28 July 2017Insurance

Markel downgraded due to possible negative impact from $1.2bn M&A activity

Ratings agency S&P Global has lowered its long-term counterparty credit and senior unsecured debt ratings on Markel Corporation to 'BBB' from 'BBB+' following its recent M&A activity. The outlook is stable.

The agency has also revised its outlook on Markel's core insurance operating subsidiaries to 'stable' from 'positive', and affirmed its 'A' long-term counterparty credit and financial strength ratings on the subsidiaries.

US insurer Markel recently announced the acquisition of two entities, State National Companies (in a $919 million deal) and Costa Farms, for a total of approximately $1.2 billion that it will fund entirely through internal cash and invested assets.

S&P stated that the downgrade reflects the company's announced acquisitions, as well as the potential for additional large transactions in the next few years, which will negatively affect the strength of the balance sheet and risk-adjusted capital (as the ratio of intangibles-to-equity increases).

"We are lowering our long-term counterparty credit and senior unsecured debt ratings on Markel by one notch to 'BBB' from 'BBB+' because, in our view, the strength of the company's balance sheet and risk–adjusted capital will decline."

"We are affirming our 'A' ratings on Markel's insurance subsidiaries and revising the outlook on them to stable from positive, because our view of capitalisation will remain constrained due to potential for additional acquisitions," S&P added.

The ratings agency believes that the prospective liquidity at the holding company will likely not stay at the same level as in the last few years ($2.5 billion as of Dec. 31, 2016) as Markel deploys excess capital for current and potential acquisitions.

The agency further stated that it could lower the ratings in the next 24 months if Markel's capital adequacy position falls below very strong, the group experiences sustained deterioration in its competitive position, as shown by earnings performance consistently below peers', or if underwriting losses are meaningfully outside the company's tolerances.

Never miss an important re/insurance news story again - Sign up for our newsletter

Ascot hires strategy head from AIG to form new MGA

PartnerRe reports fall in half year results

Marsh enjoys solid revenue growth in Q2

EMEA and Asia Pacific developments boost RGA growth in Q2

Oak Hill acquires controlling stake in EPIC Insurance Brokers

Arthur J Gallagher’s revenues up in Q2, CEO “optimistic”

FM Global reveals Europe and Asia leadership changes

Arch Capital sees Q2 profit fall

Validus reports solid progress in Q2 2017 results

Don't miss our monthly insurtech email newsletter - sign up today


More on this story

Insurance
8 December 2023   Employers need to be proactive when it comes to identifying risks associated with pay equity legislation, and the rise in pay transparency rules in particular, warns Vikki Edmonds of Markel Bermuda.
Insurance
5 December 2023   The executive to identify new territories to drive profitable growth in cyber.
News
4 December 2023   The hire has 20 years of experience from Howden, Novae and StarStone.

More on this story

Insurance
8 December 2023   Employers need to be proactive when it comes to identifying risks associated with pay equity legislation, and the rise in pay transparency rules in particular, warns Vikki Edmonds of Markel Bermuda.
Insurance
5 December 2023   The executive to identify new territories to drive profitable growth in cyber.
News
4 December 2023   The hire has 20 years of experience from Howden, Novae and StarStone.

Intelligent Insurer
Newton Media Ltd
Kingfisher House
21-23 Elmfield Road
BR1 1LT
United Kingdom