-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, F3nYUE0Roc0G5t4ekZ4XtNEzEu6Pa6CmQaPyI3iiw6TE294CEk3Wcn8XzCT9hx3A Cg+QDnT7FQfSHCOT+2jVDg== 0000916641-97-001025.txt : 19971029 0000916641-97-001025.hdr.sgml : 19971029 ACCESSION NUMBER: 0000916641-97-001025 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971028 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MARKEL CORP CENTRAL INDEX KEY: 0000803509 STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY INSURANCE [6331] IRS NUMBER: 540292420 STATE OF INCORPORATION: VA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-13051 FILM NUMBER: 97701762 BUSINESS ADDRESS: STREET 1: 4551 COX RD CITY: GLEN ALLEN STATE: VA ZIP: 23060-3382 BUSINESS PHONE: 8047470136 MAIL ADDRESS: STREET 1: P O BOX 2009 CITY: GLEN ALLEN STATE: VA ZIP: 23058-2009 10-Q 1 THIRD QUARTER 10-Q 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 September 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 October 27, 1997: 5,496,106 1 Markel Corporation Form 10-Q Index Page Number PART I. FINANCIAL INFORMATION: Item 1. Financial Statements Consolidated Balance Sheets-- September 30, 1997 and December 31, 1996 3 Consolidated Statements of Income-- Quarters and Nine Months Ended September 30, 1997 and 1996 4 Consolidated Statements of Cash Flows-- Nine Months Ended September 30, 1997 and 1996 5 Notes to Consolidated Financial Statements-- September 30, 1997 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 PART II. OTHER INFORMATION: Item 6. Exhibits and Reports on Form 8-K 12 2 PART I. FINANCIAL INFORMATION Item 1. Financial Statements MARKEL CORPORATION AND SUBSIDIARIES Consolidated Balance Sheets
September 30, December 31, ----------------------------- 1997 1996 ----------- ------------ (dollars in thousands) ASSETS Investments, available-for-sale, at estimated fair value Fixed maturities (cost of $1,007,531 in 1997 and $879,401 in 1996) $ 1,025,063 $ 885,874 ----------- ---------- Equity securities (cost of $146,837 in 1997 and $132,558 in 1996) 256,520 193,395 Short-term investments (estimated fair value approximates cost) 107,518 51,507 ----------- ---------- Total investments, available-for-sale 1,389,101 1,130,776 ----------- ---------- Cash and cash equivalents 886 11,054 Receivables 67,903 58,336 Reinsurance recoverable on unpaid losses 214,808 210,518 Reinsurance recoverable on paid losses 15,652 11,631 Deferred policy acquisition costs 37,427 37,979 Prepaid reinsurance premiums 40,390 44,881 Property and equipment 9,295 15,434 Intangible assets 37,542 39,297 Other assets 30,690 45,391 ----------- ---------- Total assets $ 1,843,694 $1,605,297 =========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Unpaid losses and loss adjustment expenses $ 963,985 $ 935,582 Unearned premiums 196,218 200,852 Payables to insurance companies 30,936 23,870 Long-term debt (estimated fair value of $95,497 in 1997 and $115,191 in 1996) 93,153 114,691 Other liabilities 67,378 61,967 Company-Obligated Mandatorily Redeemable Preferred Capital Securities of the Subsidiary Trust Holding Solely Junior Subordinated Deferrable Interest Debentures of Markel Corporation 150,000 -- ----------- ---------- Total liabilities 1,501,670 1,336,962 ----------- ---------- Shareholders' equity Common stock 24,606 24,347 Retained earnings 234,729 200,237 Net unrealized gains on fixed maturities and equity securities, net of taxes 82,689 43,751 ----------- ---------- Total shareholders' equity 342,024 268,335 ----------- ---------- Total liabilities and shareholders' equity $ 1,843,694 $ 1,605,297 =========== =========== See accompanying notes to consolidated financial statements. 3 MARKEL CORPORATION AND SUBSIDIARIES Consolidated Statements of Income Quarter Ended Nine Months Ended September 30, September 30, ------------------------- --------------------------- 1997 1996 1997 1996 ------- -------- --------- --------- (dollars in thousands, except per share data) Operating revenues Earned premiums $84,650 $ 76,861 $ 250,453 $ 225,051 Net investment income 17,441 12,363 50,944 36,500 Net realized gains from investment sales 8,277 449 8,117 2,956 Other 244 694 1,271 2,522 ------- -------- --------- --------- Total operating revenues 110,612 90,367 310,785 267,029 ------- -------- --------- --------- Operating expenses Losses and loss adjustment expenses 54,313 50,592 161,469 151,471 Underwriting, acquisition and insurance expenses 29,714 25,773 86,940 74,592 Other -- 284 -- 1,192 Amortization of intangible assets 562 660 1,755 1,995 ------- -------- --------- --------- Total operating expenses 84,589 77,309 250,164 229,250 ------- -------- --------- --------- Operating income 26,023 13,058 60,621 37,779 Interest expense 4,984 1,914 15,228 5,964 ------- -------- --------- --------- Income before income taxes 21,039 11,144 45,393 31,815 Income taxes (benefit) 5,051 2,675 10,893 (10,554) ------- -------- --------- --------- Net income $15,988 $ 8,469 $ 34,500 $ 42,369 ------- -------- --------- --------- Earnings per share Primary $ 2.82 $ 1.50 $ 6.10 $ 7.50 ------- -------- --------- --------- Fully diluted $ 2.82 $ 1.50 $ 6.09 $ 7.50 ======== ======= ========= ========= See accompanying notes to consolidated financial statements. 