A.M. Best Comments on Credit Ratings of Markel Corp. Following Announced Acquisitions of State National Companies, Inc. & Cos...
July 26 2017 - 5:25PM
Business Wire
A.M. Best has commented that the Long-Term Issuer Credit
Rating (Long-Term ICR) of “bbb+” of Markel Corporation
(Markel) [NASDAQ:MKL] (Glen Allen, VA) is unchanged following the
announcement today of the company’s planned acquisitions of
State National Companies, Inc. [NASDAQ:SNC] (State National)
and Costa Farms, a non-insurance entity being acquired by Markel’s
Markel Ventures subsidiary. All Long-Term Issue Credit Ratings of
Markel and all Financial Strength Ratings and Long-Term ICRs of
Markel’s insurance subsidiaries also are unchanged. The outlook of
these Credit Ratings (ratings) is stable.
The acquisition of State National adds to the diversity of
Markel’s insurance product offerings and enhances its revenue
stream through the inclusion of State National’s insurance
operations and fee-based services. State National will continue to
operate as a separate business unit following the close of the
transaction, with its current management team remaining in
place.
State National is the largest provider of fronting services in
the United States, and the company has demonstrated an ability to
manage the associated credit risk over a period of many years.
State National also is a leading provider of collateral protection
services to financial institutions, primarily covering automobile
physical damage. Markel currently does not have a presence in
either of these product categories, limiting any correlation
between them and its current books of business.
Markel will acquire all of State National’s common stock at a
price of $21 per share in cash, or approximately $919 million, to
be financed with cash balances on hand. Markel will assume State
National’s net debt of approximately $44 million. The transaction
is expected to close during the fourth quarter of 2017, pending
regulatory and shareholder approvals and customary closing
conditions.
Costa Farms, a privately held grower and distributor of
ornamental plants, is being acquired by Markel Ventures, a
subsidiary of Markel that invests in non-insurance businesses. The
Markel Ventures operations provide an additional revenue source and
long-term capital growth, enhancing the strength of Markel’s
balance sheet. Markel Ventures is acquiring an 81% interest in
Costa Farms. Cash consideration is currently estimated at
approximately $255 million. Total consideration will include
contingent and additional cash consideration and will reflect
actual conditions to be determined upon closing. The transaction is
expected to close during the third quarter of 2017, following
completion of customary closing conditions.
Subsequent to the completion of these acquisitions, Markel’s
debt-to-total capital ratio is expected to remain within A.M.
Best’s guidelines for the current rating. The debt-to-tangible
capital ratio will be elevated from its recent levels, reflecting
the increase in goodwill and intangible assets associated with
these transactions. However, concerns regarding the increase in
debt-to-tangible capital are offset by the solid cash flows
associated with the businesses being acquired. Cash coverage ratios
also are forecast to remain well within the guidelines for the
current rating.
This press release relates to Credit Ratings 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 see A.M.
Best’s Recent Rating Activity web page. For
additional information regarding the use and limitations of Credit
Rating opinions, please view Understanding Best’s Credit
Ratings. For information on the proper media use of Best’s
Credit Ratings and A.M. Best press releases, please view
Guide for Media - Proper Use of Best’s Credit Ratings and A.M.
Best Rating Action Press Releases.
A.M. Best is the world’s oldest and most authoritative
insurance rating and information source. For more information,
visit www.ambest.com.
Copyright © 2017 by A.M. Best Rating
Services, Inc. and/or its subsidiaries. ALL RIGHTS
RESERVED.
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version on businesswire.com: http://www.businesswire.com/news/home/20170726006423/en/
A.M. BestJennifer Marshall, CPCU, ARM, +1 908 439
2200, ext.
5327Directorjennifer.marshall@ambest.comorMichael J.
Lagomarsino, CFA, FRM, +1 908 439 2200, ext. 5810Senior
Directormichael.lagomarsino@ambest.comorChristopher Sharkey,
+1 908 439 2200, ext. 5159Manager, Public
Relationschristopher.sharkey@ambest.comorJim Peavy,+1 908
439 2200, ext. 5644Director, Public
Relationsjames.peavy@ambest.com
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