AM Best Affirms Credit Ratings of Markel Corporation and Most Subsidiaries

OLDWICK, N.J.--(BUSINESS WIRE)-- AM Best has affirmed the Long-Term Issuer Credit Rating (Long-Term ICR) of “bbb+” of Markel Corporation (Markel) and all of its Long-Term Issue Credit Ratings (Long-Term IRs) and indicative Long-Term IRs (see below for a detailed list of Long-Term IRs and indicative Long-Term IRs). AM Best also has affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term ICRs of “a+” of all the members of the Markel North America Insurance Group. (See below for a detailed list of companies.) AM Best also has affirmed the FSR of A (Excellent) and the Long-Term ICRs of “a” of Markel Bermuda Limited (Hamilton, Bermuda) and its affiliate Markel Global Reinsurance Company (Delaware) (collectively called Markel Bermuda). The outlook of these Credit Ratings (ratings) is stable.

Concurrently, AM Best has affirmed the FSR of A (Excellent) and the Long-Term ICRs of “a+” of State National Insurance Company, Inc. and its subsidiaries, which operate under a pooling agreement and are collectively referred to as State National Group (State National) (see below for a detailed listing of companies). The outlook of these ratings remains stable. All companies are headquartered in Bedford, TX.

At the same time, AM Best has affirmed the FSR of A (Excellent) and the Long-Term ICR of “a+” of Lloyd’s Syndicate 3000 (Markel Syndicate Management Limited) (Syndicate 3000) (United Kingdom). The outlook of these ratings remains stable.

The ratings of the Markel North America Insurance Group, which is considered the lead rating unit in the Markel enterprise, reflect its balance sheet strength, which AM Best categorizes as strongest, as well as its adequate operating performance, favorable business profile and appropriate enterprise risk management (ERM).

The balance sheet assessment of the Markel North America Group reflects its strongest level of risk-adjusted capitalization, as measured with Best’s Capital Adequacy Ratio (BCAR). It also considers the group’s loss reserve development trends, which have been favorable over a number of years, its consistently positive cash flows and favorable organic surplus generation. These factors are offset partially by its relatively high underwriting leverage, elevated investment risk, including a high level of common stock leverage, and an appetite for catastrophe-exposed business that has resulted in variability in surplus generation in years with significant industry catastrophe losses. The balance sheet assessment also incorporates a neutral view of the holding company, whose financial leverage and coverage metrics are within guidelines for the rating, and whose level of risk-adjusted capital, as measured by BCAR, comfortably support the risks in the overall enterprise.

The group’s operating performance assessment is derived from its strong loss and loss adjustment expense metrics, which typically outperform the peer group, offset by an expense ratio that, while improving, remains elevated relative to composite averages. While the group benefits from consistent levels of investment income and realized gains, total return can be impacted by unrealized losses in some years, as occurred in 2015 and 2018. Returns on equity generally outperform the peer group, but operating results and pre-tax return on revenue tend to lag.

The group’s business profile benefits from its strong position in the U.S. surplus lines market, now ranking third-largest overall and second-largest of the U.S.-based surplus lines companies. The group’s business is well-diversified by line of business and geographically, within the United States and internationally.

AM Best views the group’s ERM as appropriate for the scope and size of the business. The group has developed, implemented and embedded a risk management framework that appropriately addresses the risks inherent in its profile. Its risk management capabilities generally meet or exceed its risk profile.

The ratings of State National reflect its balance sheet strength, which AM Best categorizes as very strong, as well as its strong operating performance, neutral business profile and appropriate ERM.

The ratings of Markel Bermuda reflect its balance sheet strength, which AM Best categorizes as very strong, as well as its adequate operating performance, neutral business profile and appropriate ERM.

The ratings of Syndicate 3000 reflect the balance sheet strength of the Lloyd’s market, which AM Best categorizes as very strong, as well as the market’s strong operating performance, favorable business profile and appropriate ERM. Markel is the ultimate parent company of Syndicate 3000’s managing agent, Markel Syndicate Management Limited, and of its corporate member, Markel Capital Limited. Syndicate 3000 is important to Markel as its main underwriting center for marine, large U.S. and international property risks and specialty and financial lines written in the London market.

The FSR or A (Excellent) and the Long-Term ICRs of “a+” have been affirmed, each with a stable outlook, for the following members of Markel North America Insurance Group:

• Markel Insurance SE
• Essentia Insurance Company
• Evanston Insurance Company
• FirstComp Insurance Company
• Markel American Insurance Company
• Markel Insurance Company
• Markel International Insurance Company Ltd.
• SureTec Indemnity Company
• SureTec Insurance Company

The FSR of A (Excellent) and the Long-Term ICRs of “a+” have been affirmed, each with a stable outlook, for the following members of State National Group:

• State National Insurance Company, Inc.
• National Specialty Insurance Company
• United Specialty Insurance Company
• City National Insurance Company
• Independent Specialty Insurance Company
• Pinnacle National Insurance Company
• Superior Specialty Insurance Company

The following Long-Term IRs have been affirmed, each with a stable outlook:

Markel Corporation—
-- “bbb+” on $350 million 4.9% senior unsecured notes, due 2022
-- “bbb+” on $250 million 3.625% senior unsecured notes, due 2023
-- “bbb+” on $300 million 3.5% senior unsecured notes, due 2027
-- “bbb+” on $300 million 3.35% senior unsecured notes, due 2029
-- “bbb+” on $200 million 7.35% senior unsecured notes, due 2034
-- “bbb+” on $250 million 5.0% senior unsecured notes, due 2043
-- “bbb+” on $500 million 5.0% senior unsecured notes, due 2046
-- “bbb+” on $300 million 4.3% senior unsecured notes, due 2047
-- “bbb+” on $600 million 5.0% senior unsecured notes, due 2049
-- “bbb+” on $500 million 4.15% senior unsecured notes, due 2050

The following indicative Long-Term IRs under the existing shelf registration have been affirmed, each with a stable outlook:

Markel Corporation—
-- “bbb+” on senior unsecured debt
-- “bbb” on subordinated debt
-- “bbb-” on preferred securities

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.

AM Best is a global credit rating agency, news publisher and data provider specializing in the insurance industry. The company does business in more than 100 countries. Headquartered in Oldwick, NJ, AM Best has offices in cities around the world, including London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

Copyright © 2019 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

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Jennifer Marshall

Director

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Michael Lagomarsino, CFA, FRM

Senior Director

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Christopher Sharkey

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Jim Peavy

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Source: AM Best