AM Best Affirms Credit Ratings of Markel Group Inc. and Its Subsidiaries

AM Best has affirmed the Long-Term Issuer Credit Rating (Long-Term ICR) of “bbb+” (Good) and the Long-Term Issue Credit Ratings (Long-Term IRs) of Markel Group Inc. (Markel) (Glen Allen, VA). AM Best also has affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term ICRs of “a+” (Excellent) of all the members of the Markel North America Insurance Group (Markel NA). Additionally, AM Best has affirmed the FSR of A (Excellent) and the Long-Term ICRs of “a+” (Excellent) of Markel Bermuda Limited (Hamilton, Bermuda) and its affiliate, Markel Global Reinsurance Company (Delaware) (collectively referred to as Markel Bermuda).

Concurrently, AM Best has affirmed the FSR of A (Excellent) and the Long-Term ICRs of “a+” (Excellent) of the members of State National Group (State National). All State National companies are headquartered in Bedford, TX. The outlook of all of these Credit Ratings (ratings) is stable. (See below for a detailed list of the companies and ratings.)

The ratings of Markel NA, which is considered the lead rating unit in the Markel enterprise, reflect its balance sheet strength, which AM Best assesses as strongest, as well as its adequate operating performance, favorable business profile and appropriate enterprise risk management (ERM). The balance sheet strength assessment for Markel NA is supported by its strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR). The balance sheet strength assessment further considers Markel NA’s favorable reserve development on prior accident years and the effectiveness of its reinsurance program, as well as other actions taken, to manage net exposures to catastrophe losses. Offsetting these factors somewhat are variability in the capital base resulting from equity investments, as Markel NA maintains common stock leverage, which is substantially elevated relative to peer group averages, and its slightly elevated levels of net and gross leverage that result from its above-average retention of business.

Markel NA’s adequate operating performance assessment is based on its underwriting results, which generally outperform peers by a significant margin based on better-than-average loss and loss adjustment expense ratios. This outperformance is offset partially by a weaker-than-average underwriting expense ratio and an operating ratio that has been just slightly better than average over the last five years. Markel NA’s investment policy reflects its long-term capital appreciation objectives. As a result, the group typically reports favorable total return metrics, but below-average net investment income due to its above-average allocation to common stocks. Markel NA has demonstrated an ability to increase surplus organically through underwriting profits, offset partially by policyholder dividends in four out of the last five years, which have limited the level of surplus growth. This is reflective of the parent’s capital management strategy, in which profits are generally funneled upward to allow for greater financial flexibility within the enterprise.

Markel NA maintains a favorable business profile, ranking among the 25 largest property/casualty insurance organizations in the United States, based on consolidated U.S. direct premiums written in 2022. It is the fourth-largest writer of excess and surplus (E&S) business in the United States, after Lloyd’s, Berkshire Hathaway Insurance Group and American International Group, Inc. Markel NA’s business is well-diversified by line of business and state within the United States. The group also includes Markel’s Europe-based operating companies, providing international diversification. The group’s participation in admitted and non-admitted markets provides it with advantages across market cycles.

Markel NA’s ERM program is embedded appropriately within the organization to manage the risks of Markel’s complex global operations, which include insurance and non-insurance sectors. The group has demonstrated an ability to operate effectively at moderately higher levels of leverage than its peers, in part through the effectiveness of its ERM program.

The ratings of Markel Bermuda reflect its balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile and appropriate ERM. Markel Bermuda’s balance sheet strength assessment reflects its strongest level of risk-adjusted capitalization, as measured by BCAR, which in recent years has benefited from reduced exposure to natural catastrophes due to its withdrawal from risk-bearing property catastrophe and property excess of loss businesses in its global reinsurance segment, as well as favorable reserve development. The assessment of the business profile acknowledges the diverse geographies and lines of business in which the group operates that is offset by its modest relative position within the global reinsurance market. Markel Bermuda’s ratings also reflect rating enhancement it receives as a result of its strategic importance to the Markel enterprise, as well as the benefits it receives through its relationship with other Markel subsidiaries.

The ratings of State National reflect its balance sheet strength, which AM Best assesses as strongest, as well as its strong operating performance, neutral business profile and appropriate ERM. State National’s balance sheet continues to be supported by a strongest level of risk-adjusted capitalization, as measured by BCAR. State National’s balance sheet strength is enhanced by the effectiveness with which it has managed its program services business over time. State National continues to produce underwriting and operating results on its lender services business that consistently outperform its peers. The group’s business profile reflects its leadership position in lender and program services, while taking into consideration the competitive nature of both segments.

The ratings of Markel reflect the ratings of its operating insurance subsidiaries, as well as its financial leverage and coverage metrics, which remain within AM Best’s guidelines. As of June 30, 2023, Markel’s adjusted debt to total capital ratio measured 21.6%. Unadjusted debt to total capital measured 23.4% as of that date.

The FSR of A (Excellent) and the Long-Term ICRs of “a+” (Excellent) have been affirmed with a stable outlook for the following members of Markel NA, including European entities, which are grouped with the rating unit:

• Markel Insurance SE
• Essentia Insurance Company
• Evanston Insurance Company
• FirstComp Insurance Company
• Markel American Insurance Company
• Markel Insurance Company
• Markel International Insurance Company Ltd.
• SureTec Insurance Company

The FSR of A (Excellent) and the Long-Term ICRs of “a+” (Excellent) have been affirmed with a stable outlook for the following members of State National:

• State National Insurance Company, Inc.
• National Specialty Insurance Company
• United Specialty Insurance Company
• City National Insurance Company
• Pinnacle National Insurance Company
• Superior Specialty Insurance Company

The following Long-Term IRs have been affirmed with a stable outlook:

Markel Group Inc.—

-- “bbb+” (Good) on $300 million 3.5% senior unsecured notes, due 2027

-- “bbb+” (Good) on $300 million 3.35% senior unsecured notes, due 2029

-- “bbb+” (Good) on $200 million 7.35% senior unsecured notes, due 2034 ($130 million outstanding)

-- “bbb+” (Good) on $250 million 5.0% senior unsecured notes, due 2043

-- “bbb+” (Good) on $500 million 5.0% senior unsecured notes, due 2046

-- “bbb+” (Good) on $300 million 4.3% senior unsecured notes, due 2047

-- “bbb+” (Good) on $600 million 5.0% senior unsecured notes, due 2049

-- “bbb+” (Good) on $500 million 4.15% senior unsecured notes, due 2050

-- “bbb+” (Good) on $600 million 3.45% senior unsecured notes, due 2052

-- “bbb-” (Good) on $600 million 6.00% preferred stock

The following indicative Long-Term IRs under the existing shelf registration have been affirmed with a stable outlook:

Markel Group Inc.—

-- “bbb+” (Good) on senior unsecured debt

-- “bbb” (Good) on subordinated debt

-- “bbb-” (Good) on preferred securities

This press release relates to Credit Ratings that have been published on AM 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 AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best's Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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