4 MARKEL CORPORATION AND SUBSIDIARIES Consolidated Statements of Cash Flows Nine Months Ended September 30, --------------------------- 1997 1996 --------- -------- (dollars in thousands) Operating Activities Net Income $ 34,500 $ 42,369 Adjustments to reconcile net income to net cash provided by operating activities 12,663 26,755 --------- -------- Net cash provided by operating activities 47,163 69,124 --------- -------- Investing Activities Proceeds from sales of fixed maturities and equity securities 456,412 312,186 Proceeds from maturities of fixed maturities 37,600 49,401 Cost of fixed maturities and equity securities purchased (630,509) (420,073) Net change in short-term investments (56,011) (3,475) Net proceeds from sale of building 6,500 -- Other 2,187 (3,016) --------- -------- Net cash used by investing activities (183,821) (64,977) --------- -------- Financing Activities Net proceeds from issuance of company-obligated mandatorily redeemable preferred capital securities 148,137 -- Repayments and repurchases of long-term debt (21,577) (7,050) Other (70) 840 --------- -------- Net cash provided (used) by financing activities 126,490 (6,210) --------- -------- Decrease in cash and cash equivalents (10,168) (2,063) Cash and cash equivalents at beginning of period 11,054 18,315 --------- -------- Cash and cash equivalents at end of period $ 886 $ 16,252 ========= ========
See accompanying notes to consolidated financial statements. 5 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--September 30, 1997 1. Principles of Consolidation The consolidated balance sheet as of September 30, 1997, the related consolidated statements of income for the quarters and nine months ended September 30, 1997 and 1996, and the consolidated statements of cash flows for the nine months ended September 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):
Quarter Ended Nine Months Ended September 30, September 30, ------------------------ -------------------------- 1997 1996 1997 1996 -------- ------- -------- -------- Net income, as reported $ 15,988 $ 8,469 $ 34,500 $ 42,369 Dividends on redeemable preferred stock -- (4) (8) (12) -------- ------- -------- -------- Primary and fully diluted income $ 15,988 $ 8,465 $ 34,492 $ 42,357 ======== ======= ======== ======== Average common shares outstanding 5,492 5,440 5,481 5,431 Shares applicable to common stock equivalents 177 211 169 208 -------- ------- -------- -------- Average primary shares outstanding 5,669 5,651 5,650 5,639 Additional dilution attributable to common stock equivalents 4 -- 12 -- -------- ------- -------- -------- Average fully diluted shares outstanding 5,673 5,651 5,662 5,639 ======== ======= ======== ========
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 the year ending December 31, 1997. Under the new standard, basic and diluted EPS would have been $2.91 and $2.82 for the third quarter of 1997. For the nine months ended September 30, 1997, basic and diluted EPS would have been $6.29 and $6.09, respectively. 6 3. Reinsurance The table below summarizes the effect of reinsurance on premiums written and earned (dollars in thousands):
Quarter Ended September 30, -------------------------------------------------------------- 1997 1996 ---------------------------- --------------------------- Written Earned Written Earned Direct $ 109,575 $ 106,394 $ 106,445 $ 99,370 Assumed 1,498 1,641 4,216 4,653 Ceded (22,545) (23,385) (25,788) (27,162) --------- --------- --------- -------- Net premiums $ 88,528 $ 84,650 $ 84,873 $ 76,861 ========= ========= ========= ======== Nine Months Ended September 30, -------------------------------------------------------------- 1997 1996 ---------------------------- --------------------------- Written Earned Written Earned Direct $ 314,152 $ 319,452 $ 304,599 $ 286,532 Assumed 4,705 4,901 7,858 11,230 Ceded (68,554) (73,900) (72,859) (72,711) --------- --------- --------- -------- Net premiums $ 250,303 $ 250,453 $ 239,598 $ 225,051 ========= ========= ========= ========
Incurred losses and loss adjustment expenses are net of reinsurance recoveries of $10.9 million and $9.6 million for the quarters ended September 30, 1997 and 1996, respectively, and $52.2 million and $33.33 million for the nine months ended September 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 $154,640,000 aggregate principal amount of the Company's 8.71% Junior Subordinated Deferable 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 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 Capital Securities. 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Quarter and Nine Months ended September 30, 1997 compared to Quarter and Nine Months ended September 30, 1996 The Company underwrites specialty insurance products and programs for 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: Gross Premium Volume
Quarter Ended September 30, Nine Months Ended September 30, --------------------------- ------------------------------- 1997 1996 (amounts in thousands) 1997 1996 -------- -------- -------- -------- $ 31,757 $ 30,788 Excess and Surplus Lines $ 93,717 $ 89,723 27,265 28,648 Professional/Products Liability 86,878 91,959 28,708 29,135 Specialty Program Insurance 67,360 74,797 13,443 18,879 Specialty Personal and Commercial Lines 37,210 52,969 10,611 -- Brokered Excess and Surplus 33,464 -- 621 2,048 Other 2,653 8,333 -------- -------- -------- -------- $112,405 $109,498 Total $321,282 $317,781 ======== ======== ======== ========
