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1 MARKEL BERMUDA LIMITED MARKEL EUROPE PLC ALTERRA REINSURANCE USA INC. ALTERRA AMERICA INSURANCE COMPANY ALTERRA EXCESS & SURPLUS INSURANCE CO A A A A A A 2013 A.M. Best Company, Oldwick, NJ Printed October 11, Page 1 of 23

2 Operating Company Composite Ultimate Parent: Markel Corporation MARKEL BERMUDA LIMITED Markel House, 2 Front Street, Hamilton HM 11, Bermuda Web: Tel.: Fax: AMB#: AIIN#: AA Ultimate Parent#: BEST S CREDIT RATING Best s Financial Strength Rating: A Outlook: Stable Best s Financial Size Category: XV RECENT DEVELOPMENTS On December 19, 2012, the ultimate parent, Alterra Capital Holdings Limited, announced that it entered into a merger agreement with Markel Corporation. On May 1, 2013 Markel Corporation announced that it had completed the acquisition of Alterra Capital Holdings Limited. The ratings of Markel Bermuda Limited (formerly known as Alterra Bermuda Limited), its parent Alterra Capital Holdings Limited and its direct operating subsidiaries are unaffected by this announcement. RATING RATIONALE Rating nale: On May 1, 2013, Alterra was acquired by Markel Corporation (Markel), and the integration is ongoing. Both Alterra and Markel are specialty-focused underwriters. The ratings for the Alterra organization take into consideration its recent change in ownership, the future benefits to be derived from its integration into Markel, as well as some of the immediate benefits gained in terms of enhanced scale, reach, the Markel brand, distribution platform and its leadership position in the excess and surplus lines marketplace in the United States. With integration plans underway, A.M. Best will continue to maintain a dialogue with management to review and discuss Alterra, its future plans and how the Alterra organization will ultimately align with Markel and its existing members. Until that time, the ratings of Alterra are considered as if it were a bolt-on acquisition and assume no material changes to business profile, capitalization, performance as well as intercompany reinsurance. In addition to the new owner, these ratings also reflect Markel Bermuda s solid financial performance through the second quarter of 2013 and its strong risk-adjusted capitalization. Alterra has platforms and operations in major global underwriting markets, which give it flexibility to optimize its underwriting portfolio composition. Being part of Markel, revenue and earnings prospects are likely to be enhanced through synergies, the leveraging of existing business relationships and efficiencies gained. Partially offsetting these positive rating attributes are the current soft market in casualty classes of business, which represents a significant portion of Alterra s risk portfolio, and the challenging investment climate that places increased pressure on underwriting profitability. Rating factors that could lead to a downgrading of the Alterra organization s ratings and/or a revised outlook to negative include unfavorable operating profitability trends, outsized catastrophe or investment losses relative to peers, significant adverse loss reserve development or a material decline in its risk-adjusted capital. Alternatively, factors that could lead to an upgrading of the ratings include continued favorable operating profitability coupled with maintenance of a strong risk-adjusted capital level and/or explicit or implicit support from Markel that would enhance the capital or profile of the Alterra organization. FIVE YEAR RATING HISTORY Date Best s FSR Date Best s FSR 08/09/13 A 05/13/10 A 06/20/12 A 03/04/10 A- u 08/05/11 A 12/11/08 A- 09/07/10 A RATING UNIT MEMBERS Markel Bermuda Limited (AMB# ): AMB# COMPANY BEST S FSR Alterra America Insurance Co A Alterra Excess & Surplus Ins A Alterra Reinsurance USA Inc. A Markel Europe plc A BUSINESS PROFILE Markel Bermuda Limited is the Bermuda-based operating unit of Alterra Capital Holdings Limited. Alterra Capital Holdings Limited was a publicly traded company on the NASDAQ exchange prior to being acquired by Markel Corporation on May 1, Alterra Capital Holdings Limited was formed as a result of the merger between Max Capital Group Ltd. and Harbor Point Limited in May The holding company and the operating companies were rebranded with the Alterra name. The integration of Alterra s operations into Markel are currently ongoing. Through Alterra Capital Holdings Limited s operating subsidiaries, traditional reinsurance and insurance of both long-tailed and short-tailed liabilities are provided. Affiliated operating companies distribute products for the group in the U.S., Europe (including Lloyd s), Canada, Japan, Latin America, Australia and New Zealand. Underwriting operations provide a diversified and balanced mix of short-tail and long-tail insurance and reinsurance capacity. Covered risks include the (re)insurance of general casualty, professional lines, workers compensation, accident and health, medical malpractice, property, agriculture, aviation, credit/surety, and marine and energy. The Reinsurance segment products are offered on both excess of loss and quota share bases, and are generally written on market terms, where the company participates alongside other reinsurers. Whole account coverage is underwritten with a focus on casualty risk exposures. The U.S. Insurance lines segment (formerly known as Alterra Excess & Surplus) provides access to the U.S. excess and surplus lines market with coverage in property, casualty, marine, umbrella and excess liability to the middle market. In June 2008, Alterra America Insurance Company was acquired. This company offers the same type of coverage but on an admitted basis. In November 2008, Imagine Group (UK) Limited (Imagine Lloyd s), a Lloyd s insurance operation, was acquired from Imagine Insurance Company Limited. It had been rebranded as Alterra at Lloyd s Limited to form the Lloyds segment and through Lloyd s Syndicate 1400, offers a diverse portfolio of specialty risks, which includes accident and health, agriculture, aviation, international