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Markel Reports Second Quarter Results

RICHMOND, Va., July 28 /PRNewswire-FirstCall/ -- Markel Corporation (NYSE: MKL) reported net income of $5.99 per diluted share for the quarter ended June 30, 2004 compared to net income of $5.97 per diluted share for the same period of 2003. Net income for the six month period ended June 30, 2004 was $10.28 per diluted share compared to $9.66 per diluted share in 2003. The combined ratio for the second quarter of 2004 was 90% compared to 95% in 2003. For the six month period ended June 30, 2004, the combined ratio was 93% compared to 96% in the prior year. Alan I. Kirshner, Chairman and Chief Executive Officer, commented, "We are pleased to report record underwriting profits for Markel. This performance reflects our strong underwriting discipline and commitment to underwriting profitability in all phases of the insurance market."

    In evaluating its operating performance, the Company focuses on core
underwriting and investing results (core operations) before consideration of
realized gains or losses and amortization expenses (these measures do not
replace operating income (loss) or net income (loss) computed in accordance
with generally accepted accounting principles as a measure of profitability).
The Company believes that this measure provides meaningful information about
the performance of its core underwriting and investing activities.  The
Company's definition of core operations may not be comparable to that used by
other companies. Following is a comparison of 2004 and 2003 results on a per
diluted share basis, except for book value per common share outstanding
(shares in thousands).


                                  Quarter Ended            Six Months Ended
                                     June 30,                  June 30,

                                 2004         2003         2004         2003
    Core operations             $6.00        $3.65        $9.81        $7.08
    Realized gains (losses)      (.01)        2.42          .47         2.85
    Amortization expense           --         (.10)          --         (.27)
    Diluted net income          $5.99        $5.97       $10.28        $9.66
    Weighted average
     diluted shares             9,854        9,862        9,856        9,861



                              June 30,   December 31,
                                2004         2003
    Book value per common
     share outstanding        $145.44      $140.38

    Common shares
     outstanding                9,847        9,847

Second quarter income from core operations was $6.00 per share in 2004 compared to $3.65 per share for 2003. For the six month period ended June 30, 2004, income from core operations was $9.81 per share compared to income from core operations of $7.08 per share for the same period in 2003. The increase in both periods of 2004 was primarily due to higher underwriting profits in the Excess and Surplus Lines and Specialty Admitted segments compared to 2003.

Book value per share was $145.44 at June 30, 2004, an increase of 4% since December 31, 2003. This increase has been impacted by the decline in market value of the Company's investment portfolio which occurred during the second quarter of 2004. For the quarter and six months ended June 30, 2004 the investment portfolio produced unrealized losses, net of tax, of $101.1 million and $48.0 million, respectively. The unfavorable movement in the investment portfolio during the quarter was partially offset by net income of $59.0 million resulting in a comprehensive loss of $41.7 million for the second quarter of 2004 compared to comprehensive income of $151.2 million for the same period of 2003. For the six month period ended June 30, 2004, net income of $101.3 million offset the unfavorable movement in the investment portfolio resulting in comprehensive income of $52.6 million compared to $169.9 million in 2003.


                                           -Combined Ratio Analysis- (1)
                                    Quarter Ended          Six Months Ended
                                       June 30,                 June 30,
                                  2004         2003       2004          2003
    Excess and Surplus Lines       84%          88%        83%           88%
    Specialty Admitted             85%          92%        89%           95%
    London Insurance Market       100%         102%       110%          102%
    Other                         173%         342%       150%          269%
    Consolidated                   90%          95%        93%           96%

The combined ratio for the Excess and Surplus Lines segment improved for the quarter and six months ended June 30, 2004 primarily due to lower current year losses and strong pricing.

The Specialty Admitted segment produced improved underwriting results for the quarter and six months ended June 30, 2004 compared to the same periods of 2003 primarily due to lower current year losses and lower expense ratios.

The improvement in the London Insurance Market segment's combined ratio for the second quarter of 2004 was primarily due to a lower loss ratio compared to the same period of 2003. The underwriting loss for the London Insurance Market segment for the six months ended June 30, 2004 was $31.1 million compared to $6.3 million for the same period of 2003. The underwriting loss for the six months ended June 30, 2004 included $30.0 million of loss reserve increases reported during the first quarter of 2004.

