UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) February 5, 1997
MARKEL CORPORATION
(Exact name of registrant as specified in its charter)
Virginia 0-15458 54-0292420
(State or other jurisdiction of (Commission (I.R.S. employer
incorporation or organization) file number) 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)
<PAGE>
Item 5. Other Events
On February 5, 1997, Markel Corporation released annual earnings and other
information. A copy of this press release is included as an exhibit to this
report.
c) Exhibits
The Exhibits listed on the Exhibit Index are filed as part of this report.
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 hereunto duly authorized.
MARKEL CORPORATION
Date: February 6, 1997 By: Darrell D. Martin
-----------------
Executive Vice President and
Chief Financial Officer
2
<PAGE>
EXHIBIT INDEX
Exhibit No. Page No.
- ----------- --------
99 Press Release dated February 5, 1997.
3
Richmond, VA, February 5, 1997 --- (NASDAQ - MAKL) Markel Corporation
announced record earnings for the year ended December 31, 1996. Alan I.
Kirshner, Chairman and Chief Executive Officer, commented, "1996 was both a
challenging and exciting year at Markel. Despite hurricane and winter storm
losses, we were able to record our fifth straight year of underwriting profits
by a slim margin. As is the goal each year, our Company is stronger than when
the year began. "
In evaluating its operating performance, the Company focuses on core
underwriting and investing results before consideration of realized investment
gains, amortization expenses, and nonrecurring items.
Following is a comparison of 1996 and 1995 results on a per share basis.
<TABLE>
<CAPTION>
QUARTER ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
---------------- -----------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C>
Core operations $1.81 $1.46 $6.03 $5.15
Realized investment gains .24 .50 .58 1.39
Amortization expenses (.09) (.08) (.36) (.39)
-------- -------- -------- --------
Net income before
nonrecurring items 1.96 1.88 6.25 6.15
Nonrecurring items (1.20) - 2.05 -
------- --------- ------- --------
Net income $ .76 $1.88 $8.30 $6.15
-------- -------- ----- --------
</TABLE>
Fourth quarter income from core operations increased 24 percent to
$1.81 per primary share from $1.46 per primary share in 1995. For the year, core
operating income rose 17 percent to $6.03 per primary share from $5.15 per
primary share a year ago. The growth in both periods resulted primarily from
higher net investment income.
<PAGE>
Earned premiums were $307.5 million for the year, up 8 percent from
$285.1 million last year. The growth reflects increases in gross premium volume
over the past two years and higher retentions in 1996.
Underwriting profitability is measured by the combined ratio of losses
and expenses to earned premiums. The Company reported a combined ratio of
slightly below 100 percent in 1996 compared to 99 percent in 1995. This
represents the fifth consecutive year and ninth out of the past ten years that
the Company has reported an underwriting profit.
The Company's loss ratio was 66 percent compared to 65 percent in 1995.
Losses in the medical malpractice book of business and property losses from
Hurricane Fran and the winter storms prompted the increase. The 1996 expense
ratio was flat at 34 percent compared to 1995. In 1996, the expense ratio
benefited from the recognition of contingent profit commissions which offset
higher acquisition costs in several of the Company's newer lines of business.
Net investment income was $51.2 million for the year, up 19 percent
compared to $43.0 million in 1995. The increase is primarily the result of the
Company's larger investment portfolio. The growth in the portfolio is the result
of the purchase of Investors on October 31, 1996 and operating cash flows.
Realized gains totaled $5.0 million for the year, down from $12.0 million last
year. Variability in the timing of realized and unrealized investment gains is
to be expected and often results from interest rate volatility which impacts the
market values of fixed maturity and equity investments.
During 1996 the Company recognized two nonrecurring items. First, in
the second quarter the Company recognized a nonrecurring benefit of $18.4
million, or $3.25 per primary share, related to the recognition of tax benefits
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.
The second nonrecurring item in 1996 relates to an anticipated loss on
the disposition of real estate. As part of the purchase of Shand/Evanston in
1987, the Company acquired Shand's headquarters building in Evanston, Illinois.
