Exhibit 99.1
MARKEL REPORTS THIRD QUARTER AND NINE MONTH PERIOD RESULTS
FOR IMMEDIATE RELEASE CONTACT: DARRELL MARTIN
DIRECT LINE: 804-965-1635
Richmond, VA, October 31, 2001 --- (NYSE - MKL) Markel Corporation
reported a net loss of $10.58 and $9.85 per diluted share, respectively, for the
quarter and nine month period ended September 30, 2001 compared to a net loss of
$2.15 and $2.85 per diluted share, respectively, for the quarter and nine month
period ended September 30, 2000. The Company's 2001 third quarter results
reflect $75 million of estimated losses related to the terrorist attack on the
World Trade Center and other related events of September 11, 2001 (WTC). In
addition the Company strengthened prior years' loss reserves by $68 million in
the third quarter of 2001 due to $39 million of loss development in Markel
International's discontinued lines and $29 million of loss development in New
York contractors business which the Company's Brokered Excess and Surplus Lines
unit stopped writing in January 2000. Excluding these items, the Company's 2001
third quarter and nine month period net income was $0.65 and $1.75 per diluted
share, respectively. Alan I. Kirshner, Chairman and Chief Executive Officer,
commented, "The tragic events of September 11, 2001 could not have been
anticipated and will have a long and lasting impact on the property and casualty
insurance industry. We are disappointed that, despite our efforts to set
conservative reserves, we recognized $68 million of adverse development in the
third quarter of 2001. Given the changes taking place in the industry such as
increasing demand for insurance, constrained capacity and especially favorable
conditions in our specialty markets, we expect to see continued growth in
premium volume including significant price increases. We are enthusiastic about
the future and look forward to a strong insurance marketplace."
In evaluating its operating performance, the Company focuses on core
underwriting and investing results before consideration of realized gains or
losses, amortization expenses and nonrecurring items (these measures do not
replace operating income or net income computed in accordance with generally
accepted accounting principles as a measure of profitability). The Company's
results include Markel International since its acquisition on March 24, 2000.
Following is a comparison of 2001 and 2000 results on a per diluted share basis
(shares in thousands).
Quarter Ended Nine Months Ended
September 30, September 30,
------------- -------------
2001 2000 2001 2000
------- ------ ------ ------
Core operations $(10.44) $(2.46) $(8.71) $(1.61)
Realized gains (losses) .64 .08 1.27 (.33)
Amortization expense (.78) (.87) (2.41) (2.09)
Nonrecurring tax benefit - 1.10 - 1.18
------- ------- ------- -------
Net loss (10.58) (2.15) (9.85) (2.85)
Net change in unrealized
gains and other 1.83 5.41 4.86 5.95
------- ------- ------- -------
Comprehensive income
(loss) $ (8.75) $3.26 $(4.99) $ 3.10
======= ======= ======= =======
Weighted average diluted shares 8,605 7,288 8,327 6,793
======= ======= ======= =======
1
The third quarter loss from core operations was $10.44 per share
compared to a loss from core operations of $2.46 per share in 2000. For the nine
months, loss from core operations was $8.71 per share compared to loss from core
operations of $1.61 per share in the prior year. The higher losses for both
periods of 2001 were due to $75 million of estimated WTC losses and $68 million
of prior years' loss development in the third quarter of 2001.
-Premium Analysis-
Quarter Ended September 30,
-------------------------------------------
Gross Written Premiums Earned Premiums
2001 2000 2001 2000
--------------------- -------------------
Markel North America $ 258,734 $196,198 $165,534 $121,425
Markel International 169,546 123,286 135,678 108,245
Discontinued Lines 16,505 4,129 26,310 23,486
--------------------- -------------------
Total $ 444,785 $323,613 $327,522 $253,156
===================== ===================
-Premium Analysis-
Nine Months Ended September 30,
-------------------------------------------
Gross Written Premiums Earned Premiums
2001 2000 2001 2000
--------------------- -------------------
Markel North America $ 710,086 $520,253 $457,749 $337,835
Markel International 535,890 252,918 334,079 225,642
Discontinued Lines 33,095 45,402 75,028 91,867
--------------------- -------------------
Total $1,279,071 $818,573 $866,856 $655,344
===================== ===================
Markel North America gross written premiums for the third quarter and
nine month period increased 32 percent and 36 percent, respectively, due to
increased submission activity and price increases across all business units.
Markel International remained on target to produce approximately $650 million of
gross premium volume in 2001. The Company anticipates that the North American
and London insurance markets will continue to tighten and provide a favorable
environment for its operations. The Company is currently obtaining significant
rate increases across most programs. Discontinued Lines consisted of
discontinued Markel International programs.
