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Markel Reports Strong Quarterly Earnings

RICHMOND, Va., July 29 /PRNewswire-FirstCall/ -- Markel Corporation (NYSE: MKL) reported net income of $5.97 and $9.66 per diluted share, respectively, for the quarter and six month period ended June 30, 2003 compared to net income of $2.36 and $4.09 per diluted share, respectively, for the quarter and six month period ended June 30, 2002. Both periods of 2003 benefited from continued improvement in underwriting profits and increased net investment income and realized gains. The combined ratio for the second quarter of 2003 was 95% compared to 101% in 2002. For the six month period ended June 30, 2003, the combined ratio was 96% compared to 102% in the prior year. Alan I. Kirshner, Chairman and Chief Executive Officer, commented, "During the second quarter, we continued to build upon the momentum created by our strong results over the past several quarters. Our investment portfolio produced impressive total returns and underwriting profits continued to increase. The combination of underwriting profits and strong investment returns resulted in a 15% increase in book value per share for the first six months of 2003."

    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 or net income 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 2003 and 2002 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,

                                  2003         2002         2003         2002
     Core operations             $3.65 $1.77 $7.08 $3.32
     Realized gains               2.42          .76         2.85         1.13
     Amortization expense         (.10)        (.17)        (.27)        (.36)
     Diluted net income          $5.97 $2.36 $9.66 $4.09
     Weighted average
     diluted shares              9,862        9,854        9,861        9,849


                               June 30,    December 31,
                                2003          2002
     Book value per common
      share outstanding        $135.07 $117.89

     Common shares outstanding   9,841        9,832

Second quarter 2003 income from core operations was $3.65 per share compared to income from core operations of $1.77 per share for the same period of 2002. For the six months ended June 30, 2003, income from core operations was $7.08 per share compared to income from core operations of $3.32 per share in the prior year. The improved results for both periods were primarily due to underwriting profitability in the Excess and Surplus Lines (E&S) and Specialty Admitted segments as well as improving underwriting results in our London Insurance Market segment.

    Book value per common share outstanding increased to $135.07 at June 30,
2003 from $117.89 at December 31, 2002.  The 2003 increase was primarily the
result of $95.3 million of net income and a $67.8 million increase in net
unrealized investment gains, net of taxes, during the six months ended June
30, 2003.


                                           -Premium Analysis-
                                         Quarter Ended June 30,
                                         (Dollars in thousands)
                             Gross Written Premiums         Earned Premiums
                                 2003        2002           2003        2002
     Excess and Surplus
      Lines                   $371,802 $304,303 $247,242 $176,659
     Specialty Admitted         73,700      62,086         57,416      43,606
     London Insurance Market   165,888     156,026        129,977     119,586
     Other                       7,465       1,300          4,238       6,425
          Total               $618,855 $523,715 $438,873 $346,276


                                           -Premium Analysis-
                                       Six Months Ended June 30,
                                         (Dollars in thousands)
                             Gross Written Premiums        Earned Premiums
                                 2003        2002            2003       2002
     Excess and Surplus
      Lines                   $737,411 $585,245 $483,916 $333,787
     Specialty Admitted        131,438     108,608         112,074     82,767
     London Insurance Market   365,578     326,985         264,215    242,161
     Other                      29,164      21,523          11,021     15,100
          Total             $1,263,591 $1,042,361 $871,226 $673,815


    For the quarter and six month period ended June 30, 2003, E&S and
Specialty Admitted gross written premiums increased 22% and 25%, respectively,
due to increased submission activity and price increases across all business
units.  Writings in the London Insurance Market increased 6% and 12% for the
quarter and six month period ended June 30, 2003, respectively, and continued
to meet the Company's expectations both in terms of volume and price increases
achieved.  Other consisted primarily of Corifrance's writings in both periods
of 2003 and 2002.


