UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[ X ] Quarterly report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended June 30, 1997
or
[ ] Transition report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934 for the transition period from _____ to _____
Commission File Number 1-13051
MARKEL CORPORATION
(Exact name of registrant as specified in its charter)
Virginia 54-0292420
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
4551 Cox Road, Glen Allen, Virginia 23060-3382
(Address of principal executive offices)
(Zip code)
(804) 747-0136
(Registrant's telephone number, including area code)
NONE
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes [ X ] No [ ]
Number of shares of the registrant's common stock outstanding at
July 29, 1997: 5,490,323
1
<PAGE>
Markel Corporation
Form 10-Q
Index
<TABLE>
<S> <C>
Page Number
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Consolidated Balance Sheets--
June 30, 1997 and December 31, 1996 3
Consolidated Statements of Income--
Quarters and Six Months Ended June 30, 1997 and 1996 4
Consolidated Statements of Cash Flows--
Six Months Ended June 30, 1997 and 1996 5
Notes to Consolidated Financial Statements--
June 30, 1997 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
PART II. OTHER INFORMATION:
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 6. Exhibits and Reports on Form 8-K 13
</TABLE>
2
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
MARKEL CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
<CAPTION>
June 30, December 31,
--------------------------------------------
1997 1996
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
(dollars in thousands)
ASSETS
Investments, available-for-sale, at estimated fair value
Fixed maturities (cost of $973,306 in 1997 and $879,401 in 1996) $ 982,664 $ 885,874
Equity securities (cost of $145,834 in 1997 and $132,558 in 1996) 237,915 193,395
Short-term investments (estimated fair value approximates cost) 110,946 51,507
- -----------------------------------------------------------------------------------------------------------------------------------
Total investments, available-for-sale 1,331,525 1,130,776
- -----------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents 1,183 11,054
Receivables 62,963 58,336
Reinsurance recoverable on unpaid losses 219,439 210,518
Reinsurance recoverable on paid losses 13,225 11,631
Deferred policy acquisition costs 36,586 37,979
Prepaid reinsurance premiums 41,157 44,881
Property and equipment 9,055 15,434
Intangible assets 38,104 39,297
Other assets 38,814 45,391
- -----------------------------------------------------------------------------------------------------------------------------------
Total assets $ 1,792,051 $1,605,297
===================================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Unpaid losses and loss adjustment expenses $ 956,045 $ 935,582
Unearned premiums 193,101 200,852
Payables to insurance companies 28,136 23,870
Long-term debt (estimated fair value of $93,132 in 1997 and $115,191 in 1996) 93,140 114,691
Other liabilities 62,422 61,967
Company Obligated Mandatorily Redeemable Preferred Securities of Subsidiary
Trust Holding Solely Junior Subordinated Deferrable Interest Debentures
of the Company 150,000 --
- -----------------------------------------------------------------------------------------------------------------------------------
Total liabilities 1,482,844 1,336,962
- -----------------------------------------------------------------------------------------------------------------------------------
Shareholders' equity
Common stock 24,531 24,347
Retained earnings 218,741 200,237
Net unrealized gains on fixed maturities and equity securities, net of taxes 65,935 43,751
- -----------------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 309,207 268,335
- -----------------------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 1,792,051 $ 1,605,297
===================================================================================================================================
See accompanying notes to consolidated financial statements.
3
<PAGE>
MARKEL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Income
<CAPTION>
Quarter Ended Six Months Ended
June 30, June 30,
--------------------------- ----------------------------
1997 1996 1997 1996
- -----------------------------------------------------------------------------------------------------------------------------------
(dollars in thousands, except per share data)
Operating revenues
Earned premiums $84,132 $ 71,393 $ 165,803 $ 148,190
Net investment income 16,797 11,853 33,503 24,137
Net realized gains (losses) from investment sales 418 (467) (160) 2,507
Other 353 893 1,027 1,828
- -----------------------------------------------------------------------------------------------------------------------------------
Total operating revenues 101,700 83,672 200,173 176,662
- -----------------------------------------------------------------------------------------------------------------------------------
Operating expenses
Losses and loss adjustment expenses 54,506 46,327 107,156 100,879
Underwriting, acquisition and insurance expenses 28,912 24,089 57,226 48,819
Other -- 458 -- 908
Amortization of intangible assets 596 660 1,193 1,335
- -----------------------------------------------------------------------------------------------------------------------------------
Total operating expenses 84,014 71,534 165,575 151,941
- -----------------------------------------------------------------------------------------------------------------------------------
Operating income 17,686 12,138 34,598 24,721
Interest expense 5,210 2,021 10,244 4,050
- -----------------------------------------------------------------------------------------------------------------------------------
Income before income taxes 12,476 10,117 24,354 20,671
Income taxes (benefit) 2,754 (15,973) 5,842 (13,229)
- -----------------------------------------------------------------------------------------------------------------------------------
Net income $ 9,722 $ 26,090 $ 18,512 $ 33,900
- -----------------------------------------------------------------------------------------------------------------------------------
Earnings per share
Primary $ 1.72 $ 4.61 $ 3.28 $ 5.99
- -----------------------------------------------------------------------------------------------------------------------------------
Fully diluted $ 1.72 $ 4.60 $ 3.27 $ 5.98
===================================================================================================================================
See accompanying notes to consolidated financial statements.