Gross premium volume was $112.4 million for the third quarter and $321.3 million for the nine month period in 1997 compared to $109.5 million and $317.8 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 third quarter gross premium volume was $31.8 million compared to $30.8 million in 1996. For the nine month period, excess and surplus lines gross premium volume rose to $93.7 million from $89.7 million in 1996. Growth in the inland marine, property and excess and umbrella programs was partially offset by decreases in the special property program due to increased competition. Premiums from professional/products liability insurance were $27.3 million for the third quarter and $86.9 million for the nine month period compared to $28.6 million and $92.0 million, respectively, for the same periods last year. Growth in the employment practices program was more than offset by lower production from other lines, including directors and officers liability, financial institutions, medical malpractice and the specified medical programs. 8 Gross premiums from specialty program insurance were $28.7 million for the third quarter and $67.4 million for the nine month period compared to $29.1 million and $74.8 million for the quarter and nine month period of 1996. Increased competition in the youth and recreation division and health and fitness unit 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 $13.4 million for the third quarter and $37.2 million for the nine month period from $18.9 million and $53.0 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 $10.6 million in the third quarter and $33.5 million for the nine month period of 1997. This new underwriting unit is the result of the purchase of Investors on October 31, 1996. Other gross premiums totaled $0.6 million for the third quarter and $2.7 million for the nine month period compared to $2.0 million and $8.3 million for the quarter and nine month periods in 1996. In 1997 other gross premium volume primarily consisted of facultative reinsurance placed by the Professional/Products Liability unit. In 1996 other gross premium volume also included runoff business related to Lincoln Insurance Company, and the Company's wholesale brokerage 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. 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 79% in the third quarter of 1997 and 78% for the nine month period compared to 78% and 75%, respectively, for both periods in 1996. The increases for both periods reflect higher retentions in the specialty personal and commercial lines division. Following is a comparison of earned premiums by significant underwriting area: Earned Premiums
Quarter Ended September 30, Nine Months Ended September 30, --------------------------- ------------------------------- 1997 1996 (amounts in thousands) 1997 1996 -------- -------- -------- -------- $ 21,695 $ 20,025 Excess and Surplus Lines $ 62,601 $ 55,239 25,871 26,149 Professional/Products Liability 77,502 84,163 16,967 18,322 Specialty Program Insurance 51,068 50,421 12,228 12,432 Specialty Personal and Commercial Lines 37,175 32,732 7,882 -- Brokered Excess and Surplus Lines 22,121 -- 7 (67) Other (14) 2,496 -------- -------- -------- -------- $ 84,650 $ 76,861 Total $250,453 $225,051 ======== ======== ======== ========
Total operating revenues for the third quarter rose 22% to $110.6 million from $90.4 million in the prior year. For the nine month period, operating revenues rose 16% to $310.8 million from $267.0 million a year ago. Earned premiums advanced 10% to $84.7 million for the quarter and 11% to $250.5 million for the nine month period compared to $76.9 million for the third quarter and $225.1 million for the nine month period of 1996. The growth 9 resulted from increased retentions in the Company's core products and the acquisition of Investors in the Fall of 1996. Third quarter net investment income increased 41% to $17.4 million from $12.4 million a year ago. For the nine month period, net investment income increased 40% to $50.9 million from $36.5 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 third quarter, the Company realized $8.3 million of investment gains compared to $0.4 million in 1996. For the nine month period, realized investment gains were $8.1 million compared to $3.0 million 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 third quarter were $84.6 million, an increase of 9%, compared to $77.3 million in 1996. Total operating expenses for the nine month period were $250.2 million, an increase of 9%, compared to $229.3 million a year ago. The increases for both periods resulted primarily from higher variable expenses associated with higher earned premiums. Following is a comparison of selected data from the Company's operations (in thousands):
Quarter Ended September 30, Nine Months Ended September 30, --------------------------- ------------------------------- 1997 1996 (amounts in thousands) 1997 1996 -------- -------- -------- -------- $112,405 $109,498 Gross premium volume $321,282 $317,781 $ 88,528 $ 84,873 Net premiums written $250,303 $239,598 79% 78% Net Retention 78% 75% $ 84,650 $ 76,861 Earned premiums $250,453 $225,051 $ 54,313 $ 50,592 Losses and loss adjustment expenses $161,469 $151,471 Underwriting acquisition and $ 29,714 $ 25,773 insurance expenses $ 86,940 $ 74,592 GAAP ratios 64% 66% Loss ratio 64% 67% 35% 33% Expense ratio 35% 33% -------- -------- -------- -------- 99% 99% Combined ratio 99% 100% ======== ======== ======== ========