casualty, financial institutions, marine, professional indemnity, property, employers and public liability, and surety. The Lloyd s syndicates complement underwriting operations in Bermuda, Ireland and the U.S. Alterra Capital Holdings Limited also owned Alterra Europe plc, which was a (re)insurance company domiciled in Ireland. This company has been rebranded as Markel Europe plc. RISK MANAGEMENT Alterra s enterprise risk management (ERM) framework permeates all levels of the organization. There were several committees set up to oversee the various operational and risk functions as well as delegated authority. Underwriting and investing activities were modeled on an integrated basis and proprietary and non-proprietary models were used to analyze risk characteristics of its liabilities and assets. It is expected that ERM will continue to support Alterra although going forward the ERM of Alterra will be under the umbrella of Markel. This is viewed to be a positive rating attribute. Regulatory and Accounting Environment: Insurance companies in Bermuda are licensed and supervised by the Bermuda Monetary Authority under the Bermuda Insurance Act. Companies may be local companies licensed to conduct business in Bermuda (must be at least 60% owned by Bermudians), or exempted companies incorporated in Bermuda for non-domestic business, where overseas investors may have 100% ownership. In Bermuda, there are no taxes on profits, income, dividends or capital gains. There is only a licensing fee, which is dependent upon the level of authorized capital. The government has granted the company a tax exemption until March 31, With that stated, being that Markel Corporation is a U.S. domiciled company, Alterra Capital Holdings Limited and Markel Bermuda Limited will elect to pay U.S. taxes going forward A.M. Best Company, Oldwick, NJ Printed October 11, Page 2 of 23

3 The Insurance Act provides that the statutory assets of an insurer must exceed its statutory liabilities by an amount greater than the prescribed minimum solvency margin or enhanced capital requirement, whichever is greater. The minimum solvency margin for a Class 4 insurer such as Alterra is the greatest of $100 million, 50% of net premiums written or 15% of loss and loss expense provisions and other insurance reserves. The enhanced capital requirement is determined by reference to a standardized statutory risk-based capital model used to measure the risk associated with Alterra s assets, liabilities and premiums. BALANCE SHEET STRENGTH Capitalization: The company s risk-adjusted capitalization is at an excellent level and remains commensurate with the company s rating and business profile per A.M. Best s risk-based capital model (BCAR). Following the merger between Max Capital Group Ltd. and Harbor Point Limited in May 2010, shareholders equity for the consolidated organization was roughly $3 billion. In September 2010, the ultimate holding company issued $350 million of senior notes due in Given that the integration with Markel is currently ongoing, it is possible that the capital within certain operating subsidiaries may be right sized to reflect its future business position within the group. Historically, the company actively managed its capital as it evaluated various opportunities in the market. Liquidity: Historically, the vast majority of fixed income securities have been held in highly liquid and highly rated investments. The individual funds of alternative investments require varying notice periods before redemptions are processed and cash is returned. Fixed income securities fund insurance reserves and related claim payments. Broadly speaking, the company s investment portfolio allocations are similar to that of most Bermuda market companies, which A.M. Best views as relatively conservative. As part of the current integration with Markel, it is possible that the group s investment strategy may change to better optimize the total asset portfolio of the larger organization. Summarized Accounts as of December 31, 2012 Data reflected within all tables of this report has been compiled from the consolidated financial statements of this company (Source: Company Financial Statement). ASSETS 12/31/2011 % of total Cash and equivalents 307, ,735 Long term fixed maturity investments 5,480, ,439,373 Other investments 320, ,419 Trading account securities 164, OPERATING PERFORMANCE Operating Results: Alterra s pro forma five-year average combined ratio has Invested assets 5,965, ,715,792 been relatively stable and profitable; however, overall operating performance has experienced some volatility, most notably in Catastrophe losses in Receivables 734, , from hurricanes Ike and Gustav were minimal, but the impact of the Reinsurance recoverable 961, ,127 financial crisis resulted in significant losses for the investment portfolio. Since then the company has reduced its allocation to hedge funds and has taken a more conservative investment stance, which is in line with industry peers. The current investment posture coupled with the financial market rebound in 2009 has aided in strengthening the company s balance sheet. Consequently, longer-term return measures have been skewed as a result of the Deferred policy acquisition cost Other assets Total assets 109, ,454 8,312, , ,708 8,083,772 volatility experienced in Since the merger in 2010, Alterra s operating performance has been steady LIABILITIES & SURPLUS and stable. In 2011, losses from global catastrophes were on the lower side relative to peers, which A.M. Best expected given the company s risk profile. However, it is also worth noting that the losses from the global catastrophes, including the Japanese and New Zealand earthquakes and flooding in Thailand were within the company s stated risk tolerances which speaks to the Life / Health reserves Property / Casualty reserves 1,159,545 3,823,422 % of total /31/2011 1,190,697 3,472,162 company s catastrophe risk management. Net operating income for the year Unearned premium reserves 726, ,962 ended December 31, 2012 improved in comparison to 2011 primarily due to the significant decline in property catastrophe losses. Operating income for Total policy reserves 5,709, ,388, was however adversely impacted by the recording of a valuation allowance related to deferred tax asset of the US operating subsidiary and a decline in investment income due to lower investment yields on new investment purchases. Other liabilities Total liabilities 495,397 6,204, ,681 5,795,502 Equity - common stock 58, ,829 Paid-in capital 1,343, ,536,927 Accumulated other comprehensive income 218, ,245 Retained earnings 486, ,269 Total equity 2,107, ,288,270 Total liabilities & equity 8,312, ,083, A.M. Best Company, Oldwick, NJ Printed October 11, Page 3 of 23

