A.M. Best Affirms Ratings of Markel Corporation and Its Subsidiaries

OLDWICK, N.J.--(BUSINESS WIRE)--

A.M. Best has affirmed the financial strength rating (FSR) of A (Excellent) and the issuer credit ratings (ICR) of "a+" of the members of the Markel North America Insurance Group (Markel). A.M. Best has also affirmed the FSR of A (Excellent) and the ICRs of "a" of Markel Bermuda Limited (Hamilton, Bermuda) and its affiliated operating companies (collectively referred to as Markel Bermuda). In addition, A.M. Best has affirmed the ICR of "bbb+" of Markel Corporation MKL and all of its existing issue ratings and indicative issue ratings. A.M. Best has upgraded to "bbb+" from "bbb" the issue ratings of Alterra USA Holdings Limited (Alterra USA) and Alterra Finance, LLC (Alterra Finance) (both domiciled in Delaware), reflecting the guarantee of those issues by Markel Corporation. The outlook for each rating is stable. Concurrently, A.M. Best has withdrawn the ICR of "bbb" and indicative issue ratings of Alterra Capital Holdings Limited (ACHL), and the indicative issue ratings of Alterra USA. A.M. Best also has administratively withdrawn the FSR of A (Excellent) and ICR of "a+" of Essex Insurance Company, as the company merged into Evanston Insurance Company, effective June 30, 2016. All companies are headquartered in Glen Allen, VA, unless otherwise specified. (See below for a detailed listing of the companies and ratings.)

The affirmation of the ratings of Markel reflect the group's well-established market position as one of the leading excess and surplus lines organizations in the United States, its historically profitable operating performance, solid risk-adjusted capitalization and ability to maintain profitable growth through an extended soft market cycle. These positive attributes are partially offset by the group's elevated underwriting leverage, above-average common stock leverage, high expense base and the challenges presented by low new money yields and the slow economic recovery.

The ratings of Markel Bermuda reflect its operating profitability and strong risk-adjusted capitalization. Markel Bermuda's platforms and operations in major global underwriting markets also provide broad diversification, as well as additional flexibility in optimizing its underwriting portfolio composition. Partially offsetting these positive rating attributes are the very competitive prevailing market conditions in the reinsurance sector and the group's relatively modest position therein; the group's underwriting losses in most recent years; and the challenging investment climate that places increased pressure on operating profitability.

The rating of Markel Corporation reflects the solid performance of its insurance and non-insurance operations, which reflect the company's focus on long-term capital appreciation. The company's financial leverage and coverage ratios as of March 31, 2016, are within A.M. Best's guidelines for the rating. In addition, Markel Corporation maintains a solid liquidity position, with significant cash and marketable securities held at the holding company enhanced further by favorable operating cash flows.

The Alterra USA and Alterra Finance notes that have been upgraded based on their guarantee by Markel Corporation are also guaranteed by ACHL, an intermediate holding company within the Markel structure that was the ultimate parent of Alterra USA and Alterra Finance when the notes were issued. As the ACHL rating is no longer applicable to these notes, in light of the guarantee by Markel Corporation, its ICR has been withdrawn. The withdrawal of the indicative issue ratings of ACHL and Alterra USA reflect the termination of the associated shelf registrations.

Future positive rating actions could be taken if underwriting and operating results outperform peers over an extended period of time, with strong risk-adjusted capital being maintained. Negative rating actions could occur from a material decline in underwriting or operating performance to a level that is not in line with peer companies, or as a result of a significant deterioration in the group's investment portfolio. A significant adverse change in the financial condition of Markel Corporation also could trigger negative rating actions.

The FSR of A (Excellent) and ICRs of "a+" have been affirmed, each with a stable outlook, for the following members of Markel North America Insurance Group:

• Essentia Insurance Company
• Evanston Insurance Company
• FirstComp Insurance Company
• Markel American Insurance Company
• Markel Insurance Company

The FSR of A (Excellent) and ICRs of "a" have been affirmed, each with a stable outlook, for Markel Bermuda Limited and its following affiliates:

• Alterra America Insurance Company
• Markel Global Reinsurance Corporation

The following issue ratings have been affirmed, each with a stable outlook:

Markel Corporation—

-- "bbb+" on $350 million 7.125% senior unsecured notes, due 2019

-- "bbb+" on $250 million 5.35% senior unsecured notes, due 2021

-- "bbb+" on $350 million 4.9% senior unsecured notes, due 2022

-- "bbb+" on $250 million 3.625% senior unsecured notes, due 2023

-- "bbb+" on $200 million 7.35% senior unsecured notes, due 2034

-- "bbb+" on $250 million 5.0% senior unsecured notes, due 2043

-- "bbb+" on $500 million 5.0% senior unsecured notes, due 2046

The following issue ratings have been upgraded, each with a stable outlook:

Alterra USA Holdings Limited (guaranteed by Markel Corporation)—

-- to "bbb+" from "bbb" on $100 million 7.2% senior unsecured notes, due 2017

Alterra Finance, LLC (guaranteed by Markel Corporation)—

-- to "bbb+" from "bbb" on $350 million 6.25% senior unsecured notes, due 2020

The following indicative issue ratings under the existing shelf registration have been affirmed, each with a stable outlook:

Markel Corporation—

-- "bbb+" on senior unsecured debt

-- "bbb" on subordinated debt

-- "bbb-" on preferred securities

This press release relates to rating(s) that have been published on A.M. 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 A.M. Best's Recent Rating Activity web page.

A.M. Best is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2016 by A.M. Best Rating Services, Inc. ALL RIGHTS RESERVED.

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