RICHMOND, Va., Feb. 3 /PRNewswire-FirstCall/ -- Markel Corporation
(NYSE: MKL) reported diluted net income per share of $20.52 for the
year ended December 31, 2009 compared to diluted net loss per share
of $5.95 for 2008. The 2009 combined ratio was 95% compared to 99%
in 2008. Book value per common share outstanding increased 27% to
$282.55 at December 31, 2009 from $222.20 at December 31, 2008.
Over the five-year period ended December 31, 2009, compound annual
growth in book value per common share outstanding was 11%. Alan I.
Kirshner, Chairman and Chief Executive Officer, commented, "While
2009 was certainly a volatile year for the financial markets and a
challenging year for the economy and the insurance industry, our
associates met these challenges and delivered solid underwriting
profits and strong investment returns. Their efforts enabled us to
grow book value per share to an all time high. We do not expect
significant improvement in the insurance market in 2010. However,
we are excited about the opportunities we see to provide quality
products and services to our customers and build value for our
shareholders." The following tables present selected financial data
from 2009 and 2008. Year Ended December 31, (in thousands, except
per share amounts) 2009 2008 ------------ ------------ Net income
(loss) to shareholders $201,638 $(58,767) ============ ============
Comprehensive income (loss) to shareholders $590,995 $(403,269)
============ ============ Weighted average diluted shares 9,826
9,876 Diluted net income (loss) per share $20.52 $(5.95)
============ ============ (in thousands, except per share amounts)
December 31, December 31, 2009 2008 ------------ ------------ Book
value per common share outstanding $282.55 $222.20 ============
============ Common shares outstanding 9,819 9,814 ------------
------------ The improvement in diluted net income per share during
2009 was primarily due to lower realized investment losses as a
result of significantly less write downs for other-than-temporary
declines in the estimated fair value of investments compared to
2008. Comprehensive income to shareholders for 2009 was $591.0
million compared to comprehensive loss to shareholders of $403.3
million in 2008. This favorable movement was primarily due to a
significant increase in net unrealized gains on investments during
2009 compared to a significant decline in net unrealized gains on
investments during 2008. Combined Ratio Analysis
----------------------- Year Ended December 31,
----------------------- 2009 2008 -------- -------- Excess and
Surplus Lines 96% 92% Specialty Admitted 99% 106% London Insurance
Market 91% 104% Other Insurance (Discontinued Lines) NM NM --------
-------- Consolidated 95% 99% NM - Ratio is not meaningful. Further
discussion of Other Insurance (Discontinued Lines) underwriting
loss follows. The decrease in the combined ratio was the result of
better underwriting performance due in part to a benign hurricane
season in 2009. Our 2008 underwriting results included $94.8
million, or 5 points, of underwriting loss related to Hurricanes
Gustav and Ike (2008 Hurricanes). The 2009 combined ratio included
approximately $33 million, or 2 points, of costs associated with
the implementation of our One Markel initiative compared to
approximately $20 million, or 1 point, for 2008. The combined ratio
for 2009 included $235.3 million of favorable development on prior
years' loss reserves compared to $163.8 million in 2008. The Excess
and Surplus Lines segment's combined ratio for the year ended
December 31, 2009 was 96% compared to 92% (including 3 points of
losses on the 2008 Hurricanes) in 2008. The combined ratio
increased in 2009 due to a higher expense ratio and a higher
current accident year loss ratio on non-catastrophe-exposed lines
of business, which were partially offset by more favorable
development of prior years' loss reserves compared to 2008. The
higher current accident year loss ratio in 2009 was due in part to
higher than expected incurred losses during 2009 in certain
professional liability programs, most notably our architects and
engineers book of business, as a result of recent economic
conditions. The Excess and Surplus Lines segment's 2009 combined
ratio included $130.8 million of favorable development on prior
years' loss reserves compared to $118.8 million in 2008. The
redundancies on prior years' loss reserves experienced within the
Excess and Surplus Lines segment in 2009 and 2008 were primarily on
our professional and products liability programs due to lower loss
severity than originally anticipated. The Specialty Admitted
segment's combined ratio for the year ended December 31, 2009 was
99% compared to 106% (including 5 points of losses on the 2008
Hurricanes) in 2008. Aside from the impact of the storms, the 2009
combined ratio benefited from a lower current accident year loss
ratio and a lower expense ratio compared to 2008. In 2008, the
current accident year loss ratio was adversely impacted by a
greater than expected incidence of high severity property losses on
specialty program business. Due to corrective actions taken during
late 2008 and early 2009, we have not seen the same pattern of loss
development on the 2009 accident year for this book of business.
