A.M. Best has affirmed the financial strength rating (FSR) of A (Excellent) and the issuer credit ratings (ICR) of “a+” of the members of the Markel North America Insurance Group (Markel). In conjunction with this affirmation of Markel, A.M. Best has upgraded the FSR to A (Excellent) from B++ (Good) and the ICR to “a+” from “bbb+” of FirstComp Insurance Company (FirstComp) (Omaha, NE) as FirstComp was added as a member of the Markel rating unit.

Concurrently, A.M. Best has downgraded the ICR to “a” from “a+” and affirmed the FSR of A (Excellent) for Associated International Insurance Company (Associated International) (Deerfield, IL) as it was removed as a member of the Markel rating unit. The outlooks for the ratings of Associated International have been revised to negative from stable. Concurrently, A.M. Best has withdrawn the ratings in response to the group’s request to no longer have this company participate in A.M. Best’s interactive rating process. Additionally, A.M. Best has affirmed the FSR of A- (Excellent) and the ICR of “a-” of Deerfield Insurance Company (Deerfield) (Deerfield, IL), as well as the ICR of “bbb+” and all debt ratings of the publicly traded parent, Markel Corporation (MKL) (Glen Allen, VA) [NYSE:MKL].

A.M. Best also has affirmed the FSR of A (Excellent) and the ICRs of “a” of Markel Bermuda Limited (Markel Bermuda), formerly Alterra Bermuda Limited, and its affiliated operating companies.

In addition, A.M. Best has affirmed the ICR of “bbb” of Markel Bermuda’s immediate parent company, Alterra Capital Holdings Limited (Alterra), and all existing debt ratings of Alterra, Alterra USA Holdings Limited and Alterra Finance, LLC (both domiciled in Delaware). The outlook for all ratings is stable unless otherwise specified. (See below for a detailed listing of the companies and ratings.)

The ratings of Markel and its members reflect the well-established position of the entities in the specialty niche markets and businesses that each of them serve. They also reflect Markel’s historically profitable operating performance, solid risk-adjusted capitalization, excellent operating cash flow and adequate liquidity. Markel benefits from its long-standing relationships with wholesalers and retailers, which is indicative of its leadership position among excess and surplus lines insurers in the United States. The ability to customize and create solutions for its insureds continues to be a key component to Markel’s success over the years. In addition, these ratings acknowledge the financial flexibility afforded to it through MKL. Despite Markel’s high loss reserve leverage, its loss reserves are generally viewed as conservative, which has served the group well in terms of consistent favorable reserve development.

The ratings of FirstComp have been afforded full rating enhancement from Markel considering the explicit financial support provided and the growth of its strategic role within the group, specifically through the cross-selling of products between FirstComp and affiliate Markel Insurance Company. The ratings of FirstComp also consider its supportive risk-adjusted capitalization, as well as the more favorable underwriting performance in recent years. Explicit support for FirstComp is provided by Markel’s affiliate, Evanston Insurance Company, through quota share reinsurance, which covers 50% of all business written on and after Nov. 1, 2010. These ratings also take into consideration the company’s relatively narrow business profile, competitive market pressures and the challenges related to current macroeconomic factors. FirstComp is one of the leading providers of workers’ compensation coverage in the United States, specializing in small, main street businesses in underserved rural markets across 28 states.

The ratings for Deerfield also recognize its niche role within the group and are afforded partial rating enhancement through the implied support of Markel.

The ratings of Markel Bermuda and its subsidiaries reflect the niche markets and businesses that each of these entities serve and their current roles within Markel Bermuda and MKL. While A.M. Best acknowledges the inherent benefits from the 2013 merger of Alterra and MKL, and the belief that the combination will ultimately prove to be beneficial, the ratings of Markel Bermuda receive no rating enhancement currently. This may change as the benefits of the integration/assimilation efforts become more definitive. Markel Bermuda’s ratings reflect its supportive risk-adjusted capitalization and the advantages of being part of the larger MKL organization. These attributes are somewhat offset by reserve strengthening actions taken in 2013 and 2014, relative to legacy reserves associated with U.S. casualty business, and soft reinsurance pricing due to the continued flow of alternative capital into the reinsurance space.

MKL’s financial leverage remains supportive of its current ratings. MKL’s total debt-to-capital ratio as of March 31, 2015, was 27.0%, increasing to 34.1% when debt is measured relative to adjusted tangible capital. Parent holding company cash flow, liquidity and debt servicing capabilities are all supportive of the ratings.

Triggers that could lead to an upgrading of the ratings include continued favorable operating profitability, coupled with an enhancement of risk-adjusted capitalization. Alternatively, drivers that could lead to a downgrading of the ratings and/or a negative revision of the outlook include unfavorable operating profitability trends, outsized catastrophe or investment losses in a given quarter or year, material adverse loss reserve development and/or a material decline in the organization’s risk-adjusted capital.

The FSR of A (Excellent) and ICRs of “a+” have been affirmed for the following members of Markel North America Insurance Group:

  • Essex Insurance Company
  • Essentia Insurance Company
  • Evanston Insurance Company
  • Markel American Insurance Company
  • Markel Insurance Company

The FSR of A (Excellent) and ICRs of “a” have been affirmed for Markel Bermuda Limited and its following operating affiliates:

  • Markel Europe plc
  • Alterra America Insurance Company
  • Alterra Excess & Surplus Insurance Company
  • Alterra Reinsurance USA Inc.

The following debt ratings have been affirmed:

Markel Corporation

-- “bbb+” on $250 million 5.35% senior unsecured notes, due 2021

-- “bbb+” on $350 million 7.125% senior unsecured notes, due 2019

-- “bbb+” on $200 million 7.35% senior unsecured notes, due 2034

-- “bbb+” on $350 million 4.90% senior unsecured notes, due 2022

-- “bbb+” on $250 million 3.625% senior unsecured notes, due 2023

-- “bbb+” on $250 million 5.0% senior unsecured notes, due 2043

Alterra USA Holdings Limited (guaranteed by Alterra Capital Holdings Limited)

-- “bbb” on $100 million 7.2% senior unsecured notes, due 2017

Alterra Finance, LLC (guaranteed by Alterra Capital Holdings Limited)

-- “bbb” on $350 million 6.25% senior unsecured notes, due 2020

The following indicative ratings have been affirmed under the existing shelf registration:

Markel Corporation

-- “bbb-” on preferred securities

-- “bbb” on subordinated debt

-- “bbb+” on senior unsecured debt

Alterra Capital Holdings Limited

-- “bb+” on preferred securities

-- “bbb-” on subordinated debt

-- “bbb” on senior unsecured debt

Alterra USA Holdings Limited (guaranteed by Alterra Capital Holdings Limited)

-- “bbb-” on subordinated debt

-- “bbb” on senior secured debt

The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

Key insurance criteria reports utilized:

  • Catastrophe Analysis in A.M. Best Ratings
  • Insurance Holding Company and Debt Ratings
  • Rating Members of Insurance Groups
  • Risk Management and the rating Process for Insurance Companies
  • Understanding BCAR for Property/Casualty Insurers
  • Understanding Universal BCAR

This press release relates to rating(s) that have been published on A.M. Best's website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please visit A.M. Best’s Ratings & Criteria Center.

A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

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