UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                    FORM 10-K

Annual report pursuant to section 13 or 15(d) of the Securities Exchange Act of
1934 for the fiscal year ended December 31, 1998

Commission File Number 1-13051

MARKEL CORPORATION
(Exact name of registrant as specified in its charter)

A Virginia Corporation
IRS Employer Identification No. 54-0292420

4551 Cox Road, Glen Allen, Virginia 23060-3382
(Address of principal executive offices) (Zip code)

Telephone (804) 747-0136
(Registrant's telephone number including area code)

Securities Registered Pursuant to Section 12(b) of the Act:
Common Stock, no par value
New York Stock Exchange
(title and class and name of the exchange on which registered)

Securities Registered Pursuant to Section 12(g) of the Act:  None

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 [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy of information
statements incorporated by reference in Part III of this Form 10-K or any any
amendment to this Form 10-K. [X]

The aggregate market value of the shares of the registrant's Common Stock held
by non-affiliates as of January 31, 1999 was approximately $673,819,266.

The number of shares of the registrant's Common Stock outstanding at January 31,
1999: 5,542,332.


                      Documents Incorporated By Reference

The portions of the registrant's Proxy Statement for the Annual Meeting of
Shareholders scheduled to be held on May 13, 1999, referred to in Part III.

               Index and Cross References- Form 10-K Annual Report

Item No.                                                            Page

Part I
1.  Business                                                         8-19
1a. Executive Officers of the Registrant                               65
2.  Properties (note 5)                                             31-32
3.  Legal Proceedings (note 15)                                        39
4.  Submission of Matters to a Vote of Security Holders              NONE

Part II
5.  Market for the Registrant's Common Equity and
    Related Stockholder Matters                                        64
6.  Selected Financial Data                                         20-21
7.  Management's Discussion and Analysis of Financial Condition
    and Results of Operations                                       48-63
7a. Qualitative and Quantitative Disclosures About Market Risk      60-62
8.  Financial Statements and Supplementary Data
    The response to this item is submitted in Item 14.
9.  Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosures                            NONE

Part III
10. Directors and Executive Officers of the Registrant*
11. Executive Compensation*
12. Security Ownership of Certain Beneficial Owners and Management*
13. Certain Relationships and Related Transactions*

Part IV
14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
    a. Documents filed as part of this Form 10-K



<PAGE>


Item No.                                                              Page

(1)    Financial Statements
       Consolidated Balance Sheets at
       December 31, 1998 and 1997                                      22
       Consolidated Statements of Income and Comprehensive
       Income for the Years Ended December 31, 1998, 1997, and 1996    23
       Consolidated Statements of Changes in Shareholders'
       Equity for the Years Ended December 31, 1998, 1997, and 1996    24
       Consolidated Statements of Cash Flows for the Years Ended
       December 31, 1998, 1997, and 1996                               25
       Notes to Consolidated Financial Statements for
       the Years Ended December 31, 1998, 1997, and 1996            26-45
       Independent Auditors' Report                                    46

(2)    Schedules have been omitted since they either are not required or are
       not applicable, or the information called for is shown in the
       Consolidated Financial Statements.

(3)    Index to Exhibits
       b. Reports on Form 8-K.  No reports on Form 8- K were filed during the
          fourth quarter of 1998
       c. See Index to Exhibits and Item 14a(3)
       d. See Index to Financial Statements and Item 14a(2)

* Items Number 10,11,12, and 13 will be incorporated by reference from the
Registrant's 1999 Proxy Statement pursuant to instructions G(1) and G(3) of the
General Instructions to Form 10-K.


<PAGE>


                                      1998
                               Markel Corporation
                               1998 Annual Report
                                       and
                                    Form 10-K

The Corporate Profile

     Markel Corporation markets and underwrites specialty insurance products and
programs to a variety of niche markets. In each of these markets, we seek to
provide quality products and excellent customer service so that we can be a
market leader. Our financial goals are to earn consistent underwriting profits
and superior investment returns to build shareholder value.

The Markel Style

     Markel has a Commitment to Success. We believe in hard work and a zealous
pursuit of excellence while keeping a sense of humor. Our creed is honesty and
fairness in all of our dealings.

     The Markel way is to seek to be a market leader in each of our pursuits. We
seek to know our customers' needs and to provide our customers with quality
products and service.

     Our pledge to our shareholders is that we will build the financial value of
our Company. We respect our relationship with our suppliers and have a
commitment to our communities.

     We are encouraged to look for a better way to do things... to challenge
management. We have the ability to make decisions or alter a course quickly. The
Markel approach is one of spontaneity and flexibility. This requires a respect
for authority but a disdain of bureaucracy.

     At Markel, we hold the individual's right to self-determination in the
highest light, providing an atmosphere in which people can reach their personal
potential. Being results oriented, we are willing to put aside individual
concerns in the spirit of teamwork to achieve success.

     Above all, we enjoy what we are doing. There is excitement at Markel, one
that comes from innovating, creating, striving for a better way, sharing success
with others... winning.

<PAGE>

Highlights

<TABLE>
<CAPTION>
Financial Highlights
(in millions, except per share data)            1998      1997       1996
-----------------------------------------------------------------------------
<S>                                         <C>         <C>         <C>
Gross premium volume                        $   437     $   423     $   414
Net written premiums                            344         330         313
Earned premiums                                 333         333         307
Net income                                       57          50          47
Comprehensive income                             68          92          56
GAAP combined ratio                              98%         99%        100%
-----------------------------------------------------------------------------

Total investments                           $ 1,481     $ 1,408     $ 1,131
Total assets                                  1,921       1,870       1,605
Long-term debt                                   93          93         115
8.71% Capital Securities                        150         150          --
Shareholders' equity                            425         357         268
Debt to total capital                            25%         28%         30%
-----------------------------------------------------------------------------

Per Share Data
Common shares outstanding (in thousands)      5,522       5,474       5,458
Net income (diluted)                        $ 10.17     $  8.92     $  8.30
Total investments                           $268.22     $257.27     $207.18
Book value                                  $ 77.02     $ 65.18     $ 49.16
Growth in book value                             18%         33%         25%
-----------------------------------------------------------------------------
</TABLE>


Operating Highlights

o    Underwriting profits for the seventh consecutive year and the twelfth year
     out of the past thirteen

o    Book value per share increases to $77.02, an 18% increase for the year and
     a 23% compound annual growth rate for the past five years

o    The Company's insurance subsidiaries were assigned a group rating of "A"
     (excellent) by A.M. Best Co., Inc.

o    Through the Company-sponsored stock loan program, associates acquired an
     additional $5.8 million of Markel stock in 1998

o    Acquired Gryphon Holdings, Inc. in January 1999

     Net Income        Total Investments        Book Value Per Share
$   in millions         $ in millions             $ per share
[graph appears here]  [graph appears here]      [graph appears here]
     1988   11            1988     51              1988    9.22
     1993   24            1993    597              1993   27.83
     1998   57            1998  1,481              1998   77.02

<PAGE>

1998

To Our Business Partners

     We are pleased to report another busy and successful year. In 1998 we
extended our record of success in earning consistent underwriting profits and
superior investment returns. While we will review our company's annual progress
in this report, we will also discuss some important long term industry trends
which we expect to affect us. Also, without making too many predictions, we will
try to look toward the future, and give you some idea of what we expect.

     Overall our 1998 results were extremely good. While premium growth was
small, given the competitive insurance marketplace, bottom line profits were
very solid. Underwriting profit exceeded $5 million and our combined ratio was
98%. Investment returns were excellent as we earned a total tax equivalent
return on our portfolio of 8.9%. Earnings per share amounted to $10.17,
comprehensive income was $12.07 per share, and book value per share grew 18% to
$77.02.