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 nine month period compared to 100% in 1996. The quarterly loss ratio decreased to 64% from 66% in 1996. The nine month loss ratio decreased to 64% from 67% a year ago. The third quarter 1996 loss ratio was adversely affected by property losses from Hurricane Fran. The nine month 1997 loss ratio compares favorably to 1996 due to winter storm and Hurricane Fran property losses and underwriting losses in the professional liability book of business in 1996. The expense ratios for the third quarter and nine month period were 35% compared to 33% in 1996. The increase in both periods was due to higher acquisition and overhead expenses which were partially offset by 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 10 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 third quarter of 1997, income from core underwriting and investing operations advanced 27% to $11.0 million, or $1.95 per primary share, from $8.7 million, or $1.54 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 nine month period, income from core operations grew 29% to $30.6 million, or $5.41 per primary share, from $23.6 million, or $4.18 per primary share, last year. The nine month period benefited from higher net investment income and an underwriting profit compared to a small underwriting loss for the same period last year. The Company's effective tax rate for the third quarter of 1997 was flat at 24% compared to the third quarter of 1996. For the nine month period, the tax rate was 24% compared to (33%) 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 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. Third quarter 1997 net income was $16.0 million compared to $8.5 million in 1996. For the nine month period net income was $34.5 million compared to $42.4 million last year. The quarterly increase was due to higher net investment income and realized gains and continued underwriting profits. The decrease in the nine month period of 1997 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 September 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 nine month period ended September 30, 1997, the Company reported net cash provided by operating activities of $47.2 million, compared to net cash provided by operating activities of $69.1 million for the same period in 1996. The decrease was due to slowed growth in gross premium volume in the first nine months of 1997. For the nine month period ended September 30, 1997, the Company reported net cash used by investing activities of $183.8 million compared to $65.0 million in 1996. The difference was primarily due to the Company's investment of the $150 million Capital Securities offering proceeds. At September 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 September 30, 1997 the unused balances available under the Company's revolving credit facility totaled $150 million compared to $135 million at December 31, 1996. 11 Shareholders' equity at September 30, 1997 was $342.0 million compared to $268.3 million at December 31, 1996. Book value per share rose to $62.23 at September 30, 1997 from $49.16 at December 31, 1996. Other Items During the third quarter, 258 Markel associates, representing over 30% of total associates, and two outside Directors purchased $6.3 million of Markel common stock in the 1997 edition of the Markel Employee Stock Purchase and Loan Program. The program, similar to one offered in 1995, is designed to strengthen the bond between associates and shareholders, by facilitating associates' participation, as owners, in the Company's success. It gives all Markel associates the opportunity to purchase common stock by providing loans at favorable terms. Approximately 42,900 shares were purchased in the open market and privately negotiated transactions, including transactions with senior management shareholders. The average purchase price per share was $145.91. 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) No reports on Form 8-K were filed during the quarter ended September 30, 1997. 12 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 28th day of October, 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) 13 Exhibit Index Number Description 27 Financial Data Schedule * * Filed electronically with the Commission's operational EDGAR system 14 EX-27 2 EXHIBIT 27 - FINANCIAL DATA SCHEDULE
7 This schedule contains summary financial information extracted from the financial statements contained in the Form 10-Q for the quarterly period ended September 30, 1997 for Markel Corporation and is qualified in its entirety by reference to such financial statements. 1,000 9-MOS DEC-31-1997 SEP-30-1997 1,025,063 0 0 256,520 0 0 1,389,101 886 15,652 37,427 1,843,694 963,985 196,218 0 0 93,153 0 0 24,606 317,418 1,843,694 250,453 50,944 8,117 1,271 161,469 60,675 26,265 45,393 10,893 34,500 0 0 0 34,500 6.10 6.09 0 0 0 0 0 0 0
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