.3 million, or 12 points, of underwriting losses on the 2005 Hurricanes included in the 2005 combined ratio. The additional losses on the 2005 Hurricanes during 2006 were primarily concentrated in our contract property and delegated authority books of business included in the Excess and Surplus Lines and London Insurance Market segments. In addition to the favorable impact of the benign hurricane season experienced this year, the improved combined ratio for 2006 was due in part to $193.8 million of favorable development on prior years' loss reserves before considering adverse development on the 2005 Hurricanes compared to favorable development of $50.6 million on prior years' loss reserves in 2005.

The Excess and Surplus Lines segment's combined ratio for the year ended December 31, 2006 was 78% (including 1 point of losses related to the 2005 Hurricanes) compared to 92% (including 10 points of losses related to the 2005 Hurricanes) in 2005. During 2006, unfavorable loss reserve development of $16.5 million on the 2005 Hurricanes was more than offset by $176.6 million of favorable development on other prior years' loss reserves. The favorable development experienced during 2006 was primarily on the specified medical, medical malpractice, products liability and employment practices liability programs at the Shand Professional/Products Liability unit and was a result of the favorable rates and terms experienced on the 2002 to 2005 accident years.

The Specialty Admitted segment's combined ratio for the year ended December 31, 2006 was 91% compared to 83% (including 5 points of losses related to the 2005 Hurricanes) in 2005. The increase in the 2006 combined ratio was primarily due to lower favorable development on prior years' loss reserves compared to 2005.

The London Insurance Market segment's combined ratio for the year ended December 31, 2006 was 100% (including 7 points of losses related to the 2005 Hurricanes) compared to 126% (including 22 points of losses related to the 2005 Hurricanes) in 2005. During 2006, unfavorable loss reserve development of $43.8 million on the 2005 Hurricanes was partially offset by $25.3 million of favorable development on other prior years' loss reserves. This favorable prior year development reflects improved risk selection and the favorable rates and terms associated with the London market in recent years. The combined ratio for 2006 also improved due to lower frequency and severity of losses on several property classes of business compared to 2005.

The London Insurance Market segment reported a combined ratio of 87% for the fourth quarter of 2006, which represents the third consecutive quarter that this segment has reported an underwriting profit. The underwriting performance for this segment may vary to a greater degree than our other segments due to Markel International's current mix of business, which includes a higher percentage of catastrophe-exposed business, and Markel International's minimal use of reinsurance.

    The Other segment produced an underwriting loss of $23.4 million for the
year ended December 31, 2006 compared to an underwriting loss of $28.8 million
in 2005.  The underwriting loss in 2006 and in 2005 included $16.7 million and
$31.3 million, respectively, of loss reserve development on asbestos and
environmental (A&E) exposures and related reinsurance bad debt.  The increase
in A&E reserves in both years was a result of the completion of our annual
review of these exposures during the third quarters of 2006 and 2005.  During
these reviews, we noted an increase in the severity of losses on reported
claims, which caused us to increase our estimate of ultimate loss reserves for
A&E exposures.


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

                              Gross Written Premiums       Earned Premiums
                                 2006        2005          2006        2005

    Excess and Surplus Lines  $1,465,725  $1,439,744    $1,242,184  $1,138,525
    Specialty Admitted           340,483     318,717       317,401     291,273
    London Insurance Market      729,160     640,986       624,599     507,518
    Other                            862       1,887           197       1,145
         Total                $2,536,230  $2,401,334    $2,184,381  $1,938,461


Gross written premiums for the year ended December 31, 2006 increased 6% compared to 2005. The increase was primarily due to rate increases achieved by Markel International's Marine and Energy and Non-Marine Property divisions, as well as increased volume from new programs written by Markel Re's Specialized Markel Alternative Risk Transfer division. With the exception of large rate increases on catastrophe-exposed business, rates have generally been flat or down slightly compared to 2005. We have continued to experience increased competition throughout 2006, most notably in our professional liability programs, where rates are generally down 5% to 10%, and our casualty programs, where rates are generally flat to down 5%. We expect that competition in the property and casualty insurance industry will remain strong in 2007.

Net retention of gross premium volume was 87% for the year ended December 31, 2006 compared to 82% in 2005. Net written premiums for 2005 were reduced by $57.6 million of additional reinsurance costs resulting from the 2005 Hurricanes. As a result of these additional reinsurance costs, our net retention of gross premium volume was reduced by 3% for the year ended December 31, 2005. Aside from the impact of the storms in 2005, the increase in retention in 2006 was primarily due to purchasing lower amounts of reinsurance in the Excess and Surplus Lines and London Insurance Market segments during 2006 compared to 2005.