The lower expense ratio in 2009 was primarily due to our decision
in the fourth quarter of 2008 to close the Markel Global Marine and
Energy unit. The Specialty Admitted segment's 2009 combined ratio
included $0.3 million of adverse development on prior years' loss
reserves compared to $16.5 million of favorable development on
prior years' loss reserves in 2008. The London Insurance Market
segment's combined ratio was 91% for the year ended December 31,
2009 compared to 104% (including 8 points of losses on the 2008
Hurricanes) in 2008. Aside from the impact of the storms, the
improved combined ratio for 2009 was due to greater favorable
development of prior years' loss reserves. The London Insurance
Market segment's 2009 combined ratio included $108.1 million of
favorable development on prior years' loss reserves compared to
$58.3 million in 2008. During 2009, actual incurred losses and loss
adjustment expenses on reported claims for the 2003 to 2006
accident years were less than we expected in our actuarial
analyses. This favorable experience occurred in a variety of
programs across each of our divisions, most notably the
professional liability programs in the Retail and Professional and
Financial Risks divisions. The Other Insurance (Discontinued Lines)
segment produced an underwriting loss of $4.7 million for the year
ended December 31, 2009 compared to an underwriting loss of $28.1
million in 2008. The underwriting loss in both 2009 and 2008 was
primarily a result of loss reserve development on asbestos and
environmental exposures. The Other Insurance (Discontinued Lines)
segment's underwriting loss for the year ended December 31, 2009
included $10.0 million of loss reserve development on asbestos and
environmental exposures compared to $24.9 million in 2008. We
complete an in-depth review of our asbestos and environmental
exposures annually in the third quarter of each year. During our
2009 review, we increased our estimate of the number of claims that
will ultimately be closed with an indemnity payment and, as a
result, increased prior years' loss reserves accordingly. During
our 2008 review, we noted that claims had been closed with total
indemnity payments that were higher than had been anticipated, and
as a result of this higher than expected average severity on closed
claims, our actuaries updated their average severity assumptions
for both open claims and claims incurred but not yet reported. The
underwriting loss related to asbestos and environmental reserve
increases in 2009 was partially offset by favorable development of
loss reserves in other discontinued lines of business included in
this segment. Premium Analysis Year Ended December 31, (dollars in
thousands) ---------------------------------------------------
Gross Written Premiums Earned Premiums 2009 2008 2009 2008
--------------------------------------------------- Excess and
Surplus Lines $962,702 $1,163,992 $940,098 $1,089,967 Specialty
Admitted 301,827 355,061 303,897 315,764 London Insurance Market
641,226 693,138 572,438 615,828 Other Insurance (Discontinued
Lines) 138 593 (598) 625 ----------------------
---------------------- Total $1,905,893 $2,212,784 $1,815,835
$2,022,184 ======================= ======================= Gross
written premiums for the year ended December 31, 2009 decreased 14%
compared to 2008. The decrease in 2009 was primarily due to
continued competition across many of our product lines and the
effects of the current economic environment. Premiums for many of
our product lines are based upon our insureds' revenues, gross
receipts or payroll, which have been negatively impacted by the
depressed levels of business activity that began in 2008. The
decline in gross written premium in the Excess and Surplus Lines
segment was also impacted by the transition to our regional
underwriting model during the first half of 2009. Additionally, the
effect of foreign currency exchange rate movements in the London
Insurance Market segment accounted for two points of the decrease
in gross written premiums for 2009 compared to 2008. Net retention
of gross premium volume was 90% for 2009 and 89% for 2008. Net
retention of gross written premiums increased compared to 2008,
which is consistent with our strategy to retain more of our
profitable business. Earned premiums for the year ended December
31, 2009 decreased 10% compared to 2008. The decrease in 2009 was
primarily due to lower earned premiums in the Excess and Surplus
Lines segment as a result of lower gross premium volume compared to
2008. Another contributing factor was the effect of foreign
currency exchange rate movements in our London Insurance Market
segment, which accounted for two points of the decrease in earned
premiums for 2009 compared to 2008. Net investment income for the
year ended December 31, 2009 was $259.8 million compared to $282.1
million in 2008. The decrease in 2009 was primarily due to having
lower yields and average invested assets compared to 2008. Our
investment yield in 2009 declined compared to 2008 as we increased
our allocation to short-term investments and cash and cash
equivalents, while short-term interest rates declined.
