<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q/A
[X] Quarterly report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended September 30, 1999
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 October 28,
1999: 5,598,056
1
<PAGE>
The purpose of this amended filing is to reflect additional unaudited pro forma
information in Footnote 6 of Item 1. The third quarter Form 10-Q is being
refiled in its entirety.
Markel Corporation
Form 10-Q
Index
<TABLE>
<CAPTION>
Page Number
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets--
September 30, 1999 and December 31, 1998 3
Consolidated Statements of Income and Comprehensive Income--
Quarters and Nine Months Ended September 30, 1999 and 1998 4
Consolidated Statements of Cash Flows--
Nine Months Ended September 30, 1999 and 1998 5
Notes to Consolidated Financial Statements--
September 30, 1999 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations 10
Item 3. Quantitative and Qualitative Disclosures About Market Risk 17
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 19
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
MARKEL CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
<TABLE>
<CAPTION>
September 30, December 31,
---------------------------------
1999 1998
- --------------------------------------------------------------------------------------------------------------------------
(dollars in thousands)
<S> <C> <C>
ASSETS
Investments, available-for-sale, at estimated fair value
Fixed maturities (cost of $1,316,895 in 1999 and $1,041,155 in 1998) $1,285,686 $1,070,978
Equity securities (cost of $217,643 in 1999 and $200,004 in 1998) 281,409 317,887
Short-term investments (estimated fair value approximates cost) 85,391 92,228
- --------------------------------------------------------------------------------------------------------------------------
Total Investments, Available-For-Sale 1,652,486 1,481,093
- --------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents 1,476 1,527
Receivables 102,699 68,138
Reinsurance recoverable on unpaid losses 400,037 198,288
Reinsurance recoverable on paid losses 38,697 21,205
Deferred policy acquisition costs 50,859 40,471
Prepaid reinsurance premiums 72,636 42,241
Property and equipment 9,667 7,981
Intangible assets 93,529 35,298
Other assets 85,250 25,022
- --------------------------------------------------------------------------------------------------------------------------
Total Assets $2,507,336 $1,921,264
- --------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Unpaid losses and loss adjustment expenses $1,376,745 $ 933,830
Unearned premiums 288,164 205,908
Payables to insurance companies 67,396 22,715
Long-term debt (estimated fair value of $156,852 in 1999 and $96,931 in 1998) 158,258 93,219
Other liabilities 80,790 90,291
Company-Obligated Mandatorily Redeemable Preferred Capital Securities of Subsidiary
Trust Holding Solely Junior Subordinated Deferrable Interest Debentures
of Markel Corporation (estimated fair value of $124,500 in 1999 and $144,453 in 1998) 150,000 150,000
- --------------------------------------------------------------------------------------------------------------------------
Total Liabilities 2,121,353 1,495,963
- --------------------------------------------------------------------------------------------------------------------------
Shareholders' equity
Common stock 25,593 25,415
Retained earnings 339,229 303,878
Accumulated other comprehensive income
Net unrealized holding gains on fixed maturities and equity securities, net of taxes 21,161 96,008
- --------------------------------------------------------------------------------------------------------------------------
Total Shareholders' Equity 385,983 425,301
- --------------------------------------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $2,507,336 $1,921,264
==========================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
MARKEL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Income and Comprehensive Income
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
September 30, September 30,
------------------- -----------------------
1999 1998 1999 1998
- -------------------------------------------------------------------------------------------------------------------
(dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
OPERATING REVENUES
Earned premiums $110,311 $ 84,665 $327,047 $248,089
Net investment income 21,943 18,409 66,253 53,137
Net realized gains from investment sales 254 1,814 9,297 11,434
Other 491 206 1,426 665
- -------------------------------------------------------------------------------------------------------------------
Total Operating Revenues 132,999 105,094 404,023 313,325
- -------------------------------------------------------------------------------------------------------------------
OPERATING EXPENSES
Losses and loss adjustment expenses 72,444 54,207 210,747 157,293
Underwriting, acquisition and insurance expenses 41,152 29,356 123,463 86,754
Amortization of intangible assets 1,564 508 4,184 1,525
- -------------------------------------------------------------------------------------------------------------------
Total Operating Expenses 115,160 84,071 338,394 245,572
- -------------------------------------------------------------------------------------------------------------------
Operating Income 17,839 21,023 65,629 67,753
Interest expense 6,280 5,109 19,098 15,290
- -------------------------------------------------------------------------------------------------------------------
Income Before Income Taxes 11,559 15,914 46,531 52,463
Income tax expense 2,775 3,819 11,168 12,591
- -------------------------------------------------------------------------------------------------------------------
Net Income $ 8,784 $ 12,095 $ 35,363 $ 39,872
- -------------------------------------------------------------------------------------------------------------------
OTHER COMPREHENSIVE INCOME (LOSS)
Unrealized gains (losses) on securities, net of taxes
Net unrealized holding gains (losses) arising during
the period $(36,575) $ (7,765) $(68,804) $ 14,349
Less reclassification adjustments for gains included in
net income (165) (1,179) (6,043) (7,432)
- -------------------------------------------------------------------------------------------------------------------
Total Other Comprehensive Income (Loss) (36,740) (8,944) (74,847) 6,917
- -------------------------------------------------------------------------------------------------------------------
Comprehensive Income (Loss) $(27,956) $ 3,151 $(39,484) $ 46,789
- -------------------------------------------------------------------------------------------------------------------
NET INCOME PER SHARE
Basic $ 1.57 $ 2.20 $ 6.34 $ 7.25
Diluted $ 1.55 $ 2.14 $ 6.27 $ 7.07
===================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
MARKEL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-----------------------
1999 1998
- -----------------------------------------------------------------------------------------------------------
(dollars in thousands)
<S> <C> <C>
OPERATING ACTIVITIES
Net Income $ 35,363 $ 39,872