4
<PAGE>
MARKEL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
<CAPTION>
Six Months Ended
June 30,
-------------------------------
1997 1996
- -----------------------------------------------------------------------------------------------------------------------------------
(dollars in thousands)
Operating activities
Net Income $ 18,512 $ 33,900
Adjustments to reconcile net income to net cash provided by operating activities 8,022 1,051
- -----------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 26,534 34,951
- -----------------------------------------------------------------------------------------------------------------------------------
Investing Activities
Proceeds from sales of fixed maturities and equity securities 311,108 209,900
Proceeds from maturities of fixed maturities 28,519 38,670
Cost of fixed maturities and equity securities purchased (448,045) (288,856)
Net change in short-term investments (59,439) 16,400
Net proceeds from sale of building 6,500 --
Other (1,813) (2,026)
- -----------------------------------------------------------------------------------------------------------------------------------
Net cash used by investing activities (163,170) (25,912)
- -----------------------------------------------------------------------------------------------------------------------------------
Financing Activities
Net proceeds from issuance of company obligated mandatorily redeemable
preferred securities 148,166 --
Repayments and repurchases of long-term debt (21,577) (7,050)
Other 176 73
- -----------------------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by financing activities 126,765 (6,977)
- -----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents (9,871) 2,062
Cash and cash equivalents at beginning of period 11,054 18,315
- -----------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 1,183 $ 20,377
===================================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--June 30, 1997
1. Principles of Consolidation
The consolidated balance sheet as of June 30, 1997, the related consolidated
statements of income for the quarters and six months ended June 30, 1997 and
1996, and the consolidated statements of cash flows for the six months ended
June 30, 1997 and 1996, are unaudited. In the opinion of management, all
adjustments necessary for a fair presentation of such consolidated financial
statements have been included. Such adjustments consist only of normal recurring
items. Interim results are not necessarily indicative of results of operations
for the full year.
The consolidated financial statements and notes are presented as permitted by
Form 10-Q, and do not contain certain information included in the Company's
annual consolidated financial statements and notes.
2. Earnings per share
Earnings per share was determined by dividing net income, as adjusted below, by
the applicable shares outstanding (in thousands):
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
June 30, June 30,
------------------------- ---------------------------
1997 1996 1997 1996
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Net income, as reported $ 9,722 $ 26,090 $18,512 33,900
Dividends on redeemable preferred stock (4) (4) (8) (8)
- -----------------------------------------------------------------------------------------------------------------------------------
Primary and fully diluted income $ 9,718 $ 26,086 $18,504 $ 33,892
===================================================================================================================================
Average common shares outstanding 5,485 5,428 5,475 5,426
Shares applicable to common stock equivalents 174 233 171 231
- -----------------------------------------------------------------------------------------------------------------------------------
Average primary shares outstanding 5,659 5,661 5,646 5,657
Additional dilution attributable to common
stock equivalents 5 8 8 10
- -----------------------------------------------------------------------------------------------------------------------------------
Average fully diluted shares outstanding 5,664 5,669 5,654 5,667
===================================================================================================================================
</TABLE>
In February 1997, the FASB issued Statement of Financial Accounting Standard
(SFAS) No. 128, Earnings per Share. The statement establishes new standards for
computing and presenting earnings per share (EPS). It replaces the presentation
of primary EPS with basic EPS and the presentation of fully diluted EPS with
diluted EPS. Basic EPS excludes dilution and is computed by dividing net income
by the weighted-average number of common shares outstanding. Diluted EPS
reflects the potential dilution that could occur if securities and other
contracts to issue common stock were exercised or converted into common stock
and then shared in the earnings of the entity. The Company will be required to
adopt SFAS No. 128 during the fourth quarter and for year ending December 31,
1997. Under the new standard, basic EPS would have been 1.77 and 3.38 and
diluted EPS would have been 1.72 and 3.28 for the second quarter and the six
months ended June 30, 1997, respectively.
