A.M. Best Affirms the Financial Strength, Senior Debt And Preferred Ratings of Markel Corp.Business & Insurance Editors OLDWICK, N.J.--(BUSINESS WIRE)--March 28, 2000 A.M. Best Co. has affirmed af·firm v. af·firmed, af·firm·ing, af·firms v.tr. 1. To declare positively or firmly; maintain to be true. 2. To support or uphold the validity of; confirm. v.intr. the financial strength, senior debt and preferred stock Stock shares that have preferential rights to dividends or to amounts distributable on liquidation, or to both, ahead of common shareholders. Preferred stock is given preference over common stock. Holders of preferred stock receive dividends at a fixed annual rate. ratings of Markel Markel Corporation is an insurance holding company. Never declaring a stock split, their stock has risen from $8.33 per share in its 1986 IPO to over $475 a share in 2007. Corp. following the close of its acquisition of Terra Nova Terra Nova may refer to: In geography:
tr.v. as·signed, as·sign·ing, as·signs 1. To set apart for a particular purpose; designate: assigned a day for the inspection. 2. a senior debt rating of "bbb+" to Terra Nova Insurance (UK) Holdings plc. The affirmations reflect the combined entity's disciplined underwriting Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. , strong operating results, conservative reserving, limited integration risk, enhanced scale and good strategic fit of the acquisition within Markel's existing operations. Terra Nova and Markel have shown considerable underwriting discipline and reported strong operating performance relative to the overall property and casualty sector. The companies achieved these strong operating results in an extremely competitive market. Markel also has reported favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. reserve development over the past several years. The 1999 underwriting result at Terra Nova was significantly impacted by adverse development on the 1998 accident year primarily due to late reported losses, a high level of catastrophe Catastrophe, from the Greek Καταστροφή (katastrephein), literally means "to turn" (strephein) "downwards" (kata-). activity in 1999 and costs associated with discontinuing certain lines of business. This was partially offset by prior accident year casualty redundancies. The transaction, valued at approximately $660 million, was funded through $245 million bank debt, the assumption of $175 million of Terra Nova debt, $294 million in common stock and contingent value rights and $121 million in available cash. Although Terra Nova writes a significantly larger book of business than Markel, the acquisition involves little integration risk because Markel will only have to provide oversight
Oversight may refer to:
Gryphon Insurance Group, acquired by Markel in January 1999, has integration issues outstanding with a reported combined ratio of 145 in its first year of operation under Markel's efforts to re-underwrite the book and bring reserves in line with Markel's more stringent standards. A.M. Best believes Markel will successfully re-underwrite this book of business because of management's strong track record of integrating challenging acquisitions. Markel and Terra Nova's books of business are complementary from a business, geographic and distribution perspective. As an insurer An individual or company who, through a contractual agreement, undertakes to compensate specified losses, liability, or damages incurred by another individual. An insurer is frequently an insurance company and is also known as an underwriter. , Markel predominantly pre·dom·i·nant adj. 1. Having greatest ascendancy, importance, influence, authority, or force. See Synonyms at dominant. 2. provides specialty coverages for small commercial businesses. Terra Nova, however, underwrites specialty coverages for reinsurance The contract made between an insurance company and a third party to protect the insurance company from losses. The contract provides for the third party to pay for the loss sustained by the insurance company when the company makes a payment on the original contract. and primary clients. Most of Terra Nova's primary business is written for medium to large commercial accounts. Markel insures only U.S.-domiciled risks and distributes through agents and brokers in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. . Terra Nova's insureds are primarily based internationally and Lloyd's brokers produce the vast majority of business. As a result of the limited redundancies in business between the two organizations, the acquisition will provide significant scale to Markel's operations. It is anticipated that few significant cost savings will result from the transaction. While the acquisition gives Markel distribution, geographic and business diversity, Terra Nova's property book introduces additional catastrophe exposure. Terra Nova's results were adversely affected by European European emanating from or pertaining to Europe. European bat lyssavirus see lyssavirus. European beech tree fagussylvaticus. European blastomycosis see cryptococcosis. storms and other catastrophe losses in 1999, which added approximately 10 points to the company's combined ratio. However, Terra Nova's strong modeling techniques and international spread of risk should cushion Cushion In the context of project financing, the extra amount of net cash flow remaining after expected debt service. cushion See call protection. the company's property business from future catastrophes. While the transaction is aggressive--Markel is increasing its financial leverage and acquiring a significantly larger book of business than its existing operations--it is strategically sound. The acquisition allows the company to build on its underwriting expertise in the specialty market, enhance its scale and diversify diversify To acquire a variety of assets that do not tend to change in value at the same time. To diversify a securities portfolio is to purchase different types of securities in different companies in unrelated industries. its earnings. Diverse earnings are important in a competitive property/casualty market. Offsetting these strengths is the risk associated with Markel's financial leverage, its appetite for future acquisitions and its investment leverage. Markel's financial leverage--total debt plus preferred stock to total capital of approximately 52%--is significantly higher than that of its peers. Its interest coverage, however, is substantially greater than most property/casualty insurers with similar financial leverage. This is primarily because Markel writes a higher profit margin specialty business. While the level of financial leverage is important, an insurer's interest coverage more accurately reflects its ability to repay its debt and generate capital. Markel's profitability and ability to service its debt is sustainable, even in this competitive market because of the company's disciplined underwriting culture. A.M. Best also believes the company is committed to improving its financial leverage. Markel maintains alternative liquidity in the form of cash at the holding company level, equivalent to approximately two times its annual interest expense. A.M. Best expects that Markel will continue its aggressive acquisition strategy, which could lead to the continuation of its high leverage and future integration risks. However, Terra Nova, with its strong underlying operations, provides significant scale to absorb future acquisitions and reduce this event risk. Excluding Terra Nova, Markel has a higher degree of investment risk than other U.S. property/casualty insurers, with common stock comprising approximately 55% of statutory surplus as of Dec. 31, 1999. This risk is somewhat offset by the company's policy of matching conservative reserves with high investment grade bonds. Terra Nova has historically held a conservative investment portfolio. A.M. Best expects that Terra Nova, under the influence of its parent, will more aggressively manage its investments. However, Terra Nova will have to maintain a more conservative investment profile relative to Markel, because it operates in the high-risk high-risk adjective Referring to an ↑ risk of suffering from a particular condition Infectious disease Referring to an ↑ risk for exposure to blood-borne pathogens, which occurs with blood bank technicians, dental professionals, dialysis unit environment of the Lloyd's and London company market. Furthermore, Lloyds own regulations require a conservative investment policy. Markel Corp., based in Glen Allen Glen Allen is the name of several places in the United States of America:
The following existing debt ratings were affirmed: - Markel Corp.--senior debt rating of "bbb+". - Markel Capital Trust I--preferred stock rating of "bbb". The following debt rating was assigned: - Terra Nova Insurance (UK) Holdings plc--senior debt rating of "bbb+" The A (Excellent) financial strength ratings of the following members of Markel were affirmed: - Markel Insurance Group - Essex Insurance Co. - Evanston Insurance Co. - Markel Insurance Co. - Markel American Insurance Co. - Investors Insurance Company of America - Terra Nova (Bermuda) Holdings Ltd. - Terra Nova (Bermuda) Insurance Co. Ltd. - Terra Nova Insurance Co. Ltd. - Terra Nova Insurance Co. Ltd. CAB. - Corifrance The A- (Excellent) financial strength ratings of the following members of Markel were affirmed: - Associated International Insurance Co. - Deerfield Insurance Co. A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com. |
|
||||||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion