EXHIBIT 99.1
NEWS RELEASE
LOGO MARKEL CORPORATION
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4521 Highwoods Parkway, Glen Allen, VA 23060 P.O. Box 2009, Glen Allen. VA 23058-2009
(804) 747-0136 (800) 446-6671 Fax: (804) 965-1600 www.markelcorp.com
MARKEL REPORTS STRONG EARNINGS
FOR IMMEDIATE RELEASE CONTACT: BRUCE KAY
TELEPHONE: 804-747-0136
Richmond, VA, April 29, 2003 --- (NYSE - MKL) Markel Corporation
reported net income of $3.70 per diluted share for the quarter ended March 31,
2003 compared to net income of $1.73 per diluted share for the first quarter of
2002. Strong underwriting profits drove the increase in 2003 earnings. The
combined ratio was 96% for the first quarter of 2003 compared to a combined
ratio of 102% for the same period in 2002. Alan I. Kirshner, Chairman and Chief
Executive Officer, commented, "Our North American results were excellent and we
continued our steady march to underwriting profitability in London. Pricing
remains strong in all our markets. We are off to a marvelous start to 2003 and
are encouraged by our building momentum."
In evaluating its operating performance, the Company focuses on core
underwriting and investing results (core operations) before consideration of
realized gains or losses and amortization expenses (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
believes that this measure provides meaningful information about the performance
of its core underwriting and investing activities. The Company's definition of
core operations may not be comparable to that used by other companies. Following
is a comparison of 2003 and 2002 results on a per diluted share basis, except
for book value per common share outstanding (shares in thousands).
Quarter Ended
March 31,
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2003 2002
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Core operations $3.44 $1.54
Realized gains .43 .37
Amortization expense (.17) (.18)
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Diluted net income $3.70 $1.73
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Weighted average
diluted shares 9,856 9,852
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March 31, December 31,
2003 2002
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Book value per common
share outstanding $119.72 $117.89
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Common shares outstanding 9,840 9,832
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1
First quarter 2003 income from core operations was $3.44 per share
compared to income from core operations of $1.54 per share in 2002. The 2003
improvement was primarily due to strong underwriting performance in the Excess
and Surplus Lines (E&S) segment and improved underwriting results in our London
Insurance Market segment. The Company reported a combined ratio of 96% in the
first quarter of 2003 compared to a combined ratio of 102% in 2002.
Book value per common share outstanding increased to $119.72 at March
31, 2003 from $117.89 at December 31, 2002. The 2003 increase was primarily the
result of $36.4 million of net income partially offset by $19.7 million of net
unrealized investment losses, net of taxes, during the quarter.
-Premium Analysis-
Quarter Ended March 31,
(Dollars in thousands)
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Gross Written Premiums Earned Premiums
2003 2002 2003 2002
---------- ---------- ---------- ----------
Excess and Surplus Lines $365,609 $280,942 $236,674 $157,128
Specialty Admitted 57,738 46,522 54,658 39,161
London Insurance Market 199,690 170,959 134,238 122,575
Other 21,699 20,223 6,783 8,675
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Total $644,736 $518,646 $432,353 $327,539
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For the quarter ended March 31, 2003, E&S and Specialty Admitted gross
written premiums increased 30% and 24%, respectively, due to increased
submission activity and price increases across all business units. Writings in
the London Insurance Market increased 17% and continued to meet the Company's
expectations both in terms of volume and price increases achieved. Other
consisted primarily of Corifrance's writings in 2003 and 2002.
-Quarterly Combined Ratio Analysis-
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Quarter Ended
March 31,
2003 2002
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Excess and Surplus Lines 88% 95%
Specialty Admitted 98% 99%
London Insurance Market 103% 110%
Other 223% 144%
Consolidated 96% 102%
The E&S segment continued to produce strong underwriting profits in the
first quarter of 2003. The significant improvement in 2003 primarily resulted
from reduced loss ratios in all units as the impact of improved pricing, more
restrictive coverage and better risk selection over the past several years began
to emerge. In addition, the E&S segment expense ratio continued to benefit from
lower commissions and additional premium volume.
2
The Specialty Admitted segment produced improved underwriting profits
in the first quarter of 2003. The segment benefited from an improved expense
ratio due to higher volume in the first quarter. The Company continues to work
to increase prices and reduce expenses in the Specialty Admitted segment in
order to increase underwriting profits.