6
<PAGE>
3. Reinsurance
The table below summarizes the effect of reinsurance on premiums written and
earned (dollars in thousands):
<TABLE>
<CAPTION>
Quarter Ended June 30,
- -----------------------------------------------------------------------------------------------------------------------------------
1997 1996
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Written Earned Written Earned
Direct $ 107,969 $ 106,245 $ 106,037 $ 91,381
Assumed 2,063 1,541 1,583 2,402
Ceded (24,230) (23,654) (25,809) (22,390)
- -----------------------------------------------------------------------------------------------------------------------------------
Net premiums $ 85,802 $ 84,132 $ 81,811 $ 71,393
===================================================================================================================================
<CAPTION>
Six Months Ended June 30,
- -----------------------------------------------------------------------------------------------------------------------------------
1997 1996
- -----------------------------------------------------------------------------------------------------------------------------------
Written Earned Written Earned
Direct $ 204,577 $ 213,058 $ 198,154 $ 187,162
Assumed 3,207 3,260 3,642 6,578
Ceded (46,009) (50,515) (47,071) (45,550)
- -----------------------------------------------------------------------------------------------------------------------------------
Net premiums $ 161,775 $ 165,803 $ 154,725 $ 148,190
===================================================================================================================================
</TABLE>
Incurred losses and loss adjustment expenses are net of reinsurance recoveries
of $23.2 million and $11.1 million for the quarters ended June 30, 1997 and
1996, respectively, and $41.3 million and $23.7 million for the six months ended
June 30, 1997 and 1996, respectively.
4. Company Obligated Mandatorily Redeemable Preferred Securities (Capital
Securities)
On January 8, 1997 the Company arranged the sale of $150 million of 8.71%
Capital Securities issued under an Amended and Restated Declaration of Trust
dated January 13, 1997 (The Declaration) by Markel Capital Trust I (the Trust),
a statutory business trust sponsored and wholly-owned by Markel Corporation.
Proceeds from the sale of the Capital Securities were used to purchase the
Company's 8.71% Junior Subordinated Debentures (the Debentures) due January 1,
2046, issued to the Trust under an indenture dated January 13, 1997 (the
Indenture). The Debentures are the sole assets of the Trust. The Company has the
right to defer interest payments on the Debentures for up to five years. The
Capital Securities and related Debentures are redeemable by the Company on or
after January 1, 2007. Payments of distributions and other amounts due on the
Capital Securities (to the extent the Trust has funds on hand legally available
for the payment of such distributions) are irrevocably guaranteed by the Company
(the Guarantee). Taken together, the Company's obligations under the Debentures,
the Indenture, the Declaration and the Guarantee provide, in the aggregate, a
full, irrevocable and unconditional guarantee of payments of distributions and
other amounts due on the Capital Securities.
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
Quarter and Six Months ended June 30, 1997 compared to Quarter and Six Months
ended June 30, 1996
The Company underwrites specialty insurance products and programs to niche
markets. Significant areas of underwriting include excess and surplus lines,
professional and products liability, specialty programs, specialty personal and
commercial lines, and brokered excess and surplus lines. Property/casualty
insurance for nonstandard and hard-to-place risks is underwritten on an excess
and surplus lines basis. Professional liability coverage is offered to
physicians and health professionals, insurance companies, directors and
officers, attorneys and architects and engineers. Special risk programs provide
products liability insurance for manufacturers and distributors and tailored
coverages for other unique exposures. Specialty program insurance includes
coverage for camps, youth and recreation, child care, health and fitness and
agribusiness organizations, as well as accident and health insurance for
colleges. The Company also underwrites personal and commercial property and
liability coverages for watercraft, motorcycles, automobiles, mobile homes,
dwellings and commercial freight companies. The brokered excess and surplus
lines unit writes hard-to-place, large general liability and products liability
accounts.
