AM Best Affirms Credit Ratings of Markel Corporation and its Subsidiaries
AM Best has affirmed the Long-Term Issuer Credit Rating (Long-Term ICR) of “bbb+” (Good) of Markel Corporation (Markel) (Glen Allen, VA), as well as its Long-Term Issue Credit Ratings (Long-Term IRs). AM Best also has affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term ICRs of “a+” (Excellent) of all the members of the Markel North America Insurance Group (Markel NA). Additionally, AM Best has affirmed the FSR of A (Excellent) and the Long-Term ICRs of “a+” (Excellent) of Markel Bermuda Limited (Hamilton, Bermuda) and its affiliate, Markel Global Reinsurance Company (Delaware) (collectively referred to as Markel Bermuda).
Concurrently, AM Best has affirmed the FSR of A (Excellent) and the Long-Term ICRs of “a+” (Excellent) of the members of State National Group (State National). All State National companies are headquartered in Bedford, TX. At the same time, AM Best has affirmed the FSR of A (Excellent) and the Long-Term ICR of “a+” (Excellent) of Lloyd’s Syndicate 3000 (Markel Syndicate Management Limited) (Syndicate 3000) (United Kingdom).
The outlook of these Credit Ratings (ratings) is stable. See below for a detailed list of companies, Long-Term IRs and indicative Long-Term IRs.
The ratings of Markel NA, which is considered the lead rating unit in the Markel enterprise, reflect its balance sheet strength, which AM Best assesses as strongest, as well as its adequate operating performance, favorable business profile and appropriate enterprise risk management (ERM). The balance sheet strength assessment for Markel NA is supported by its risk-adjusted capital level, which is in the strongest category, as measured by Best’s Capital Adequacy Ratio (BCAR). The balance sheet strength assessment further considers Markel NA’s consistently favorable loss reserve development patterns over time and the effectiveness of its reinsurance program in protecting against major losses associated with large catastrophes. Offsetting these factors somewhat are variability in the capital base resulting from the group’s equity investments, as it maintains a level of common stock leverage that is substantially elevated relative to peer group averages; its slightly elevated levels of net and gross leverage that result from its above-average retention of business; and the group’s catastrophe appetite, which can result in surplus variations in years with an accumulation of smaller catastrophe losses.
Markel NA’s adequate operating performance assessment is based on its underwriting results, which generally outperform peers by a significant margin based on better-than-average loss and loss adjustment expense ratios. This outperformance is offset by a weaker-than-average underwriting expense ratio and an operating ratio that has been just slightly better than average over the past five years. The group’s investment policy reflects Markel’s long-term capital appreciation objectives. As a result, the group typically reports favorable total return metrics but below-average net investment income due to its above-average allocation to common stocks. The group has demonstrated an ability to increase surplus organically through underwriting profits, but policyholder dividends over the last five years have limited the level of surplus growth. This is reflective of the parent’s capital management strategy, in which profits are funneled upward to allow for greater financial flexibility within the enterprise.
The group maintains a favorable business profile, ranking among the 25 largest property/casualty insurance organizations in the United States, based on consolidated U.S. direct premiums written in 2021.
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. The group’s business is well-diversified by line of business and state within the United States. The group also includes Markel’s Europe-based operating companies, providing international diversification. The group’s participation in admitted and nonadmitted markets provides it with advantages across market cycles.
Markel NA’s ERM program is embedded appropriately within the organization to manage the risks of Markel’s complex global operations, which include insurance and noninsurance sectors. The group has demonstrated an ability to operate effectively at moderately higher levels of leverage than its peers, in part through the effectiveness of the ERM program.
The ratings of State National reflect 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 continued to be supported by a strongest level of risk-adjusted capital level, as measured by BCAR. The group’s balance sheet strength is enhanced by the effectiveness with which it has managed its Program Services business over time. State National continues to produce underwriting and operating results on its lender services business that consistently outperform its peers. The group’s business profile reflects its leadership position in lender and program services, while taking into consideration the increasingly competitive nature of both segments.
