The ratings for Markel Corporation’s core property and casualty insurance subsidiaries have been affirmed by Fitch Ratings, although the Rating Outlook has been revised to Negative from Stable.
Specifically, Fitch has affirmed the ‘A+’ (Strong) Insurer Financial Strength (IFS) ratings for Markel Corporation’s principal P/C insurance subsidiaries, and the firm’s senior unsecured notes at ‘BBB+’.
However, the Rating Outlook has been revised to negative based on Fitch’s assessment of the impact of the ongoing COVID-19 coronavirus pandemic, including its economic impact. Fitch says that the revision reflects pro forma results that fall outside some capitalisation and leverage rating sensitivities and criteria guidelines by one notch.
At 28.7%, Fitch says that the pro forma financial leverage ratio is above the 28% downgrade rating sensitivity and remains in line with a very low ‘a’ credit factor score. Additionally, says Fitch, the re/insurer’s U.S. businesses estimated pro forma score on Fitch’s Prism capital model has fallen to ‘Adequate’ from ‘Strong’.
The pro forma results reflect a 21% decline in shareholders equity, mostly as a result of Fitch’s assumption regarding a 35% decline in stock indices. The ratings agency explains that Markel holds one of the highest concentrations in equities in its universe of rated P/C entities, at 34% of the total investment portfolio and 69% of shareholders’ equity as at year-end 2019.
Away from the investment side of the balance sheet, and Fitch still views Markel’s underwriting performance as very strong under both its actual 2019 combined ratio of 94.4% and its pro forma combined ratio of 97.6%.