The combined ratio for the London Insurance Market segment continued to
improve in the first quarter of 2003. The segment's combined ratio has steadily
improved in each of the last five quarters. This improvement has resulted from a
combination of lower loss ratios due to improved risk selection, pricing and the
appropriate use of reinsurance and lower expense ratios due to lower commissions
and expense control.
The underwriting loss from Other, which includes discontinued lines
of business, increased to $8.3 million in the first quarter of 2003 compared to
$3.8 million in 2002. The increase was primarily due to an increase in the
allowance for potentially uncollectible reinsurance related to the Company's
discontinued operations. The Company's action was the result of the weakened
financial condition of certain reinsurance market participants.
The Company anticipates that all segments of the specialty insurance
marketplace in which it competes will continue to provide a favorable
environment for its operations. For 2003 budgeting purposes, the Company
anticipates gross premium growth of 15%, with domestic operations slightly
higher and international operations slightly lower. Management continues to
believe that this is a reasonable growth forecast for the full year. All of the
Company's insurance operations continue to achieve significant rate increases.
Net investment income for the first quarter of 2003 was $45.2 million
compared to $41.5 million in the prior year. In 2003, a larger investment
portfolio offset lower investment yields. During the first quarter of 2003, the
Company added approximately $50 million on a cost basis to the equity investment
portfolio. To the extent that the Company allocates additional funds to the
equity portfolio in order to maximize long-term investment returns, current
investment yields will decrease. In the first quarter of 2003, the Company
recognized $6.5 million of net realized gains compared to $5.6 million of net
realized gains in 2002. Variability in the timing of realized and unrealized
investment gains and losses is to be expected.
Amortization of intangible assets was $2.6 million in the first quarter
of 2003 compared to $2.8 million last year. Intangible assets, other than
goodwill, will be fully amortized by the end of the second quarter of 2003.
For the quarter ended March 31, 2003, the Company's effective tax rate
decreased to 33% from 37% in the first quarter of 2002. The decrease was due to
the elimination during 2002 of nondeductible interest expense and due to
increased investment allocations to state and municipal securities, which are
exempt from U.S. federal taxation.
3
Comprehensive income was $18.7 million for the first quarter of 2003
compared to comprehensive income $4.3 million in 2002. The improvement in 2003
was primarily due to higher net income partially offset by a decrease in net
unrealized investment gains compared to 2002. The Company reported net
unrealized gains, net of taxes, on its fixed maturity and equity investments of
$159.4 million at March 31, 2003 compared to $179.2 million at December 31,
2002.
During the first quarter of 2003, the Company's investment portfolio
increased 2% to $4.4 billion from $4.3 billion at December 31, 2002. Cash flows
from operations were approximately $104 million for the first quarter of 2003
compared to approximately $51 million in 2002.
During February 2003, the Company issued $200 million of 6.80%
unsecured senior notes, due February 15, 2013. Shortly after the end of the
first quarter, the Company issued an additional $50 million of these securities.
Net proceeds were used to repay $175.0 million outstanding under the Company's
revolving credit facility. In addition, the issue provides funding for $67.0
million of notes that mature on November 1, 2003.
This is a "Safe Harbor" statement under the Private Securities
Litigation Reform Act of 1995. It also contains general cautionary statements
regarding the Company's business, estimates and management assumptions. 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 and anticipated improvements in underwriting profitability are
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. Recently enacted legislation requires the Company to offer terrorism
insurance. The potential impact of this legislation cannot be determined at this
time. Changing legal and social trends and inherent uncertainties in the loss
estimation process can adversely impact the adequacy of loss reserves and the
allowance for reinsurance recoverables. In addition, industry and economic
conditions can affect the ability and/or willingness of reinsurers to pay
balances due. The Company continues to closely monitor discontinued lines and
related 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 rates 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.
4
The quarterly conference call, which will involve discussion of the
first quarter financial results and may include forward-looking information,
will be held Wednesday, April 30th, 2003 at approximately 10:30 a.m. Eastern
Daylight Savings 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 Friday, May 9, 2003, 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 corporate web site, www.markelcorp.com. A replay of the call will
also be available on this web site until Friday, May 9, 2003.
