EXHIBIT 99.1
MARKEL REPORTS IMPROVED UNDERWRITING RESULTS
FOR IMMEDIATE RELEASE CONTACT: BRUCE KAY
TELEPHONE: 804-747-0136
Richmond, VA, May 1, 2002 --- (NYSE - MKL) Markel Corporation
announced net income of $1.73 per diluted share for the quarter ended March 31,
2002 compared to net income of $1.04 per diluted share for the first quarter of
2001. Underwriting results improved, resulting in a combined ratio of 102% in
2002 compared to a combined ratio of 106% for the first quarter of 2001. The
decrease in the combined ratio was primarily due to continued improvement at
Markel International and smaller underwriting losses in Discontinued Lines. Alan
I. Kirshner, Chairman and Chief Executive Officer, commented, "We believe that
our efforts over the two years since Markel International's acquisition are
paying off as first quarter results were improved and in line with our
expectations. Our insurance operations have been achieving significant volume
and rate increases since early 2001. We are confident that over time our
underwriting results will benefit from these increases."
In evaluating its operating performance, the Company focuses on core
underwriting and investing results before consideration of realized gains or
losses, amortization expense 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). Following is a
comparison of 2002 and 2001 results on a per diluted share basis (shares in
thousands).
QUARTER ENDED
MARCH 31,
--------
2002 2001
---------------- ---------------
CORE OPERATIONS $1.54 $1.03
REALIZED GAINS .37 .85
AMORTIZATION EXPENSE (.18) (.84)
---------------- ---------------
NET INCOME 1.73 1.04
NET CHANGE IN UNREALIZED
GAINS AND OTHER (1.29) .28
---------------- ---------------
COMPREHENSIVE INCOME $0.44 $1.32
================ ===============
WEIGHTED AVERAGE DILUTED
SHARES 9,852 7,929
================ ===============
First quarter 2002 income from core operations was $1.54 per share
compared to income from core operations of $1.03 per share in 2001. The increase
was due to continued
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strong performance at Markel North America and improved operating results at
Markel International.
-PREMIUM ANALYSIS-
QUARTER ENDED MARCH 31,
(dollars in thousands)
---------------------------------------------
GROSS WRITTEN PREMIUMS EARNED PREMIUMS
2002 2001 2002 2001
--------------------- --------------------
Markel North America $327,464 $215,873 $196,289 $141,298
Markel International 170,959 234,725 122,575 104,610
Discontinued Lines 20,223 16,342 8,675 32,873
--------------------- --------------------
TOTAL $518,646 $466,940 $327,539 $278,781
===================== ====================
Markel North America gross written premiums for the first quarter
increased 52% due to increased submission activity and price increases across
all business units. Markel International's gross written premiums declined
primarily due to stricter underwriting guidelines, reduced aggregate policy
limits and the reunderwriting of some classes of business. Markel
International's first quarter writings met the Company's expectations both in
terms of volume and price increases achieved. Discontinued Lines' gross written
premiums consisted primarily of Corifrance's writings in both periods.
-QUARTERLY COMBINED
RATIO ANALYSIS-
-------------------------
QUARTER ENDED
MARCH 31,
2002 2001
----------------------
Markel North America 96% 96%
Markel International 110% 112%
Discontinued Lines 144% 130%
CONSOLIDATED 102% 106%
Markel North America continued to produce solid underwriting profits
in the first quarter of 2002. In 2002 Markel North America benefited from an
improved expense ratio due to higher volume, partially offset by modest adverse
loss reserve development in the Excess and Surplus Lines segment.
Markel International's first quarter 2002 combined ratio was in line
with the Company's expectations and improved compared to 112% (before the effect
of reserve strengthening) in the fourth quarter of 2001. Markel International
benefited from an improved expense ratio due to lower commission rates and lower
overhead costs. The Company is intent on strengthening Markel International's
operating performance and balance sheet through a focus on expense control and
underwriting discipline which includes improved risk selection, pricing and the
appropriate use of reinsurance.
The underwriting loss from Discontinued Lines decreased to $3.8
million in the first quarter of 2002 compared to $10.0 million in 2001. The
Company did not experience
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any significant unfavorable loss development in Discontinued Lines in the first
quarter of 2002. As Markel International's discontinued programs run off, the
negative impact of Discontinued Lines should continue to decrease.
