Outlook Stable for Markel

Moody’s Investors Service affirmed Glen Allen, Va.-based Markel Corp.’s “Baa3” senior debt rating and “A3” insurance financial strength ratings at its U.S. insurance entities. The outlook for the ratings remains stable.

Moody’s noted that the affirmation reflects Markel’s strong position in U.S. specialty and excess and surplus (E&S) property/casualty segments, its historical focus on underwriting results and reserve stability in its North American E&S segment. Moody’s noted that the company is reporting solid underwriting profit margins in current accident year results and the rating agency believes that Markel is well positioned to take advantage of improved market conditions in the commercial lines sector.

Markel has dedicated considerable amounts of capital and management focus to improve the balance sheet and operating platforms of its acquired businesses. Improved operating results from Markel’s international segment are expected, though execution risks will likely persist considering the segment’s historical patterns of earnings volatility. It is believed that recent restructuring efforts may take time to materially improve the underwriting profitability of Markel’s international businesses.

Offsetting factors include the increasing degree of stress or risk being supported by Markel’s capital base. The company’s financial and double leverage are high relative to peers and the holding company’s financial flexibility is somewhat constrained relative to peers due to its lower unencumbered dividend capacity coverage of annual interest expense.

Moody’s current ratings are based upon the expectation that Markel’s primary focus will continue to be on organic growth and sustaining earnings improvements over the near-term. Moody’s believes that Markel presently has sufficient liquidity and capital resources to meet its ongoing requirements, though the company’s likely dependence on bank borrowings to meet its near-term holding company liquidity and other working capital needs remains a concern.

The outlook for the ratings is stable and reflects the rating agency’s expectations that the company will continue to report earnings and capital growth without material disruption.

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