Fitch Rates Markel Corporation's $500MM Senior Notes 'BBB'
CHICAGO -- March 5, 2013
Fitch Ratings has assigned a 'BBB' rating to the issuances of $250 million in
senior notes maturing in March 2023 and $250 million in senior notes maturing
in March 2043 planned by the Markel Corporation (NYSE: MKL).
KEY RATING DRIVERS
MKL will use the notes for general corporate purposes. The notes are subject
to a special mandatory redemption in the event that MKL's acquisition of
Alterra Capital Holdings Limited (Alterra) is not consummated on or prior to
Nov. 1, 2013, or if prior to Nov. 1, 2013, the merger agreement is terminated.
MKL's pro forma financial leverage ratio (FLR) with Alterra is 26.8% and
without Alterra is 30.8%. These compare to a FLR 27.3%, excluding non-recourse
subsidiary debt and FAS 115 for MKL at Dec. 31, 2012. The pro forma figures
include MKL's repayment of $250 million senior notes on Feb. 15, 2013.
MKL's debt-servicing capabilities remain ample due to solid operating company
maximum dividend capacity and holding company cash position.
Key rating triggers that could lead to a downgrade of MKL's ratings include:
material underperformance of newly acquired Alterra businesses, and a material
deterioration in underwriting or balance sheet strengths. Fitch's rating
rationale anticipates consolidated GAAP operating leverage to remain below
1.0x and FLR to remain below 30%.
Key rating 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 assigned the following ratings:
--$250 million senior notes due March 2023 'BBB';
--$250 million senior notes due March 2043 'BBB'.
MKL's ratings were affirmed with a Stable Outlook on Dec. 19, 2012 as follows:
--IDR 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';
--$350 million 4.9% senior notes due July 1, 2022 'BBB'.
--$200 million 7.35% senior notes due Aug. 15, 2034 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'.
Additional information is available at 'www.fitchratings.com'. The ratings
above were solicited by, or on behalf of, the issuer, and therefore, Fitch has
been compensated for the provision of the ratings.
Applicable Criteria and Related Research:
--'Insurance Rating Methodology' (Jan. 11, 2013).
Applicable Criteria and Related Research
Insurance Rating Methodology -- Amended
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Martha M. Butler, CFA, +1-312-368-3191
Fitch Ratings, Inc.
70 W. Madison Street
Chicago, IL 60602
Douglas M. Pawlowski, CFA, +1-312-368-2054
R. Andrew Davidson, CFA, +1-312-368-3144
Brian Bertsch, New York, +1-212-908-0549
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