4 STATEMENT OF INCOME 12/31/2011 Direct premiums written 371, ,763 Reins assumed 1,073,737 1,060,236 Gross premiums written 1,445,375 1,425,999 Reins ceded 461, ,625 Net premiums written 983,474 1,102,374 STATEMENT OF CASH FLOWS 12/31/2011 Net cash provided/(used) in operating activities 240,023 18,115 Net cash provided/(used) in investment activities -39,398 82,372 Net cash provided/(used) in financing activities -323, ,303 Effect of exchange rates on cash 398-1,594 Total increase (decrease) in cash -122, ,410 Change in unearned premiums -65,071-39,447 Net premiums earned 1,048,545 1,141,821 Net investment income 183, ,140 Net realized gains/(losses) 39,085-44,896 Other revenue Total revenue 1,272,346 1,299,760 Benefits & reserves 748, ,071 Operating expenses 314, ,305 Total benefits & expenses 1,063,213 1,150,376 Earnings before interest & taxes (EBIT) 209, ,384 Interest expense 8,302 16,708 Pre-tax income/(loss) from continuing operations 200, ,676 Total taxes ,093 Net income/(loss) before minority interest 201, ,583 Net income/(loss) from continuing operations 201, ,583 Net income/(loss) 201, ,583 STATEMENT OF CHANGES IN EQUITY 12/31/2011 Common shares, beginning balance 58,829 58,829 Common shares, ending balance 58,829 58,829 Paid-in capital - Beg bal 1,536,927 1,804,168 Paid-in capital - Equity units -200,000 Paid-in capital - Contingent capital cost 275,000 Paid-in capital - other 6,545 7,759 Paid-in capital - End bal 1,343,472 1,536,927 AOCI - beginning balance 157,245 90,176 AOCI - change in unrealized gains/losses on investments 66,641 71,035 AOCI - foreign currency adjustments -5,029-3,966 AOCI - ending balance 218, ,245 Cash, beginning balance 302, ,196 Cash, ending balance 180, ,786 HISTORY Alterra became a wholly owned subsidiary of the Markel Corporation effective May 1, 2013, when its parent Alterra Capital Holdings Limited was merged into a direct, wholly owned subsidiary of Markel. Alterra Capital Holdings Limited is the result of the merger between Max Capital Group Ltd. and Harbor Point Limited that took place in May Max Capital Group Ltd. s origins date back to 1999 when it was formed as Maximus Capital Holdings Limited on July 8, Since then, the name has changed several times, and following the 2010 merger, the company has been rebranded. Alterra operates as an insurance company under Bermuda Law and is registered as a Class 4 insurer and Class C long-term insurer. MANAGEMENT Subsidiaries/Affiliates: Markel Europe plc, 100%; Alterra Excess & Surplus Insurance Company, 100%, Alterra America Insurance Company, 100%, Alterra Reinsurance USA Inc., 100%; Alterra Resseguradora do Brasil, 100%; Alterra at Lloyd s, 100%. Officers: President, Richard R. Whitt III; Chief Financial Officer, Anne G. Waleski; Executive Vice President, Britton L. Glisson. Directors: Gerard Albanese, Jr., F. Michael Crowley, David F. Shead, Richard R. Whitt III. REINSURANCE The group provides reinsurance coverage to third party insurance and reinsurance companies and also purchases reinsurance protection for its insurance and reinsurance operations. On an internal basis, the lead company in Bermuda provides reinsurance coverage to its operating affiliates in the U.S. and Europe through respective quota share agreements. BALANCE SHEET ITEMS USD USD USD USD USD (000) (000) (000) (000) (000) Invested assets 5,965,615 5,715,792 5,845,215 4,200,909 4,212,182 Total assets 8,312,583 8,083,772 8,307,072 6,633,242 6,442,008 Debt & notes payable 225,000 Total liabilities 6,204,725 5,795,502 5,775,213 5,106,840 5,158,621 Total equity 2,107,858 2,288,270 2,531,859 1,526,402 1,283,387 Total capital 2,107,858 2,288,270 2,531,859 1,526,402 1,508,387 Retained earnings, beginning balance 535, ,686 Retained earnings, net income 201, ,583 Retained earnings, common dividends 250, ,000 Retained earnings, ending balance 486, ,269 Total shareholder equity 2,107,858 2,288, A.M. Best Company, Oldwick, NJ Printed October 11, Page 4 of 23

5 INCOME STATEMENT ITEMS USD USD USD USD USD (000) (000) (000) (000) (000) Gross premiums written 1,445,375 1,425,999 1,137,261 1,141,388 1,111,567 Net premiums written 983,474 1,102, , , ,524 Net investment income 183, , , , ,552 Net realized gains/(losses) 39,085-44,896 28,263 75, ,838 Net income/(loss) 201, , , , ,494 LIQUIDITY RATIOS (%) RECENT DEVELOPMENTS On December 19, 2012, the ultimate parent, Alterra Capital Holdings Limited, announced that it entered into a merger agreement with Markel Corporation. On May 1, 2013 Markel Corporation announced that it had completed the acquisition of Alterra Capital Holdings Limited. The ratings of Markel Bermuda Limited (formerly known as Alterra Bermuda Limited), its parent Alterra Capital Holdings Limited and its direct operating subsidiaries are unaffected by this announcement. RATING RATIONALE Rating nale: The ratings of Markel Bermuda Limited have been extended to Markel Europe plc based on the role of Markel Europe in the organization s operations. This position is further supported by common ownership, common management, implicit support and internal reinsurance. Total investments to total reserves Liquid assets to total liabilities Total investments to total liabilities Bonds to total reserves PROFITABILITY RATIOS (%) Loss ratio Expense ratio Combined ratio Investment income ratio Return on assets Return on revenues