Adjustments to reconcile net income to net cash provided by operating activities (22,494) (1,073)
- -----------------------------------------------------------------------------------------------------------
Net Cash Provided By Operating Activities 12,869 38,799
- -----------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Proceeds from sales of fixed maturities and equity securities 795,684 320,942
Proceeds from maturities of fixed maturities 38,443 84,594
Cost of fixed maturities and equity securities purchased (718,869) (469,677)
Net change in short-term investments 6,837 26,145
Acquisition of insurance company, net of cash acquired (143,557) --
Other (749) (1,298)
- -----------------------------------------------------------------------------------------------------------
Net Cash Used By Investing Activities (22,211) (39,294)
- -----------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Additions to long-term debt 105,000 --
Repayments of long-term debt (95,000) --
Other (709) 553
- -----------------------------------------------------------------------------------------------------------
Net Cash Provided By Financing Activities 9,291 553
- -----------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents (51) 58
Cash and cash equivalents at beginning of period 1,527 1,309
- -----------------------------------------------------------------------------------------------------------
Cash And Cash Equivalents At End Of Period $ 1,476 $ 1,367
===========================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - September 30, 1999
1. Principles of Consolidation
The consolidated balance sheet as of September 30, 1999, the related
consolidated statements of income and comprehensive income for the quarters and
nine months ended September 30, 1999 and 1998, and the consolidated statements
of cash flows for the nine months ended September 30, 1999 and 1998, 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. Net Income Per Share
Net income per share was determined by dividing net income by the applicable
shares outstanding (in thousands):
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
September 30, September 30,
---------------------------- ----------------------------
1999 1998 1999 1998
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net income, as reported (basic and diluted income) $8,784 $12,095 $35,363 $39,872
========================================================================================================================
Average basic common shares outstanding 5,594 5,509 5,580 5,503
Dilutive potential common shares 60 140 60 140
- ------------------------------------------------------------------------------------------------------------------------
Average diluted shares outstanding 5,654 5,649 5,640 5,643
========================================================================================================================
</TABLE>
3. Reinsurance
The table below summarizes the effect of reinsurance on premiums written and
earned (dollars in thousands):
<TABLE>
<CAPTION>
Quarter Ended September 30,
- ------------------------------------------------------------------------------------------------------------------------
1999 1998
- ------------------------------------------------------------------------------------------------------------------------
Written Earned Written Earned
<S> <C> <C> <C> <C>
Direct $145,591 $137,769 $116,707 $105,504
Assumed 4,469 7,705 948 947
Ceded (38,588) (35,163) (23,958) (21,786)
- ------------------------------------------------------------------------------------------------------------------------
Net premiums $111,472 $110,311 $ 93,697 $ 84,665
========================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended September 30,
- ------------------------------------------------------------------------------------------------------------------------
1999 1998
- ------------------------------------------------------------------------------------------------------------------------
Written Earned Written Earned
<S> <C> <C> <C> <C>
Direct $ 426,766 $ 424,746 $331,378 $308,704
Assumed 23,588 17,892 3,904 4,246
Ceded (124,302) (115,591) (71,171) (64,861)
- ------------------------------------------------------------------------------------------------------------------------
Net premiums $ 326,052 $ 327,047 $264,111 $248,089
========================================================================================================================
</TABLE>
Incurred losses and loss adjustment expenses are net of reinsurance recoveries
of $34.6 million and $12.7 million for the quarters ended September 30, 1999 and
1998, respectively and $88.0 million and $42.6 million for the nine months ended
September 30, 1999 and 1998, respectively.
6
<PAGE>
4. Company Obligated Mandatorily Redeemable Preferred Securities (8.71% 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 8.71% Capital Securities were used to purchase
$154,640,000 aggregate principal amount of the Company's 8.71% Junior
Subordinated Deferrable Interest 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
8.71% Capital Securities and related Debentures are redeemable by the Company on
or after January 1, 2007. Taken together, the Company's obligations under the
Debentures, the Indenture, the Declaration and a guarantee made by the Company
provide, in the aggregate, a full, irrevocable and unconditional guarantee of
payments of distributions and other amounts due on the 8.71% Capital Securities.
5. Comprehensive Income
Other comprehensive income (loss) is composed of net unrealized holding gains
(losses) on securities arising during the period less reclassification
adjustments for gains included in net income. The related tax expense (benefit)
on net unrealized holding gains (losses) on securities was $(19.7) million and
$(37.0) million for the quarter and nine months ended September 30, 1999 and
$(4.2) million and $7.7 million for the same periods in 1998. The related tax
expense on the reclassification adjustments for gains included in net income was
$0.1 million and $3.3 million for the quarter and nine months ended September
30, 1999, respectively and $0.6 million and $4.0 million for the same periods in
1998.
6. Acquisition
On January 15, 1999, the Company acquired Gryphon Holdings, Inc. and its
subsidiaries (Gryphon) as the result of the completion of a public tender offer.
The Company's third quarter and nine month results for the period ending
September 30, 1999 include Gryphon's results of operations since the date of
acquisition. The acquisition was accounted for using the purchase method of
accounting. Total consideration paid for Gryphon was approximately $145.7
million. The excess of the purchase price over the fair value of the net
tangible and identifiable intangible assets acquired was recorded as goodwill
and is being amortized using the straight-line method over 20 years. The Company
funded the transaction with available cash of approximately $95.7 million and
borrowings of approximately $50 million. In addition the Company refinanced
$55.0 million of Gryphon's long-term debt.