Underwriting

     The property and casualty insurance market remains extremely competitive
but we continue to maintain our underwriting discipline. The net effect is that
our premium growth has been very modest over the past few years and 1998 was no
exception. In 1998, gross written premiums increased just 3% to $437 million and
net earned premium was flat at $333 million. These small changes in total volume
do not accurately reflect the vital efforts of our associates in eliminating
unprofitable business, fighting "tooth and nail" to keep existing business in
the face of fierce competition, and developing and expanding new business
opportunities.

     We continue our focus on maintaining adequate price levels and disciplined
risk selection so that we can earn underwriting profits. In 1998 we reported a
combined ratio of 98%, a result slightly better than last year.

Loss Reserves

     Our practice is to establish current year reserves on a conservative basis
because loss data emerging during the first underwriting year is somewhat
limited. Over time, underwriting results for each specific year become more
apparent and reserve levels can more easily be set. As in prior years, we have
enjoyed the benefit of finding our actual loss experience to be better than
originally estimated. We believe that our total loss reserves are as strong
today as ever.

     In reviewing our loss experience over the past few years, we found that
some lines of business were significantly more profitable than


2

<PAGE>

we originally thought. On the other hand, we continue to learn bad news about
the ultimate costs associated with asbestos and environmental claims. Because of
these events, we have reallocated reserves among different business units. While
these shifts occurred, we believe our overall level of loss reserves remains
sufficient to cover our exposures.

     There can be no doubt that our strong commitment to underwriting
profitability, coupled with a conservative approach to setting loss reserves,
underpinned the Company's success over a number of years. The underwriting
results in 1998 represent the seventh year in a row we have reported an
underwriting profit and the twelfth year out of thirteen since our initial
public offering in 1986.

Investments

     At year end our investment portfolio was $1.5 billion, an increase over the
prior year of 5%. During the year, investment markets were quite exciting. The
bond market enjoyed the continuation of the broad trend of lower interest rates
causing bond prices to be generally higher. The change throughout the year,
however, was certainly not smooth. In addition, many events, including problems
in Russia and Brazil, the failure of prominent hedge funds, and the Asian
meltdown produced very different results among various segments of the fixed
income market. Quality and liquidity proved to be extremely valuable. Despite
the turbulence we are quite pleased with our fixed income performance.

     The stock market was no less interesting, as in spite of a brief September
correction, equity prices continued to rise. It is incredible that the S & P 500
index has increased by more than 20% for the fourth year in a row. We have
trouble believing that the underlying intrinsic value of the companies
represented increased at the same rate. Consequently, as business people making
business judgements, our portfolio is not weighted toward the securities in the
index. Our 13.3% return on equities, although solid, was short of the index
return. We currently own no high technology or internet stocks (the valuations
of which we also don't understand). We continue our long-standing practice of
careful selection and extremely low portfolio turnover as it serves our purpose
of owning good companies for the long term, and maximizing the total after tax
return to our shareholders.

Book Value Growth

     Our primary financial goal is to increase book value over the long term on
a per share basis. In 1998 book value grew from $357 million to $425 million. On
a per share basis book value increased 18%, to $77.02 from $65.18. Our goal is
to compound book value at a 20% annual rate. In 1998 we just missed the

                                                                               3
<PAGE>


mark, however, we do expect some volatility in this measure on an annual basis.
In the past five years, a more meaningful period and the one we use to calculate
incentive compensation, book value grew at a 23% compound annual rate on a per
share basis.

     Several years ago we discussed our "model for profit." This model helps one
understand how we believe we can compound book value at a 20% rate.
Simplistically, if we do not lose anything in the underwriting operation, and
maintain $4 in investments for every $1 in equity, earning a 5% after tax total
return, then we will grow book value at a 20% rate. At year end our investments
totaled $1.5 billion and shareholders' equity was $425 million. This represents
only $3.50 in investments for every $1 in equity. This is the obvious result of
growing book value at a rate faster than the investment portfolio. As discussed
later, the acquisition of Gryphon Holdings, Inc. provides additional investment
leverage and positions us to work toward compounding book value at 20% in the
future.

Gryphon Acquisition

     One of the most important events of the year for us was the decision to
purchase Gryphon. This transaction consumed a great deal of energy throughout
the year, and concluded with an agreement to purchase the company for
approximately $150.7 million and the assumption of $55.0 million in debt.
Gryphon is an insurance holding company that owns three insurance companies:
Associated International Insurance Company based in Woodland Hills, California;
Calvert Insurance Company with offices in Hoboken, New Jersey; and The First
Reinsurance Company of Hartford which operates out of Chicago. Together these
companies control approximately $200 million in annual premium volume.

     Gryphon has excellent franchises in property subject to earthquake risk,
professional liability insurance for architects and engineers, as well as
directors and officers liability insurance and other miscellaneous professional
coverages. The company was also active in many other programs with very
inconsistent results. In today's environment, it is very difficult for a small
company to operate successfully in multiple products across many states. As with
other companies in similar circumstances, Gryphon was burdened with too much
overhead and too much bureaucracy. While the company tried to grow its way out
of its problems, this strategy proved to be difficult in the current competitive
environment.

     The process of integrating Gryphon into the Markel organization has just
begun. We expect that each line of business that we continue to write will be
managed by an existing Markel operating company. For example, the property
division writing California earthquake coverage

4

<PAGE>


will become a business within the Essex Insurance Company where we currently
write similar coverages. The architects and engineers coverage, as well as the
Chicago operations specializing in directors and officers coverage, will become
part of the Shand/ Evanston team where we have a great deal of expertise and
believe we can add value and grow these businesses.

     Gryphon did not enjoy underwriting success. In fact, the company incurred
significant underwriting losses in each of the past four years. These results
stemmed from high operating costs, a lack of management focus, inadequate loss
reserves, and attempts to develop new business in areas where the company lacked
sufficient expertise. We believe that as part of Markel this will quickly
change. As the unprofitable businesses are run off and underwriting standards
are reviewed, we expect Gryphon's premium volume to decline, probably by as much
as 50%; however, more importantly, we expect the remaining businesses to
ultimately produce underwriting profits.

     As part of our review of Gryphon we determined that the company's loss
reserves were set somewhat optimistically. As a result, Gryphon took an
additional charge in the fourth quarter to set its reserves on a more
realistic basis. At year end we think the company's reserves are adequate
(although not yet with the margin of safety we would prefer).

     In looking at the investment side of the operation we also see significant
opportunity. Gryphon has an investment portfolio of approximately $400 million,
invested in high quality fixed income securities with fairly short durations.
Markel will also be able to add significant value in the management of the
investment portfolio and overall investment leverage will improve. On a pro
forma basis at December 31, 1998 we now have investments of $1.8 billion and
equity of $425 million which represents slightly more than our targeted level of
investment leverage of $4 in portfolio for each $1 in equity.

     When we achieve underwriting profitability, we can take full advantage of
the additional investment leverage, and the acquisition will help us to compound
book value at a 20% rate. The additional premium will better utilize our growing
capital base and the additional portfolio provides the balance sheet leverage we
seek to maintain.

     We believe we start 1999 in an excellent position to continue to build
shareholder value. As always, for the actual results, we must wait and be
patient.

Industry in Transition

     The property and casualty insurance industry remains very competitive.
Industry premium growth has been slow, returns on equity from operations are at
unacceptably low levels and the industry has too much capital.