Return on equity LEVERAGE & DEBT RATIOS (%) Net premiums written to equity Cash flow coverage (x) Interest coverage (x) Debt to equity 17.5 Debt to total capital 14.9 Cash and equivalents to total assets Operating Company Non-Life Ultimate Parent: Markel Corporation MARKEL EUROPE PLC 7/8 Wilton Terrace, Dublin 2, Ireland Web: Tel.: Fax: AMB#: AIIN#: AA Ultimate Parent#: BEST S CREDIT RATING Best s Financial Strength Rating: A Outlook: Stable Best s Financial Size Category: XV On May 1, 2013, Alterra was acquired by Markel Corporation (Markel), and the integration is ongoing. Both Alterra and Markel are specialty-focused underwriters. The ratings for the Alterra organization take into consideration its recent change in ownership, the future benefits to be derived from its integration into Markel, as well as some of the immediate benefits gained in terms of enhanced scale, reach, the Markel brand, distribution platform and its leadership position in the excess and surplus lines marketplace in the United States. With integration plans underway, A.M. Best will continue to maintain a dialogue with management to review and discuss Alterra, its future plans and how the Alterra organization will ultimately align with Markel and its existing members. Until that time, the ratings of Alterra are considered as if it were a bolt-on acquisition and assume no material changes to business profile, capitalization, performance as well as intercompany reinsurance. In addition to the new owner, these ratings also reflect Markel Bermuda s solid financial performance through the second quarter of 2013 and its strong risk-adjusted capitalization. Alterra has platforms and operations in major global underwriting markets, which give it flexibility to optimize its underwriting portfolio composition. Being part of Markel, revenue and earnings prospects are likely to be enhanced through synergies, the leveraging of existing business relationships and efficiencies gained. Partially offsetting these positive rating attributes are the current soft market in casualty classes of business, which represents a significant portion of Alterra s risk portfolio, and the challenging investment climate that places increased pressure on underwriting profitability. Rating factors that could lead to a downgrading of the Alterra organization s ratings and/or a revised outlook to negative include unfavorable operating profitability trends, outsized catastrophe or investment losses relative to peers, significant adverse loss reserve development or a material decline in its risk-adjusted capital. Alternatively, factors that could lead to an upgrading of the ratings include continued favorable operating profitability coupled with maintenance of a strong risk-adjusted capital level and/or explicit or implicit support from Markel that would enhance the capital or profile of the Alterra organization. FIVE YEAR RATING HISTORY Date Best s FSR Date Best s FSR 08/09/13 A 05/13/10 A 06/20/12 A 03/04/10 A- u 08/05/11 A 12/11/08 A- 09/07/10 A BUSINESS PROFILE Markel Europe plc is a member of Alterra Capital Holdings Limited, a Bermuda-based holding company that, through its operating subsidiaries, provides traditional reinsurance and insurance of both long-tailed and short-tailed liabilities. Markel Europe plc is a multi-line provider producing business from the London market, continental Europe, Latin America and Australasia. All business is written through the broker market. Lines of business include excess liability, professional liability, aviation & satellite and property insurance. The company also offers excess of loss and quota share reinsurance products in the property, casualty, marine and energy, terror, surety and aviation classes A.M. Best Company, Oldwick, NJ Printed October 11, Page 5 of 23

6 Markel Bermuda Limited is the Bermuda-based operating unit of Alterra Capital Holdings Limited. Alterra Capital Holdings Ltd. was a publicly traded company on the NASDAQ exchange prior to being acquired by Markel Corporation on May 1, Alterra Capital Holdings Limited was formed as a result of the merger between Max Capital Group Ltd. and Harbor Point Limited in May The holding company and the operating companies were rebranded with the Alterra name. The integration of Alterra s operations into Markel are currently ongoing. Through Alterra Capital Holdings Limited s operating subsidiaries, traditional reinsurance and insurance of both long-tailed and short-tailed liabilities are provided. Affiliated operating companies distribute products for the group in the U.S., Europe (including Lloyd s), Canada, Japan, Latin America, Australia and New Zealand. Underwriting operations provide a diversified and balanced mix of short-tail and long-tail insurance and reinsurance capacity. Covered risks include the (re)insurance of general casualty, professional lines, workers compensation, accident and health, medical malpractice, property, agriculture, aviation, credit/surety, and marine and energy. The Reinsurance segment products are offered on both excess of loss and quota share bases, and are generally written on market terms, where the company participates alongside other reinsurers. Whole account coverage is underwritten with a focus on casualty risk exposures. The U.S. Insurance lines segment (formerly known as Alterra Excess & Surplus) provides access to the U.S. excess and surplus lines market with coverage in property, casualty, marine, umbrella and excess liability to the middle market. In June 2008, Alterra America Insurance Company was acquired. This company offers the same type of coverage but on an admitted basis. In November 2008, Imagine Group (UK) Limited (Imagine Lloyd s), a Lloyd s insurance operation, was acquired from Imagine Insurance Company Limited. It had been rebranded as Alterra at Lloyd s Limited to form the Lloyds segment and through Lloyd s Syndicate 1400, offers a diverse portfolio of specialty risks, which includes accident and health, agriculture, aviation, international casualty, financial institutions, marine, professional