The table below summarizes, on a pro forma basis, the Company's consolidated
results of operations as if the purchase of Gryphon had taken place as of
January 1, 1998 (dollars in thousands, except per share amounts):
<TABLE>
<CAPTION>
Nine Months Ended
September 30, 1998
- --------------------------------------------------------------------------------
<S> <C>
Total operating revenues $411,140
Net income 27,342
- --------------------------------------------------------------------------------
Net income per share
Basic $ 4.97
Diluted 4.85
- --------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
7. Segment Reporting Disclosures
The Company has five underwriting units focused on specific niches within the
Excess and Surplus Lines and Specialty Admitted markets. Excess and Surplus
Lines, Professional/Products Liability and Brokered Excess and Surplus Lines
write business in the Excess and Surplus Lines market and for purposes of
segment reporting are aggregated as one operating segment. Specialty Program
Insurance and Specialty Personal and Commercial Lines write business in the
Specialty Admitted market and for purposes of segment reporting are aggregated
as one operating segment. All investing activities are included in the Investing
operating segment.
The Company has significantly restructured Gryphon's operations and Gryphon's
premium volume has decreased by more than 50% from preacquisition levels. The
Gryphon programs that the Company continues will be
7. Segment Reporting Disclosures (continued)
administered by underwriting units in the Excess and Surplus Lines operating
segment. Gryphon's discontinued programs are included in Other for purposes of
segment reporting.
The Company considers many factors including the nature of the underwriting
units' insurance products, production sources, distribution strategies and
regulatory environment in determining how to aggregate operating segments.
Segment profit or loss for the Excess and Surplus Lines and the Specialty
Admitted operating segments is measured by underwriting profit or loss. Segment
profit for the Investing operating segment is measured by net investment income
and realized gains or losses.
The Company does not allocate assets to the Excess and Surplus Lines or the
Specialty Admitted operating segments for management reporting purposes. The
total investment portfolio is allocated to the Investing operating segment. The
Gryphon acquisition increased the total investment portfolio by approximately
$300 million in the first quarter of 1999. The Company does not allocate capital
expenditures for long-lived assets to any of its operating segments for
management reporting purposes.
a) Following is a summary of segment disclosures:
<TABLE>
<CAPTION>
Segment Revenues
Quarter Ended September 30, Nine Months Ended September 30,
- ----------------------------------------------------------------------------------------------------------
1999 1998 (dollars in thousands) 1999 1998
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 72,343 $ 57,810 Excess & Surplus Lines $210,593 $170,978
30,540 26,855 Specialty Admitted 84,882 77,111
22,197 20,223 Investing 75,550 64,571
7,428 -- Other 31,572 --
- ----------------------------------------------------------------------------------------------------------
$ 132,508 $104,888 Total $402,597 $312,660
==========================================================================================================
<CAPTION>
Segment Profit (Loss)
Quarter Ended September 30, Nine Months Ended September 30,
- ----------------------------------------------------------------------------------------------------------
1999 1998 (dollars in thousands) 1999 1998
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 3,173 $ 2,278 Excess & Surplus Lines $ 12,666 $ 8,469
(2,672) (1,176) Specialty Admitted (5,385) (4,427)
22,197 20,223 Investing 75,550 64,571
(3,786) -- Other (14,444) --
- ----------------------------------------------------------------------------------------------------------
$ 18,912 $ 21,325 Total $ 68,387 $ 68,613
==========================================================================================================
</TABLE>
8
<PAGE>
7. Segment Reporting Disclosures (continued)
<TABLE>
<CAPTION>
Combined Ratio
Quarter Ended September 30, Nine Months Ended September 30,
- ----------------------------------------------------------------------------------------------------------
1999 1998 1999 1998
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
96% 96% Excess & Surplus Lines 94% 95%
109% 104% Specialty Admitted 106% 106%
-- -- Investing -- --
151% -- Other 146% --
- ----------------------------------------------------------------------------------------------------------
103% 99% Total 102% 98%
==========================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Segment Assets (dollars in thousands)
September 30,
---------------------------
1999 1998
- ----------------------------------------------------------------------------------------
<S> <C>
Excess & Surplus Lines $ -- $ --
Specialty Admitted -- --
Investing 1,652,486 1,462,860
Other 854,850 446,540
- ----------------------------------------------------------------------------------------
Total $2,507,336 $1,909,400
========================================================================================
</TABLE>
b) The following summary reconciles segment profit to income before income taxes
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
September 30, September 30,
---------------------------- --------------------------
1999 1998 1999 1998
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Income before income taxes
Segment profit $18,912 $21,325 $ 68,387 $ 68,613
Unallocated amounts
Amortization expense (1,564) (508) (4,184) (1,525)
Interest expense (6,280) (5,109) (19,098) (15,290)
Other 491 206 1,426 665
- ----------------------------------------------------------------------------------------------------------
Income Before Income Taxes $11,559 $15,914 $ 46,531 $ 52,463
==========================================================================================================
</TABLE>
9
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
Quarter and Nine Months ended September 30, 1999 compared to Quarter and Nine
Months ended September 30, 1998
The Company underwrites specialty insurance products and programs for niche
markets. Significant areas of underwriting include Excess and Surplus Lines,
Professional/Products Liability, Brokered Excess and Surplus Lines, Specialty
Programs and Specialty Personal and Commercial Lines. Property and casualty
insurance for nonstandard and hard-to-place risks is underwritten by the Excess
and Surplus Lines unit. Professional liability coverage is offered to physicians
and health professionals, insurance companies, attorneys and architects and
engineers. Special risk programs provide products liability insurance for
manufacturers and distributors and tailored coverages for other unique
exposures. In addition, employment practices liability coverage is offered. The
Brokered Excess and Surplus Lines unit writes hard-to-place, large general
liability, commercial umbrella, products liability and property accounts.