                                                                               5
<PAGE>

There are more than 3,000 insurance companies competing for business. Price
levels continue to decline and it's hard to remember when the industry last
earned an annual underwriting profit. Many observers also believe that loss
reserves are now inadequate. Compensating for weak operations, the industry has
been bailed out by rising investment portfolio values from the decline in
interest rates and rising stock prices. In addition, many companies are
manufacturing earnings per share though creative reinsurance arrangements. This
environment will not necessarily change quickly, however, it will change.

     Over the past several years there has been a continued change among the
companies which lead the industry. Many of the industry's former leaders have
been acquired or substantially reorganized. Merger and acquisition activity has
picked up among both large and small companies as the industry consolidates. We
expect this trend to continue.

     In 1986 when we completed our initial public offering, we trumpeted our
small size, our spontaneity and flexibility, our ability to make decisions
quickly, and our customer focus. These attributes undoubtedly contributed to our
success. Today we are by most measures at least ten times larger than when we
went public. Can we maintain these strengths and values as we continue to grow?
The acquisition of Gryphon will add $100 million in premium, $300 million in
incremental investment portfolio and initially more than 100 new associates. How
long will it take this group to embrace the Markel Style? As we grow and meet
the new challenges of our changing industry, we recognize the importance of
sticking with and communicating to our new associates the important, common
sense principles which guided us in the past.

     The industry is facing many challenges and we expect as many or more
changes in the next decade as we saw in the last. Neither inadequate pricing,
nor inadequate loss reserves can last forever. These problems must be addressed
and resolved and opportunities exist for Markel to be part of the solution.
Interest rates are currently as low as they have been in many years. At current
levels, many insurance companies will see a significant decline in investment
income and returns on equity could drop to even lower levels.
In this environment, we expect to see a continuation of industry consolidation.

     All of these developments spell opportunity for Markel. While growth is not
one of our strategic objectives, we expect to grow in the future. We want to
provide excellent customer service, quality products, underwriting profits, and
superior investment returns. All of this to build shareholder value.

6

<PAGE>

The Markel Style

     As an organization, one of our core strengths has been our strong values;
values we articulate in The Markel Style. Often organizations have trouble
balancing the different demands from clients, associates and shareholders. Some
would believe that every decision is a trade off among these different
interests. We disagree. Our goal is to make decisions which support all
constituencies. For example, associates become owners through payroll stock
purchase programs and loan plans, as opposed to dilutive stock options.
Additionally, our incentive compensation systems are designed to reward
individual achievement. Our performance culture builds financial strength which
our clients can count on. Creating an atmosphere in which people can reach their
personal potential is much easier when the business is growing and successful.
Success breeds success and we have designed Markel to be successful. We also
know that just as soon as we become complacent, just as soon as we start to
think we're pretty good, then we're headed for trouble. We pledge not to become
satisfied with what we've done in the past. We set long term goals and we work
toward them every day. We've come a long way and we are excited about the road
ahead.

     In closing, we would like to express our deep appreciation to Prem Watsa ,
who resigned from our Board of Directors in November, for his loyal service and
keen advice over the years. Your Company is much stronger today because of
Prem's contributions.

     Additionally, we welcome Tom Gayner to the Board. Tom joined Markel in 1990
and has contributed both in the management of our equity portfolio and his
common sense business advice.

     Thank you for your support.

/s/ Alan I. Kirshner
-----------------------------------
Alan I. Kirshner
Chairman of the Board and Chief Executive Officer

/s/ Anthony F. Markel
-----------------------------------
Anthony F. Markel
President and Chief Operating Officer

/s/ Steven A. Markel
-----------------------------------
Steven A. Markel
Vice Chairman

/s/ Darrell D. Martin
-----------------------------------
Darrell D. Martin
Executive Vice President and Chief Financial Officer


            [photograph]
Clockwise from left to right: Anthony F. Markel,
Darrell D. Martin, Steven A. Markel, Alan I. Kirshner


                                                                               7

<PAGE>

Markel Corporation & Subsidiaries

BUSINESS OVERVIEW

Markel Corporation (the Company), an insurance holding company, writes specialty
insurance products and programs for a variety of niche markets through its
insurance subsidiaries. The Company believes that its specialty product focus
and niche market strategy enable it to develop expertise and specialized market
knowledge.

Specialty Insurance
-------------------------------------------------------------------------------

The specialty insurance market differs from the standard market where insurance
rates and forms are highly regulated by state insurance departments, products
and coverages are largely uniform with relatively predictable exposures and
companies tend to compete for customers on the basis of price. In contrast, the
specialty market provides coverage for risks that do not fit the underwriting
criteria of the standard carriers. Competition tends to focus less on price and
more on availability, service and other value-based considerations. While
specialty market exposures may have higher insurance risks than their standard
market counterparts, Markel manages these risks to achieve higher financial
returns. To reach its financial and operational goals, the Company must have
extensive knowledge and expertise in its chosen markets. Most of the Company's
risks are considered on an individual basis, and restricted limits, deductibles,
exclusions and surcharges are employed in order to respond to distinctive risk
characteristics.

Markets
-------------------------------------------------------------------------------

The Company competes in two distinct areas of the specialty insurance market;
the excess and surplus lines segment (E&S) and the specialty admitted segment.
See note 18 in the notes to consolidated financial statements for additional
segment reporting disclosures.

The E&S market focuses on hard to place risks and risks that admitted insurers
specifically refuse to write. E&S eligibility allows the Company's insurance
subsidiaries to underwrite nonstandard market risks with more flexible policy
forms and unregulated premium rates. This typically results in coverages that
are more restrictive and more expensive than the standard admitted market. In
1997 the E&S market represented approximately $9.1 billion, or 3.2%, of the
entire $287.2 billion property and casualty (P&C) industry.*

The Company is the sixth largest domestic E&S writer in the United States as
measured by direct premium writings.* Three of the Company's underwriting units,
Excess and Surplus Lines, Professional/Products Liability and Brokered Excess
and Surplus Lines, write in the E&S market. In 1998, on a consolidated basis,
the Company controlled $314.2 million of E&S business.

The Company also writes business in the specialty admitted market. Most of these
risks are unique and hard to place in the standard market, but for marketing and
regulatory reasons, must remain with an admitted insurance company. In 1996, the
last year for which data is available, the specialty admitted market represented
$5.4 billion, or 1.9%, of the entire P&C industry as measured by direct premium
writings.* The specialty admitted market is subject to more state regulation
than the E&S market, particularly with regard to rate and form filing
requirements, restrictions on the ability to exit lines of business, premium tax
payments and membership in various state associations, such as state guaranty
funds and assigned risk plans.

* According to the 1998 and 1997 A.M. Best Company Special Report, Annual Review
of the Excess and Surplus Lines Industry.

8

<PAGE>

Two of the Company's underwriting units, Specialty Program Insurance and
Specialty Personal and Commercial Lines, write in the specialty admitted market.
In 1998, on a consolidated basis, the Company controlled $123.3 million of
specialty admitted business.

Competition
-------------------------------------------------------------------------------

The Company's underwriting operations compete with numerous insurance companies,
risk retention groups, insurance buying groups, risk securitization programs and
alternative self-insurance mechanisms. Competition may take the form of lower
prices, broader coverages, greater product flexibility, higher quality services
or higher ratings by independent rating agencies. In all of its markets, the
Company competes by developing specialty products to satisfy well-defined market
needs and by maintaining relationships with brokers and insureds who rely on the
Company's expertise. This expertise in offering and underwriting products that
are not readily available is the Company's principal means of competition. The
Company offers over forty major product lines, each with its own distinct
competitive environment. In all of its products, the Company competes with
innovative ideas, appropriate pricing, expense control and quality service to
policyholders, agents and brokers.