indemnity, property, employers and public liability, and surety. The Lloyd s syndicates complement underwriting operations in Bermuda, Ireland and the U.S. Alterra Capital Holdings Limited also owned Alterra Europe plc, which was a (re)insurance company domiciled in Ireland. This company has been rebranded as Markel Europe plc. RISK MANAGEMENT Alterra s enterprise risk management (ERM) framework permeates all levels of the organization. There were several committees set up to oversee the various operational and risk functions as well as delegated authority. Underwriting and investing activities were modeled on an integrated basis and proprietary and non-proprietary models were used to analyze risk characteristics of its liabilities and assets. It is expected that ERM will continue to support Alterra although going forward the ERM of Alterra will be under the umbrella of Markel. This is viewed to be a positive rating attribute. OPERATING PERFORMANCE Since the merger in 2010, Alterra s operating performance has been steady and stable. In 2011, losses from global catastrophes were on the lower side relative to peers, which A.M. Best expected given the company s risk profile. However, it is also worth noting that the losses from the global catastrophes, including the Japanese and New Zealand earthquakes and flooding in Thailand were within the company s stated risk tolerances which speaks to the company s catastrophe risk management. Net operating income for the year ended December 31, 2012 improved in comparison to 2011 primarily due to the significant decline in property catastrophe losses. Operating income for 2012 was however adversely impacted by the recording of a valuation allowance related to deferred tax asset of the US operating subsidiary and a decline in investment income due to lower investment yields on new investment purchases. BALANCE SHEET STRENGTH Capitalization: The company s risk-adjusted capitalization is at an excellent level and remains commensurate with the company s rating and business profile per A.M. Best s risk-based capital model (BCAR). Following the merger between Max Capital Group Ltd. and Harbor Point Limited in May 2010, shareholders equity for the consolidated organization was roughly $3 billion. In September 2010, the ultimate holding company issued $350 million of senior notes due in Given that the integration with Markel is currently ongoing, it is possible that the capital within certain operating subsidiaries may be right sized to reflect its future business position within the group. Historically, the company actively managed its capital as it evaluated various opportunities in the market. Liquidity: Historically, the vast majority of fixed income securities have been held in highly liquid and highly rated investments. The individual funds of alternative investments require varying notice periods before redemptions are processed and cash is returned. Fixed income securities fund insurance reserves and related claim payments. Broadly speaking, the company s investment portfolio allocations are similar to that of most Bermuda market companies, which A.M. Best views as relatively conservative. As part of the current integration with Markel, it is possible that the group s investment strategy may change to better optimize the total asset portfolio of the larger organization. Summarized Accounts as of December 31, 2012 Data reflected within all tables of this report has been compiled from the financial statements of this company (Source: Company Financial Statement). Operating Results: Alterra s pro forma five-year average combined ratio has been relatively stable and profitable; however, overall operating performance has experienced some volatility, most notably in Catastrophe losses in 2008 from hurricanes Ike and Gustav were minimal, but the impact of the financial crisis resulted in significant losses for the investment portfolio. Since then the company has reduced its allocation to hedge funds and has taken a more conservative investment stance, which is in line with industry peers. The current investment posture coupled with the financial market rebound in 2009 has aided in strengthening the company s balance sheet. Consequently, longer-term return measures have been skewed as a result of the volatility experienced in A.M. Best Company, Oldwick, NJ Printed October 11, Page 6 of 23

7 STATEMENT OF INCOME 12/31/2011 Technical account: Direct premiums 121, ,979 Reinsurance premiums assumed 125, ,171 Gross premiums written 247, ,150 Reinsurance ceded 196, ,686 Net premiums written 50,760 36,464 Increase/(decrease) in gross unearned premiums 5,992 44,899 Reinsurers share unearned premiums -2,865 34,265 Net premiums earned 41,903 25,830 Total underwriting income 41,903 25,830 Net claims paid 11,943 9,736 Net increase/(decrease) in claims provision 25,141 5,439 Net claims incurred 37,084 15,175 Management expenses 25,717 22,385 Acquisition expenses -11,067-11,216 Net operating expenses 14,650 11,169 Total underwriting expenses 51,734 26,344 Balance on technical account -9, Combined technical account: Direct premiums 121, ,979 Reinsurance premiums assumed 125, ,171 Gross premiums written 247, ,150 Reinsurance ceded 196, ,686 Net premiums written 50,760 36,464 Increase/(decrease) in gross unearned premiums 5,992 44,899 Increase/(decrease) in reinsurers share unearned premiums -2,865 34,265 Net premiums earned 41,903 25,830 Total revenue 41,903 25,830 Net claims paid 11,943 9,736 Net increase/(decrease) in claims provision 25,141 5,439 Net claims incurred 37,084 15,175 Management expenses 25,717 22,385 Acquisition expenses -11,067-11,216 Net operating expenses 14,650 11,169 Total underwriting expenses 51,734 26,344 Balance on combined technical account -9, Non-technical account: Net investment income 4,551 3,901 Realised capital gains/(losses) -1,040 1,899 Unrealised capital gains/(losses) 5, Profit/(loss) before tax -1,121 4,530 Taxation Profit/(loss) after tax ,582 Other adjustments -75 Retained profit/(loss) for the financial year ,507 Retained profit/(loss) brought forward 46,895 43,388 Retained profit/(loss) carried forward 45,951 46,895 MOVEMENT IN CAPITAL & SURPLUS 12/31/2011 Capital & surplus brought forward 152, ,036 Change in share capital 2,178 Change in non-distributable reserves 2,249 34,599 Change in other reserves -775 Profit or loss for the year ,582 Other changes -3,803 Total change in capital & surplus 1,305 35,781 Capital & surplus carried forward 154, ,817 ASSETS % of total 12/31/2011 Cash & deposits with credit institutions 52, ,128 Bonds & other fixed interest securities 220, ,369 Liquid assets 272, ,497 Total investments 272, ,497 Reins. sh. of tech. reserves - unearned premiums 109, ,069 Reinsurers share of technical reserves - claims 414, ,419 Total reinsurers share of technical reserves 524, ,488 Insurance/reinsurance debtors 137, ,116 Total debtors 137, ,116 Fixed assets Prepayments & accrued income 31, ,548 Total assets 966, ,823 LIABILITIES % of total 12/31/2011 Capital 6, ,616 Paid-up capital 6, ,616 Non-distributable reserves 101, ,306 Retained earnings 46, ,313 Current year net income ,582 Capital & surplus 154, ,817 Gross provision for unearned premiums 139, ,031 Gross provision for outstanding claims 485, ,854 Total gross technical reserves 624, ,885 Insurance/reinsurance creditors 80, ,118 Inter-company creditors 66, ,308 Total creditors 147, ,426 Accruals & deferred income 39, ,695 Total liabilities & surplus 966, ,823 MANAGEMENT Directors: John Boylan, Andrew Davies, Trevor Carvey, Michelle Moore, James E. O Mahoney, J. Walker Rainey, Ralph Snedden, William Stovin, Anne Whitaker, Henry Withinshaw 2013 A.M. Best Company, Oldwick, NJ Printed October 11, Page 7 of 23

8 ANALYSIS OF GROSS PREMIUMS WRITTEN USD USD USD USD USD (000) (000) (000) (000) (000) Aviation 30,570 31,274 45,189 34,849 25,807 Liability 66,533 63,879 57,637 70,703 73,347 Property 24,471 24,826 19,649 13,747 12,690 Reinsurance 125, ,171 31,493 Total non-life 247, , , , ,844 REINSURANCE PROFITABILITY RATIOS (%) Loss ratio Operating expense ratio Combined ratio Net investment income ratio Operating ratio Return on net premiums written Return on total assets Return on capital & surplus The group provides reinsurance coverage to third party insurance and reinsurance companies and also purchases reinsurance protection for its insurance and reinsurance operations. On an internal basis, the lead company in Bermuda provides reinsurance coverage to its operating affiliates in the U.S. and Europe through respective quota share agreements. GEOGRAPHICAL DISTRIBUTION OF PREMIUMS WRITTEN USD USD (000) (000) Gross % of total 12/31/2011 Gross European Community 84, ,386 Other Europe 2, Total Europe 86, ,384 Other World-Wide 160, ,766 Total 247, ,150 BALANCE SHEET ITEMS USD USD USD USD USD (000) (000) (000) (000) (000) Liquid assets 272, , , , ,119 Total investments 272, , , , ,119 Total assets 966, , , , ,152 Total gross technical reserves 624, , , , ,534 Net technical reserves 99,900 65,397 49,758 36,079 36,902 Total liabilities 812, , , , ,695 Capital & surplus 154, , ,036 60,225 49,457 INCOME STATEMENT ITEMS USD USD USD USD USD (000) (000) (000) (000) (000) Gross premiums written 247, , , , ,844 Net premiums written 50,760 36,464 21,291 12,221 12,905 Balance on technical account(s) -9, , Profit/(loss) before tax -1,121 4,530 4,494 12, Profit/(loss) after tax ,582 3,947 10, LIQUIDITY RATIOS (%) Total debtors to total assets Liquid assets to net technical reserves Liquid assets to total liabilities Total investments to total liabilities LEVERAGE RATIOS (%) Net premiums written to capital & surplus Net technical reserves to capital & surplus Gross premiums written to capital & surplus Gross technical reserves to capital & surplus Total debtors to capital & surplus Total liabilities to capital & surplus Ultimate Parent: Markel Corporation ALTERRA REINSURANCE USA INC. Greenwich, CT 535 Springfield Avenue, Summit, NJ Web: Tel: Fax: AMB#: NAIC#: Ultimate Parent#: FEIN#: BEST S CREDIT RATING Best s Financial Strength Rating: A Outlook: Stable Best s Financial Size Category: XV RECENT DEVELOPMENTS On December 19, 2012, the ultimate parent, Alterra Capital Holdings Limited, announced that it entered into a merger agreement with Markel Corporation. On May 1, 2013 Markel Corporation announced that it had completed the acquisition of Alterra Capital Holdings Limited. The ratings of Markel Bermuda Limited (formerly known as Alterra Bermuda Limited), its parent Alterra Capital Holdings Limited and its direct operating subsidiaries are unaffected by this announcement. RATING RATIONALE Rating nale: The ratings of Markel Bermuda Limited. have been extended to Alterra Reinsurance USA, Inc., based on its affiliation with Markel Bermuda Limited. and its role in the organization s operations. This position is further supported by common ownership, common management, implicit support and internal reinsurance. On May 1, 2013, Alterra was acquired by Markel Corporation (Markel), and the integration is ongoing. Both Alterra and Markel are specialty-focused underwriters. The ratings for the Alterra organization take into consideration its recent change in ownership, the future benefits to be derived from its integration into Markel, as well as some of the immediate benefits gained in terms of enhanced scale, reach, the Markel brand, distribution platform and its leadership position in the excess and surplus lines marketplace in the United States. With integration plans underway, A.M. Best will continue to maintain a dialogue with management to review and discuss Alterra, its future plans and how the Alterra organization will ultimately align with Markel and its existing members. Until that time, the ratings of Alterra are considered as if it were a bolt-on acquisition and assume no material changes to business profile, capitalization, performance as well as intercompany reinsurance. In addition to the new owner, these ratings also reflect Markel Bermuda s solid financial performance through the second quarter of 2013 and its strong risk-adjusted capitalization. Alterra has platforms and operations in major global underwriting markets, which give it flexibility to optimize its underwriting portfolio composition. Being part of Markel, revenue and earnings prospects are likely to be enhanced through synergies, the leveraging of existing business relationships and efficiencies gained A.M. Best Company, Oldwick, NJ Printed October 11, Page 8 of 23