Earned premiums for the year ended December 31, 2006 increased 13% compared to 2005. Earned premiums for 2005 were reduced by $57.6 million of additional reinsurance costs resulting from the 2005 Hurricanes. In addition to the impact of additional reinsurance costs in 2005, earned premiums increased in 2006 due to higher gross premium volume and higher retentions compared to 2005.

Net investment income for the year ended December 31, 2006 was $271.0 million compared to $242.0 million in 2005. The increase in 2006 was due to higher investment yields on a larger investment portfolio compared to the same period of 2005.

Net realized investment gains for the year ended December 31, 2006 were $63.6 million compared to $19.7 million in 2005. Variability in the timing of realized and unrealized investment gains and losses is to be expected.

Interest expense for the year ended December 31, 2006 was $65.2 million compared to $63.8 million for 2005. The increase in interest expense is primarily due to the August 2006 issuance of $150 million of 7.50% unsecured senior debentures due August 22, 2046. Interest expense from the new debt issuance was partially offset by lower interest expense on our Junior Subordinated Deferrable Interest Debentures due to our retirement of a portion of these debentures during 2006. Proceeds from the August 2006 debt issuance were used to redeem the remaining Junior Subordinated Deferrable Interest Debentures on January 2, 2007. Interest expense in 2006 included interest expense on our Liquid Yield Option(TM) Notes (LYONs) through their redemption in December 2006.

The effective tax rate was 29% for 2006 compared to 20% for 2005. 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, 2006, our investment portfolio increased 14% to $7.5 billion from $6.6 billion at December 31, 2005. Net unrealized holding gains, net of taxes, on fixed maturities and equity securities were $462.5 million at December 31, 2006 compared to $302.5 million at December 31, 2005. Equity securities were $1.8 billion, or 23%, of our total investment portfolio at December 31, 2006 compared to $1.4 billion, or 21%, of our total investment portfolio at December 31, 2005.

Net cash provided by operating activities was $511.6 million for the year ended December 31, 2006 compared to $551.3 million for 2005. The decrease was primarily due to higher claim payments related to hurricanes and higher income tax payments in 2006 compared to 2005, offset in part by collections of related reinsurance balances, increased premium volume and cash received from reinsurance commutation agreements completed in 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:

      -- Gross and net loss estimates related to the 2005 Hurricanes are based
         upon currently available information related to covered exposures and
         assumptions about how coverage applies.  As actual losses are
         reported, claims are adjusted and, as specific reinsurers are
         associated with those losses, both gross and net losses for the 2005
         Hurricanes may change significantly.

      -- 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.

      -- 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.

      -- 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.

      -- Regulatory actions can impede our ability to charge adequate rates
         and efficiently allocate capital.

      -- 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 on 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. 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 Thursday, January 25, 2007 at approximately 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 Friday, February 2, 2007, 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, http://www.markelcorp.com. A replay of the call will also be available on this web site until Friday, February 2, 2007.

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,
                                   2006       2005       2006         2005
                                (dollars in thousands, except per share data)

    OPERATING REVENUES
    Earned premiums             $  558,750 $  517,694  $2,184,381  $1,938,461
    Net investment income           67,665     62,361     271,016     241,979
    Net realized investment
     gains (losses)                 23,758       (427)     63,608      19,708
       Total Operating Revenues    650,173    579,628   2,519,005   2,200,148

    OPERATING EXPENSES
    Losses and loss adjustment
     expenses                      250,601    227,999   1,132,579   1,299,983
    Underwriting, acquisition
     and insurance expenses        216,520    177,455     767,853     650,323
       Total Operating
        Expenses                   467,121    405,454   1,900,432   1,950,306
       Operating Income            183,052    174,174     618,573     249,842
    Interest expense                17,364     15,700      65,172      63,842
       Income Before Income
        Taxes                      165,688    158,474     553,401     186,000
    Income tax expense              44,306     35,346     160,899      38,085
       Net Income               $  121,382 $  123,128  $  392,502  $  147,915