Few barriers exist to prevent insurers from entering the Company's segments of
the P&C industry, but many of the larger P&C insurance companies have
historically been unwilling to write specialty coverages. The P&C industry is
currently experiencing a soft market due to what is perceived by many as
excessive amounts of capital in the industry. In an attempt to utilize their
capital, many insurance companies often seek to write additional premium without
regard for its ultimate profitability. Admitted standard companies are now
writing programs that previously were written almost exclusively in the
specialty admitted or E&S markets. This additional competition from the standard
market has reduced rates and led to broader coverage being offered to many of
the Company's customers. In response to this additional competition, the Company
has maintained its underwriting standards at the expense of growth in premium
volume. The Company does not expect the current soft market conditions to
improve until more rational pricing and capital allocation takes place in the
P&C industry.



                                                                               9

<PAGE>

Markel Corporation & Subsidiaries

Business Overview (continued)

Underwriting Philosophy
-------------------------------------------------------------------------------

By focusing on market niches where it has underwriting expertise, the Company
seeks to earn consistent underwriting profits. Underwriting profits are a key
component of the Company's strategy. The ability to achieve consistent
underwriting profits demonstrates knowledge and expertise, commitment to
superior customer service and the ability to manage insurance risk. The Company
has earned an underwriting profit in each of the past seven years and in twelve
of the past thirteen years. The following graph shows Markel's GAAP combined
ratio as compared to the P&C industry for the past five years:

Markel Corporation Industry Average*

COMBINED RATIOS
[graph appears here]

Markel Corporation
        Markel           Industry
      Corporation         Average
      ----------         --------
1994      97%              109%
1995      99%              107%
1996     100%              106%
1997      99%              102%
1998      98%              105%


*Source A.M. Best Co., Inc.
Industry Average is estimated for 1998.

The Underwriting Units
-------------------------------------------------------------------------------

The Company has five underwriting units focused on specific niches within the
E&S and specialty admitted markets. Excess and Surplus Lines,
Professional/Products Liability and Brokered Excess and Surplus Lines write
business in the E&S market. The Brokered Excess and Surplus Lines unit was
formed with the purchase of Investors Insurance Holding Corp. (Investors) in
1996. Specialty Program Insurance and Specialty Personal and Commercial Lines
write business in the specialty admitted market.

TOTAL GROSS PREMIUM VOLUME ($437 million)
[graph appears here]

Specialty Personal and Commercial Lines      9%
Brokered Excess and Surplus Lines           15%
Specialty Program Insurance                 19%
Excess and Surplus Lines                    28%
Professional/Products Liability             29%


10

<PAGE>


Excess and Surplus Lines

The Excess and Surplus Lines unit (E&S unit) writes a variety of coverages,
focusing on light-to-medium casualty exposures for businesses such as artisan
contractors, habitational risks, restaurants and bars, child and adult care
facilities, vacant properties, office buildings and light manufacturing
operations. The E&S unit also writes property insurance on classes of business
ranging from small, single location risks to large, multi-state, multi-location
risks. Property coverages consist principally of fire and allied lines, such as
windstorm, hail and water damage and more specialized property coverages. The
E&S unit also offers coverages for heavier property risks, including earthquake,
through its Markel special property division (MSP). These risks are typically
larger and are of a low frequency/high severity nature.

The E&S unit's inland marine facility provides coverages for risks that include
truck cargo, logging equipment, warehouseman's legal liability, builder's risk,
contractor's equipment and oil and gas rigs. The ocean marine facility writes
risks that include marinas, hull coverage, cargo and builder's risk for yacht
manufacturers.

Most of the E&S unit's business is generated by approximately 144 professional
surplus lines general agents who have limited quoting and binding authority.
MSP, brokerage inland marine and ocean marine produce business on a brokerage
basis through approximately 60 wholesale brokers. The E&S unit seeks to be a
substantial underwriter for its producers in order to enhance the likelihood of
receiving the most desirable underwriting opportunities. The E&S unit writes the
majority of its business in Essex Insurance Company (Essex). Essex is admitted
in Delaware and is eligible to write E&S insurance in 49 states and the District
of Columbia.

EXCESS AND SURPLUS LINES
GROSS PREMIUM VOLUME ($122 million)
[graph appears here]

Inland Marine              9%
Other                      9%
Property                  14%
Markel Special Property   31%
Casualty                  37%

                                                                              11

<PAGE>


Markel Corporation & Subsidiaries

Business Overview (continued)

Professional/Products Liability

The Professional/Products Liability unit markets specialty professional
liability coverages, including medical malpractice and specialized medical
coverages, professional liability for lawyers, architects and engineers, agents
and brokers and management consultants. Errors and omissions coverage is
targeted to mutual fund advisors, investment advisors and insurance companies.
Products liability insurance for manufacturers and distributors is provided
through the special risks program. In addition, directors' and officers'
liability coverage and employment practices liability coverages are offered.

The Professional/Products Liability unit was one of the first to enter the
emerging employment practices liability insurance (EPLI) market. EPLI provides
coverage for the defense of alleged inappropriate employment practices not
typically covered under traditional business coverages. While virtually all
businesses have a need for this coverage, the unit designed its EPLI program for
middle market firms with 25 to 250 employees, as this niche appears to be the
most underserved by other insurers.

Business is written nationwide and is developed through approximately 325
wholesale brokers. The Professional/Products Liability unit writes the majority
of its business in Evanston Insurance Company (EIC). EIC is admitted in Illinois
and is eligible to write E&S insurance in 48 states and the District of
Columbia.

PROFESSIONAL/PRODUCTS LIABILITY
GROSS PREMIUM VOLUME ($127 million)
[graph appears here]

Architects and Engineers                     7%
Specified Professions                       14%
Other                                       15%
Employment Practices Liability              17%
Special Risks                               20%
Medical Malpractice and Specified Medical   27%

Brokered Excess And Surplus Lines

Brokered Excess and Surplus Lines (Brokered E&S) was created with the purchase
of Investors in the fall of 1996. The Brokered E&S unit is comprised of three
divisions: primary casualty, property and excess and umbrella. The primary
casualty division's areas of expertise are hard to place, large general
liability and products liability accounts. The majority of the general liability
book of business is comprised of coverages for commercial and residential
contractors. The division also specializes in writing manufacturing accounts
with heavy products liability exposures. Examples include sporting goods
manufacturers, toy manufacturers, truck trailer manufacturers and vitamin supply
manufacturers. The property division focuses on monoline property and package
coverages for mercantile, industrial, habitational and builder's risk exposures.

12

<PAGE>


In 1998 the Company's excess and umbrella division was aligned with the Brokered
E&S unit to maximize producer relationships and distribution strategy. The
excess and umbrella division provides commercial umbrella and excess coverages.
This division is also expanding its product lines to include a personal umbrella
program for defined groups of individuals.

The unit operates through approximately 95 wholesale brokers and writes the
majority of its business in Investors Insurance Company of America (IICA). IICA
is eligible to write E&S insurance in 47 states and the District of Columbia and
is admitted in New York and New Jersey.

BROKERED EXCESS AND SURPLUS LINES
GROSS PREMIUM VOLUME ($65 million)
[graph appears here]

   Excess and Umbrella    19%
   Property               19%
   Casualty               62%

Specialty Program Insurance

Specialty Program Insurance focuses on providing total insurance programs for
businesses engaged in similar, but highly specialized, activities. These
activities typically do not fit the risk profiles of standard insurers which
makes complete coverage difficult to obtain from a single insurer.

