Moody's Investor Service of
) has affirmed the credibility of
), while also upgrading its outlook.The move acknowledges the
company's improved operating leverage.
The ratings agency avowed the senior debt rating of "Baa2" for
Markel and the financial units of Alterra Capital Holdings Ltd.,
which was acquired by Markel in May 2013. Additionally, it
reaffirmed the insurance financial strength (IFS) of "A2" for
Markel and its operating subsidiaries.
Meanwhile, the outlook on all of the aforementioned ratings were
revised to 'stable' from 'negative'. Furthermore, Moody's lifted
the IFS rating of Markel Bermuda Ltd. to "A2" from "A3", while the
outlook remained stable.
Basis of Ratings
Post one year of acquisition of Alterra, Moody's remains
confident of its successful integration as well as decent capital
adequacy from its primary subsidiary, Markel Bermuda Ltd. Markel's
efforts to break even Alterra's loss reserves, to retain business
and improve branding are also bearing fruit now.
Markel's strengths also lie in its diversified product
portfolio, moderate catastrophe exposures, disciplined underwriting
and proactive reserve management. On the capital front, Markel
enjoys decent risk-based capitalization and liquidity with $1.1
billion of cash and short-term investments at Mar 2014-end.
However, Moody's posed concern over Markel's investment
portfolio, which is highly exposed to volatile equity markets. As
well, the company's financial leverage (26% at Mar 2014-end) is
higher in the peer group. Markel also faces intense competition and
exposure to businesses that are volatile in nature, and specific
losses for which may not be known immediately, while claims may
reportedly be significant. These factors add to operating and
Nevertheless, the ratings agency opines that Markel has the
potential to diminish its risk exposures through strong
underwriting and by shifting away from businesses that no longer
pay the value for the undertaken risk. Going ahead, Moody's expects
Markel to maintain pre-tax interest coverage of 4x−6x, adjusted
financial leverage within 20−30% and return on capital of about 8%,
among other metrics.
Both Markel and Moody's carry a Zacks Rank #3 (Hold). However,
some better-ranked insurers include
HCI Group Inc.
Hallmark Financial Services Inc.
), both of which sporta Zacks Rank #1 (Strong Buy).
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