                                           -Combined Ratio Analysis-
                                     Quarter Ended          Six Months Ended
                                        June 30,                 June 30,
                                   2003         2002       2003          2002
     Excess and Surplus Lines       88%          93%        88%           94%
     Specialty Admitted             92%         105%        95%          102%
     London Insurance Market       102%         107%       102%          109%
     Other                         342%         186%       269%          162%
     Consolidated                   95%         101%        96%          102%

The E&S segment produced strong underwriting profits for the quarter and the six months ended June 30, 2003 and continues to benefit from improved pricing, more restrictive coverage and better risk selection. The underwriting profits in both periods of 2003 resulted primarily from favorable development of prior years' loss reserves in the Essex E&S Lines and the Shand Professional/Products Liability units. This favorable development was partially offset by adverse development of prior years' loss reserves in the Investors Brokered Excess and Surplus Lines unit. During the six months ended June 30, 2003, this unit experienced approximately $11 million of adverse development on loss reserves primarily for business written between 1996 and 2000.

The Specialty Admitted segment produced underwriting profits for the quarter and the six months ended June 30, 2003 compared to underwriting losses for the same periods of 2002. The significant improvement in both periods of 2003 was primarily the result of favorable development on prior years' loss reserves. The Company continues to focus on pricing, risk selection and expense control to meet its profitability goals for the Specialty Admitted segment.

The combined ratio for the London Insurance Market improved for the quarter and six months ended June 30, 2003 compared to the same periods of 2002. This improvement has resulted from a combination of lower loss ratios due to improved risk selection, pricing and the appropriate use of reinsurance and lower expense ratios due to lower commissions and expense control. The second quarter 2003 combined ratio of 102% decreased from 103% in the first quarter of 2003. The London Insurance Market segment combined ratio has steadily improved and the London underwriting units continue to work towards their goal of underwriting profitability.

The underwriting loss from Other, which includes discontinued lines of business, was $10.3 million and $18.6 million, respectively, for the second quarter and six month period ended June 30, 2003 compared to $5.5 million and $9.4 million, respectively, in the same periods of 2002. The increase in the underwriting loss for both periods was primarily due to increases in the allowance for potentially uncollectible reinsurance and run off provisions for discontinued lines of business.

The Company anticipates that all segments of the specialty insurance marketplace in which it competes will continue to provide a favorable environment for its operations. For 2003 budgeting purposes, the Company anticipates gross premium growth of 15%, with domestic operations slightly higher and international operations slightly lower. Management continues to believe that this is a reasonable growth forecast for the full year. While all of the Company's insurance operations continue to achieve rate increases compared to the prior year, rate increases have begun to slow in certain lines of business.

Second quarter 2003 net investment income was $45.5 million compared to $42.6 million in the prior year. Net investment income for the six month period ended June 30, 2003 was $90.7 million compared to $84.0 million in 2002. In both periods of 2003, a larger investment portfolio offset lower investment yields.

In the second quarter of 2003, the Company recognized $36.7 million of net realized gains compared to $11.5 million of net realized gains in 2002. For the six month period of 2003, net realized gains were $43.2 million compared to net realized gains of $17.1 million for the same period last year. Realized gains in both periods of 2003 were primarily the result of the Company's decision to sell certain government securities and buy higher yielding fixed income investments, including tax-exempt municipal bonds. Variability in the timing of realized and unrealized investment gains and losses is to be expected.

Amortization of intangible assets was $1.5 million in the second quarter of 2003 compared to $2.6 million last year. For the six month period of 2003, amortization of intangible assets was $4.1 million compared to $5.4 million for the same period of 2002. Intangible assets, other than goodwill, were fully amortized at the end of the second quarter of 2003.

Interest expense was $13.6 million for the second quarter of 2003 compared to $10.9 million for the same period of 2002. For the six months ended June 30, 2003, interest expense was $25.0 million compared to $20.0 million for the same period last year. The increase in both periods is primarily due to the Company's 2003 issuance of $250 million of 6.80% unsecured senior notes, due February 15, 2013. A portion of the net proceeds was used to repay $175 million outstanding under the Company's revolving credit facility.