Additionally, dividend income in 2009 was lower than dividend
income in 2008. For the year ended December 31, 2009, net
investment income included a favorable change in the fair value of
our credit default swap of $3.0 million compared to an adverse
change of $13.7 million in 2008. Net realized investment losses for
the year ended December 31, 2009 were $96.1 million compared to
$407.6 million in 2008. Net realized investment losses for 2009
included $90.0 million of write downs for other-than-temporary
declines in the estimated fair value of investments compared to
$339.2 million in 2008. Variability in the timing of realized and
unrealized investment gains and losses is to be expected. Invested
assets were $7.8 billion at December 31, 2009 compared to $6.9
billion at December 31, 2008. Equity securities and investments in
affiliates were $1.4 billion, or 18% of invested assets, at
December 31, 2009 compared to $1.2 billion, or 17% of invested
assets, at December 31, 2008. Net unrealized gains on investments,
net of taxes, were $417.8 million at December 31, 2009 compared to
$58.7 million at December 31, 2008. At December 31, 2009, we held
securities with gross unrealized losses of $54.3 million, or less
than 1% of invested assets. Interest expense for the year ended
December 31, 2009 increased to $54.0 million from $48.2 million in
2008. In September 2009, we issued $350 million of 7.125% unsecured
senior notes. The income tax benefit for the year ended December
31, 2009 was 2% of our income before income taxes, which differs
from the statutory tax rate of 35% primarily as a result of
tax-exempt investment income and tax benefits associated with our
foreign operations. The income tax benefit for the year ended
December 31, 2008 was 63% of our loss before income taxes, which
differs from the statutory tax rate of 35% primarily as a result of
tax-exempt investment income and foreign and other tax credits. In
October 2009, we acquired Elliott Special Risks, a Canadian
managing general agent that provides insurance underwriting and
administrative services to insurers, and Panel Specialists, Inc., a
company based in Temple, Texas that manufactures panels, wall
systems, casework, furniture and other related products.