Following is a comparison of gross premium volume by significant underwriting
area:
<TABLE>
<CAPTION>
Gross Premium Volume
Quarter Ended June 30, Six Months Ended June 30,
- -----------------------------------------------------------------------------------------------------------------------------------
1997 1996 (amounts in thousands) 1997 1996
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
$ 33,385 $ 29,890 Excess & Surplus Lines $ 61,960 $ 58,935
28,964 32,116 Professional/Products Liability 59,613 63,311
20,108 24,916 Specialty Program Insurance 38,652 45,662
15,573 20,528 Specialty Personal and Commercial Lines 23,767 34,090
11,742 -- Brokered Excess and Surplus Lines 22,853 --
968 3,488 Other 2,032 6,285
- -----------------------------------------------------------------------------------------------------------------------------------
$110,740 $110,938 Total $208,877 $208,283
===================================================================================================================================
</TABLE>
Gross premium volume was $110.7 million for the second quarter and $208.9
million for the six month period in 1997 compared to $110.9 million and $208.3
million, respectively, for the same periods last year. Aggressive competition in
many of the Company's markets contributed to decreased premium volume which was
offset by the acquisition of Investors Insurance Holding Corp. (Investors).
Excess and surplus lines second quarter gross premium volume was $33.4 million,
an increase of 12%, compared to $29.9 million in 1996. For the six month period,
excess and surplus lines gross premium volume rose 5% to $62.0 from $58.9
million in 1996. Increased production in the property and excess and umbrella
programs was responsible for the growth in both periods.
Premiums from professional/products liability insurance were $29.0 million for
the second quarter and $59.6 million for the six month period compared to $32.1
million and $63.3 million, respectively, for the same periods last year. Growth
in the employment practices line was more than offset by lower production from
8
<PAGE>
other lines, including directors and officers liability, medical malpractice and
the specified medical programs.
Gross premiums from specialty program insurance were $20.1 million for the
second quarter and $38.7 million for the six month period compared to $24.9
million and $45.7 million for the quarter and six month period of 1996.
Increased competition in the youth and recreation program and re-underwriting
portions of the agribusiness program contributed to the decrease. In addition,
in 1997, the division began directly placing all of its workers' compensation
business with another insurance carrier.
Specialty personal and commercial lines premiums declined to $15.6 million for
the second quarter and $23.8 million for the six month period from $20.5 million
and $34.1 million, respectively, during the same periods in 1996. The decrease
was primarily due to discontinuance of two auto insurance programs.
Premiums from Brokered Excess and Surplus Lines totaled $11.7 million in the
second quarter and $22.9 million for the first six months of 1997. This new
underwriting unit is the result of the purchase of Investors on October 31,
1996.
Other gross premiums totaled $1.0 million for the second quarter and $2.0
million for the six month period compared to $3.5 million and $6.3 million for
the quarter and six month periods in 1996. Other gross premium volume included
facultative reinsurance placed by the Professional/Products Liability unit and
run-off business related to Lincoln Insurance Company.
While certain of the Company's products may be adversely affected by the
increased competition and lower rates which characterize a "soft" insurance
market, the Company does not intend to relax underwriting standards or rates in
order to sustain premium volume. Further, the volume of premiums written may
vary significantly with the Company's decision to alter its product
concentration to maintain or improve underwriting profitability.
The Company enters into reinsurance agreements in order to reduce its liability
on individual risks and enable it to underwrite policies with higher limits. The
Company's net retention of gross premium volume increased to 78% in the second
quarter of 1997 and 77% for the six month period compared to 74% for both
periods in 1996. The increases for both periods reflect higher retentions in the
specialty personal and commercial lines division.
9
<PAGE>
Following is a comparison of earned premiums by significant underwriting area:
<TABLE>
<CAPTION>
Earned Premiums
Quarter Ended June 30, Six Months Ended June 30,
- -----------------------------------------------------------------------------------------------------------------------------------
1997 1996 (amounts in thousands) 1997 1996
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
$ 20,924 $ 17,075 Excess & Surplus Lines $ 40,906 $ 35,214
26,047 26,455 Professional/Products Liability 51,631 58,014
16,886 15,663 Specialty Program Insurance 34,101 32,099
13,117 11,581 Specialty Personal and Commercial Lines 24,947 20,300
7,203 -- Brokered Excess and Surplus Lines 14,239 --
(45) 619 Other (21) 2,563
- -----------------------------------------------------------------------------------------------------------------------------------
$ 84,132 $ 71,393 Total $165,803 $148,190
===================================================================================================================================
</TABLE>
Total operating revenues for the second quarter rose 22% to $101.7 million from
$83.7 million in the prior year. For the six month period, operating revenues
rose 13% to $200.2 million from $176.7 million a year ago.
Earned premiums advanced 18% to $84.1 million for the quarter and 12% to $165.8
million for the six month period compared to $71.3 million for the second
quarter and $148.2 million for the six month period of 1996. The growth resulted
from increased retentions in the Company's core products and the acquisition of
Investors in the Fall of 1996.