Gryphon's continuing lines of business consist of an earthquake exposed
California property program, professional liability programs and several
specialty casualty programs. Specialty Program Insurance includes coverage for
camps, youth and recreation, child care, health and fitness and agribusiness
organizations, as well as accident and medical insurance for colleges. The
Company also underwrites personal and commercial property and liability
coverages for watercraft and motorcycles.
Following is a comparison of gross premium volume by significant underwriting
area:
<TABLE>
<CAPTION>
Gross Premium Volume
Quarter Ended September 30, Nine Months Ended September 30,
- ----------------------------------------------------------------------------------------------------------
1999 1998 (dollars in thousands) 1999 1998
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 34,409 $ 30,312 Excess and Surplus Lines $ 98,351 $ 89,872
34,059 29,771 Professional/Products Liability 103,154 92,986
19,665 18,558 Brokered Excess and Surplus Lines 54,861 50,423
20,144 -- Gryphon Continuing Programs 54,459 --
27,600 26,816 Specialty Program Insurance 62,049 66,101
11,776 12,124 Specialty Personal and Commercial Lines 42,796 33,918
2,785 -- Gryphon Discontinued Programs 34,353 --
360 680 Other 1,169 2,478
- ----------------------------------------------------------------------------------------------------------
$ 150,798 $118,261 Total $451,192 $335,778
==========================================================================================================
</TABLE>
Gross premium volume was $150.8 million for the third quarter and $451.2 million
for the nine month period in 1999 compared to $118.3 million and $335.8 million,
respectively, for the same periods last year. The growth was primarily the
result of the Gryphon acquisition which added $22.9 million and $88.8 million to
the Company's gross premium volume in the third quarter and nine month period of
1999. As the Company re-underwrites the Gryphon programs, the Gryphon business
is expected to decline significantly. The Company's core books of business,
excluding the effect of Gryphon, increased 8% in both the third quarter and
first nine months of 1999.
Excess and Surplus Lines third quarter gross premium volume increased 14% to
$34.4 million from $30.3 million in 1998. For the nine month period, gross
premium volume rose 9% to $98.4 million from $89.9 million last year. The growth
in both periods was due to increased production in the casualty, inland marine
and Essex special property programs.
10
<PAGE>
Third quarter gross premium volume from Professional/Products Liability rose 14%
to $34.1 million from $29.8 million a year ago. For the nine month period, gross
premium volume advanced 11% to $103.2 million from $93.0 million in 1998. For
the quarter, the increase was the result of growth in the employment practices
liability, special risks and specified professions programs. For the first nine
months of 1999, growth in the employment practices liability and specified
professions programs was partially offset by lower production from the medical
malpractice and lawyers programs.
Gross premiums from Brokered Excess and Surplus Lines totaled $19.7 million in
the third quarter of 1999 compared to $18.6 million in 1998. For the nine month
period, gross premium volume grew to $54.9 million from $50.4 million last year.
The increase in both periods was primarily due to higher gross premium volume in
the unit's excess and umbrella and property programs.
Gross premium volume for the Gryphon programs that the Company will continue was
$20.1 million in the third quarter of 1999 and $54.5 million for the nine month
period. For the nine month period of 1999, continuing program gross premium
volume consisted of $36.1 million of earthquake exposed California property
business which will become part of the Excess and Surplus Lines unit's special
property program, $11.5 million of professional liability business which will
become part of the Professional/Products Liability unit and $6.9 million of
casualty programs, most of which will be administered by the Brokered Excess and
Surplus Lines underwriting unit.
In the third quarter of 1999, Specialty Program Insurance gross premium volume
increased to $27.6 from $26.8 million in 1998. For the nine month period, gross
premium volume was $62.0 million compared to $66.1 million in 1998. Increased
competition in the youth and recreation and agribusiness programs was partially
offset by continued growth in the surety program and the sports liability,
accident and medical program.
Third quarter gross premium volume from Specialty Personal and Commercial Lines
was $11.8 million compared to $12.1 million last year. For the nine month
period, gross premium volume rose to $42.8 million from $33.9 million in 1998.
The 1999 nine month increase was primarily due to the acquisition of a yacht
program which added $16.5 million in gross premium, including $7.3 million of
unearned premium at the date of acquisition. This growth was partially offset by
the discontinuance of certain property programs. The yacht program is expected
to generate approximately $18 million of gross premium volume in 1999.
Gross premium volume for the discontinued Gryphon programs was $2.8 million in
the third quarter and $34.4 million for the nine month period in 1999. The
Company reviewed all of Gryphon's programs at the time of acquisition and
determined that certain programs were unprofitable and presented little
opportunity to generate future underwriting profits. The Company has
discontinued these programs and is working aggressively to run-off these
programs.
Other gross premiums totaled $0.4 million in the third quarter of 1999 compared
to $0.7 million in the prior year. For the nine month period in 1999, other
gross premiums totaled $1.2 million compared to $2.5 million a year ago. Other
gross premium volume consisted primarily of facultative reinsurance placed by
the Professional/Products Liability unit.