The underwriting loss from Other was $4.2 million for the quarter ended June 30, 2004 compared to $10.3 million for 2003. The Other underwriting loss for the six month period ended June 30, 2004 was $6.5 million compared to $18.6 million for the same period of 2003.

The pricing environment began to soften on certain product lines during the first half of 2004 as a result of increased competition. While the Company has experienced market pressure to reduce rates in some lines, the Company believes the rates being obtained across all lines of business are at levels that support underwriting profit targets. The Company will not sacrifice underwriting profits to achieve top line growth.


                                           -Premium Analysis-
                                         Quarter Ended June 30,
                                         (Dollars in thousands)
                            Gross Written Premiums          Earned Premiums
                                 2004        2003           2004        2003
    Excess and Surplus
     Lines                   $378,402    $371,802       $291,216    $247,242
    Specialty Admitted         84,037      73,700         64,996      57,416
    London Insurance Market   166,626     165,888        153,365     129,977
    Other                       3,714       7,465          5,849       4,238
         Total               $632,779    $618,855       $515,426    $438,873



                                            -Premium Analysis-
                                       Six Months Ended June 30,
                                         (Dollars in thousands)
                            Gross Written Premiums          Earned Premiums
                                 2004        2003            2004       2003
    Excess and Surplus
     Lines                   $740,671    $737,411        $566,670   $483,916
    Specialty Admitted        145,775     131,438         127,741    112,074
    London Insurance Market   377,672     365,578         313,372    264,215
    Other                      33,516      29,164          13,035     11,021
         Total             $1,297,634  $1,263,591      $1,020,818   $871,226

While the Company may not achieve its previous estimate of gross premium growth of 5% to 10%, net retention of gross written premium has increased, consistent with the Company's strategy to retain more of its underwriting profits. Net written premium increased 9% to $517.4 million and 11% to $1.1 billion, respectively, for the quarter and six months ended June 30, 2004 compared to the same periods of 2003.

Net retention of gross written premium for the second quarter of 2004 was 82% compared to 77% for 2003. For the six months ended June 30, 2004 net retention of gross written premium was 81% compared to 75% for the same period of 2003. The increase was primarily due to changes in the mix of premium writings and purchasing lower amounts of reinsurance in both the Excess and Surplus Lines and the London Insurance Market segments during 2004 compared to 2003.

Earned premium for the second quarter and six months ended June 30, 2004 increased 17% compared to the same periods of 2003. This increase in both periods of 2004 is due to higher gross premium volume and higher retentions over the past year in all segments.

Second quarter 2004 net investment income was $48.0 million compared to $45.5 million in the prior year. Net investment income for the six month period ended June 30, 2004 was $96.7 million compared to $90.7 million in 2003. In both periods of 2004, a larger investment portfolio offset lower investment yields.

In the second quarter of 2004, net realized losses were $0.2 million compared to net realized gains of $36.7 million in 2003. For the six month period ended June 30, 2004, net realized gains were $7.2 million compared to net realized gains of $43.2 million for the same period last year. Variability in the timing of realized and unrealized investment gains and losses is to be expected.

The Company's effective tax rate was 32% for both the second quarter and six months ended June 30, 2004 compared to 33% for the same periods of 2003.

At June 30, 2004, the Company's investment portfolio increased approximately 3% to $5.5 billion from $5.3 billion at December 31, 2003. The Company reported net unrealized gains, net of taxes, on its fixed maturity and equity investments of $222.8 million at June 30, 2004 compared to $270.8 million at December 31, 2003. Equity securities were $1.1 billion, or 19% of the total investment portfolio, at June 30, 2004 compared to $968.8 million, or 18%, at December 31, 2003. Net cash provided by operating activities was approximately $232 million for the six month period ended June 30, 2004 compared to approximately $258 million for the same period in 2003.

