Have you ever heard of a "jitney bus"? It was one of the vehicles that started the motor carrier industry back in the Roaring Twenties-an old car converted into a pint-sized bus. Many were owned and operated by World War I veterans, who found it tough sledding to make a living out of the nickel fares which gave the jalopies their name, (Jitney was a slang word for a nickel.) Public transportation by automobile was a daring innovation in those days, and there was no G.I. Bill of Rights to help the veteran pioneers. To make matters worse, the leary public demanded protection against the accidents the struggling operators were having.

That's where Samuel A. Markel, the Founder of our Company, came into the picture.

When Norfolk, Virginia passed the first city ordinance requiring the buses to be insured, Mr. Markel, owner of a small local insurance agency, tried to place the coverage with the companies he represented, without any success. No company was willing to take that kind of gamble, and no one blamed them.

Finally, in desperation, Mr. Markel got all the jitney operators together and organized a small mutual insurance company to take care of their needs. He then wrote the first public transportation policy on record and filed it with the city authorities. Richmond soon took the cue from Norfolk and passed a similar law. The newly formed Mutual Casualty Association was pressed into service there also, and since Richmond had more buses than Norfolk, the headquarters was moved to the Capitol City.

Insuring jitney buses proved to be even more costly than anticipated. Since the insureds could not afford higher premiums, there was only one solution if the company was to stay in business-reduce the number and costs of accidents. To accomplish this, Mr. Markel established two "firsts" in transportation insurance-safety engineering to prevent accidents by eliminating their causes, and a claims department geared to lower costs by prompt settlements and 24-hour service.

In 1926, Mutual Casualty Company was reorganized into a stock company, American Fidelity & Casualty Company. And it was only natural at that time for a company specializing in insuring buses to welcome into the fold another infant transportation industry snubbed by other insurance companies-motor freight carriers.

This was the age of the so-called "wild-catters". Anyone with a truck or bus could operate wherever he wanted and charge whatever he could get. The industry was flooded with many "fly-by-night" operators not at all interested in rendering a legitimate public service. As a result, the public clamored for restrictive legislation and the railroads looked on happily at the prospects of early suicide among their baby competitors.

Mr. Markel felt that the future of legitimate truck and bus operations, as well as his own company, was at stake, and proceeded to dedicate himself to cleaning house within the industry. He helped organize bus and truck associations in almost every state to present a united front against undesirable operators and restrictive legislation that would be harmful to the industry. He also assisted in drafting the National Motor Carrier Act of 1935, which paved the way for control of interstate transportation. Routes, rates and schedules fell under the supervision of state and federal governments, and the public was assured of adequate, safe, and permanent service. The motor transportation industry had come of age.

Markel Service Formed

It had become a difficult problem for American Fidelity & Casualty to keep pace with the growth of the bus and truck fleets it insured - the company was, at this point, the largest insurer of trucks and buses in the country. They were spreading their operations nationwide, while the company, because of its comparatively small size, was only licensed in a handful of states. Arrangements were made to use the policies of other insurance companies reinsured by AF&C in those unlicensed states. However, there was still the problem of providing service in those areas, for Mr. Markel had long since learned that trucks and buses could not be successfully insured without intensive safety and claims service.

Mr. Markel had the solution. In 1930, he established Markel Service, Incorporated along with his older pair of twin sons, Lewis and Irvin, who had been working with him for some time. Markel Service was formed to be a separate, nationwide service organization to take care of both the direct and reinsured business of AF&C. The younger pair of twins, Stanley and Milton, joined the Companies soon afterwards. Markel Service grew and developed over the two decades between 1930 and 1950, as did the management team. When Sam Markel died in 1954, there was a seasoned, second generation management team to carry on in the traditions set by their pioneer father.

Expansion to Canada

Markel Service became known as the country's leading motor carrier insurance market, and in 1951 it was approached by the Ontario Trucking Association to extend its operations into Canada. The Company quickly went international, forming the same year a subsidiary, Markel Service Canada, Ltd., with its Head Office in Toronto. Operations paralleled those in the U.S. with identical underwriting, safety and claims service.