-Combined Ratio Analysis-
------------------------------------------
Quarter Ended Nine Months Ended
September 30, September 30,
2001 2000 2001 2000
------------------------------------------
Markel North America 115% 98% 104% 97%
Markel International 165% 116% 135% 118%
Discontinued Lines 278% 281% 187% 168%
------------------------------------------
Consolidated 149% 123% 123% 114%
==========================================
Markel North America's 2001 third quarter and nine month period
underwriting loss was the result of $29 million of adverse loss development on
New York contractors business discontinued by the Brokered Excess and Surplus
Lines unit in January 2000 and due to $2.5 million of WTC and Hurricane Allison
losses. Excluding these items, Markel North America continued to produce solid
2
underwriting profits with a combined ratio of 96 percent and 97 percent,
respectively, for the third quarter and nine months ended September 30, 2001.
Since discontinuing the New York contractors program, the Company has
experienced adverse development in the program and as a result initiated a
project to reevaluate its potential ultimate exposure. Issues involving
application of statutes of limitations and the evolving and complex judicial and
legislative environment in New York made the process difficult. In addition the
Company brought in new claims management at the unit. New claims management with
legal and actuarial assistance completed a review of this program during the
quarter. As a result of this review, the Company determined that reserves
required strengthening.
The Company's total estimated exposure to WTC losses is $75 million,
net of estimated reinsurance recoveries of approximately $250 million. Markel
International's, Markel North America's and Discontinued Lines' WTC provisions
were $70.8 million, $1.5 million and $2.7 million, respectively. The Company has
used many loss estimation techniques including detailed policy level reviews,
the use of catastrophe modeling software, direct contact with insureds and
brokers and sensitivity analysis to possible coverage scenarios in order to
develop its estimated WTC exposure. The Company has also completed a detailed
review of its reinsurance recoverables related to its potential WTC losses.
Approximately 98 percent of the estimated reinsurance recoverables are due from
reinsurers rated "A-" or better by A.M. Best or Standard and Poor's. The
Company's gross and net WTC loss estimate includes a margin for underestimation
of claims, reinsurance reinstatement premiums and potentially uncollectable
reinsurance. New information concerning potential losses and coverage emerges
daily. While the Company believes that its WTC reserve is adequate, adverse
development is possible.
Markel International's 2001 third quarter and nine month period
results included $70.8 million of WTC losses. Excluding the impact of WTC
losses, Markel International's combined ratio for the quarter and nine month
period of 2001 was 112 percent and 113 percent, respectively. Markel
International's expense reductions have not kept pace with planned premium
reductions. The Company will continue working to align Markel International's
expenses with its premium writings. Expense reduction initiatives include the
consolidation of Markel International's four syndicates at Lloyd's into one
syndicate for 2002 and planned reductions of brokerage commissions. The pricing
environment continues to improve in the London Market.
The underwriting loss from Discontinued Lines increased in the third
quarter and nine month periods of 2001 to $46.9 million and $65.0 million,
respectively, compared to $42.5 million and $62.7 million, respectively, in
2000. The increase in the Discontinued Lines underwriting loss in both periods
of 2001 was due to $39.0 million of reserve strengthening primarily in Markel
International's discontinued worldwide motor program and WTC losses. The Company
discontinued the worldwide motor book of business shortly after the purchase of
Markel International due to the program's poor administrative controls,
including delegation of underwriting and claims authority to brokers around the
world, and due to inadequate pricing. During the third quarter of 2001, the
Company obtained information from brokers and performed broker audits in order
to reassess its potential exposure. Upon completion of this work, the Company
determined that reserve strengthening was required.
Management continues to monitor claims and reinsurance experience on
pre-acquisition books of business and Discontinued Lines. The Company also
continues to closely monitor recent unfavorable development at its Brokered
Excess and Surplus Lines unit. The Company believes that its reserves are
adequate; however adverse experience is possible and could result in reserve
increases in the future.
3
Third quarter 2001 net investment income was $42.2 million compared
to $44.1 million in the prior year. The decrease was due to lower investment
yields partially offset by a larger investment portfolio. Net investment income
for the nine month period rose to $127.9 million from $110.8 million in 2000.
The increase was due to the acquisition of Markel International. The Company's
equity portfolio produced a small positive return for the first nine months of
2001, in contrast to generally negative equity market returns.
In the third quarter, the Company recognized $8.5 million of net
realized gains compared to $0.9 million of net gains in 2000. For the nine month
period of 2001, net realized investment gains were $16.3 million compared to net
losses of $3.5 million for the same period last year. Variability in the timing
of realized and unrealized investment gains and losses is to be expected.