The estimated fair value of the building has fallen significantly since 1987 due
to escalating property taxes and reduced demand for office space in Evanston. In
response to a purchase offer, the Company decided to dispose of the building and
immediately recognized a $6.8 million, or $1.20 per primary share, after tax,
nonrecurring, noncash loss. While Shand/Evanston will remain in the building in
the short-term, the transaction is expected to reduce future operating expenses
at this unit by approximately $1.5 million per year.
<PAGE>
Net income rose sharply to $46.7 million, or $8.30 per primary share,
compared to net income of $34.5 million, or $6.15 per primary share last year.
The increase was the result of strong growth in net investment income and the
net effect of the two nonrecurring items offset by lower realized gains in 1996.
The Company reported net unrealized gains, net of taxes, on its fixed
maturity and equity investments of $43.8 million at December 31, 1996, compared
to $34.0 million at December 31, 1995. The increase was primarily the result of
the strong performance of the Company's equity portfolio offset by declines in
its fixed maturity portfolio. Book value per common share increased to $49.16 at
December 31, 1996, a 25 percent increase compared to $39.37 at December 31,
1995. At December 31, 1996 the five year compound average growth rate in book
value per common share was 26 percent.
On January 8, 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 plans to
use the proceeds of the offering to reduce indebtedness and for general
corporate purposes.
Markel Corporation markets and underwrites specialty insurance products
and programs to a variety of niche markets. In each of these markets, the
Company seeks to provide quality products and excellent customer service so that
it can be a market leader. The financial goals of the Company are to earn
consistent underwriting profits and superior investment returns to build
shareholder value.
<PAGE>
MARKEL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Income
<TABLE>
<CAPTION>
Quarter Ended Year Ended
December 31, December 31,
1996 1995 1996 1995
(dollars in thousands, except per share data)
<S> <C>
Operating revenues
Earned premiums ..................... $ 82,402 $ 75,254 $ 307,453 $ 285,146
Net investment income ............... 14,668 12,451 51,168 42,981
Net realized gains from investment
sales.............................. 2,057 4,302 5,013 11,952
Other ............................... 580 935 3,102 3,496
--------- --------- ---------- ---------
Total operating revenues ......... 99,707 92,942 366,736 343,575
--------- --------- ---------- ---------
Operating expenses
Losses and loss adjustment expenses . 50,907 48,970 202,378 186,655
Underwriting, acquisition and
insurance expenses ................. 30,440 25,859 105,032 96,113
Other................................ 83 403 1,275 1,642
Loss on building ...................... 10,380 -- 10,380 --
Amortization of intangible assets ... 660 586 2,655 2,778
--------- --------- ---------- ---------
Total operating expenses ......... 92,470 75,818 321,720 287,188
--------- --------- ---------- ---------
Operating income ................. 7,237 17,124 45,016 56,387
Interest expense ....................... 2,052 2,156 8,016 8,460
--------- --------- ---------- ---------
Income before income taxes ....... 5,185 14,968 37,000 47,927
Income tax expense (benefit) ........... 882 4,352 (9,672) 13,435
--------- --------- ---------- ---------
Net income ...................... $ 4,303 $ 10,616 $ 46,672 $ 34,492
========= ========= ========== =========
Earnings per share
Primary ........................... $ 0.76 $ 1.88 $ 8.30 $ 6.15
========= ========= ========= ==========
Fully diluted ..................... $ 0.76 $ 1.88 $ 8.29 $ 6.12
========= ========= ========= ==========
</TABLE>
<TABLE>
<CAPTION>
December 31,
Selected Balance Sheet Data
(dollars in thousands, except per share data) 1996 1995
<S> <C>
Total investments, available-for-sale $1,130,776 $ 908,583
Total assets 1,605,297 1,314,537
Unpaid losses and loss adjustment expenses 935,582 734,409
Long-term debt 114,691 106,689
Total shareholders' equity 268,335 213,442
Book value per share $49.16 $39.37
</TABLE>