Second quarter net investment income increased 42% to $16.8 million from $11.9
million a year ago. For the six month period, net investment income increased
39% to $33.5 million from $24.1 million in 1996. The increase reflected the
impact of significant growth in the Company's investment portfolio due to the
acquisition of Investors, the issuance of $150 million of Capital Securities in
January 1997 and operating cash flows.
In the second quarter, the Company realized $0.4 million of investment gains
compared to $0.5 million of losses in 1996. For the six month period, realized
investment losses were $0.2 million compared to $2.5 million of gains for the
same period last year. Variability in the timing of realized investment gains or
losses is to be expected and often results from interest rate volatility which
affects the market values of fixed maturities and equity investments.
Total operating expenses for the second quarter were $84.0 million, an increase
of 17%, compared to $71.5 million in 1996. Total operating expenses for the six
month period were $165.6 million, an increase of 9%, compared to $151.9 million
a year ago. The increases for both periods resulted primarily from higher
variable expenses associated with higher earned premiums.
10
<PAGE>
Following is a comparison of selected data from the Company's operations (in
thousands):
<TABLE>
<CAPTION>
Quarter Ended June 30, Six Months Ended June 30,
- -----------------------------------------------------------------------------------------------------------------------------------
1997 1996 (amounts in thousands) 1997 1996
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
$110,740 $ 110,938 Gross premium volume $208,877 $208,283
$ 85,802 $ 81,811 Net premiums written $161,775 $154,725
78% 74% Net Retention 77% 74%
$ 84,132 $ 71,393 Earned premiums $165,803 $148,190
$ 54,506 $ 46,327 Losses and loss adjustment expenses $107,156 $100,879
Underwriting acquisition and
$ 28,912 $ 24,089 insurance expenses $ 57,226 $ 48,819
GAAP ratios
65% 65% Loss ratio 65% 68%
34% 34% Expense ratio 34% 33%
- ----------------------------------------------------------------------------------------------------------------------------------
99% 99% Combined ratio 99% 101%
===================================================================================================================================
</TABLE>
Underwriting performance is measured by the combined ratio of losses and
expenses to earned premiums. For the quarter, the combined ratio was flat at 99%
compared to 1996. The combined ratio was 99% for the six month period compared
to 101% in 1996. The quarterly loss ratio was flat at 65% when compared to 1996,
while the six month loss ratio decreased to 65% from 68% a year ago. The six
month 1997 loss ratio compares favorably to 1996 due to winter storm losses and
underwriting losses in the professional liability book of business in 1996. The
expense ratio for the second quarter was flat at 34% compared to 1996. The
expense ratio for the six month period was 34% compared to 33% in 1996. The
increase was due to higher acquisition and overhead expenses which were
partially offset by the recognition of contingent profit commissions.
In evaluating its operating performance, the Company focuses on core
underwriting and investing results before consideration of realized gains or
losses from the sales of investments, expenses related to the amortization of
intangible assets and any nonrecurring items. Management believes this is a
better indicator of the Company's operating performance because it reduces the
variability in results associated with realized investment gains or losses and
eliminates the impact of accounting transactions which do not reflect current
operating costs. For the second quarter of 1997, income from core underwriting
and investing operations advanced 17% to $9.9 million, or $1.75 per primary
share, from $8.5 million, or $1.50 per primary share, in 1996. The increase was
due to higher net investment income from the larger investment portfolio
supported by underwriting profits. For the six month period, income from core
operations grew 32% to $19.5 million, or $3.46 per primary share, from $14.9
million, or $2.63 per primary share, last year. The six month period benefited
from higher net investment income and a 1% underwriting profit compared to a 1%
underwriting loss for the same period last year.
The Company's effective tax rate for the second quarter of 1997 was 22% compared
to (158%) in 1996. For the six month period, the tax rate was 24% compared to
(64%) last year. In the second quarter of 1996, the Company recognized a
nonrecurring benefit of $18.4 million related to the realization of tax benefits
11
<PAGE>
attributable to certain differences between financial reporting and tax bases of
assets acquired in a prior period. This benefit was recognized when management
determined that estimated tax liabilities were less than amounts previously
accrued.
Second quarter 1997 net income was $9.7 million compared to $26.1 million in
1996. For the six month period net income was $18.5 million compared to $33.9
million last year. The 1997 decrease was due to the nonrecurring tax benefit
recognized in the second quarter of 1996, offset by higher net investment income
and continued underwriting profits.
