Fitch Rates Markel Corporation's $500MM Senior Notes 'BBB'

CHICAGO--()--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.

RATING SENSITIVITIES

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:

Markel Corporation

--$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

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=698731

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Contacts

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
Committee Chairperson
R. Andrew Davidson, CFA, +1-312-368-3144
Senior Director
or
Media Relations
Brian Bertsch, New York, +1-212-908-0549
brian.bertsch@fitchratings.com

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Contacts

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
Committee Chairperson
R. Andrew Davidson, CFA, +1-312-368-3144
Senior Director
or
Media Relations
Brian Bertsch, New York, +1-212-908-0549
brian.bertsch@fitchratings.com