The Specialty Program Insurance operation is organized into six business units,
which concentrate on particular markets and customer groups. The camp and youth
recreation division serves children's summer camps, conference centers and youth
organizations such as YM/YWCA's and Boys' and Girls' Clubs. The agriculture
division specializes in insurance coverages for horse-related risks, such as
horse mortality coverage, and property and liability coverages for horse farms
and boarding, breeding and training facilities. Liability insurance for sports
organizations, and accident and medical insurance for colleges, universities and
private schools are sold through the sports liability, accident and medical
division. The child care division develops and markets insurance programs for
child care centers, nursery schools, Head Start programs, Montessori schools and
private schools. Gymnastic schools, health clubs, and martial arts and dance
schools are serviced by the health and fitness division. The contract surety
bond division provides surety bonds for small and transitional contractors.

The majority of Specialty Program Insurance business is produced by
approximately 4,000 retail insurance agents. Management grants very limited
underwriting authority to carefully selected agents and controls agency business
through regular audits and pre-approvals. Certain products and programs are also
marketed directly to consumers or through wholesale producers. Specialty Program
Insurance is underwritten by Markel Insurance Company (MIC). MIC is licensed to
write P&C insurance in all 50 states, including the domicile state of Illinois,
and the District of Columbia.


                                                                              13

<PAGE>


Markel Corporation & Subsidiaries

Business Overview (continued)

SPECIALTY PROGRAM INSURANCE
GROSS PREMIUM VOLUME ($84 million)
[graph appears here]

Child Care                                 7%
Other                                      7%
Health and Fitness                        10%
Sports Liability, Accident and Medical    20%
Camp and Youth Recreation                 27%
Agriculture                               29%


Specialty Personal And Commercial Lines

Specialty Personal and Commercial Lines markets and underwrites its insurance
products in niche markets that are overlooked by large admitted carriers. The
recreational products division concentrates on watercraft and motorcycle
coverages. The watercraft program markets personal insurance coverage for jet
skis, yachts and high performance boats; while small fishing ventures and small
boat rentals are the focus of the commercial marine department. The motorcycle
program's target market is mature riders of high value bikes. The property
division provides coverage for dwellings which do not qualify for standard
homeowner's coverage. In addition, the Specialty Personal and Commercial Lines
unit markets a series of insurance products designed to meet the collateral
protection needs of automobile lenders.

Specialty Personal and Commercial Lines products are characterized by high
numbers of transactions, low average premiums and creative solutions for
underserved and emerging markets. The unit distributes the watercraft and
property products primarily through wholesale brokers. The motorcycle program is
marketed directly to the consumer, using direct mail and telephone promotion as
well as relationships with various motorcycle manufacturers, dealers and
associations. The Specialty Personal and Commercial Lines unit writes the
majority of its business in Markel American Insurance Company (MAIC). MAIC is
licensed to write P&C business in 46 states, including its state of domicile,
Virginia, and the District of Columbia.

SPECIALTY PERSONAL AND COMMERCIAL LINES
GROSS PREMIUM VOLUME ($40 million)
[graph appears here]

Other         3%
Motorcycle   19%
Property     35%
Watercraft   43%


14

<PAGE>


Reinsurance
-------------------------------------------------------------------------------

The Company enters into reinsurance agreements in order to reduce its liability
on individual risks and to enable it to underwrite policies with higher limits.
During the past several years, Markel has reduced its reliance on reinsurance by
gradually increasing retentions on its profitable book of business.

Markel strives to minimize credit exposure to reinsurers and maintains a margin
of safety through adherence to its internal reinsurance guidelines. To become a
reinsurance partner of Markel, prospective companies generally must: (i)
maintain an A.M. Best rating of "A" (excellent), (ii) maintain minimum capital
and surplus of $100 million and (iii) provide collateral for recoverables in
excess of an individually established amount (usually $10 million). In addition,
foreign reinsurers must provide collateral equal to 100% of recoverables (with
the exception of Lloyd's syndicates). The following table shows Markel's top ten
active reinsurers at December 31, 1998. These ten reinsurers represent 74% of
Markel's $219.5 million reinsurance recoverable.
                                                              Reinsurance
Reinsurers                                 A.M. Best Rating   Recoverable
---------------------------------------------------------------------------
American Re-Insurance Company                     A++         $   34,756
TIG Reinsurance Company                           A               30,980
Trenwick America Reinsurance Corporation          A+              18,005
Zurich Reinsurance (North America) Inc.           A               16,300
Underwriters Reinsurance Company                  A+              13,969
NAC Reinsurance Corporation                       A+              11,663
Chartwell Reinsurance Company                     A               10,722
St. Paul Fire and Marine Insurance Company        A+               9,858
Signet Star Reinsurance Company                   A                8,170
Folksamerica Reinsurance Company                  A                7,911

Other reinsurers                                  --              57,159

---------------------------------------------------------------------------
Total reinsurance recoverable on paid and unpaid losses        $ 219,493
---------------------------------------------------------------------------

Reinsurance treaties are generally subject to cancellation by
the Company or the reinsurers on the anniversary date and are
subject to renegotiation annually. The reinsurer remains
responsible for all business produced prior to termination.
Treaties also typically contain provisions concerning ceding
commissions, required reports to the reinsurers,
responsibility for taxes, arbitration in the event of a
dispute and provisions allowing the Company to demand that a
reinsurer post letters of credit or assets as security if a
reinsurer becomes an "unapproved" reinsurer under applicable
state laws and regulations.

                                                                              15
<PAGE>


Markel Corporation & Subsidiaries

Business Overview (continued)

Investments
-------------------------------------------------------------------------------

The Company's business philosophy clearly recognizes the importance of both
underwriting profits and superior investment returns to build shareholder value.
The Company relies on sound underwriting practices to produce investable funds
with minimum underwriting risk. Approximately three quarters of the Company's
investable assets come from premiums paid by policyholders. Policyholder funds
are invested predominately in high quality corporate, government and municipal
bonds with relatively short durations. The balance, comprised of shareholder
funds, is available to be invested in equity securities, which over the long
run, have produced higher returns relative to fixed income investments. The
Company seeks to invest in companies with the potential for appreciation and
hold these investments over the long term.

Total investment returns include items which impact net income, such as net
investment income and realized gains or losses from the sales of investments, as
well as items which do not impact net income, such as changes in unrealized
holding gains or losses. The Company does not intend to lower the quality of its
investment portfolio in order to enhance or maintain yields. The Company's focus
on long-term total investment returns may result in variability in the level of
realized and unrealized investment gains or losses from one period to the next.

The ultimate success of the Company's investment strategy is evident from the
review of total investment returns over several years. The following table
presents taxable equivalent total returns for Markel's investment portfolio for
the past five years:

ANNUAL TAXABLE EQUIVALENT TOTAL RETURNS
---------------------------------------------------------
<TABLE>
<CAPTION>
                                                                5 Year     10 Year
                                                                Weighted  Weighted
                                                                 Average   Average
                                 Years Ended December 31,        Annual    Annual
                          1994    1995     1996    1997    1998  Return    Return
-----------------------------------------------------------------------------------
<S>                       <C>     <C>      <C>     <C>     <C>    <C>       <C>
Equities                  (3.3)%  29.7%    26.9%   31.4%   13.3%  20.4%     19.1%
Fixed maturities          (0.2)%  13.9%     4.8%    9.2%    7.6%   7.5%      8.3%
Total portfolio           (1.1)%  15.7%     7.5%   12.8%    8.9%   9.5%      9.9%

-----------------------------------------------------------------------------------
Ending portfolio
balance (in millions)    $ 612   $ 909  $ 1,131 $ 1,408 $ 1,481
-----------------------------------------------------------------------------------
</TABLE>

The Company's investment performance also benefitted from continued growth in
the investment portfolio over the past ten years. The portfolio increased to
$1.5 billion at December 31, 1998 from $50.6 million at December 31, 1988.