This is a "Safe Harbor" statement under the Private Securities Litigation Reform Act of 1995. It also contains general cautionary statements regarding the Company's business, estimates and management assumptions. Future actual results may materially differ from those in these statements because of many factors. Among other things, 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. The occurrence of additional terrorist activities could have a material impact on the Company and the insurance industry. The Company's anticipated premium growth 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. The Company is legally required to offer terrorism insurance and has attempted to manage its exposure. However, in the event of a covered terrorist attack, the Company could sustain material losses. Changing legal and social trends and inherent uncertainties (including but not limited to those uncertainties associated with the Company's asbestos and environmental reserves) in the loss estimation process can adversely impact the adequacy of loss reserves and the allowance for reinsurance recoverables. In addition, industry and economic conditions can affect the ability and/or willingness of reinsurers to pay balances due. The Company continues to closely monitor discontinued lines and reinsurance programs and exposures. Adverse experience in these areas could lead to additional charges. Regulatory actions can impede the Company's ability to charge adequate rates and efficiently allocate capital. Economic conditions, interest rates and foreign exchange rate volatility 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. The Company's premium growth, underwriting and investment results have been and will continue to be potentially materially affected by these factors. Additional factors, which could affect the Company, are discussed in the Company's reports on Forms 8-K, 10-Q and 10-K. By making these forward looking statements, the Company is not intending to become obligated to publicly update or revise any forward looking 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.

The quarterly conference call, which will involve discussion of the second quarter financial results and may include forward-looking information, will be held Thursday, July 29, 2004 at approximately 10:30 a.m. Eastern Daylight Savings Time. Any person interested in listening to the call, or a replay of the call, which will be available approximately two hours after the conclusion of the call until Friday, August 6, 2004, 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 corporate web site, http://www.markelcorp.com. A replay of the call will also be available on this web site until Friday, August 6, 2004.

The webcast, the conference call and the content and permitted replays or rebroadcasts thereof, are the exclusive copyrighted property of Markel Corporation and may not be copied, taped, rebroadcast, or published in whole or in part without the express written consent of Markel Corporation.

(1) Management considers both the combined ratio and the actual dollars of underwriting profit (loss) in evaluating the operating performance of its reporting segments. Investment decisions are not made within the underwriting segments. A reconciliation of segment profit (loss) to consolidated operating income is set forth below.

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 Operations and Comprehensive Income (Loss)

                                     Quarter Ended        Six Months Ended
                                       June 30,               June 30,
                                   2004        2003       2004        2003
                                (dollars in thousands, except per share data)
    OPERATING REVENUES
    Earned premiums               $515,426   $438,873  $1,020,818    $871,226
    Net investment income           48,025     45,467      96,688      90,700
    Net realized gains (losses)
     from investment sales            (203)    36,732       7,190      43,203
          Total Operating
           Revenues                563,248    521,072   1,124,696   1,005,129

    OPERATING EXPENSES
    Losses and loss adjustment
     expenses                      301,794    279,933     628,128     559,952
    Underwriting, acquisition
     and insurance expenses        161,694    138,157     321,757     273,793
    Amortization of intangible
     assets                             --      1,498          --       4,127
          Total Operating
           Expenses                463,488    419,588     949,885     837,872
          Operating Income          99,760    101,484     174,811     167,257
    Interest expense                12,941     13,641      25,822      25,036
          Income Before Income
           Taxes                    86,819     87,843     148,989     142,221
    Income tax expense              27,782     28,988      47,676      46,933
           Net Income              $59,037    $58,855    $101,313     $95,288

    OTHER COMPREHENSIVE INCOME
    Unrealized gains (losses) on
     securities, net of taxes
           Net holding gains
            (losses) arising
            during the period    $(101,182)  $111,458    $(43,328)    $95,929
           Less reclassification
            adjustments for
            gains (losses)
             included in net
              income                   131    (23,876)     (4,674)    (28,082)
          Net unrealized gains
           (losses)               (101,051)    87,582     (48,002)     67,847
    Currency translation
     adjustments, net of taxes         352      4,741        (711)      6,725
           Total Other
            Comprehensive
             Income (Loss)        (100,699)    92,323     (48,713)     74,572
           Comprehensive Income
            (Loss)                $(41,662)  $151,178     $52,600    $169,860