Comprehensive loss was $8.75 per share for the third quarter of 2001
compared to comprehensive income of $3.26 per share in 2000. For the nine month
period ended September 30, 2001, comprehensive loss was $4.99 per share compared
to comprehensive income of $3.10 per share in 2000. The comprehensive losses in
both periods of 2001 were primarily due to lower net income due to WTC losses
and reserve strengthening partially offset by the increased market value of the
Company's investment portfolio. The Company reported net unrealized gains, net
of taxes, on its fixed maturity and equity investments of $165.0 million at
September 30, 2001 compared to $124.2 million at December 31, 2000.
Book value per common share was $105.66 at September 30, 2001
compared to $102.63 at December 31, 2000. The increase was primarily due to the
February 2001 completion of a 1,288,940 share common stock offering with net
proceeds of approximately $198 million and higher unrealized gains, partially
offset by a net loss for the nine months of 2001.
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.
This is a "Safe Harbor" statement under the Private Securities
Litigation Reform Act of 1995. Certain statements contained herein are
forward-looking statements that involve risks and uncertainties. Future actual
results may materially differ from those in these statements because of many
factors. Among other things, the impact of the events of September 11, 2001 will
depend on the number of insureds and reinsureds affected by the events, the
amount and timing of losses incurred and reported and questions of how coverage
applies. The Company's anticipated premium and profitability growth are based on
current knowledge and assume no man-made or natural catastrophes, no significant
changes in products or personnel and no adverse changes in market conditions.
Changing legal and social trends and inherent uncertainties in the loss
estimation process can adversely impact the adequacy of loss reserves. The
Company continues to closely monitor reinsurance programs and exposures. Adverse
experience in these programs could lead to additional charges. Regulatory
actions can impede the Company's ability to charge adequate rates and
efficiently allocate capital. Economic conditions and interest rate volatility
can have significant impact on the market value of fixed maturity and equity
investments and foreign currency exchange rates. The Company's premium growth,
underwriting and investment results have been and will continue to be
potentially materially affected by these factors. Additional factors, which
could affect the Company, are discussed in the Company's reports on Forms 8-K,
10-Q and 10-K. By making these forward looking statements, the Company is not
intending to become obligated to publicly update or revise any forward
4
looking 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.
The quarterly conference call, which will involve discussion of the
third quarter and nine month period financial results and may include
forward-looking information, will be held Wednesday, October 31st, at 11:00 a.m.
Eastern time. Any person interested in listening to the call, or a replay of the
call which will be available approximately two hours after the conclusion of the
call until November 9, 2001, should contact Markel's Investor Relations
Department at 804-747-0136. The call will be broadcast over the Internet at
www.markelcorp.com. A replay of the call will also be available on this web site
------------------
until November 9, 2001.
5
MARKEL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations and Comprehensive Income (Loss)
Quarter Ended Nine Months Ended
September 30, September 30,
------------------------- --------------------------
2001 2000 2001 2000
---------- ----------- ----------- -----------
(dollars in thousands, except per share data)
OPERATING REVENUES
Earned premiums .................................. $ 327,522 $ 253,156 $ 866,856 $ 655,344
Net investment income ............................ 42,243 44,136 127,937 110,818
Net realized gains (losses) from investment sales 8,508 880 16,278 (3,462)
Other ............................................ -- 47 -- 141
---------- ----------- ----------- -----------
Total Operating Revenues ................... 378,273 298,219 1,011,071 762,841
========== =========== =========== ===========
OPERATING EXPENSES
Losses and loss adjustment expenses .............. 370,419 218,231 752,950 511,883
Underwriting, acquisition and insurance
expenses ................................... 117,933 92,185 311,713 236,295
Amortization of intangible assets ................ 7,712 7,202 23,096 15,979
---------- ----------- ----------- -----------
Total Operating Expenses ................... 496,064 317,618 1,087,759 764,157
---------- ----------- ----------- -----------
Operating Loss ............................. (117,791) (19,399) (76,688) (1,316)
Interest expense ................................. 11,782 14,978 37,811 37,235
---------- ----------- ----------- -----------
Loss Before Income Taxes ................... (129,573) (34,377) (114,499) (38,551)
Income tax benefit ............................... (38,548) (18,728) (32,518) (19,180)
---------- ----------- ----------- -----------
Net Loss ................................... $ (91,025) $ (15,649) $ (81,981) $ (19,371)
========== =========== =========== ===========
OTHER COMPREHENSIVE INCOME
Unrealized gains on securities, net of taxes
Net holding gains arising during the period $ 21,920 $ 43,375 $ 51,384 $ 41,575
Less reclassification adjustments for gains
