ALTE Alterra Capital Holdings Limited (MM)

A.M. Best Co. has allotted a debt rating of “bbb+” to Markel Corporation Inc.’s (MKL) 3.625% senior unsecured notes worth $250 million and the 5.0% senior unsecured notes worth $250 million. The MKL notes are scheduled to mature in 2023 and 2043 respectively. Both the ratings carry a stable outlook.

The ratings reflect Markel’s improving debt levels and coverage ratios. The proceeds from the issuances will be deployed for general corporate purposes including acquisition costs.

As of Dec 31, 2012, the debt to capital ratio of Markel was 28% in line with the 2011 end debt to capital ratio. The debt to equity ratio was 38%. Post the acquisition of Alterra Capital Holdings Limited (ALTE), expected to close in the second quarter of 2013, the debt to capital ratio of the company is expected to improve 100 basis points to 27%. The acquisition is expected to improve the debt to equity ratio by 400 basis points to 34% over the same time period.

Rating affirmations or upgrades from credit rating agencies play an important part in retaining investor confidence in the stock as well as maintaining the creditworthiness in the market. We believe that Markel’s present score with the credit rating agencies will help it write more business going forward.

Last Nov, A.M. Best affirmed the issuer credit rating (ICR) for Markel at “bbb+” as well as the debt ratings on its senior unsecured debt at “bbb+”. The rating agency also affirmed the indicative ratings on the company’s shelf registered securities – preferred securities at “bbb-”, subordinated debt at “bbb” and senior unsecured debt at “bbb+”. Additionally, A.M. Best affirmed the financial strength rating (FSR) of Markel’s subsidiary – Markel North America Insurance Group (Markel N.A.) – at “A” and its ICR at “a+”. The credit rating agency also affirmed the FSR and ICR of Markel’s subsidiary FirstComp Insurance Company at “B++” and “bbb+”, respectively, and those of Deerfield Insurance Company at “ A-“ and “a-“. A.M. Best maintains a stable outlook on all the ratings.

The Travelers Companies Inc. (TRV), another property and casualty insurer had its ratings affirmed by another credit rating agency, Fitch ratings. Fitch reaffirmed the Issuer Default Rating (“IDR”) of Travelers last December. It also maintained the senior unsecured notes at “A” and subordinated notes at “BBB+”. The Insurer Financial Strength Rating (IFS) of the subsidiaries carried the rating of “AA”. All the ratings of TRV and its subsidiaries held a stable outlook. The rating reflected Travelers’ strong market position, consistent earnings results and a robust balance sheet.

Markel Corporation carries a Zacks Rank #3 (Hold) while Travelers carries a Zacks Rank #2 (Buy). Another industry major, Cincinnati Financial Corporation (CINF) carries a favorable Zacks Rank #1 (Strong Buy).

 
ALTERRA CAP HLD (ALTE): Free Stock Analysis Report
 
CINCINNATI FINL (CINF): Free Stock Analysis Report
 
MARKEL CORP (MKL): Free Stock Analysis Report
 
TRAVELERS COS (TRV): Free Stock Analysis Report
 
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