The U.S. Operations Change

Meanwhile, in the U.S., the business of Markel Service, Inc. had been growing rapidly, keeping pace with the outstanding growth of the motor transportation industry. Given the limited size of AF&C, it finally became necessary to use the facilities and capacity of other insurance companies. To accomplish this, Markel Service changed its role from that of company managers to a general agency and independent servicing organization in 1959. Its nationwide claims division became National Claims Service, an independent adjusting company, offering services to numerous insurance carriers and self-insureds. The Safety Engineering Division began marketing its many services directly to truck and bus fleets throughout the country. These changes in operations were also marked by the entry into the business of third generation of the Markel family.

The insurance industry began to change. The old line, standard companies were geared for the kinds of coverage readily marketed through their large agency plants. They were not equipped to handle new, unique or unusual risks that did not fit into their normal patterns and rate filings. And yet social conditions were changing, creating new legitimate enterprises that required insurance to stay in business. In addition, a suddenly claims-conscious public put products liability, medical malpractice, directors and officers liability, and other highly volatile coverages on the restricted list of many insurers. This gave rise to the formation of many excess/surplus and specialty companies, with complete pricing flexibility and the ability to manuscript policy forms to fit the particular exposure. It also gave rise to specialty general agents to market the business for these new carriers.

The third family generation, by then in management positions, enthusiastically latched on to the opportunity to diversify Markel Service's product lines. Tony Markel, Steve Markel and Gary Markel found that it was not an easy task for a company that specialized exclusively in truck and bus-related business for almost 40 years to venture into new coverage lines. Qualified people with different skills had to be employed and many present personnel had to be cross-trained. The company could not afford to lose the reputation for service and professionalism it had built over four decades. Finally, agency agreements had to be made with the top excess/surplus and specialty insurance companies so the business produced could be safely and properly placed. It was difficult, but they did it, staffing each production office with the expertise to handle the other coverages in addition to motor carrier insurance.

Overseas Partners

Markel Service had placed transportation oriented coverages with Lloyd's of London for many years. Extremely close relations were established with the Hogg Robinson Group Limited, an international conglomerate and one of the largest and most successful Lloyd's brokerage firms, with offices in more than thirty different countries. Hogg Robinson had for some time indicated a desire to purchase a substantial interest in the company, and in 1978 arrangements were completed for them to acquire newly issued common stock, amounting to a 30% holding, for a price of $2.5 million making the company's a little over $8 million. Markel Service now had the benefit of world-wide facilities plus ready funds available to complete a long planned project-the formation of its own excess/surplus insurance company subsidiary.

A New Insurance Company

The business focus of the entire corporation was changed forever. In October of 1980, with seasoned management to guide it, Essex Insurance Company (Essex) was incorporated and licensed to underwrite excess and surplus lines insurance in the State of Delaware. Essex began writing business as a property insurer located in White Bear Lake, Minnesota and was subsequently re-located to Richmond. Markel enthusiastically pursued the diversification of the Company's product base. Underwriters with experience in specialty markets were hired, existing staff was cross-trained and agency agreements were procured from the top excess and surplus lines and specialty insurers.

The strategy worked. Since 1980, Essex has earned a reputation for delivering quality products and first-class service to its producers and customers. It has also achieved an enviable record of profitability.

Going Public

Markel Service, Inc., an operating company itself, now had four U.S. and three Canadian subsidiaries, plus a separate revenue producing Safety Engineering Division. The next step was a natural evolution that had been a part of the early planning stages-the establishment of a holding company that would own Markel Service and all of its subsidiaries. In this way, a centralized management could assure proper allocation among the companies of financial and human resources. It could consolidate planning and budgeting, and take maximum advantage of all synergistic opportunities. In addition, it could be an important vehicle for future expansion or acquisitions. The reorganization produced Markel Corporation as the company owning all operating entities.

Markel Corporation was born when the family decided that it was time to centralize the management of its various holdings. Under this scenario, each subsidiary would develop its own identity and reputation and its own products and markets, and still benefit from the financial and human resources of a combined operation. The corporate entity would also provide an important vehicle for future expansion and acquisitions.

Because ready capital would be needed to fuel that expansion and fund those acquisitions, the Markels decided to take the company public. In December 1986, Markel Corporation (Markel) made an initial public offering (IPO) of stock. Shares were offered at $8.33 per share giving the company a market value of almost $15 million. All employees received an opportunity to share in the ownership of the company, reflecting the family's belief that as owners, employees would be intensely committed to Markel's future success.