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. The group’s balance sheet strength assessment reflects its strongest level of risk-adjusted capitalization, as measured by BCAR, which in recent years has benefited from reduced exposure to natural catastrophes as a result of its withdrawal from risk-bearing property catastrophe and property excess of loss businesses in its global reinsurance segment, as well as the levels of favorable reserve development. The group’s operating results have been variable in recent years, reflecting competitive reinsurance market conditions and loss reserve development, which while generally favorable, did not reflect the levels of historical reserve redundancy enjoyed by a number of its peers. The assessment of business profile acknowledges the group’s diverse geographies and lines of business in which the group operates, offset by the group’s 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.
The ratings of Syndicate 3000 reflect the balance sheet strength of the Lloyd’s market, which AM Best assesses as very strong, as well as the market’s strong operating performance, favorable business profile and appropriate ERM. Markel is the ultimate parent company of Syndicate 3000’s managing agent, Markel Syndicate Management Limited, and of its corporate member, Markel Capital Limited. Syndicate 3000 is important to Markel as its main underwriting center for large U.S. and international marine, energy, specialty and financial lines written in the London market.
The ratings of Markel reflect the ratings of its operating insurance subsidiaries, as well as its financial leverage and coverage metrics, which remain within AM Best’s guidelines. At June 30, 2022, Markel’s adjusted debt to total capital ratio measured 26.5%. Unadjusted debt to total capital measured 28.5% as of that date.
AM Best notes that Hurricane Ian, which recently passed through Florida and may make a second U.S. landfall in the Carolinas, may cause record-setting industry claim costs. Markel likely will have its share of those losses, in particular in its specialty insurance segment, while its Bermuda and other international operations have de-emphasized property-catastrophe reinsurance and other catastrophe-exposed lines of business. However, AM Best notes that Markel’s ERM discipline, and its purchase of aggregate catastrophe reinsurance protection, is expected to limit its net loss retention to a manageable level.
The FSR or A (Excellent) and the Long-Term ICRs of “a+” (Excellent) have been affirmed, each with a stable outlook, for the following members of Markel NA, including European entities that are grouped with the rating unit:
- Markel Insurance SE
- Essentia Insurance Company
- Evanston Insurance Company
- FirstComp Insurance Company
- Markel American Insurance Company
- Markel Insurance Company
- Markel International Insurance Company Ltd.
- SureTec Insurance Company
The FSR of A (Excellent) and the Long-Term ICRs of “a+” (Excellent) have been affirmed, each with a stable outlook, for the following members of State National:
- State National Insurance Company, Inc.
- National Specialty Insurance Company
- United Specialty Insurance Company
- City National Insurance Company
- Independent Specialty Insurance Company
- Pinnacle National Insurance Company
- Superior Specialty Insurance Company
The following Long-Term IRs have been affirmed, each with a stable outlook:
-- “bbb+” (Good) on $250 million 3.625% senior unsecured notes, due 2023
-- “bbb+” (Good) on $300 million 3.5% senior unsecured notes, due 2027
-- “bbb+” (Good) on $300 million 3.35% senior unsecured notes, due 2029
-- “bbb+” (Good) on $200 million 7.35% senior unsecured notes, due 2034
-- “bbb+” (Good) on $250 million 5.0% senior unsecured notes, due 2043
-- “bbb+” (Good) on $500 million 5.0% senior unsecured notes, due 2046
-- “bbb+” (Good) on $300 million 4.3% senior unsecured notes, due 2047
-- “bbb+” (Good) on $600 million 5.0% senior unsecured notes, due 2049
-- “bbb+” (Good) on $500 million 4.15% senior unsecured notes, due 2050
-- “bbb+” (Good) on $600 million 3.45% senior unsecured notes, due 2052
-- “bbb-” (Good) on $600 million 6.00% preferred stock
The following indicative Long-Term IRs under the existing shelf registration have been affirmed, each with a stable outlook:
-- “bbb+” (Good) on senior unsecured debt
-- “bbb” (Good) on subordinated debt
-- “bbb-” (Good) on preferred securities
This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best's Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.
AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.
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