Fitch placed the ratings of Markel Corporation on Rating Watch Negative. The rating action reflects Fitch’s concerns that losses from the terrorists attacks in the U.S. recently as a percent of capital may ultimately prove to be higher than is consistent with expectations for the current rating category. The actions also reflect Fitch’s concerns that operating results at the Markel International insurance operations have not improved at the rate expected when those ratings were assigned.
Should ultimate losses related to the terrorist attacks remain consistent with Markel’s current estimates of $75 million, and should Fitch gain greater comfort that the Markel International operating results are continuing to improve, the ratings will likely be affirmed and removed from Rating Watch.
If losses grow higher than current estimates, or results at Markel International do not improve, Fitch may downgrade the insurer FSR of the continuing operations to a level that is likely to be no less than “A-,” which still implies a strong ability to meet claim obligations. Fitch will monitor the operating results of Markel International, as well as Markel’s plans to raise capital or take other offsetting actions, and expects to resolve the Rating Watch within the next several quarters.
Markel’s pretax lost estimate of $75 million represents approximately 5 percent to 7.5 percent of its June 30, 2001 equity, which was $985 million, depending upon the ultimate tax effect of the loss. Markel has consistently reserved for its losses conservatively, though the unprecedented nature of this loss introduces and additional element of uncertainty.
Additionally, Fitch considers Markel’s financial flexibility to be very good.
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