The Company monitors its portfolio to ensure that credit risk does not exceed
prudent levels. Standard and Poor's Corp. (S&P) and Moody's Investors Service
(Moody's) provide corporate and municipal debt ratings based on their assessment
of the credit quality of an obligor with respect to a specific obligation. S&P's
ratings range from "AAA" (capacity to pay interest and repay principal is
extremely strong) to "D" (debt is in payment default). Securities with ratings
of "BBB" or higher are referred to as "investment grade" securities. Debt rated
"BB" and below is regarded by S&P as having predominately speculative
characteristics with respect to capacity to pay interest and repay principal.
Moody's ratings range from "Aaa" to "C" with ratings of "Baa" or higher
considered "investment grade."

The Company's fixed maturity portfolio has an average rating of "AA", with 87%
rated "A" or better by at least one nationally recognized rating organization.
The Company's policy is to minimize its investments in fixed maturity securities
that are unrated or rated below investment grade.

16

<PAGE>


The following chart shows the Company's fixed maturity portfolio, at estimated
fair value, by rating category at December 31, 1998:

CREDIT QUALITY OF FIXED MATURITY PORTFOLIO ($1,071 million)
[graph appears here]

   Other        4%
   BBB          9%
   A           22%
   AAA/AA      65%


Approximately 79% of the investment portfolio is managed directly by officers of
the Company. During 1998 approximately 20% of the Company's cash and investments
was managed by Hamblin Watsa Investment Counsel Ltd., a Canadian investment
management firm. Effective January 1, 1999, the portion of the Company's
portfolio managed by Hamblin Watsa was transferred for management purposes to
officers of the Company. The remainder of the portfolio is managed by an
independent portfolio manager.


Shareholder Value
-------------------------------------------------------------------------------

The Company's financial goals are to earn consistent underwriting profits and
superior investment returns to build shareholder value. More specifically, the
Company assesses its effectiveness in building shareholder value through the
measurement of growth in book value per share. The Company believes that growth
in book value per share is the most comprehensive measure of its success due to
the fact that it includes all underwriting and investing results. The Company
has a stated objective to grow book value per share by 20% annually. Over the
past five years, the Company has grown book value per share at a compound annual
rate of 23%. The following graph presents Markel's book value per share for the
past five years:

BOOK VALUE PER SHARE
    $ per share
[graph appears here]

  1994       25.71
  1995       39.37
  1996       49.16
  1997       65.18
  1998       77.02


                                                                              17

<PAGE>


Markel Corporation & Subsidiaries

Business Overview (continued)

Regulatory Environment
-------------------------------------------------------------------------------

The Company's insurance subsidiaries are subject to regulation and supervision
by the insurance regulatory authorities of the various jurisdictions in which
they conduct business. Regulation is intended for the benefit of policyholders
rather than shareholders. Insurance regulatory authorities have broad
regulatory, supervisory and administrative powers relating to solvency
standards, the licensing of insurers and their agents, the approval of forms and
policies used, the nature of, and limitations on, insurers' investments, the
form and content of annual statements and other reports on the financial
condition of such insurers and the establishment of reserves.

The Company is also subject to state laws regulating insurance holding
companies. Under these laws, insurance departments may, at any time, examine the
Company, require disclosure of material transactions by the holding company,
require approval of certain extraordinary transactions, such as extraordinary
dividends from an insurance subsidiary to the holding company, or require
approval of changes in control of an insurer or an insurance holding company.
Generally, "control" for these purposes is defined as ownership or voting power
of 10% or more of a company's shares.

The laws of the domicile states of the Company's insurance subsidiaries govern
the amount of dividends which may be paid to the Company. Generally, statutes in
the domicile states of the Company's insurance subsidiaries require prior
approval for payment of "extraordinary" as opposed to "ordinary" dividends. At
December 31, 1998, the Company's insurance subsidiaries could pay up to $47.6
million during the following twelve months under the ordinary dividend
regulations without prior regulatory approval.

Ratings
-------------------------------------------------------------------------------

Financial stability and strength are important purchase considerations of
policyholders and insurance agents and brokers. Because an insurance premium
paid today purchases coverage for losses that might not be paid for many years,
the financial viability of the insurer is of critical concern. Various
independent rating agencies provide information to assist buyers in their search
for financially sound insurers.

A.M. Best Co., Inc. (Best) publishes Best's Insurance Reports, Property-Casualty
and assigns ratings to P&C insurance companies based on quantitative criteria,
such as profitability, leverage and liquidity as well as qualitative
assessments, such as the spread of risk, the adequacy and soundness of
reinsurance, the quality and estimated market value of assets, the adequacy of
loss reserves and surplus and the competence, experience and integrity of
management. Best's letter ratings range from "A++" (superior) to "F" (in
liquidation). S&P and Duff & Phelps' Credit Rating Co. (Duff & Phelps) provide
analytical and statistical information on the solvency and liquidity of major
U.S. licensed insurance companies. S&P's financial strength ratings and Duff &
Phelps' claims paying ability (CPA) ratings concern only the likelihood of
timely payment of policyholder obligations and are not intended to refer to the
ability of either the rated company or its parent or subsidiary to pay
non-policy obligations such as debt or commercial paper. The S&P financial
strength ratings range from "AAA" (extremely strong financial security) to "CC"
(extremely weak financial security). The Duff & Phelps CPA rating categories
range from "AAA" (risk factors are negligible) to "DD" (under order of
liquidation).


18

<PAGE>

On January 26, 1999 Best assigned the Company's insurance subsidiaries a group
rating of "A" (excellent). This action by Best represented a rating upgrade for
Investors Insurance Company of America and Markel Insurance Company and was an
affirmation of the ratings of Essex Insurance Company, Evanston Insurance
Company and Markel American Insurance Company. In addition the Company's
insurance subsidiaries are rated "A+" (strong financial security) by S&P and
"A+" (high claims paying ability) by Duff & Phelps.

Associates
-------------------------------------------------------------------------------

At December 31, 1998, the Company and its consolidated subsidiaries employed 772
persons, four of whom were executive officers.

The Company believes that, as a service organization, its continued
profitability and growth are dependent upon the talent and enthusiasm its
associates bring to their jobs. The Company has structured incentive
compensation plans and stock purchase plans to encourage associates to think and
act like owners. Associates are offered many opportunities to become
shareholders. Every associate eligible to participate in the Company's
retirement program, a 401(k) plan, receives a portion of the Company's
contribution in Markel stock and may purchase stock with their own
contributions. Stock may be acquired through a payroll deduction plan, and
associates have been given the opportunity to purchase stock with interest
financing partially subsidized by the Company. Under Markel's incentive
compensation plans, associates may earn a meaningful bonus based on individual
performance and the Company's performance. At December 31, 1998, the Company
estimated associates' ownership, including executive officers and directors, at
approximately 31% of the Company. The Company believes that employee stock
ownership and rewarding value-added performance aligns associates' interests
with the interests of non-employee shareholders.


