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.

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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