Currently many of the Company's products are being adversely affected by
increased competition and lower rates in the property and casualty market. The
Company does not intend to relax underwriting standards 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.
11
<PAGE>
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 decreased to 74% in the third
quarter of 1999 and 72% in the nine month period compared to 79% for both
periods in the prior year. The decrease was due to low retentions on Gryphon's
California property program.
Total operating revenues for the third quarter of 1999 rose to $133.0 million
from $105.1 million in the prior year. For the nine month period, operating
revenues rose to $404.0 million from $313.3 million in 1998.
<TABLE>
<CAPTION>
Earned Premiums
Quarter Ended September 30, Nine Months Ended September 30,
- --------------------------------------------------------------------------------------------------------
1999 1998 (dollars in thousands) 1999 1998
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 22,803 $21,126 Excess and Surplus Lines $ 65,387 $ 64,758
30,232 26,713 Professional/Products Liability 86,578 77,286
11,975 9,971 Brokered Excess and Surplus Lines 33,264 28,926
7,333 -- Gryphon Continuing Programs 25,364 --
17,904 16,287 Specialty Program Insurance 50,239 46,864
12,636 10,568 Specialty Personal and Commercial Lines 34,643 30,247
7,428 -- Gryphon Discontinued Programs 31,572 --
-- -- Other -- 8
- --------------------------------------------------------------------------------------------------------
$ 110,311 $84,665 Total $327,047 $248,089
========================================================================================================
</TABLE>
Third quarter earned premiums were $110.3 million compared to $84.7 million in
1998. Nine month earned premiums were $327.0 million compared to $248.1 million
a year ago. The growth in the third quarter was the result of $14.8 million of
earned premiums for Gryphon and $10.9 million of growth from existing
operations. For the nine month period, the growth resulted from $56.9 million of
Gryphon earned premiums and $22.0 million of growth from existing operations.
Third quarter net investment income increased 19% to $21.9 million from $18.4
million in 1998. For the nine month period, net investment income rose 25% to
$66.3 million from $53.1 million last year. The increases were primarily the
result of the Gryphon acquisition which added approximately $300 million to the
Company's investment portfolio in January 1999.
In the third quarter, the Company realized $0.3 million of investment gains
compared to $1.8 million of gains in 1998. For the nine month period, realized
investment gains were $9.3 million compared to gains of $11.4 million for the
same period last year. Variability in the timing of realized and unrealized
investment gains and losses is to be expected.
Total operating expenses for the third quarter were $115.2 million compared to
$84.1 million in 1998. Total operating expenses for the nine month period were
$338.4 million compared to $245.6 million a year ago. The increases resulted
primarily from the Gryphon acquisition.
12
<PAGE>
Following is a comparison of selected data from the Company's operations
(dollars in thousands):
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
September 30, September 30,
------------------------ --------------------------
1999 1998 1999 1998
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Gross premium volume $150,798 $118,261 $451,192 $335,778
Net premiums written $111,472 $ 93,697 $326,052 $264,111
Net retention 74% 79% 72% 79%
Earned premiums $110,311 $ 84,665 $327,047 $248,089
Losses and loss adjustment expenses $ 72,444 $ 54,207 $210,747 $157,293
Underwriting, acquisition and insurance expenses $ 41,152 $ 29,356 $123,463 $ 86,754
Underwriting profit (loss) $ (3,285) $ 1,102 $ (7,163) $ 4,042
GAAP ratios
Loss ratio 66% 64% 64% 63%
Expense ratio 37% 35% 38% 35%
- --------------------------------------------------------------------------------------------------------
Combined ratio 103% 99% 102% 98%
========================================================================================================
</TABLE>
Underwriting performance is measured by the combined ratio of losses and
expenses to earned premiums. For the third quarter and nine month period ended
September 30, 1999, the Company reported a combined ratio of 103% and 102%,
respectively, compared to a combined ratio of 99% and 98% in the same periods of
1998. The underwriting losses in 1999 were the result of Gryphon's combined
ratio of 131% and 126% for the third quarter and nine month period,
respectively. Excluding Gryphon, the Company's 1999 combined ratio was 99% and
97% for the quarter and nine month period, respectively.
The third quarter and nine month period loss ratio was 66% and 64%,
respectively, compared to 64% and 63% for the same periods of 1998. For the
third quarter and nine month period of 1999, favorable loss development in the
Excess & Surplus Lines operating segment was more than offset by the higher loss
ratio on Gryphon's discontinued lines of business and $2.7 million ($2.1 million
after tax) of property losses related to Hurricane Floyd. The third quarter and
nine month period expense ratio was 37% and 38%, respectively, compared to 35%
for both periods in 1998. The increase was due to expenses incurred to runoff
Gryphon's discontinued lines. The Company is working to reduce the expense of
administering Gryphon's discontinued lines.
The Company's five underwriting units focus on specific niches within the Excess
and Surplus Lines and Specialty Admitted markets. Excess and Surplus Lines,
Professional/Products Liability and Brokered Excess and Surplus Lines write
business in the Excess and Surplus Lines market and for purposes of segment
reporting are aggregated as one operating segment. The Gryphon programs that the
Company will continue will be administered by underwriting units in the Excess
and Surplus Lines operating segment. Specialty Program Insurance and Specialty
Personal and Commercial Lines write business in the Specialty Admitted market
and for purposes of segment reporting are aggregated as one operating segment.
