Markel Group companies’ A ratings affirmed
Markel Group’s financial strength rating of A (Excellent) has been affirmed by ratings agency AM Best, as have the “A” FSRs of subsidiary Markel Bermuda and its affiliate Markel Global insurance company (Delaware).
The A FSR rating of all members of Markel North American Insurance Group (Markel NA) have also been affirmed by AM Best.
“The ratings of Markel Bermuda reflect its balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile and appropriate ERM,” AM Best said of the company which is led by Don Bahr (pictured).
“Markel Bermuda’s balance sheet strength assessment reflects its strongest level of risk-adjusted capitalisation, as measured by BCAR, which in recent years has benefited from reduced exposure to natural catastrophes due to its withdrawal from risk-bearing property catastrophe and property excess of loss businesses in its global reinsurance segment, as well as favourable reserve development.”
AM Best acknowledged “the diverse geographies and lines of business in which the group operates” and said they were offset by “its modest relative position” within the global reinsurance market.
“Markel Bermuda’s ratings also reflect rating enhancement it receives as a result of its strategic importance to the Markel enterprise, as well as the benefits it receives through its relationship with other Markel subsidiaries,” AM Best said.
The agency said Markel NA is the lead rating unit in the Markel enterprise, reflecting its balance sheet strength, which AM Best assesses as strongest, as well as its adequate operating performance, favourable business profile and appropriate enterprise risk management (ERM).
“The balance sheet strength assessment for Markel NA is supported by its strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR),” Best said. “The balance sheet strength assessment further considers Markel NA’s favourable reserve development on prior accident years and the effectiveness of its reinsurance program, as well as other actions taken, to manage net exposures to catastrophe losses.
“Offsetting these factors somewhat are variability in the capital base resulting from equity investments, as Markel NA maintains common stock leverage, which is substantially elevated relative to peer group averages, and its slightly elevated levels of net and gross leverage that result from its above-average retention of business.”
Markel NA’s underwriting results generally outperform its peers by a significant margin based on better-than-average loss and loss adjustment expense ratios.
However, Best said this was offset by a weaker-than-average underwriting expense ratio and an operating ratio that has been just slightly better than average over the last five years.
Markel NA’s investment policy generated above average total return metrics, but its above average allocation to common stocks meant its net investment income was below average. Markel NA has increased surplus organically through underwriting profits, but this was offset partially by policyholder dividends in four out of the last five years, which have limited the level of surplus growth.
“This is reflective of the parent’s capital management strategy, in which profits are generally funnelled upward to allow for greater financial flexibility within the enterprise.”
Best noted that Markel NA is ranked among the 25 largest property/casualty insurance organisations in the US. It is the fourth-largest writer of excess and surplus (E&S) business in the United States, after Lloyd’s, Berkshire Hathaway Insurance Group and American International Group, Inc.
AM Best said the “A” financial strength rating of Markel subsidiary State National reflected its balance sheet strength, which AM Best assesses as strongest, as well as its strong operating performance, neutral business profile and appropriate ERM. State National’s balance sheet continues to be supported by a strongest level of risk-adjusted capitalization, as measured by BCAR.