The Company anticipates that the North American and London insurance
markets will continue to provide a favorable environment for growth. While all
of the Company's insurance operations are achieving significant rate increases,
first quarter results contain minimal benefit from these increases as the
Company attempts to establish loss reserves that are more likely redundant than
deficient.
Net investment income for the first quarter of 2002 was $41.5 million
compared to $43.6 million in 2001. The decrease was due to lower investment
yields partially offset by continued growth in the investment portfolio due to
positive cash flows from operations. For the quarter ended March 31, 2002, net
realized investment gains were $5.6 million compared to realized gains of $10.4
million in 2001. Variability in the timing of realized and unrealized investment
gains and losses is to be expected.
Amortization of intangible assets was $2.8 million in the first
quarter of 2002 compared to $7.7 million last year. The Company adopted
Financial Accounting Standards Board Statement (Statement) No. 142, Goodwill and
Other Intangible Assets, as of January 1, 2002. The decrease in amortization in
2002 is due to the fact that goodwill is no longer amortized after the adoption
of Statement No. 142. Instead, Statement No. 142 requires that goodwill and
other intangible assets with indefinite useful lives be tested for impairment
annually in lieu of being amortized.
The Company completed the transitional goodwill impairment test
required by Statement No. 142 in the first quarter of 2002 and determined that
there was no indication of goodwill impairment.
The following table compares net income and net income per share for
2001, as adjusted for the adoption of Statement No. 142, with the amounts for
2002 (in thousands):
QUARTER ENDED
MARCH 31,
2002 2001
-------------------------------
Net income $17,037 $ 8,232
Add back: Goodwill amortization - 4,791
-------------------------------
Adjusted net income $17,037 $13,023
===============================
Adjusted net income per share:
Basic $1.74 $1.68
Diluted $1.73 $1.64
Average shares outstanding:
Basic 9,814 7,765
Diluted 9,852 7,929
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Comprehensive income was $0.44 per share in the first quarter of 2002
compared to comprehensive income of $1.32 per share in 2001. The decrease in the
first quarter of 2002 was primarily due to the decreased market value of the
Company's investment portfolio partially offset by increased net income. The
Company reported net unrealized gains, net of taxes, on its fixed maturity and
equity investments of $161.7 million at March 31, 2002 compared to $173.9
million at December 31, 2001.
Book value per common share was $110.93 at March 31, 2002 compared to
$110.50 at December 31, 2001.
The Company recently commenced an exchange offer and consent
solicitation for approximately $171 million of outstanding notes issued by
Markel International. If successful, the offer will have no impact on
outstanding indebtedness, as the notes are included in the Company's
consolidated liabilities.
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 occurrence of additional terrorist activities could have a material
impact on the Company and the insurance industry. The Company's anticipated
premium growth is based on current knowledge and assumes 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 Discontinued Lines
and reinsurance programs and exposures. Adverse experience in these areas could
lead to additional charges. Regulatory actions can impede the Company's ability
to charge adequate rates and efficiently allocate capital. Economic conditions,
interest and foreign exchange rate volatility can have a significant impact on
the market value of fixed maturity and equity investments as well as the
carrying value of other assets and liabilities. 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 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.
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The quarterly conference call, which will involve discussion of the
first quarter financial results and may include forward-looking information,
will be held Wednesday, May 1st, at 10:30 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 May 10,
2002, should contact Markel's Investor Relations Department at 804-747-0136. The
call will also be broadcast over the Internet at www.markelcorp.com. A replay of
------------------
the call will also be available on this web site until May 10, 2002.