The combined ratio for the Excess and Surplus Lines segment was 96% in the third
quarter of 1999 and 1998. For the nine month period, the Excess and Surplus
Lines segment combined ratio decreased to 94% from 95% in 1998. The decrease was
due to continued favorable loss development, partially offset by property losses
from Hurricane Floyd and higher acquisition costs. For the third quarter of
1999, the Specialty Admitted segment's combined ratio increased to 109% from
104% in the prior year. The combined ratio for the Specialty Admitted segment
was 106% for the first nine months of 1999 and 1998. The increase in the third
quarter of 1999 was due to property losses from Hurricane Floyd, partially
offset by lower acquisition costs.
13
<PAGE>
Amortization of intangible assets was $1.6 million in the third quarter of 1999
compared to $0.5 million last year. For the nine month period, amortization of
intangible assets was $4.2 million compared to $1.5 million in 1998. The
increase in both periods was primarily the result of goodwill from the Gryphon
acquisition which is being amortized over 20 years.
Interest expense was $6.3 million in the third quarter of 1999 compared to $5.1
million in 1998. Interest expense was $19.1 million for the nine month period in
1999 compared to $15.3 million last year. In January 1999, the Company borrowed
$105 million under its $250 million revolving credit facility to complete the
acquisition of Gryphon.
The Company's effective tax rate for both periods of 1999 and 1998 was 24% of
income before income taxes.
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 and expenses related to the amortization of
intangible assets. 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 conventions which do not reflect current operating costs. For the
third quarter of 1999, income from core underwriting and investing operations
was $10.0 million, or $1.77 per diluted share, compared to $11.3 million, or
$2.01 per diluted share, in 1998. For the nine month period, income from core
underwriting and investing operations was $33.2 million, or $5.89 per diluted
share, compared to $33.7 million, or $5.98 per diluted share, in 1998. The
decreases were due to $2.7 million ($2.1 million after tax), or $0.37 per
diluted share of property losses from Hurricane Floyd.
Third quarter 1999 net income was $8.8 million compared to $12.1 million in
1998. For the nine month period of 1999, net income was $35.4 million compared
to $39.9 million last year. The decrease was due to underwriting losses and
lower realized gains in 1999, partially offset by higher net investment income.
Comprehensive income for the third quarter of 1999 was a loss of $28.0 million,
or $4.94 per diluted share, compared to comprehensive income of $3.2 million, or
$0.56 per diluted share, in 1998. The decrease was primarily the result of the
net decrease in unrealized gains of $6.49 per diluted share in 1999 compared to
the net decrease in unrealized gains of $1.58 per diluted share in 1998. For the
nine month period, comprehensive income was a loss of $39.5 million, or $7.00
per diluted share, compared to comprehensive income of $46.8 million, or $8.29
per diluted share, last year. The decrease was primarily the result of the net
decrease in unrealized gains of $13.27 per diluted share in 1999 compared to the
net increase in unrealized gains of $1.22 per diluted share in 1998.
Financial Condition as of September 30, 1999
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. Short-term investments held by the Company's
insurance subsidiaries provide liquidity for projected claims, reinsurance costs
and operating expenses. To the extent that operating cash flows are negative
during any period of time, a portion of the Company's investment portfolio may
be liquidated to meet operating needs.
On January 15, 1999, the Company acquired Gryphon Holdings, Inc. and its
subsidiaries as the result of the completion of a public tender offer. The
Company's results for the third quarter and nine month period ended
14
<PAGE>
September 30, 1999 include Gryphon's results of operations since the date of
acquisition. The acquisition was accounted for using the purchase method of
accounting. Total consideration paid for Gryphon was approximately $145.7
million. The excess of the purchase price over the fair value of the net
tangible and identifiable intangible assets acquired was recorded as goodwill
and is being amortized using the straight-line method over 20 years. The Company
funded the transaction with available cash of approximately $95.7 million and
borrowings of approximately $50.0 million. In addition the Company refinanced
$55.0 million of Gryphon's long-term debt.
The Company's invested assets increased to $1.7 billion at September 30, 1999
from $1.5 billion at December 31, 1998. The increase was primarily the result of
the Gryphon acquisition. The Company's unpaid losses and loss adjustment expense
reserves and paid and unpaid reinsurance recoverables increased to $1.4 billion
and $438.7 million at September 30, 1999 from $933.8 million and $219.5 million,
respectively, at December 31, 1998. The increases were the result of the
purchase of Gryphon and Gryphon's historically higher dependence on reinsurance.
For the nine month period ended September 30, 1999, the Company reported net
cash provided by operating activities of $12.9 million, compared to net cash
provided by operating activities of $38.8 million for the same period in 1998.
The decrease in 1999 was the result of Gryphon's use of $36.0 million of
operating cash for the first nine months of 1999. The Company continues to
reunderwrite and discontinue various Gryphon programs. As a result, Gryphon's
discontinued operations are expected to generate negative operating cash flows
which will partially offset the operating cash flows generated by the Company's
core underwriting units.
Proceeds from sales of fixed maturities and equity securities were $795.7
million for the nine months ended September 30, 1999 compared to $320.9 million
for the same period in 1998. Cost of fixed maturities and equity securities
purchased was $718.9 million for the nine months ended September 30, 1999
compared to $469.7 million for the same period in 1998. Both increases were
primarily due to the reallocation of the Gryphon portfolio from short-term
investments into fixed maturities after Gryphon's acquisition on January 15,
1999.
As of September 30, 1999 and December 31, 1998, the unused balances available
under the Company's $250 million revolving credit facility totaled $185 million
and $250 million, respectively. Funds are available under the facility for
general corporate purposes. During the third quarter of 1999, the Company repaid
$40 million of the $105 million of borrowings used to fund the purchase of
Gryphon. A portion of the funds used resulted from the sale of an unneeded
Gryphon insurance subsidiary as a shell for approximately $22.0 million.