Strategic Evolution

Following the IPO, the strategic focus of the Company began to shift from insurance brokerage and services to underwriting. Encouraged by its success with Essex Insurance Company, Markel realized that specialty and niche insurance markets were underserved by standard insurers. A reputable specialty insurer who was committed to understanding the unique needs of customers in these markets would surely grow. The Company outlined a strategic plan that would capitalize on the U.S. opportunities presented. The cornerstone of the plan was to further develop its presence and focus in the U.S. specialty insurance marketplace -- as an underwriter, while divesting itself of the brokerage, claims and Canadian operations.

Shand, Morahan & Company

One of the first, major steps toward becoming a leading specialty lines underwriter was the purchase of Shand, Morahan & Company (Shand) in Deerfield, IL. Formed in 1970, Shand was well respected as a managing general agent and underwriter of professional liability, malpractice and errors & omissions coverages. By 1987, Shand was underwriting most of its business through its own excess & surplus lines subsidiary, Evanston Insurance Company. And, having survived the turbulent insurance markets of the early and mid-1980's, Shand had learned the importance of strong underwriting results to an insurer's long-term success. Markel felt that Shand was positioned for profitable growth in the future. Moreover, the acquisition of Shand would broaden its excess and surplus lines presence, add to its bank of underwriting talent and complement Essex's operations and products. Accordingly, Markel struck a deal to acquire about half of Shand Morahan's stock in December 1987. In December 1990, the Company increased its ownership of Shand to 100%.

Shand has maintained its leadership position in the professional liability, malpractice and E&O marketplace by developing, refining and enhancing its products to meet the changing needs of its customers. In the past few years it has introduced new coverages such as Employment Practices Liability, Service & Technical Professions Liability, Contingent Contractor's Liability and Financial Advisors Liability.

Markel Insurance Company

As the eighties drew to a close, the Company seized another opportunity to further its strategic vision. For over 60 years, the Rhulen Agency (Rhulen) of Monticello, New York, had been developing insurance programs for specialized customers such as children's summer camps and youth organizations. Markel recognized the potential in Rhulen's existing business, and also saw opportunities to expand into other niche sports and youth-related markets. Late in 1989, the Company added Rhulen to its family of specialty insurance operations.

Though Rhulen was a brokerage operation at the time of acquisition, Markel immediately began to shape its future as an underwriter. Over the next few years, most of the business that Rhulen had placed with unaffiliated insurance companies was shifted to one of Markel's own insurance company subsidiaries. In order to facilitate this shift and all of the changes that it brought, Markel made the decision to move the operation from Monticello to its corporate headquarters in Richmond. Within a few years, the business was renamed Markel Insurance Company (MIC). Today, MIC boasts major divisions with a focus on Camp & Youth Recreation; Child Care; Health & Fitness; Agribusiness; Sports Liability and Accident and Health. It also leads the market in providing risk management services and advice to the businesses it insures.

Markel American Insurance Company

The Shand acquisition included a small operation based in Pewaukee, Wisconsin which focused on personal motorcycle and watercraft insurance. American Underwriting Managers (AUM) had been purchased by Shand in the late '80s, and had subsequently suffered a financial setback in an experimental motorcycle insurance program. Despite the setback, the unit had a core of knowledgeable underwriters and a staff dedicated to excellent customer service. Markel had confidence in this group to return the business to growth and profitability. Furthermore, it recognized an opportunity to use these resources -- which included an admitted insurance company subsidiary -- to expand into specialty personal lines coverages.

In 1992, AUM was renamed Markel American Insurance Company (MAIC) and was launched as a separate operating unit. Today MAIC is a profitable unit and enjoys a leadership position in specialty personal insurance products for underserved markets that are characterized by high volume transactions and low average premiums. Their product offerings include motorcycle, snowmobile, motor home, a full spectrum of recreational marine coverage, and property coverage for mobile homes and other non-standard dwellings.

Purchase of Investors Underwriting Managers

During October 1996, Markel bought Investors Insurance Holding Corporation (Investors) located in Red Bank, NJ. Specializing in tough general liability and product liability accounts with high average premiums, Investors had a clearly defined presence in the specialty marketplace, which complemented that of Markel's existing subsidiaries. The addition of Investors to the Markel family has strengthened its relationships with larger wholesale brokers, and expanded its expertise in general and product liability underwriting.