Additionally, in November 2009, we acquired a majority interest in
Ellicott Dredge Enterprises, LLC, a manufacturer of dredging
equipment for both domestic and international markets, which is
headquartered in Baltimore, Maryland. Total consideration for these
three acquisitions was approximately $150 million, and the related
operating revenues and expenses are included in other revenues and
other expenses in the consolidated statements of operations and
comprehensive income (loss). This release contains statements
concerning or incorporating our expectations, assumptions, plans,
objectives, future financial or operating performance and other
statements that are not historical facts. These statements are
"forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. There are risks and
uncertainties that may cause actual results to differ materially
from predicted results in forward-looking statements. Factors that
may cause actual results to differ are often presented with the
forward-looking statements themselves. Additional factors that
could cause actual results to differ from those predicted are set
forth under "Risk Factors" and "Safe Harbor and Cautionary
Statement" in our 2008 Annual Report on Form 10-K or are included
in the items listed below: -- our anticipated premium volume is
based on current knowledge and assumes no significant man-made or
natural catastrophes, no significant changes in products or
personnel and no adverse changes in market conditions; -- we are
legally required in certain instances to offer terrorism insurance
and have attempted to manage our exposure; however, if there is a
covered terrorist attack, we could sustain material losses; -- the
impact of the events of September 11, 2001 will depend on the
resolution of on-going insurance coverage litigation and
arbitrations; -- the frequency and severity of catastrophic events
is unpredictable and may be exacerbated if, as many forecast,
conditions in the oceans and atmosphere result in increased
hurricane or other adverse weather-related activity; -- changing
legal and social trends and inherent uncertainties (including but
not limited to those uncertainties associated with our asbestos and
environmental reserves) in the loss estimation process can
adversely impact the adequacy of loss reserves and the allowance
for reinsurance recoverables; -- adverse developments in insurance
coverage litigation could result in material increases in our
estimates of loss reserves; -- the loss estimation process may
become more uncertain if we experience a period of rising
inflation; -- the costs and availability of reinsurance may impact
our ability to write certain lines of business; -- industry and
economic conditions can affect the ability and/or willingness of
reinsurers to pay balances due; -- after the commutation of ceded
reinsurance contracts, any subsequent adverse development in the
re-assumed loss reserves will result in a charge to earnings; --
regulatory actions can impede our ability to charge adequate rates
and efficiently allocate capital; -- economic conditions,
volatility in interest and foreign currency exchange rates and
changes of market value in concentrated investments can have a
significant impact on the fair value of fixed maturity and equity
investments, as well as the carrying value of other assets and
liabilities, and this impact is heightened by the recent levels of
market volatility; -- we cannot predict the extent and duration of
the current economic recession; the effects of government
intervention into the markets to address the recent financial
crisis (including, among other things, financial stability and
recovery initiatives; the government's ownership interest in
American International Group, Inc. and the restructuring of that
company; potential regulatory changes affecting the insurance and
financial services industries and the securities and derivatives
markets; and changes in tax policy); and their combined impact on
our industry, business and investment portfolio; -- because of
adverse conditions in the financial services industry, access to
capital has generally become more difficult and/or more expensive,
which may adversely affect our ability to take advantage of
business opportunities as they may arise; -- our One Markel
initiative may take longer to implement and cost more than we
anticipate and may not achieve some or all of its objectives; -- we
completed a number of acquisitions in late 2009 and may engage in
additional acquisition activity in the future, which may increase
operational and control risks for a period of time; -- if we
experience a pandemic or a localized catastrophic event in an area
where we have offices, our business operations could be adversely
affected; -- loss of services of any executive officers could
impact our operations; and -- adverse changes in our assigned
financial strength or debt ratings could impact our ability to
attract and retain business or obtain capital. Our premium volume
and underwriting and investment results have been and will continue
to be potentially materially affected by these factors. By making
forward-looking statements, we do not intend to become obligated to
publicly update or revise any such statements whether as a result
of new information, future events or other changes. Readers are
cautioned not to place undue reliance on any forward-looking
statements, which speak only as at their dates. Our previously
announced conference call, which will involve discussion of our
financial results and business developments and may include
forward-looking information, will be held Thursday, February 4,
2010, beginning at 10:30 a.m. (Eastern Standard Time). Any person
interested in listening to the call, or a replay of the call, which
will be available from approximately two hours after the conclusion
of the call until Monday, February 15, 2010, should contact
Markel's Investor Relations Department at 804-747-0136. Investors,
analysts and the general public may also listen to the call free
over the Internet through Markel Corporation's web site,
http://www.markelcorp.com/. A replay of the call will also be
available on this web site until Monday, February 15, 2010. Markel
Corporation markets and underwrites specialty insurance products
and programs to a variety of niche markets. In each of these
markets, the Company seeks to provide quality products and
excellent customer service so that it can be a market leader. The
financial goals of the Company are to earn consistent underwriting
profits and superior investment returns to build shareholder value.