9 Partially offsetting these positive rating attributes are the current soft market in casualty classes of business, which represents a significant portion of Alterra s risk portfolio, and the challenging investment climate that places increased pressure on underwriting profitability. Rating factors that could lead to a downgrading of the Alterra organization s ratings and/or a revised outlook to negative include unfavorable operating profitability trends, outsized catastrophe or investment losses relative to peers, significant adverse loss reserve development or a material decline in its risk-adjusted capital. Alternatively, factors that could lead to an upgrading of the ratings include continued favorable operating profitability coupled with maintenance of a strong risk-adjusted capital level and/or explicit or implicit support from Markel that would enhance the capital or profile of the Alterra organization. FIVE-YEAR RATING HISTORY Date Best s FSR Date Best s FSR 08/09/13 A 05/13/10 A 06/20/12 A 12/01/09 A 08/05/11 A 09/26/08 A 09/07/10 A KEY FINANCIAL INDICATORS ($000) Statutory Data Direct Premiums Written Net Premiums Written Pre-tax Operating Income Net Income Total Admitted Assets Policyholders Surplus ,804 10, , , ,443 20,763 11, , , ,060 2,649-2,388 1,058, , ,645 11,700 3,823 1,177, , ,664 15,900 9,713 1,299, ,627 Profitability Leverage Liquidity Comb. Inv. Yield (%) Pre-tax ROR (%) NA Inv Lev NPW to PHS Net Lev. Overall Liq. (%) Oper. Cash flow (%) Yr (*) Within several financial tables of this report, this company is compared against the Reinsurance Composite. (*) Data reflected within all tables of this report has been compiled from the company-filed statutory statement. BUSINESS PROFILE Markel Bermuda Limited is the Bermuda-based operating unit of Alterra Capital Holdings Limited. Alterra Capital Holdings Limited was a publicly traded company on the NASDAQ exchange prior to being acquired by Markel Corporation on May 1, Alterra Capital Holdings Limited was formed as a result of the merger between Max Capital Group Ltd. and Harbor Point Limited in May The holding company and the operating companies were rebranded with the Alterra name. The integration of Alterra s operations into Markel are currently ongoing. Through Alterra Capital Holdings Limited s operating subsidiaries, traditional reinsurance and insurance of both long-tailed and short-tailed liabilities are provided. Affiliated operating companies distribute products for the group in the U.S., Europe (including Lloyd s), Canada, Japan, Latin America, Australia and New Zealand. Underwriting operations provide a diversified and balanced mix of short-tail and long-tail insurance and reinsurance capacity. Covered risks include the (re)insurance of general casualty, professional lines, workers compensation, accident and health, medical malpractice, property, agriculture, aviation, credit/surety, and marine and energy. The Reinsurance segment products are offered on both excess of loss and quota share bases, and are generally written on market terms, where the company participates alongside other reinsurers. Whole account coverage is underwritten with a focus on casualty risk exposures. The U.S. Insurance lines segment (formerly known as Alterra Excess & Surplus) provides access to the U.S. excess and surplus lines market with coverage in property, casualty, marine, umbrella and excess liability to the middle market. In June 2008, Alterra America Insurance Company was acquired. This company offers the same type of coverage but on an admitted basis. In November 2008, Imagine Group (UK) Limited (Imagine Lloyd s), a Lloyd s insurance operation, was acquired from Imagine Insurance Company Limited. It had been rebranded as Alterra at Lloyd s Limited to form the Lloyds segment and through Lloyd s Syndicates 1400, offers a diverse portfolio of specialty risks, which includes accident and health, agriculture, aviation, international casualty, financial institutions, marine, professional indemnity, property, employers and public liability, and surety. The Lloyd s syndicates complement underwriting operations in Bermuda, Ireland and the U.S. Alterra Capital Holdings Ltd also owned Alterra Europe plc, which was a (re)insurance company domiciled in Ireland. This company has been rebranded as Markel Europe plc. TOTAL PREMIUM COMPOSITION & GROWTH ANALYSIS Reinsurance DPW Prem Assumed ($000) (% Chg) ($000) (% Chg) , , , , , Yr CAGR Reinsurance Prem Ceded NPW ($000) (% Chg) ($000) (% Chg) , , , , , , , , , , Yr CAGR Territory: The company is licensed in the District of Columbia, AK, AR, CA, CT, DE, FL, GA, HI, IL, IN, IA, KS, LA, ME, MD, MA, MI, MS, MO, MT, NE, NV, NH, NJ, NM, NY, NC, ND, OH, OK, OR, PA, RI, SC, SD, TN, TX, VT, VA, WA, WV, WI and WY. Credit is allowed for reinsurance as a licensed reinsurer in AL, AZ, CO, ID, KY, MN and UT. Effective May 18, 2012, the company received a certificate of authority from the U.S. Department of the Treasury authorizing it to qualify as an acceptable reinsurer on obligations required by U.S. laws A.M. Best Company, Oldwick, NJ Printed October 11, Page 9 of 23

