To complement, diversify and strengthen its existing lines of
) announced a merger agreement with
Alterra Capital Holdings Limited
). Markel will acquire the majority stake of Alterra, the global
provider of specialty insurance and reinsurance products for
approximately $3.13 billion.
The deal will provide for Alterra shareholders to receive 0.04315
Markel common shares and a cash payment of $10. Markel will own
approximately 69% of the merged entity, with 31% stake going to
Alterra. The deal is expected to culminate in the first half of
2013 pending closing conditions. The Zacks Consensus Estimate for
2013 is currently pegged at $20.56, representing a year-over-year
increase of nearly 8.9%.
The two directors at Alterra's current board will be added to the
board of directors of Markel upon closure. The amalgamation of
the companies is expected to help accomplish strong financial
performance in the long run and benefit shareholders of both the
The merger is expected to consolidate Markel's present specialty
insurance business, on the back of Alterra's reinsurance and
large account insurance portfolios. On the other hand Markel's
asset management strengths combined with Alterra are expected to
benefit Alterra's shareholders, clients and business partners.
Upon the closure of the deal, business for Markel is expected to
be approximately 50% short tail, 50% long tail; 67% insurance and
33% reinsurance. Its acquisition will be accretive to annual
gross premiums written, significant book value, return on equity
and Markel's investment portfolio. Markel is estimated to write
approximately $4.4 billion in gross premium with equity expected
to be $6 billion post acquisition.
Subsequent to the announcement, credit rating agency A.M. Best
Co. has retained the issuer credit ratings (ICR) of 'a+' and
Financial Strength rating (FSR) of 'A' debt ratings of Markel.
Concurrently it also retained the ICR of 'BBB' together with debt
ratings of Alterra. Standard and Poor's Ratings Services affirmed
a long-term counterparty credit rating of 'BBB' rating on Markel.
Additionally, Fitch Ratings has affirmed the Insurer Financial
Strength (IFS) rating of 'A' of Alterra Capital following the
merger announcement. The rating outlook is stable.
Markel has undertaken several acquisitions from the beginning of
the year. The latest on the list was announcement of acquisition
of Essentia insurance Company from Onebeacon insurance group LLC
in October. The transaction is expected to close in January 2013.
Markel currently holds a Zacks #3 Rank, translating into short
term Hold rating. Alterra Capital also shares the same Zacks
ALTERRA CAP HLD (ALTE): Free Stock Analysis
MARKEL CORP (MKL): Free Stock Analysis Report
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