    OTHER COMPREHENSIVE INCOME
     (LOSS)
    Net unrealized gains
     (losses) on securities,
     net of taxes:
       Net holding gains
        (losses) arising during
        the period              $  133,480 $  (14,509) $  201,318  $  (61,755)
       Less reclassification
        adjustments for net
        gains (losses) included
        in net income              (15,442)       278     (41,345)    (12,810)
       Net unrealized gains
        (losses)                   118,038    (14,231)    159,973     (74,565)
    Currency translation
     adjustments, net of taxes      (2,482)       989      (1,680)     (9,709)
    Net unrealized pension loss,
     net of taxes                  (25,013)         -     (25,013)          -
       Total Other Comprehensive
        Income (Loss)               90,543    (13,242)    133,280     (84,274)
       Comprehensive Income     $  211,925 $  109,886  $  525,782  $   63,641

    NET INCOME PER SHARE
         Basic                  $    12.41 $    12.57      $40.43      $15.05
         Diluted                $    12.17 $    12.21      $39.40      $14.80



    Selected Data
    (dollars and shares in thousands,               December 31,  December 31,
     except per share data)                             2006          2005

    Total investments and cash and cash equivalents  $ 7,535,295   $ 6,588,222
    Reinsurance recoverable on paid and unpaid
     losses                                            1,362,456     1,915,611
    Goodwill                                             339,717       339,717
    Total assets                                      10,088,131     9,814,098
    Unpaid losses and loss adjustment expenses         5,583,879     5,863,677
    Unearned premiums                                  1,007,801       993,737
    Convertible notes payable                                  -        98,891
    Senior long-term debt                                751,978       608,945
    Junior Subordinated Deferrable Interest
     Debentures                                          106,379       141,045
    Total shareholders' equity                         2,296,393     1,705,433
    Book value per share                             $    229.78   $    174.04
    Common shares outstanding                              9,994         9,799



                              Markel Corporation
                        Segment Reporting Disclosures
         For the Quarters and Years Ended December 31, 2006 and 2005


                        Segment Gross Written Premiums

    Quarter Ended December 31,                         Year Ended December 31,
       2006        2005        (dollars in thousands)      2006        2005

    $  346,264  $  387,636    Excess and Surplus Lines  $1,465,725  $1,439,744
        70,391      68,744    Specialty Admitted           340,483     318,717
       147,743     138,430    London Insurance Market      729,160     640,986
           261         (39)   Other                            862       1,887
    $  564,659  $  594,771          Consolidated        $2,536,230  $2,401,334


                         Segment Net Written Premiums

    Quarter Ended December 31,                         Year Ended December 31,
       2006        2005        (dollars in thousands)      2006        2005

    $  293,116  $  317,280    Excess and Surplus Lines  $1,228,797  $1,160,948
        65,158      66,229    Specialty Admitted           322,466     299,665
       137,776     118,938    London Insurance Market      643,485     510,836
            15         (60)   Other                            197       1,145
    $  496,065  $  502,387          Consolidated        $2,194,945  $1,972,594


                               Segment Revenues

    Quarter Ended December 31,                         Year Ended December 31,
       2006        2005        (dollars in thousands)      2006        2005

    $  309,528   $  301,518   Excess and Surplus Lines  $1,242,184  $1,138,525
        80,125       77,685   Specialty Admitted           317,401     291,273
       169,082      138,551   London Insurance Market      624,599     507,518
        91,423       61,934   Investing                    334,624     261,687
            15          (60)  Other                            197       1,145
    $  650,173   $  579,628         Consolidated        $2,519,005  $2,200,148


                   Reconciliation of Segment Profit (Loss)
                       to Consolidated Operating Income

    Quarter Ended December 31,                         Year Ended December 31,
       2006        2005        (dollars in thousands)      2006        2005

    $   62,130   $  128,267   Excess and Surplus Lines  $  279,315  $  96,180
         8,652       25,556   Specialty Admitted            28,096     50,261
        21,389      (40,784)  London Insurance Market          (24)  (129,491)
        91,423       61,934   Investing                    334,624    261,687
          (542)        (799)  Other                        (23,438)   (28,795)
    $  183,052   $  174,174         Consolidated        $  618,573  $ 249,842


                               Combined Ratios

    Quarter Ended December 31,                         Year Ended December 31,
       2006        2005                                    2006        2005

           80%          57%   Excess and Surplus Lines         78%        92%
           89%          67%   Specialty Admitted               91%        83%
           87%         129%   London Insurance Market         100%       126%
            NM           NM   Other                             NM         NM
           84%          78%         Consolidated               87%       101%


    NM -- Ratio is not meaningful.


SOURCE Markel Corporation

Bruce Kay of Markel Corporation, +1-804-747-0136
http://www.markelcorp.com