10 2012 BY-LINE BUSINESS ($000) Reinsurance Reinsurance DPW Prem Assumed Prem Ceded Product Line ($000) (%) ($000) (%) ($000) (%) Oth Liab CM 128, , Reins-Casualty 71, , Priv Pass Auto Liab 34, , Credit 30, , Oth Liab Occur 28, , Fire 25, , Allied Lines 22, , Homeowners 21, , Aircraft 23, , Auto Physical 17, , Reins-Surety etc 9, , Med Prof Liab CM 9, , All Other Total 425, , Business NPW Retention Product Line ($000) (%) (%) Oth Liab CM 61, Reins-Casualty 34, Priv Pass Auto Liab 16, Credit 14, Oth Liab Occur 13, Fire 12, Allied Lines 10, Homeowners 10, Aircraft 9, Auto Physical 8, Reins-Surety etc 4, Med Prof Liab CM 4, All Other Total 201, BY-LINE RESERVES ($000) Product Line Oth Liab CM 93,125 63,895 36,374 16,716 3,097 Reins-Casualty 61,006 38,245 19,592 9,295 3,688 Priv Pass Auto Liab 12,543 10,143 4,320 2, Credit 11,469 7,287 3,141 1, Oth Liab Occur 20,816 16,886 13,064 10,895 3,326 Fire 21,964 16,549 6,208 3,194 2,326 Allied Lines 15,672 5,858 5, Homeowners 5,706 3, Aircraft 7,914 4,895 1, Auto Physical 6,861 5,667 2, Reins-Surety etc 3,649 2,250 1, Med Prof Liab CM 4,983 3,161 1, All Other 7,220 10,858 9,590 5,647 3,810 Total 272, , ,750 52,209 17,729 GEOGRAPHIC BREAKDOWN BY DIRECT PREMIUM WRITINGS ($000) Arkansas -4 All Other -15 Total -19 RISK MANAGEMENT Alterra s enterprise risk management (ERM) framework permeates all levels of the organization. There were several committees set up to oversee the various operational and risk functions as well as delegated authority. Underwriting and investing activities were modeled on an integrated basis and proprietary and non-proprietary models were used to analyze risk characteristics of its liabilities and assets. It is expected that ERM will continue to support Alterra although going forward the ERM of Alterra will be under the umbrella of Markel. This is viewed to be a positive rating attribute. OPERATING PERFORMANCE Operating Results: Alterra s pro forma five-year average combined ratio has been relatively stable and profitable; however, overall operating performance has experienced some volatility, most notably in Catastrophe losses in 2008 from hurricanes Ike and Gustav were minimal, but the impact of the financial crisis resulted in significant losses for the investment portfolio. Since then the company has reduced its allocation to hedge funds and has taken a more conservative investment stance, which is in line with industry peers. The current investment posture coupled with the financial market rebound in 2009 has aided in strengthening the company s balance sheet. Consequently, longer-term return measures have been skewed as a result of the volatility experienced in Since the merger in 2010, Alterra s operating performance has been steady and stable. In 2011, losses from global catastrophes were on the lower side relative to peers, which A.M. Best expected given the company s risk profile. However, it is also worth noting that the losses from the global catastrophes, including the Japanese and New Zealand earthquakes and flooding in Thailand were within the company s stated risk tolerances which speaks to the company s catastrophe risk management. Net operating income for the year ended December 31, 2012 improved in comparison to 2011 primarily due to the significant decline in property catastrophe losses. Operating income for 2012 was however adversely impacted by the recording of a valuation allowance related to deferred tax asset of the US operating subsidiary and a decline in investment income due to lower investment yields on new investment purchases. PROFITABILITY ANALYSIS ($000) Company Pre-tax After-tax Operating Operating Net Total Income Income Income Return ,036 2, ,763 11,217 11,050 11, ,649-5,151-2,388-5, ,700 2,858 3,823 7, ,900 9,664 9,713-13,266 5-Yr Total 61,048 20,908 22, Company Industry Composite Pre-tax Return Operating Pre-tax Return Operating ROR on PHS ROR on PHS Yr Avg A.M. Best Company, Oldwick, NJ Printed October 11, Page 10 of 23

11 UNDERWRITING EXPERIENCE Net Undrw Loss s Expense s Income ($000) Pure Loss LAE Loss LAE & Net Comm. Other Exp. Total Exp. Div. Pol. Comb , , , , , Yr Total/Avg -55, BY-LINE LOSS RATIO Product Line 5-Yr Avg Oth Liab CM Reins-Casualty Priv Pass Auto Liab Credit Oth Liab Occur Fire Allied Lines Homeowners Aircraft Auto Physical Reins-Surety etc Med Prof Liab CM All Other Total DIRECT LOSS RATIO BY STATE 5-Yr Avg Arkansas All Other Total INVESTMENT GAINS Company Net Realized Unrealized Inv Capital Capital Year Income Gains Gains ,856-1, , ,988 2,763-2, , , , ,979 5-Yr Total 116,491 1,958-22,720 Capitalization: The company s risk-adjusted capitalization is at an excellent level and remains commensurate with the company s rating and business profile per A.M. Best s risk-based capital model (BCAR). Following the merger between Max Capital Group Ltd. and Harbor Point Limited in May 2010, shareholders equity for the consolidated organization was roughly $3 billion. In September 2010, the ultimate holding company issued $350 million of senior notes due in Given that the integration with Markel is currently ongoing, it is possible that the capital within certain operating subsidiaries may be right sized to reflect its future business position within the group. Historically, the company actively managed its capital as it evaluated various opportunities in the market. CAPITAL GENERATION ANALYSIS ($000) Source of Surplus Growth Pre-tax Realized Unrealized Operating Capital Income Capital Year Income Gains Taxes Gains ,036-1,653 7, , , ,649 2,763 7,800-2, , ,843 3, , ,236-22,979 5-Yr Total 61,048 1,958 40,140-22,720 Source of Surplus Growth Net Change % Chg Contrib. Other in in Year Capital Changes PHS PHS ,521 3,600 6, ,709 2,185 15, ,670 1, , ,664 3,368 15, ,275 7,141-4, Yr Total 145,839 18, , QUALITY OF SURPLUS ($000) Surplus Other Contributed Unassigned Year Notes Debt Capital Surplus ,177 6, ,886 19, ,555 15, ,220 26, ,495 20,132 Year-End Conditional Adjusted Year PHS Reserves PHS , , , , , , , , , ,703 LEVERAGE ANALYSIS Company Industry Composite Res. Res. Company Industry Composite NPW to to Net Gross NPW to to Net Gross Inv Inc Inv Return on Total Inv Inc Inv PHS PHS Lev. Lev. PHS PHS Lev. Lev. Growth Yield Inv Assets Return Growth Yield Year (%) (%) (%) (%) (%) (%) Current BCAR: Yr Avg CEDED REINSURANCE ANALYSIS ($000) Company Industry Composite BALANCE SHEET STRENGTH Bus. Reins. Ceded Bus. Reins. Ceded Ceded Ret. Recov. to Reins. to Ret. Recov. to Reins. to Reins. Total (%) PHS (%) PHS (%) (%) PHS (%) PHS (%) , , , , , A.M. Best Company, Oldwick, NJ Printed October 11, Page 11 of 23