A.M. Best Places Markel Group's Financial Strength Rating Under Review with Negative Implications

Strategic Insights -

A.M. Best Co. has announced that it will place the financial strength, debt, and preferred stock ratings of the Markel Group under review with negative implications, effective immediately. This decision is in response to Markel Corporation's announcement that it has entered into an agreement to acquire Terra Nova Holdings, Ltd. for approximately $905 million in cash and stock. The acquisition is subject to shareholder and regulatory approvals and is expected to close in the fourth quarter of 1999 or the first quarter of 2000.

Key Takeaways:

  • A.M. Best has placed the financial strength, debt, and preferred stock ratings of the Markel Group under review with negative implications due to the uncertainty surrounding the financing structure and its impact on financial leverage and interest coverage.
  • The consideration for the acquisition will consist of 60% stock and 40% cash, with the exact allocation subject to certain maximum levels based on financing arrangements.
  • Markel will assume $175 million of Terra Nova's debt in the transaction, and A.M. Best will review the management's future business plans, including the amalgamation of the two organizations, as well as any potential growth and cross-selling opportunities.
  • The combined organization will have greater scale and scope of business and operations in various countries worldwide, providing a solid platform for growth and favorable market developments.
  • The transaction is subject to shareholder and regulatory approvals and is expected to close in the fourth quarter of 1999 or the first quarter of 2000.

Statistics:

  • The consideration for the acquisition is approximately $905 million in cash and stock.
  • The expected allocation of the consideration is 60% stock and 40% cash, with a maximum cash allocation of $360 million.
  • Markel will assume $175 million of Terra Nova's debt in the transaction.
  • The combined organization will underwrite a diverse array of property, casualty, aviation, and marine insurance on a worldwide basis.

Sources:

  • "A.M. Best Places Markel Group's Financial Strength Rating Under Review with Negative Implications" (Business Wire, August 17, 1999)
  • A.M. Best Co. Press Release (August 17, 1999)