The webcast, the conference call and the content and permitted replays
or rebroadcasts thereof, are the exclusive copyrighted property of Markel
Corporation and may not be copied, taped, rebroadcast, or published in whole or
in part without the express written consent of Markel Corporation.
* * * * * * * *
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.
5
MARKEL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations and Comprehensive Income
Three Months Ended
March 31,
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2003 2002
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(dollars in thousands, except per share data)
OPERATING REVENUES
Earned premiums ................................................ $ 432,353 $ 327,539
Net investment income........................................... 45,233 41,464
Net realized gains from investment sales ....................... 6,471 5,624
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Total Operating Revenues ................................. 484,057 374,627
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OPERATING EXPENSES
Losses and loss adjustment expenses ............................ 280,019 234,456
Underwriting, acquisition and insurance
expenses ................................................. 135,636 101,249
Amortization of intangible assets .............................. 2,629 2,797
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Total Operating Expenses ................................. 418,284 338,502
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Operating Income ......................................... 65,773 36,125
Interest expense ............................................... 11,395 9,081
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Income Before Income Taxes ............................... 54,378 27,044
Income tax expense ............................................. 17,945 10,007
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Net Income .............................................. $ 36,433 $ 17,037
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OTHER COMPREHENSIVE INCOME
Unrealized losses on securities, net of taxes
Net holding losses arising during the period ............ $ (15,529) $ (8,579)
Less reclassification adjustments for gains
included in net income ................................ (4,206) (3,655)
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Net unrealized losses..................................... (19,735) (12,234)
Currency translation adjustments, net of taxes ................. 1,984 (498)
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Total Other Comprehensive Loss........................... (17,751) (12,732)
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Comprehensive Income .................................... $ 18,682 $ 4,305
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NET INCOME PER SHARE
Basic ..................................................... $ 3.70 $ 1.74
Diluted ................................................... $ 3.70 $ 1.73
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Selected Data March 31, December 31,
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(dollars and shares in thousands, except per share data) 2003 2002
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Total investments and cash $ 4,417,614 $ 4,314,152
Reinsurance recoverable on paid and unpaid losses 1,647,026 1,730,879
Intangible assets 358,815 361,444
Total assets 7,504,808 7,408,560
Unpaid losses and loss adjustment expenses 4,387,646 4,366,803
Unearned premiums 992,468 937,364
Convertible notes payable 87,218 86,109
Long-term debt 427,831 404,384
8.71% Capital Securities 150,000 150,000
Total shareholders' equity 1,177,997 1,159,111
Book value per share $ 119.72 $ 117.89
Common shares outstanding 9,840 9,832
6
Markel Corporation
Segment Reporting Disclosures
For the Quarters Ended March 31, 2003 and 2002
Segment Gross Written Premium
Quarter Ended March 31,
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(dollars in thousands) 2003 2002
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Excess and Surplus Lines $ 365,609 $ 280,942
Specialty Admitted 57,738 46,522
London Insurance Market 199,690 170,959
Other 21,699 20,223
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Consolidated $ 644,736 $ 518,646
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Segment Net Written Premium
Quarter Ended March 31,
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(dollars in thousands) 2003 2002
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Excess and Surplus Lines $ 255,695 $ 190,599
Specialty Admitted 53,467 43,928
London Insurance Market 147,720 117,115
Other 18,081 22,474
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Consolidated $ 474,963 $ 374,116
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Segment Revenues
Quarter Ended March 31,
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(dollars in thousands) 2003 2002
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Excess and Surplus Lines $ 236,674 $ 157,128
Specialty Admitted 54,658 39,161
London Insurance Market 134,238 122,575
Investing 51,704 47,088
Other 6,783 8,675
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Consolidated $ 484,057 $ 374,627
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Segment Profit (Loss)
Quarter Ended March 31,
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(dollars in thousands) 2003 2002
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Excess and Surplus Lines $ 27,803 $ 7,298
Specialty Admitted 989 351
London Insurance Market (3,756) (11,993)
Investing 51,704 47,088
Other (8,338) (3,822)
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Consolidated $ 68,402 $ 38,922
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Combined Ratios
Quarter Ended March 31,
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2003 2002
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Excess and Surplus Lines 88% 95%
Specialty Admitted 98% 99%
London Insurance Market 103% 110%
Other 223% 144%
Consolidated 96% 102%
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