Will Markel’s big bet pay off?
Markel to acquire Nephila
AM Best has affirmed the Long-Term Issuer Credit Rating (Long-Term ICR) of “bbb+” of Markel Corporation 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 most of the members of the Markel North America Insurance Group. Concurrently, AM Best has affirmed the FSR of A (Excellent) and the Long-Term ICRs of “a” of Markel Bermuda and its affiliates, Alterra America Insurance Company and Markel Global Reinsurance Company. The outlook of these Credit Ratings (ratings) is stable.
The ratings of the Markel North America Group, which is considered the lead rating unit in the Markel Corporation enterprise, reflect its balance sheet strength, which AM Best categorises as strongest, as well as its adequate operating performance, favourable business profile and appropriate enterprise risk management (ERM).
According to the rating agency the ratings of Markel Bermuda reflect its balance sheet strength, which AM Best categorises as very strong, as well as its adequate operating performance, neutral business profile and appropriate ERM. The group’s strongest level of risk-adjusted capitalisation is supported by the generally favourable development of loss reserves in recent years and substantial retrocession program consisting primarily of highly rated reinsurance and collateralised programs. Operating performance generally lags the reinsurance peer composite but outperforms the industry overall, despite the impact of weather losses in 2017 and 2018. The group’s business is well-diversified by geography and line of business, as well as between reinsurance and insurance.
The Markel Corporation maintains financial leverage and coverage that are within AM Best’s guidelines for its rating and a level of risk-adjusted capitalisation that supports its insurance operations, as well as the risk in its considerable non-insurance investment portfolio. While common stock leverage is elevated as a result of the group’s investment strategy, which emphasises long-term capital growth, the company has a long track record of successfully managing these investments.
While underwriting results have been challenged by catastrophe activity in 2017 and 2018, AM Best anticipates that the company will produce favourable underwriting results over the long term while maintaining risk-adjusted capitalisation.
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