On August 15, 1999, Markel signed an agreement to acquire Terra Nova (Bermuda)
Holdings Ltd. (NYSE:TNA) for cash and stock valued at $905.0 million. In
addition, $175.0 million of Terra Nova debt will remain outstanding. The
transaction, which is subject to approval by the shareholders of both Markel and
Terra Nova, the receipt of necessary regulatory approvals and other customary
closing conditions, is expected to be completed by early next year.
Pursuant to the terms of the merger agreement, the consideration will consist of
approximately $407.2 million in cash and 2.69 million Markel common shares.
Terra Nova shareholders will have the ability to elect to receive cash, stock or
a combination of cash and stock, subject to certain maximum levels (45% cash and
55% stock) for each form of consideration. Subject to these limits, Terra Nova
shareholders may elect to receive $34.00 in cash or 0.184 Markel common shares
for each Terra Nova share. The acquisition will be accounted for as a purchase
transaction.
15
<PAGE>
The Company has entered into a commitment letter for a five year $500 million
revolving credit facility which will replace its existing $250 million revolving
credit facility subject to and upon closing of the Terra Nova acquisition. The
Company will use the new facility to fund a portion of the Terra Nova
acquisition, refinance balances under the existing revolving credit facility and
for other general corporate purposes.
Shareholders' equity at September 30, 1999 was $386.0 million compared to $425.3
million at December 31, 1998. Book value per share was $68.96 at September 30,
1999 compared to $77.02 at December 31, 1998. The decrease in the nine month
period of 1999 was the result of the net decrease in unrealized gains of $74.8
million, partially offset by net income of $35.4 million.
Other Matters
Year 2000
The Year 2000 issue affects virtually all companies and organizations. Many
companies have existing computer applications which use only two digits to
identify a year in the date field. These applications were designed and
developed without considering the impact of the century change. If not corrected
these computer applications may fail or create erroneous results in the year
2000.
The Company's Year 2000 Strategy
The Company has created a Year 2000 team involving associates from all areas of
the organization and has charged them with implementing the Company's Year 2000
project. The team has been in place since September of 1997. The project's scope
includes all information technology (IT), both internally developed and
purchased from third parties, material vendors, producer and customer
relationships, and an assessment of the Company's underwriting exposure as a
result of the insurance products written by the Company's underwriting units. In
addition, the Company is evaluating the Year 2000 exposure to issuers included
as part of its investment portfolio.
The Company has completed all phases of its Year 2000 compliance project for its
material and ancillary IT systems. At this time the Company believes that all
material and ancillary systems are capable of correctly processing transactions
with dates both before and after January 1, 2000.
The Company has completed a review of material business partners to determine
their state of readiness with regard to the Year 2000 issue and the potential
impact on the Company. The Company has identified the following general
categories of business partners as material to the Company's ability to conduct
its operations: software, hardware and telecommunication providers, banks and
investment brokers, material holdings in the Company's investment portfolio,
insurance producers, reinsurers and reinsurance intermediaries, major insurance
clients and utilities. Where the Company has determined that the relationship
with a business partner is material to its ability to conduct normal operations,
the Company has requested and in most cases received an update on the status of
the business partner's Year 2000 initiative. Where deemed necessary, the Company
is following up with the business partner to obtain further information. Based
on the assurances of these business partners and the Company's internal reviews
of information provided, the Company has not currently identified a material
business partner that will be non-compliant. However, there can be no assurances
that all material business partners will be compliant, and such noncompliance
could have a material effect on the Company's financial position and results of
operations.
16
<PAGE>
The Company has conducted a comprehensive review of its underwriting guidelines
and has made the decision to exclude Year 2000 exposures from most insurance
policies. The Company began adding exclusions to policies in early 1998.
Additionally it is the Company's position that Year 2000 exposures are not
fortuitous losses and thus are not covered under insurance policies even without
specific exclusions. For these reasons, the Company believes that its exposure
to Year 2000 claims will not be material. However, as was the case with
environmental exposures, changing social and legal trends may create unintended
coverage for exposures by reinterpreting insurance contracts and exclusions. It
is impossible to predict what, if any, exposure insurance companies may
ultimately have for Year 2000 claims whether coverage for the issue is
specifically excluded or included.
The cost of the Company's Year 2000 project was originally estimated to be $1.0
million. Approximately $0.5 million of this amount was incurred as of December
31, 1998, and another $0.2 million was incurred during the nine month period
ended September 30, 1999. The Company anticipates that less than $0.1 million in
additional expenditures will be required. All costs of the Year 2000 project
have been expensed as incurred.
As all of its material and ancillary IT systems were deemed Year 2000 compliant
at September 30, 1999, the Company has not established a contingency plan for
noncompliance of its IT systems. At this time, the Company is not aware of any
material business partners that will not be Year 2000 compliant. If the Company
becomes aware of non-compliant business partners, one option will be to evaluate
using other vendors. In many instances the establishment of a contingency plan
is not possible or is cost prohibitive. In these situations, noncompliance by
the Company or its material business partners could have a material adverse
impact on the Company's financial position and results of operations.
Subsequent to the Company's acquisition of Gryphon in January 1999, the Company
began an assessment of Gryphon's material IT systems for Year 2000 compliance.
The Company has converted Gryphon's continuing business to the Company's Year
2000 compliant systems. Runoff business will remain on the Gryphon systems. The
Company has done extensive analysis of these systems and believes that they are
Year 2000 compliant.
