TEXT-Fitch affirms Markel Corp ratings

Wed May 9, 2012 1:21pm EDT

May 9 - Fitch Ratings has affirmed the 'A' Insurer Financial Strength (IFS)
ratings of Markel Corporation's (NYSE: MKL) seven principal property and
casualty insurance subsidiaries. Fitch has also affirmed the following ratings
for MKL: 	
	
--Issuer Default Rating (IDR) at 'BBB+';	
--Senior unsecured notes at 'BBB'. 	
	
The Rating Outlook is Stable. (A full ratings list is provided at the end of 	
this release.) 	
	
MKL's rating strengths include pricing and underwriting discipline through 	
market cycles and expertise in a number of specialty property/casualty insurance	
products and niche markets. With solid earnings quality, MKL's long-term 	
financial performance, measured by growth in book value per share, is above 	
average. 	
	
Rating concerns are principally related to the challenges posed by competitive 	
market conditions affecting MKL's core specialty business. The company reported 	
a combined ratio of 102.1% for 2011, which deteriorated from 96.5% and 95.2% for	
the full years 2010 and 2009, respectively. 	
	
MKL's business has moderate exposure to catastrophe losses. However, for 2011 	
catastrophe losses of $152 million added 7.7 points to the combined ratio. This 	
compares with an average 2.2 points in catastrophe losses over the five years 	
ending 2010. 	
	
Fitch believes that MKL's conservative reserving practices contribute to balance	
sheet strength. MKL has posted cumulative reserve redundancies (exceeding 	
actuarially calculated point estimates) in each of the last eight years. 	
Favorable prior year reserve development continues to exceed industry trends and	
trimmed 17.9 points from the combined ratio in 2011, compared with 16.0 points 	
and 12.9 points for the full years 2010 and 2009, respectively. Reserves are 	
backed by a high-quality, liquid fixed-income investment portfolio.	
	
 	
	
Operating company capitalization is considered adequate but is supported by very	
strong holding company cash and invested assets, amounting to $1.2 billion at 	
year-end 2011. Consolidated GAAP operating leverage of 0.60 times (x) at Dec. 	
31, 2011 has improved steadily over the last five years and remains within 	
ratings expectations.	
	
Although somewhat higher than industry averages, MKL's financial leverage ratio 	
(FLR), which excludes non-recourse secured subsidiary debt and FAS 115, of 26.9%	
at Dec. 31, 2011 remained within ratings expectations. Debt-servicing 	
capabilities remain ample due to solid operating company maximum dividend 	
capacity and holding company cash position. Share repurchase activity has been 	
modest. 	
	
Key ratings drivers that could lead to a downgrade of MKL's ratings include a 	
material deterioration in underwriting or balance sheet strengths, and material 	
underperformance of newly acquired businesses. Fitch's rating rationale 	
anticipates consolidated GAAP operating leverage to remain below 1.0x and FLR to	
remain below 30%. 	
	
Key ratings triggers that could lead to an upgrade of MKL's ratings include 	
continued improvement in operating company capitalization along with GAAP 	
operating EBIT to financing charges consistently above 8.0x, or a decrease in 	
the target for maximum FLR to below 25%. 	
	
Fitch has affirmed the following ratings with a Stable Outlook:	
	
Markel Corporation 	
	
--IDR at 'BBB+';	
--$250 million 6.8% senior notes due Feb. 15, 2013 at 'BBB';	
--$350 million 7.125% senior notes due Sept. 30, 2019 at 'BBB';	
--$250 million 5.35% senior notes due June 1, 2021 at 'BBB';	
--$200 million 7.35% senior notes due Aug. 15, 2034 at 'BBB';	
--$150 million 7.5% senior notes due Aug. 22, 2046 at 'BBB'.	
	
Associated International Insurance Co.	
Deerfield Insurance Company	
Essex Insurance Company	
Evanston Insurance Company	
Markel American Insurance Company	
Markel Insurance Company	
Markel International Insurance Company Limited	
--Insurer Financial Strength (IFS) at 'A'.