AM Best has assigned a Long-Term Issue Credit Rating of “bbb+” to $600 million of 3.45% senior unsecured notes due 2052 issued by Markel Corporation (Markel) (Glen Allen, Virginia) [NYSE: MKL]. The outlook assigned to this Credit Rating (rating) is stable. The debt ranks pari passu with the company’s outstanding senior unsecured notes.
The proceeds will be used to prefund the scheduled retirement of Markel’s $350 million of senior unsecured notes due July 2022, and for general corporate purposes. The rating assignment considers the rating profile of Markel’s principal insurance subsidiary units, as well as the parent company’s financial leverage, coverage and overall debt servicing profile, and the application of appropriate notching to reflect structural subordination of the holding company’s senior debt.
Markel’s financial leverage, as calculated by AM Best, was in the low-to-mid 20% range at year-end 2020, and will remain in the mid-to-upper 20% range following the new debt offering, prior to consideration of proceeds held to pre-fund the retirement of maturing debt in mid-2022. Earnings before interest, preferred dividends and taxes interest coverage has been strong, averaging 3.9 times over the past three years, albeit declining to 2.9 times in 2020. AM Best expects Markel’s coverage ratio to remain within guidance. The company’s 2020 net operating earnings results were affected by net claim losses associated with natural catastrophes, pandemic-related event cancellation and business interruption claims, and other losses sustained by its international and U.S. insurance and reinsurance operations.
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