                                                                              19
<PAGE>


Markel Corporation & Subsidiaries

Selected Financial Data (dollars in millions, except per share data)


<TABLE>
<CAPTION>

                                                  ---------------------------------------------
                                                          1998           1997           1996
                                                  ---------------------------------------------
RESULTS OF OPERATIONS (1)
-------------------------------------------------------------------------------------------------
<S>                                                 <C>             <C>            <C>
Earned premiums                                     $      333      $      333     $      307
Net investment income                                       71              69             51
Total operating revenues                                   426             419            367
Net income                                                  57              50             47
Comprehensive income                                        68              92             56
-------------------------------------------------------------------------------------------------
DILUTED EARNINGS PER SHARE (2)
-------------------------------------------------------------------------------------------------
Core operations                                     $      8.10     $     7.43     $     6.03
Net realized gains                                         2.37           1.82           0.58
Nonrecurring items                                          --              --           2.05
Amortization expense                                      (0.30)         (0.33)         (0.36)
Net income                                          $     10.17     $     8.92     $     8.30
-------------------------------------------------------------------------------------------------
FINANCIAL POSITION (1)(3)(4)
-------------------------------------------------------------------------------------------------
Total investments                                   $    1,481      $    1,408      $   1,131
Total assets                                             1,921           1,870          1,605
Unpaid losses and loss adjustment expenses                 934             971            936
Long-term debt                                              93              93            115
8.71% Capital Securities                                   150             150             --
Shareholders' equity                                       425             357            268
-------------------------------------------------------------------------------------------------
RATIO ANALYSIS
-------------------------------------------------------------------------------------------------
GAAP combined ratio                                          98%            99%           100%
Investment yield (5)                                          5%             5%             5%
Total return (6)                                              7%            11%             8%
Debt to total capital (7)                                    25%            28%            30%
-------------------------------------------------------------------------------------------------
PER SHARE DATA (2)
-------------------------------------------------------------------------------------------------
Common shares outstanding (in thousands)                 5,522           5,474          5,458
Total investments                                   $   268.22      $   257.27       $ 207.18
Book value                                          $    77.02      $    65.18      $   49.16
Growth in book value                                        18%             33%            25%
5-Year CAGR in book value (8)                               23%             26%            26%
Closing stock price                                 $   181.00      $   156.13      $   90.00
-------------------------------------------------------------------------------------------------
</TABLE>


(1)  In December 1990 the Company acquired the remaining ownership interests of
     a previously unconsolidated subsidiary, Shand/Evanston Group, Inc.
     (Shand/Evanston). Assets and liabilities reflect the consolidation of
     Shand/Evanston beginning in 1990, and income reflects the consolidation of
     the revenues and expenses of Shand/Evanston in 1991 and subsequent years.

(2)  All per share amounts have been restated to reflect a 20% stock dividend in
     1989.

(3)  The change in accounting for net unrealized gains (losses) on fixed
     maturities in accordance with provisions of Statement of Financial
     Accounting Standards No. 115 affects 1993 and subsequent years.

20

<PAGE>

<TABLE>
<CAPTION>



                                  --------------------------------------------------------------------------------------------------
                                    1995       1994       1993         1992         1991         1990       1989     10-Year CAGR(8)
                                   -------------------------------------------------------------------------------------------------
 <S>                                <C>         <C>          <C>           <C>         <C>        <C>               <C>
------------------------------------------------------------------------------------------------------------------------------------
RESULTS OF OPERATIONS (1)
------------------------------------------------------------------------------------------------------------------------------------
Earned premiums                   $   285     $   243     $   193      $   153       $  152      $   33     $    24           32%
Net investment income                  43          29          24           27           31           7           5           33%
Total operating revenues              344         280         235          206          223          73          48           28%
Net income                             34          19          24           26           14           6          14           18%
Comprehensive income                   75         (10)         34           26           39           5          14           19%
------------------------------------------------------------------------------------------------------------------------------------
DILUTED EARNINGS PER SHARE (2)
------------------------------------------------------------------------------------------------------------------------------------
Core operations                   $  5.15     $  3.77     $  3.31      $  3.03       $ 2.63      $ 1.76     $  1.33           18%
Net realized gains                   1.39        0.45        1.83         0.89         0.94        0.13        0.89           --
Nonrecurring items                     --          --          --         1.90         0.28       (0.41)       0.65           --
Amortization expense                (0.39)      (0.89)      (0.91)       (1.18)       (1.15)      (0.43)      (0.25)          --
Net income                        $  6.15     $  3.33     $  4.23      $  4.64       $ 2.70      $ 1.05     $  2.62           16%
------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL POSITION (1)(3)(4)
------------------------------------------------------------------------------------------------------------------------------------
Total investments                 $   909     $   612     $   597      $  434        $  415      $  360     $    66           40%
Total assets                        1,315       1,103       1,135       1,129           700         670         196           29%
Unpaid losses and loss
 adjustment expenses                  734         653         688         733           346         302          31           --
Long-term debt                        107         101          78         101            94         127          44           --
8.71% Capital Securities               --          --          --          --            --          --          --           --
Shareholders' equity                  213         139         151         109            83          55          60           25%
------------------------------------------------------------------------------------------------------------------------------------
RATIO ANALYSIS
------------------------------------------------------------------------------------------------------------------------------------
GAAP combined ratio                    99%         97%         97%         97%          106%         81%         78%          --
Investment yield (5)                    6%          5%          5%          6%            7%         10%          8%          --
Total return (6)                       15%         (2%)        11%           7%         16%           8%         11%          --
Debt to total capital (7)              33%         42%         34%         48%           53%         70%         42%          --
------------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA (2)
------------------------------------------------------------------------------------------------------------------------------------
Common shares outstanding
  (in thousands)                    5,422       5,387       5,414       5,403         5,332       5,323       5,401           --
Total investments                 $167.57     $113.55     $110.27      $80.27        $77.91      $67.59     $ 12.31           39%
Book value                        $ 39.37     $ 25.71     $ 27.83      $20.24        $15.59      $10.27     $ 11.69           24%
Growth in book value                   53%         (8%)        38%         30%           52%        (12%)        27%          --
5-Year CAGR in book value (8)          31%         17%         25%         34%           35%         --          --           --
Closing stock price               $ 75.50     $ 41.50     $ 39.38      $31.25        $22.00      $11.75     $ 22.50           --
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(4)  The gross reinsurance reporting provisions of Statement of Financial
     Accounting Standards No. 113 affect 1992 and subsequent years.

(5)  Investment yield reflects net investment income as a percent of average
     invested assets.

(6)  Total return includes net investment income, net realized investment gains
     and the change in market value during the period as a percent of average
     invested assets.

(7)  The 8.71% Capital Securities are treated as 50% debt and 50% equity by the
     Company.

(8)  CAGR - compound annual growth rate

                                                                              21

<PAGE>


Markel Corporation & Subsidiaries

Consolidated Balance Sheets

<TABLE>
<CAPTION>

                                                                                                 December 31,
--------------------------------------------------------------------------------------------------------------------
                                                                                             1998            1997
--------------------------------------------------------------------------------------------------------------------
                                                                                             (dollars in thousands)
<S>                                                                                     <C>                     <C>
ASSETS
Investments, available-for-sale, at estimated fair value
     Fixed maturities (cost of $1,041,155 in 1998 and $1,037,807 in 1997)                 $ 1,070,978      $1,063,191
     Equity securities (cost of $200,004 in 1998 and $147,601 in 1997)                        317,887         253,385
     Short-term investments (estimated fair value approximates cost)                           92,228          91,744

---------------------------------------------------------------------------------------------------------------------
     TOTAL INVESTMENTS, AVAILABLE-FOR-SALE                                                  1,481,093       1,408,320
---------------------------------------------------------------------------------------------------------------------

Cash and cash equivalents                                                                       1,527           1,309
Receivables                                                                                    68,138          67,573
Reinsurance recoverable on unpaid losses                                                      198,288         225,405
Reinsurance recoverable on paid losses                                                         21,205          15,530
Deferred policy acquisition costs                                                              40,471          36,816
Prepaid reinsurance premiums                                                                   42,241          39,758
Property and equipment                                                                          7,981          10,068
Intangible assets                                                                              35,298          37,331
Other assets                                                                                   25,022          27,990