For the second quarter and six months ended June 30, 2003, the Company's effective tax rate was 33% compared to 35% and 36%, respectively, for the second quarter and six month period of 2002. The decrease was due to the elimination during 2002 of nondeductible interest expense and the 2003 increase in investment allocations to tax-exempt securities.

Comprehensive income was $151.2 million for the second quarter of 2003 compared to $37.7 million for the same period of 2002. For the six month period ended June 30, 2003, comprehensive income was $169.9 million compared to $42.0 million in 2002. The improvement in both periods of 2003 was primarily due to a significant increase in the market value of the Company's investment portfolio during the second quarter of 2003 and significantly higher net income compared to 2002. Comprehensive income for the second quarter of 2003 includes a $4.7 million gain from currency translation adjustments, net of taxes, compared to a gain of $3.8 million for the same period of 2002. For the six month period of 2003, gains from currency translation adjustments, net of taxes, were $6.7 million compared to gains of $3.3 million for the same period of 2002. The Company attempts to match assets and liabilities in original currencies to mitigate the impact of currency volatility.

At June 30, 2003, the Company's investment portfolio increased 12% to $4.8 billion from $4.3 billion at December 31, 2002. The Company reported net unrealized gains, net of taxes, on its fixed maturity and equity investments of $247.0 million at June 30, 2003 compared to $179.2 million at December 31, 2002. Equity securities were $729.2 million, or 15% of the total investment portfolio, at June 30, 2003 compared to $550.9 million, or 13%, at December 31, 2002. Cash flows from operations were approximately $258 million for the first six months of 2003 compared to approximately $150 million for the same period in 2002.

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 and anticipated improvements in underwriting profitability are 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 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 related 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 quarter and year to date financial results and may include forward-looking information, will be held tomorrow, Wednesday, July 30, 2003 at approximately 10:30 a.m. Eastern 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 8, 2003, 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, www.markelcorp.com. A replay of the call will also be available on this web site until Friday, August 8, 2003.

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.

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

                                     Quarter Ended        Six Months Ended
                                       June 30,               June 30,
                                    2003       2002       2003         2002
                                (dollars in thousands, except per share data)
    OPERATING REVENUES
    Earned premiums              $438,873 $346,276 $871,226 $673,815
    Net investment income          45,467     42,576      90,700       84,040
    Net realized gains from
     investment sales              36,732     11,471      43,203       17,095
          Total Operating
           Revenues               521,072    400,323   1,005,129      774,950

    OPERATING EXPENSES
    Losses and loss adjustment
     expenses                     279,933    239,268     559,952      473,724
    Underwriting, acquisition
     and insurance expenses       138,157    111,669     273,793      212,918
    Amortization of intangible
     assets                         1,498      2,629       4,127        5,426
          Total Operating
           Expenses               419,588    353,566     837,872      692,068
          Operating Income        101,484     46,757     167,257       82,882
    Interest expense               13,641     10,872      25,036       19,953
          Income Before Income
           Taxes                   87,843     35,885     142,221       62,929
    Income tax expense             28,988     12,648      46,933       22,655
           Net Income             $58,855 $23,237 $95,288 $40,274

    OTHER COMPREHENSIVE INCOME
    Unrealized gains on
     securities, net of taxes
           Net holding gains
            arising during the
            period               $111,458 $18,090 $95,929 $9,511
           Less reclassification
            adjustments for gains
             included in net
              income              (23,876)    (7,457)    (28,082)     (11,112)
          Net unrealized gains
           (losses)                87,582     10,633      67,847       (1,601)
    Currency translation
     adjustments, net of taxes      4,741      3,783       6,725        3,285
           Total Other
            Comprehensive Income   92,323     14,416      74,572        1,684
           Comprehensive Income  $151,178 $37,653 $169,860 $41,958

