Fitch Rates Markel Corporation's New Senior Debt 'BBB+'

CHICAGO--(BUSINESS WIRE)-- Fitch Ratings has assigned a senior unsecured debt rating of 'BBB+' to Markel Corporation's (NYSE: MKL) new issue of $400 million 5% senior notes due April 1, 2046. A full list of MKL's ratings follows at the end of this release.

KEY RATING DRIVERS

Fitch expects MKL to use the net proceeds of this offering for general corporate purposes, including the announced tender offer to purchase for cash up to $250 million combined aggregate principal amount of its 7.35% senior notes due 2034 and its 7.125% senior notes due 2019 and to retire the 7.2% senior unsecured notes of MKL's wholly-owned subsidiary Alterra USA Holdings Limited when they mature in 2017.

MKL's financial leverage ratio (FLR) was 21.7% at Dec. 31, 2015. Pro forma FLR is expected to increase by less than two percentage points, depending on the amount of senior notes tendered. For 2015, MKL's operating EBIT improved to $754 million and resulted in operating EBIT coverage of 6.4x, compared with 4.4x for 2014.

RATING SENSITIVITIES

Key rating triggers that could lead to an upgrade of MKL's ratings include very strong operating performance with a combined ratio consistently below 95%, GAAP operating EBIT coverage consistently at or above 10x, maintenance of GAAP net leverage below 2.5x, FLR maintained below 20% and further increases in operating scale.

Key rating triggers that could lead to a downgrade of MKL's ratings include failure to reach a sustainable operating EBIT coverage ratio of 5.0x over the next two years, any unexpected adverse developments from recent acquisitions, including a goodwill write down or a material deterioration in underwriting performance, and a decline in operating company surplus or shareholders' equity of 20% or greater.

FULL LIST OF RATING ACTIONS

Fitch has assigned the following rating:

Markel Corporation

--$400 million 5% senior notes due April 1, 2046 'BBB+'.

Fitch currently rates MKL as follows:

Markel Corporation

--IDR at 'A-';

--7.125% senior notes due Sept. 30, 2019 at 'BBB+';

--5.35% senior notes due June 1, 2021 at 'BBB+';

--4.9% senior notes due July 1, 2022 at 'BBB+';

--3.625% senior notes due March 30, 2023 at 'BBB+';

--7.35% senior notes due Aug. 15, 2034 at 'BBB+';

--5% senior notes due March 30, 2043 at 'BBB+'.

Alterra Capital Holdings Limited

--IDR at 'A-'.

Alterra Finance LLC

--IDR at 'A-';

--6.25% senior notes due Sept. 30, 2020 at 'BBB+'.

Alterra USA Holdings Limited

--IDR at 'A-';

--7.2% notes due April 14, 2017 at 'BBB+'.

Alterra America Insurance Company

Markel Global Reinsurance Company

Associated International Insurance Co.

Essentia Insurance Company

Essex Insurance Company

Evanston Insurance Company

Markel American Insurance Company

Markel Bermuda Limited

Markel Insurance Company

Markel International Insurance Company Limited

--IFS at 'A+'.

The Rating Outlook is Stable.

Relevant Rating Committee Date: Nov. 20, 2015.

Additional information is available on www.fitchratings.com.

Applicable Criteria

Insurance Rating Methodology (pub. 16 Sep 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=871172

Additional Disclosures

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1001652

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

View source version on businesswire.com: http://www.businesswire.com/news/home/20160329006540/en/

Fitch Ratings
Primary Analyst
Martha M. Butler, CFA, +1-312-368-3191
Senior Director
Fitch Ratings, Inc.
70 W. Madison Street
Chicago, IL 60602
or
Secondary Analyst
Douglas M. Pawlowski, CFA, +1-312-368-2054
Senior Director
or
Tertiary Analyst
Graham Coutts, +44-203-530-1654
Associate Director
or
Committee Chairperson
Mark E. Rouck, CFA, +1-312-368-2085
Senior Director
or
Media Relations
Hannah James, New York, +1-646-582-4947
[email protected]

Source: Fitch Ratings

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