MARKEL CORPORATION AND SUBSIDIARIES Consolidated Statements of
Operations and Comprehensive Income (Loss) Quarter Ended Year Ended
December 31, December 31,
------------------------------------------------- 2009 2008 2009
2008 --------- --------- ---------- ---------- (dollars in
thousands, except per share data) OPERATING REVENUES Earned
premiums $454,977 $501,997 $1,815,835 $2,022,184 Net investment
income 60,698 62,530 259,809 282,148 Net realized investment gains
(losses): Other-than-temporary impairment losses (4,414) (152,019)
(95,570) (339,164) Less other-than- temporary impairment losses
recognized in other comprehensive income (loss) 376 - 5,620 -
--------- --------- ---------- ---------- Other-than-temporary
impairment losses recognized in net income (loss) (4,038) (152,019)
(89,950) (339,164) Net realized investment gains (losses),
excluding other-than-temporary impairment losses 8,327 (55,328)
(6,150) (68,430) --------- --------- ---------- ---------- Net
realized investment gains (losses) 4,289 (207,347) (96,100)
(407,594) --------- --------- ---------- ---------- Other revenues
31,404 19,974 89,782 79,845 --------- --------- ----------
---------- Total Operating Revenues 551,368 377,154 2,069,326
1,976,583 --------- --------- ---------- ---------- OPERATING
EXPENSES Losses and loss adjustment expenses 215,982 240,020
992,863 1,269,025 Underwriting, acquisition and insurance expenses
195,342 186,477 736,660 738,546 Amortization of intangible assets
2,357 1,504 6,698 5,742 Other expenses 27,546 18,612 80,499 74,889
--------- --------- ---------- ---------- Total Operating Expenses
441,227 446,613 1,816,720 2,088,202 --------- --------- ----------
---------- Operating Income (Loss) 110,141 (69,459) 252,606
(111,619) Interest expense 18,030 11,781 53,969 48,210 ---------
--------- ---------- ---------- Income (Loss) Before Income Taxes
92,111 (81,240) 198,637 (159,829) Income tax benefit (1,631)
(48,630) (3,782) (101,395) --------- --------- ----------
---------- Net Income (Loss) $93,742 $(32,610) $202,419 $(58,434)
========= ========= ========== ========== Less net income
attributable to noncontrolling interests 386 100 781 333 Net Income
(Loss) to Shareholders $93,356 $(32,710) $201,638 $(58,767) OTHER
COMPREHENSIVE INCOME (LOSS) Change in net unrealized gains on
investments, net of taxes: Net holding gains (losses) arising
during the period $(13,101) $(220,464) $326,959 $(594,767)
Unrealized other-than- temporary impairment losses on fixed
maturities arising during the period, net of taxes 1,512 - (5,405)
- Less reclassification adjustments for net (losses) included in
net income (loss) (3,732) 134,315 52,883 264,898 ---------
--------- ---------- ---------- Change in net unrealized gains on
investments, net of taxes (15,321) (86,149) 374,437 (329,869)
Change in currency translation adjustments, net of taxes 5,354
(4,513) 19,239 (7,893) Change in net actuarial pension loss, net of
taxes (2,075) (7,488) (4,268) (6,740) --------- ---------
---------- ---------- Total Other Comprehensive Income (Loss)
(12,042) (98,150) 389,408 (344,502) --------- --------- ----------
---------- Comprehensive Income (Loss) $81,700 $(130,760) $591,827
$(402,936) --------- --------- ---------- ---------- Less
comprehensive income attributable to noncontrolling interests 437
100 832 333 Comprehensive Income (Loss) to Shareholders $81,263
$(130,860) $590,995 $(403,269) ========= ========= ==========
========== NET INCOME (LOSS) PER SHARE Basic $9.51 $(3.33) $20.54
$(5.95) Diluted $9.49 $(3.33) $20.52 $(5.95) ========= =========
========== ========== Selected Data (dollars and shares in
thousands, December 31, ----------------------- except per share
data) 2009 2008
------------------------------------------------------------------------
Total investments and cash and cash equivalents $7,848,673
$6,892,806 Reinsurance recoverable on paid and unpaid losses
952,145 1,098,748 Goodwill and intangible assets 502,833 361,424
Total assets 10,241,896 9,512,054 Unpaid losses and loss adjustment