    NET INCOME PER SHARE
         Basic                       $5.99      $5.98      $10.28       $9.68
         Diluted                     $5.99      $5.97      $10.28       $9.66



    Selected Data
    (dollars and shares in thousands,              June 30,       December 31,
     except per share data)                          2004             2003
    Total investments and cash                   $5,486,183        $5,349,952
    Reinsurance recoverable on paid and
     unpaid losses                                1,694,827         1,770,607
    Intangible assets                               357,317           357,317
    Total assets                                  8,682,464         8,532,233
    Unpaid losses and loss adjustment expenses    5,125,017         4,929,713
    Unearned premiums                             1,072,285         1,060,188
    Convertible notes payable                        92,846            90,601
    Long-term debt                                  522,455           521,510
    8.71% Junior Subordinated Debentures            150,000           150,000
    Total shareholders' equity                    1,432,163         1,382,279
    Book value per share                            $145.44           $140.38
    Common shares outstanding                         9,847             9,847



                              Markel Corporation
                        Segment Reporting Disclosures
     For the Quarters and Six Month Periods Ended June 30, 2004 and 2003


                        Segment Gross Written Premium

     Quarter Ended June 30,                          Six Months Ended June 30,
      2004          2003      (dollars in thousands)      2004         2003
    $378,402      $371,802    Excess and Surplus Lines   $740,671    $737,411
      84,037        73,700    Specialty Admitted          145,775     131,438
     166,626       165,888    London Insurance Market     377,672     365,578
       3,714         7,465    Other                        33,516      29,164
    $632,779      $618,855    Consolidated             $1,297,634  $1,263,591

                         Segment Net Written Premium

    Quarter Ended June 30,                           Six Months Ended June 30,
      2004          2003      (dollars in thousands)      2004         2003
    $300,364      $265,780    Excess and Surplus Lines   $578,365    $521,475
      78,874        69,320    Specialty Admitted          137,215     122,787
     136,430       137,869    London Insurance Market     314,112     285,589
       1,683         2,902    Other                        26,240      20,983
    $517,351      $475,871    Consolidated             $1,055,932    $950,834

                               Segment Revenues

    Quarter Ended June 30,                           Six Months Ended June 30,
      2004          2003     (dollars in thousands)        2004        2003
    $291,216      $247,242    Excess and Surplus Lines   $566,670    $483,916
      64,996        57,416    Specialty Admitted          127,741     112,074
     153,365       129,977    London Insurance Market     313,372     264,215
      47,822        82,199    Investing                   103,878     133,903
       5,849         4,238    Other                        13,035      11,021
    $563,248      $521,072    Consolidated             $1,124,696  $1,005,129

                   Reconciliation of Segment Profit (Loss)
                       to Consolidated Operating Income

     Quarter Ended June 30,                          Six Months Ended June 30,
      2004          2003     (dollars in thousands)        2004        2003
     $46,868       $28,866    Excess and Surplus Lines    $93,927     $56,669
       9,512         4,739    Specialty Admitted           14,689       5,728
        (200)       (2,565)   London Insurance Market     (31,135)     (6,321)
      47,822        82,199    Investing                   103,878     133,903
      (4,242)      (10,257)   Other                        (6,548)    (18,595)
                              Amortization of
          --        (1,498)   Intangible Assets                --      (4,127)
     $99,760      $101,484    Consolidated               $174,811    $167,257

                               Combined Ratios

     Quarter Ended June 30,                          Six Months Ended June 30,
      2004          2003                                   2004        2003
         84%           88%    Excess and Surplus Lines        83%         88%
         85%           92%    Specialty Admitted              89%         95%
        100%          102%    London Insurance Market        110%        102%
        173%          342%    Other                          150%        269%
         90%           95%    Consolidated                    93%         96%
SOURCE  Markel Corporation
    -0-                             07/28/2004
    /CONTACT:  Bruce Kay of Markel Corporation, +1-804-747-0136/
    /Web site:  http://www.markelcorp.com /
    (MKL)

CO:  Markel Corporation
ST:  Virginia
IN:  INS
SU:  ERN CCA

MB-RJ 
-- DCW061 --
5665 07/28/2004 18:15 EDT http://www.prnewswire.com