    NET INCOME PER SHARE
         Basic                      $5.98 $2.37 $9.68 $4.10
         Diluted                    $5.97 $2.36 $9.66 $4.09


    Selected Data
    (dollars and shares in thousands,                   June 30,  December 31,
     except per share data)                               2003         2002
    Total investments and cash                        $4,820,616 $4,314,152
    Reinsurance recoverable on
     paid and unpaid losses                            1,637,720    1,730,879
    Intangible assets                                    357,317      361,444
    Total assets                                       7,876,613    7,408,560
    Unpaid losses and loss adjustment expenses         4,467,216    4,366,803
    Unearned premiums                                  1,029,834      937,364
    Convertible notes payable                             88,333       86,109
    Long-term debt                                       477,571      404,384
    8.71% Capital Securities                             150,000      150,000
    Total shareholders' equity                         1,329,255    1,159,111
    Book value per share                                 $135.07 $117.89
    Common shares outstanding                              9,841        9,832



                              Markel Corporation
                        Segment Reporting Disclosures
              For the Quarter and Six Months Ended June 30, 2003


                        Segment Gross Written Premium

     Quarter Ended June 30,                          Six Months Ended June 30,
        2003        2002      (dollars in thousands)       2003        2002
     $371,802 $304,303   Excess and Surplus Lines    $737,411 $585,245
       73,700      62,086   Specialty Admitted           131,438     108,608
      165,888     156,026   London Insurance Market      365,578     326,985
        7,465       1,300   Other                         29,164      21,523
     $618,855 $523,715          Consolidated       $1,263,591 $1,042,361

                         Segment Net Written Premium

     Quarter Ended June 30,                          Six Months Ended June 30,
        2003        2002      (dollars in thousands)       2003        2002
     $265,780 $207,174   Excess and Surplus Lines    $521,475 $397,773
       69,320      57,277   Specialty Admitted           122,787     101,205
      137,869     138,147   London Insurance Market      285,589     255,262
        2,902         574   Other                         20,983      23,048
     $475,871 $403,172          Consolidated         $950,834 $777,288

                               Segment Revenues

     Quarter Ended June 30,                          Six Months Ended June 30,
        2003        2002      (dollars in thousands)       2003        2002
     $247,242 $176,659   Excess and Surplus Lines    $483,916 $333,787
       57,416      43,606   Specialty Admitted           112,074      82,767
      129,977     119,586   London Insurance Market      264,215     242,161
       82,199      54,047   Investing                    133,903     101,135
        4,238       6,425   Other                         11,021      15,100
     $521,072 $400,323          Consolidated       $1,005,129 $774,950

                            Segment Profit (Loss)

     Quarter Ended June 30,                          Six Months Ended June 30,
        2003        2002      (dollars in thousands)       2003        2002
      $28,866 $11,922   Excess and Surplus Lines     $56,669 $19,220
        4,739      (2,142)  Specialty Admitted             5,728      (1,791)
       (2,565)     (8,899)  London Insurance Market       (6,321)    (20,892)
       82,199      54,047   Investing                    133,903     101,135
      (10,257)     (5,542)  Other                        (18,595)     (9,364)
     $102,982 $49,386          Consolidated         $171,384 $88,308

                               Combined Ratios

     Quarter Ended June 30,                          Six Months Ended June 30,
         2003        2002                                   2003        2002
          88%         93%   Excess and Surplus Lines         88%         94%
          92%        105%   Specialty Admitted               95%        102%
         102%        107%   London Insurance Market         102%        109%
         342%        186%   Other                           269%        162%
          95%        101%          Consolidated              96%        102%

SOURCE  Markel Corporation
    -0-                             07/29/2003
    /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 ERP


MB-JA 
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0063 07/29/2003 18:27 EDT http://www.prnewswire.com