expenses 5,427,096 5,492,339 Unearned premiums 717,728 827,888
Senior long-term debt and other debt 963,648 694,409 Total
shareholders' equity 2,774,360 2,180,674 Book value per share
$282.55 $222.20 Common shares outstanding 9,819 9,814 Markel
Corporation Segment Reporting Disclosures For the Quarters and
Years Ended December 31, 2009 and 2008 Segment Gross Written
Premiums Quarter Ended December 31, Year Ended December 31,
-------------------------------------------------------------------------
2009 2008 (dollars in thousands) 2009 2008
-------------------------------------------------------------------------
$222,217 $254,961 Excess and Surplus Lines $962,702 $1,163,992
75,130 88,823 Specialty Admitted 301,827 355,061 131,259 121,319
London Insurance Market 641,226 693,138 (1) 120 Other Insurance 138
593 (Discontinued Lines)
-------------------------------------------------------------------------
$428,605 $465,223 Consolidated $1,905,893 $2,212,784
=========================================================================
Segment Net Written Premiums Quarter Ended December 31, Year Ended
December 31,
-------------------------------------------------------------------------
2009 2008 (dollars in thousands) 2009 2008
-------------------------------------------------------------------------
$203,458 $228,910 Excess and Surplus Lines $869,695 $1,028,816
70,259 79,027 Specialty Admitted 279,266 321,109 115,947 117,799
London Insurance Market 566,046 617,946 (458) 472 Other Insurance
(598) 625 (Discontinued Lines)
-------------------------------------------------------------------------
$389,206 $426,208 Consolidated $1,714,409 $1,968,496
=========================================================================
Segment Revenues Quarter Ended December 31, Year Ended December 31,
-------------------------------------------------------------------------
2009 2008 (dollars in thousands) 2009 2008
-------------------------------------------------------------------------
$222,645 $263,111 Excess and Surplus Lines $940,098 $1,089,967
76,952 81,610 Specialty Admitted 303,897 315,764 155,838 156,806
London Insurance Market 572,438 615,828 (458) 470 Other Insurance
(598) 625 (Discontinued Lines) 64,987 (144,817) Investing 163,709
(125,446) 31,404 19,974 Other 89,782 79,845
-------------------------------------------------------------------------
$551,368 $377,154 Consolidated $2,069,326 $1,976,583
=========================================================================
Reconciliation of Segment Profit (Loss) to Consolidated Operating
Income (Loss) Quarter Ended December 31, Year Ended December 31,
-------------------------------------------------------------------------
2009 2008 (dollars in thousands) 2009 2008
-------------------------------------------------------------------------
$19,107 $59,230 Excess and Surplus Lines $36,242 $88,162 749
(2,405) Specialty Admitted 2,324 (18,235) 23,215 23,144 London
Insurance Market 52,462 (27,259) 582 (4,469) Other Insurance
(4,716) (28,055) (Discontinued Lines) 64,987 (144,817) Investing
163,709 (125,446) 3,858 1,362 Other 9,283 4,956 (2,357) (1,504)
Amortization of (6,698) (5,742) Intangible Assets
-------------------------------------------------------------------------
$110,141 $(69,459) Consolidated $252,606 $(111,619)
=========================================================================
Combined Ratios Quarter Ended December 31, Year Ended December 31,
-------------------------------------------------------------------------
2009 2008 2009 2008
-------------------------------------------------------------------------
91% 77% Excess and Surplus Lines 96% 92% 99% 103% Specialty
Admitted 99% 106% 85% 85% London Insurance Market 91% 104%
-------------------------------------------------------------------------
90% 85% Consolidated 95% 99%
=========================================================================
DATASOURCE: Markel Corporation CONTACT: Bruce Kay of Markel
Corporation, +1-804-747-0136 Web Site: http://www.markelcorp.com/
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