(losses) included in net income ......... (5,530) (572) (10,581) 2,251
---------- ----------- ----------- -----------
Net unrealized gains ....................... 16,390 42,803 40,803 43,826
Currency translation adjustments, net of taxes ... (656) (3,368) (372) (3,368)
---------- ----------- ----------- -----------
Total Other Comprehensive Income ........... 15,734 39,435 40,431 40,458
---------- ----------- ----------- -----------
Comprehensive Income (Loss) ................ $ (75,291) $ 23,786 $ (41,550) $ 21,087
========== =========== =========== ===========
NET LOSS PER SHARE
Basic ....................................... ($10.58) ($2.15) ($9.85) ($2.85)
Diluted ..................................... ($10.58) ($2.15) ($9.85) ($2.85)
========== =========== =========== ===========
Selected Data September 30, December 31,
--------------------------
(dollars in thousands, except per share data) 2001 2000
-------------------------------------------------------------------------------------------------------------
Total investments and cash $ 3,298,530 $ 3,136,164
Reinsurance recoverable on paid and unpaid losses 1,594,048 1,104,433
Intangible assets 379,715 402,999
Total assets 6,171,943 5,473,153
Unpaid losses and loss adjustment expenses 3,602,076 3,037,006
Unearned premiums 786,800 701,663
Long-term debt 391,781 573,111
8.71% Capital Securities 150,000 150,000
Total shareholders' equity 910,665 752,372
Book value per share $ 105.66 $ 102.63
Common shares outstanding 8,619 7,331
######
Markel Corporation
Segment Reporting Disclosures
For the Quarter and Nine Months Ended September 30, 2001
Segment Gross Written Premium
Quarter Ended September 30, Nine Months Ended September 30,
--------------------------------------------------------------------------------------------
2001 2000 (dollars in thousands) 2001 2000
--------------------------------------------------------------------------------------------
$ 205,245 $ 151,657 Excess and Surplus Lines $ 581,659 $ 414,213
53,489 44,541 Specialty Admitted 128,427 106,040
42,590 12,380 London Company Market 127,852 55,006
126,956 110,906 Lloyd's Market 408,038 197,912
16,505 4,129 Other (Discontinued Lines) 33,095 45,402
--------------------------------------------------------------------------------------------
$ 444,785 $ 323,613 Consolidated $ 1,279,071 $ 818,573
============================================================================================
Segment Net Written Premium
Quarter Ended September 30, Nine Months Ended September 30,
--------------------------------------------------------------------------------------------
2001 2000 (dollars in thousands) 2001 2000
--------------------------------------------------------------------------------------------
$ 140,368 $ 108,759 Excess and Surplus Lines $ 399,345 $ 291,020
49,427 41,926 Specialty Admitted 117,797 97,200
24,884 11,454 London Company Market 92,607 38,365
86,335 82,629 Lloyd's Market 298,571 149,701
5,097 (2,265) Other (Discontinued Lines) 19,594 17,557
--------------------------------------------------------------------------------------------
$ 306,111 $ 242,503 Consolidated $ 927,914 $ 593,843
============================================================================================
Segment Revenues
Quarter Ended September 30, Nine Months Ended September 30,
--------------------------------------------------------------------------------------------
2001 2000 (dollars in thousands) 2001 2000
--------------------------------------------------------------------------------------------
$ 130,189 $ 91,089 Excess and Surplus Lines $ 358,158 $ 250,563
35,345 30,336 Specialty Admitted 99,591 87,272
33,576 34,075 London Company Market 91,869 91,150
102,102 74,170 Lloyd's Market 242,210 134,492
50,751 45,016 Investing 144,215 107,356
26,310 23,486 Other (Discontinued Lines) 75,028 91,867
--------------------------------------------------------------------------------------------
$ 378,273 $ 298,172 Consolidated $ 1,011,071 $ 762,700
============================================================================================
Segment Profit (Loss)
Quarter Ended September 30, Nine Months Ended September 30,
--------------------------------------------------------------------------------------------
2001 2000 (dollars in thousands) 2001 2000
--------------------------------------------------------------------------------------------
$ (25,625) $ (1,132) Excess and Surplus Lines $ (17,193) $ 2,730
338 3,262 Specialty Admitted (59) 6,736
(31,049) (6,245) London Company Market (39,683) (15,227)
(57,549) (10,666) Lloyd's Market (75,885) (24,350)
50,751 45,016 Investing 144,215 107,356
(46,945) (42,479) Other (Discontinued Lines) (64,987) (62,723)
--------------------------------------------------------------------------------------------
$ (110,079) $ (12,244) Consolidated $ (53,592) $ 14,522
============================================================================================
Combined Ratios
Quarter Ended September 30, Nine Months Ended September 30,
--------------------------------------------------------------------------------------------
2001 2000 2001 2000
--------------------------------------------------------------------------------------------
120% 101% Excess and Surplus Lines 105% 99%
99% 89% Specialty Admitted 100% 92%
193% 118% London Company Market 143% 117%
156% 114% Lloyd's Market 131% 118%
278% 281% Other (Discontinued Lines) 187% 168%
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149% 123% Consolidated 123% 114%
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