Quantitative and Qualitative Disclosures About Market Risk
Market risk is the risk of economic losses due to adverse changes in the
estimated fair value of a financial instrument as the result of changes in
equity prices, interest rates, foreign exchange rates and commodity prices. The
Company's consolidated balance sheets include assets and liabilities whose
estimated fair values are subject to market risk. The primary market risks to
the Company are equity price risk associated with investments in equity
securities and interest rate risk associated with investments in fixed
maturities. From time to time, equity prices and interest rates fluctuate
causing an effect on the Company's investment portfolio. The Company has no
direct commodity risk, and its exposure to foreign exchange risk is immaterial.
The Company's market risk exposures at September 30, 1999 have not materially
changed from those identified at December 31, 1998.
"Safe Harbor" Statement
This is a "Safe Harbor" statement under the Private Securities Litigation Reform
Act of 1995. Certain statements contained herein are forward-looking statements
that involve risks and uncertainties. Future actual results may materially
differ from those in these statements because of many factors. For example, the
Company continues to significantly reorganize Gryphon's operations, and the
scope and impact of these changes cannot be fully determined at this time. The
completion of the Terra Nova transaction is subject to the absence of material
17
<PAGE>
adverse changes in the buyer's or seller's financial condition and receipt of
all necessary regulatory and shareholder approvals. Insurance industry price
competition has made it more difficult to attract and retain adequately priced
business. Changing legal and social trends can adversely impact the adequacy of
loss reserves. State regulatory actions can impede the Company's ability to
charge adequate rates and efficiently allocate capital. The frequency and
severity of natural catastrophes are highly variable. Economic conditions and
interest rate volatility can have significant impacts on the market value of
fixed maturity and equity investments. The business community's state of
readiness for the Year 2000, the readiness of the Company's vendors and business
partners and the Company's potential underwriting exposure to Year 2000 claims
are difficult to predict with any certainty. Accordingly, the Company's premium
growth, underwriting and investing results have been and will continue to be
potentially materially affected by these factors.
18
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
The Exhibits to this Report are listed in the Exhibit Index.
(b)(1) On August 20, 1999, the Company filed a report on Form 8-K, reporting
under Item 5 the Agreement and Plan of Merger and Scheme of Arrangement
providing for the merger of the the Company and Terra Nova (Bermuda) Holdings
Ltd.
(b)(2) On September 22, 1999, the Company filed a report on Form 8-K reporting
under Item 2 and Item 7 the acquisition of Gryphon Holdings, Inc. and
subsidiaries.
The following financial statements of Gryphon Holdings, Inc. were filed as
part of the Form 8-K:
Independent Auditors' Report
Consolidated Balance Sheet as of December 31, 1998
Consolidated Statements of Income and Comprehensive Income for the year
ended December 31, 1998
Consolidated Statements of Shareholders' Equity for the year ended December
31, 1998
Consolidated Statements of Cash Flows for the year ended December 31, 1998
Notes to Consolidated Financial Statements
19
<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 16th day of November, 1999.
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)
20
<PAGE>
Exhibit Index
Number Description
2 Agreement and Plan of Merger and Scheme of Arrangement dated as
of August 15, 1999 incorporated by reference as Exhibit 99.1 in
the Company's Current Report on Form 8-K dated August 20, 1999. *
27 Financial Data Schedule for period ended September 30, 1999 *
* Filed electronically with the Commission
21
<TABLE> <S> <C>
<PAGE>
<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
September 30, 1999 for Markel Corporation and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<DEBT-HELD-FOR-SALE> 1,285,686
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 281,409
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 1,652,486
<CASH> 1,476
<RECOVER-REINSURE> 38,697
<DEFERRED-ACQUISITION> 50,859
<TOTAL-ASSETS> 2,507,336
<POLICY-LOSSES> 1,376,745
<UNEARNED-PREMIUMS> 288,164
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 158,258
0<F1>
0
<COMMON> 25,593
<OTHER-SE> 360,390
<TOTAL-LIABILITY-AND-EQUITY> 2,507,336
327,047
<INVESTMENT-INCOME> 66,253
<INVESTMENT-GAINS> 9,297
<OTHER-INCOME> 1,426
<BENEFITS> 210,747
<UNDERWRITING-AMORTIZATION> 66,560
<UNDERWRITING-OTHER> 56,903
<INCOME-PRETAX> 46,531
<INCOME-TAX> 11,168
<INCOME-CONTINUING> 35,363
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 35,363
<EPS-BASIC> 6.34<F2>
<EPS-DILUTED> 6.27<F2>
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0<F3>
<PROVISION-PRIOR> 0<F3>
<PAYMENTS-CURRENT> 0<F3>
<PAYMENTS-PRIOR> 0<F3>
<RESERVE-CLOSE> 0<F3>
<CUMULATIVE-DEFICIENCY> 0<F3>
<FN>
<F1>Does not include Company-Obligated Mandatorily Redeemable Preferred Capital
Securities of Subsidiary Trust Holding Solely Junior Subordinated Deferrable
Interest Debentures of Market Corporation.
<F2>Markel adopted Statement of Financial Accounting Standards No. 128 "Earnings
Per Share" effective December 31, 1997. The Financial Data Schedules tags
"EPS-PRIMARY" and "EPS-DILUTED" refer to Basic EPS and Diluted EPS,
respectively, as these terms are set forth in Statement of Financial Accounting
Standards No. 128.
<F3>Available on an annual basis only.
</FN>
</TABLE>