On the Big Board

Another chapter in Markel Corporation's long history was written in the spring of 1997 when the Company made the move from the NASDAQ stock market to the New York Stock Exchange (NYSE). With almost 5.5 million shares of common stock outstanding, Markel Corporation's market capitalization had grown to almost $900 million in the ten years since its initial public offering. Although many of the Company's first shareholders were Markel associates, the shareholder base had also broadened. The move to the NYSE reflected the Company's coming of age, and offered tangible benefits such as greater visibility, tighter quotation spreads and increased liquidity to Markel owners.

Formation of Markel Southwest Underwriters

Markel Southwest Underwriters (MSU) was founded in January 2000 in Scottsdale, AZ after Markel purchased the renewal rights to a book of property and casualty business formerly produced by Acceptance Insurance Company's Scottsdale operations. The business underwritten in this office was very complementary to that written in other Markel companies and was seen as a way to broaden the company's reach in the excess and surplus lines marketplace. The associates who were responsible for the book of business were retained in the transition and the location remained unchanged. MSU was formed as an underwriting manager for the Evanston Insurance Company to re-underwrite the acquired business and expand the premium volume written through this facility. Today, MSU is a premier underwriting manager for commercial property and casualty coverages. The success of this endeavor is evident in its recent growth that has necessitated a move into a new building during late 2001.

International Expansion

Possibly the most significant event in Markel's history occurred on March 24, 2000 with the completion of the acquisition of Terra Nova (Bermuda) Holdings Ltd. Terra Nova was the holding company for five wholly owned operating entities -- Terra Nova Insurance Company Limited in the UK, Terra Nova (Bermuda) Insurance Company Ltd., Corifrance in Paris, and Terra Nova Capital Limited and Octavian Syndicate Management Limited which managed six Lloyd's syndicates in which the Company had a participation. Through these companies, Terra Nova wrote diverse property, casualty, marine and aviation insurance and reinsurance business on a worldwide basis.

Terra Nova was acquired to gain access to specialty, international markets. Markel saw an opportunity to acquire a large specialty business, in many ways similar to the North American operations, which had the potential to produce underwriting profits while enjoying significant investment leverage.

Markel, through its Octavian Syndicate Management (later renamed Markel Syndicate Management), was now one of the largest managing agencies at Lloyd's managing six syndicates with a combined capacity of £340 million.

During 2002 and 2003, Markel International underwent a number of major reorginasations. Markel International Limited became the holding company for four wholly owned principal operating entities: Markel International Insurance Company Limited in the U.K., Corifrance (Compagnie de Reassurance d'lle-de-France) in Paris, Markel Capital Limited, a corporate capital provider at Lloyd's and Markel Syndicate Management Limited. Markel Syndicate Management manages the composite Markel Syndicate 3000, which has a capacity of over $430 million for 2003, all of which is produced through Markel Capital.

Markel had grown at home, it had expanded abroad and was now one of the largest and finest specialty insurers in the world.

What's Next

Markel has shown a remarkable ability to stay focused on its specialty insurance niche while continuing to grow rapidly and profitably through both organic growth and acquisitions. Investors have rewarded the company's focus, profitability and growth with greater amounts of capital.

From Sam Markel's humble beginning, with a handful of employees and a market value of $8 million in 1986 to the multi-billion, international company Markel has become, Markel has grown but has never lost sight of its past. Whether it's jitney buses or agribusiness - Markel has always focused on profitable, specialty insurance coverages. The history of tomorrow will now be written by the companies of Markel Corporation:

Essex Insurance Company
Shand, Morahan & Company
Markel Insurance Company
Markel American Insurance Company
Investors Underwriting Managers, Inc.
Markel Re
Markel Southwest Underwriters
Markel International Insurance Company Limited U.K.
Corifrance (Compagnie de Reassurance d'lle-de-France)
Markel Capital Limited
Markel Syndicate Management Limited
Markel Syndicate 3000

This is the Markel history. New chapters will undoubtedly be written. But, after more than seven decades, Markel is proud that the niche marketing philosophy on which it was built continues to provide a solid foundation for our endeavors. The core values established by Sam Markel have endured throughout the years: Strong relationships, Quality products, Excellent customer service, Committed employees and Teamwork. Markel will serve and survive the generations to come with a future that promises to be as rewarding as our past!