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MARKEL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations and Comprehensive Income
Three Months Ended
March 31,
-----------------------------
2002 2001
-------- --------
(dollars in thousands,
except per share data)
OPERATING REVENUES
Earned premiums ..................................................... $ 327,539 $ 278,781
Net investment income ............................................... 41,464 43,556
Net realized gains from investment sales ............................ 5,624 10,369
------------ -----------
Total Operating Revenues ...................................... 374,627 332,706
------------ -----------
OPERATING EXPENSES
Losses and loss adjustment expenses ................................. 234,456 199,045
Underwriting, acquisition and insurance expenses .................... 101,249 97,284
Amortization of intangible assets ................................... 2,797 7,692
------------ -----------
Total Operating Expenses ...................................... 338,502 304,021
------------ -----------
Operating Income .............................................. 36,125 28,685
Interest expense .................................................... 9,081 15,146
------------ -----------
Income Before Income Taxes .................................... 27,044 13,539
Income tax expense ................................................. 10,007 5,307
------------ -----------
Net Income ................................................... $ 17,037 $ 8,232
------------ -----------
OTHER COMPREHENSIVE INCOME (LOSS)
Unrealized gains (losses) on securities, net of taxes
Net holding gains (losses) arising during
the period ................................................ $ (8,579) $ 13,081
Less reclassification adjustments for gains
included in net income ..................................... (3,655) (6,740)
------------ -----------
Net unrealized gains (losses) ................................. (12,234) 6,341
Currency translation adjustments, net of taxes ...................... (498) (4,114)
------------ -----------
Total Other Comprehensive Income (Loss) ...................... (12,732) 2,227
------------ -----------
Comprehensive Income ......................................... $ 4,305 $ 10,459
------------ -----------
NET INCOME PER SHARE
Basic .......................................................... $ 1.74 $ 1.06
Diluted ........................................................ $ 1.73 $ 1.04
------------ -----------
Selected Data March 31, December 31,
------------------------------
(dollars in thousands, except per share data) 2002 2001
- --------------------------------------------------------------------------------------------------------
Total investments and cash $ 3,577,240 $ 3,591,202
Reinsurance recoverable on paid and unpaid losses 1,632,887 1,569,012
Intangible assets 369,331 372,128
Total assets 6,587,254 6,440,628
Unpaid losses and loss adjustment expenses 3,773,017 3,699,973
Unearned premiums 893,172 806,922
Convertible notes payable 117,404 116,022
Long-term debt 227,990 264,998
8.71% Capital Securities 150,000 150,000
Total shareholders' equity 1,089,679 1,085,108
Book value per share $ 110.93 $ 110.50
Common shares outstanding 9,823 9,820
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Markel Corporation
Segment Reporting Disclosures
For the Quarters Ended March 31, 2002 and 2001
Segment Gross Written Premium
Quarter Ended March 31,
- ----------------------------------------------------------------------
(dollars in thousands) 2002 2001
- ----------------------------------------------------------------------
Excess and Surplus Lines $ 280,942 $ 182,259
Specialty Admitted 46,522 33,614
London Insurance Market 170,959 234,725
Other (Discontinued Lines) 20,223 16,342
- ----------------------------------------------------------------------
Consolidated $ 518,646 $ 466,940
======================================================================
Segment Net Written Premium
Quarter Ended March 31,
- -----------------------------------------------------------------------
(dollars in thousands) 2002 2001
- -----------------------------------------------------------------------
Excess and Surplus Lines $ 190,599 $ 127,759
Specialty Admitted 43,928 30,600
London Insurance Market 117,115 169,420
Other (Discontinued Lines) 22,474 15,132
- -----------------------------------------------------------------------
Consolidated $ 374,116 $ 342,911
- -----------------------------------------------------------------------
Segment Revenues
Quarter Ended March 31,
- ----------------------------------------------------------------------
(dollars in thousands) 2002 2001
- ----------------------------------------------------------------------
Excess and Surplus Lines $ 157,128 $ 109,795
Specialty Admitted 39,161 31,503
London Insurance Market 122,575 104,610
Investing 47,088 53,925
Other (Discontinued Lines) 8,675 32,873
- ----------------------------------------------------------------------
Consolidated $ 374,627 $ 332,706
- ----------------------------------------------------------------------
Segment Profit (Loss)
Quarter Ended March 31,
- ----------------------------------------------------------------------
(dollars in thousands) 2002 2001
- ----------------------------------------------------------------------
Excess and Surplus Lines $ 7,298 $ 6,147
Specialty Admitted 351 (593)
London Insurance Market (11,993) (13,120)
Investing 47,088 53,925
Other (Discontinued Lines) (3,822) (9,982)
- -----------------------------------------------------------------------
Consolidated $ 38,922 $ 36,377
- ----------------------------------------------------------------------
Combined Ratios
Quarter Ended March 31,
- -----------------------------------------------------------------------
2002 2001
- -----------------------------------------------------------------------
Excess and Surplus Lines 95% 94%
Specialty Admitted 99% 102%
London Insurance Market 110% 112%
Other (Discontinued Lines) 144% 130%
- -----------------------------------------------------------------------
Consolidated 102% 106%
- -----------------------------------------------------------------------
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