Financial Condition as of June 30, 1997
The Company's insurance operations collect premiums and pay current claims,
reinsurance commissions and operating expenses. Premiums collected and positive
cash flows from the insurance operations are invested primarily in short-term
investments and long-term bonds. The Company's short-term investments provide
liquidity for projected claims, reinsurance costs and operating expenses.
For the six month period ended June 30, 1997, the Company reported net cash
provided by operating activities of $26.5 million, compared to net cash provided
by operating activities of $35.0 million for the same period in 1996. The
decrease was due to various large claims payments and slowed growth in gross
premium volume in the first quarter of 1997.
For the six month period ended June 30, 1997, the Company reported net cash used
by investing activities of $163.2 million compared to $25.9 million in 1996. The
difference was primarily due to the Company's investment of the $150 million
Capital Securities offering proceeds.
At June 30, 1997 the Company's fixed maturity and equity investments comprised
approximately 74% and 18% of total investments, respectively. The Company
expects variability in its realized and unrealized investment gains due to
interest rate volatility as well as other economic conditions.
In January 1997 the Company arranged the sale of $150 million of 8.71% Capital
Securities issued by Markel Capital Trust I, a statutory business trust
sponsored by Markel Corporation. Proceeds from the sale of the Capital
Securities were used to purchase the Company's 8.71% Junior Subordinated
Debentures due January 1, 2046. The Capital Securities and related Debentures
are redeemable by the Company on or after January 1, 2007. The Company used $15
million of the proceeds of the offering to reduce indebtedness under its
revolving credit facility in the first quarter of 1997. The remainder will be
used for general corporate purposes.
As of June 30, 1997 the unused balances available under the Company's revolving
credit facility totaled $150 million compared to $135 million at December 31,
1996.
Shareholders' equity at June 30, 1997 was $309.2 million compared to $268.3
million at December 31, 1996. Book value per share rose to $56.33 at June 30,
1997 from $49.16 at December 31, 1996.
12
<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
The Corporation's Annual Meeting was held on May 13, 1997, in Richmond,
Virginia. At the Annual Meeting, shareholders elected directors for the ensuing
year and ratified the selection by the Board of Directors of KPMG Peat Marwick
LLP as the Company's independent auditors for the year ending December 31, 1997.
The results of the meeting were as follows:
Election of Directors For Withheld
- --------------------- --- --------
Alan I. Kirshner 4,477,580 31,738
Anthony F. Markel 4,478,956 30,362
Steven A. Markel 4,478,956 30,362
Darrell D. Martin 4,477,580 31,738
Leslie A. Grandis 4,478,716 30,602
Stewart M. Kasen 4,477,395 31,923
Gary L. Markel 4,478,956 30,362
V. Prem Watsa 4,473,031 36,287
Ratification of Selection of Auditors:
Abstentions and Brokers
For Against Non-Votes
--- ------- ---------
4,502,249 5,137 1,932
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
The Exhibits to this Report are listed in the Exhibit Index.
(b) No reports on Form 8-K were filed during the quarter ended June 30, 1997.
13
<PAGE>
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized, this 29th day of July, 1997.
Markel Corporation
By Alan I. Kirshner
--------------------------------------
Alan I. Kirshner
Chief Executive Officer
(Principal Executive Officer)
By Anthony F. Markel
--------------------------------------
Anthony F. Markel
President
(Principal Operating Officer)
By Steven A. Markel
--------------------------------------
Steven A. Markel
Vice Chairman
By Darrell D. Martin
--------------------------------------
Darrell D. Martin
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
14
<PAGE>
Exhibit Index
Number Description
27 Financial Data Schedule *
* Filed electronically with the Commission's operational EDGAR system
15
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND> This schedule contains summary financial information extracted
from the financial statements contained in the Form 10-Q for the quarterly
period ended June 30, 1997 for Markel Corporation and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<DEBT-HELD-FOR-SALE> 982,664
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 237,915
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 1,331,525
<CASH> 1,183
<RECOVER-REINSURE> 13,225
<DEFERRED-ACQUISITION> 36,586
<TOTAL-ASSETS> 1,792,051
<POLICY-LOSSES> 956,045
<UNEARNED-PREMIUMS> 193,101
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 93,140
0
0
<COMMON> 24,531
<OTHER-SE> 284,676
<TOTAL-LIABILITY-AND-EQUITY> 1,792,051
165,803
<INVESTMENT-INCOME> 33,503
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