---------------------------------------------------------------------------------------------------------------------
     TOTAL ASSETS                                                                          $1,921,264      $1,870,100
---------------------------------------------------------------------------------------------------------------------


LIABILITIES AND SHAREHOLDERS' EQUITY
Unpaid losses and loss adjustment expenses                                                 $  933,830      $  971,157
Unearned premiums                                                                             205,908         192,815
Payables to insurance companies                                                                22,715          29,148
Long-term debt (estimated fair value of $96,931 in 1998 and $96,197 in 1997)                   93,219          93,166
Other liabilities                                                                              90,291          77,010
Company-Obligated Mandatorily Redeemable Preferred Capital Securities
     of Subsidiary Trust Holding Solely Junior Subordinated Deferrable
     Interest Debentures of Markel Corporation (estimated fair value
     of $144,453 in 1998 and $159,132 in 1997)                                                150,000         150,000

---------------------------------------------------------------------------------------------------------------------
     TOTAL LIABILITIES                                                                      1,495,963       1,513,296
---------------------------------------------------------------------------------------------------------------------

Shareholders' equity
     Common stock                                                                              25,415          24,660
     Retained earnings                                                                        303,878         246,885
     Accumulated other comprehensive income
         Net unrealized holding gains on fixed maturities and equity securities,
         net of taxes of $51,698 in 1998 and $45,909 in 1997                                   96,008          85,259

---------------------------------------------------------------------------------------------------------------------
     TOTAL SHAREHOLDERS' EQUITY                                                               425,301         356,804
Commitments and contingencies

---------------------------------------------------------------------------------------------------------------------
     TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                            $1,921,264      $1,870,100
---------------------------------------------------------------------------------------------------------------------
</TABLE>

See accompanying notes to consolidated financial statements.


22

<PAGE>

Consolidated Statements of Income and Comprehensive Income


<TABLE>
<CAPTION>
                                                                           Years Ended December 31,
----------------------------------------------------------------------------------------------------------
                                                                   1998            1997            1996
----------------------------------------------------------------------------------------------------------
                                                               (dollars in thousands, except per share data)
<S>                                                              <C>             <C>            <C>
OPERATING REVENUES
Earned premiums                                                  $ 333,267       $ 332,878       $ 307,453
Net investment income                                               71,046          68,653          51,168
Net realized gains from investment sales                            20,558          15,834           5,013
Other                                                                1,130           1,682           3,102
----------------------------------------------------------------------------------------------------------
     TOTAL OPERATING REVENUES                                      426,001         419,047         366,736
----------------------------------------------------------------------------------------------------------
OPERATING EXPENSES
Losses and loss adjustment expenses                                203,336         210,061         202,378
Underwriting, acquisition and insurance expenses                   124,841         120,076         105,032
Other                                                                   --              --           1,275
Loss on building                                                        --              --          10,380
Amortization of intangible assets                                    2,033           2,435           2,655
----------------------------------------------------------------------------------------------------------
     TOTAL OPERATING EXPENSES                                      330,210         332,572         321,720
----------------------------------------------------------------------------------------------------------
     OPERATING INCOME                                               95,791          86,475          45,016
----------------------------------------------------------------------------------------------------------
Interest expense                                                    20,406          20,124           8,016
----------------------------------------------------------------------------------------------------------
     INCOME BEFORE INCOME TAXES                                     75,385          66,351          37,000
Income tax expense (benefit)                                        18,092          15,924          (9,672)
----------------------------------------------------------------------------------------------------------
     NET INCOME                                                  $  57,293       $  50,427       $  46,672
----------------------------------------------------------------------------------------------------------
OTHER COMPREHENSIVE INCOME
Unrealized gains on securities, net of taxes
     Net unrealized holding gains arising during the period      $  24,112       $  51,800       $  13,018
     Less reclassification adjustments for gains included
         in net income                                             (13,363)        (10,292)         (3,258)
----------------------------------------------------------------------------------------------------------
     TOTAL OTHER COMPREHENSIVE INCOME                               10,749          41,508           9,760
----------------------------------------------------------------------------------------------------------
     COMPREHENSIVE INCOME                                        $  68,042       $  91,935       $  56,432
----------------------------------------------------------------------------------------------------------
NET INCOME PER SHARE
     Basic                                                       $   10.41       $    9.20       $    8.58
     Diluted                                                     $   10.17       $    8.92       $    8.30
----------------------------------------------------------------------------------------------------------
</TABLE>


See accompanying notes to consolidated financial statements.

                                                                              23

<PAGE>


Markel Corporation & Subsidiaries

Consolidated Statements Of Changes In Shareholders' Equity
<TABLE>
<CAPTION>
                                                                                       Accumulated
                                                                                          Other
                                                 Common       Common      Retained    Comprehensive
                                                 Shares        Stock      Earnings       Income        Total
---------------------------------------------------------------------------------------------------------------
                                                                    (in thousands)

<S>                                              <C>         <C>         <C>           <C>          <C>
Shareholders' Equity at January 1, 1996          5,422       $ 23,118    $ 156,333     $ 33,991     $ 213,442
     Net income                                     --             --       46,672           --        46,672
     Net unrealized holding gains
         arising during the period, net of taxes    --             --           --        9,760         9,760
---------------------------------------------------------------------------------------------------------------
         Comprehensive income                                                                          56,432
     Issuance of common stock                       68          1,229          --            --         1,229
     Repurchase of common stock                    (32)            --       (2,751)         --         (2,751)
     Other                                          --             --          (17)          --           (17)
---------------------------------------------------------------------------------------------------------------
Shareholders' Equity at December 31, 1996        5,458         24,347      200,237       43,751       268,335
     Net income                                     --             --       50,427          --         50,427
     Net unrealized holding gains
         arising during the period, net of taxes    --             --           --       41,508        41,508
---------------------------------------------------------------------------------------------------------------
         Comprehensive income                                                                          91,935
     Issuance of common stock                       41            313           --           --           313
     Repurchase of common stock                    (25)           --        (3,771)          --        (3,771)
     Other                                          --             --           (8)         --             (8)
---------------------------------------------------------------------------------------------------------------
Shareholders' Equity at December 31, 1997        5,474         24,660      246,885       85,259       356,804
     Net income                                     --            --        57,293           --        57,293
     Net unrealized holding gains
         arising during the period, net of taxes    --             --           --       10,749        10,749
---------------------------------------------------------------------------------------------------------------
         Comprehensive income                                                                          68,042
     Issuance of common stock                       50            755           --           --           755
     Repurchase of common stock                     (2)           --          (300)         --           (300)

---------------------------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY AT DECEMBER 31, 1998        5,522       $ 25,415    $ 303,878     $ 96,008     $ 425,301
---------------------------------------------------------------------------------------------------------------
</TABLE>

See accompanying notes to consolidated financial statements.

24

<PAGE>

Consolidated Statements Of Cash Flows

<TABLE>
<CAPTION>

                                                                                            Years Ended December 31,
--------------------------------------------------------------------------------------------------------------------------

                                                                                     1998           1997           1996
--------------------------------------------------------------------------------------------------------------------------
                                                                                            (dollars in thousands)
<S>                                                                             <C>              <C>            <C>
OPERATING ACTIVITIES
Net income                                                                       $  57,293       $  50,427       $  46,672
Adjustments to reconcile net income to net cash provided
    by operating activities
     Deferred income tax expense (benefit)                                           6,950            (557)        (15,345)
     Depreciation and amortization                                                   7,296           7,307          10,934
     Loss on building                                                                   --              --          10,380
     Net realized gains from investment sales                                      (20,558)        (15,834)         (5,013)
     Decrease (increase) in receivables                                              5,758          (2,669)         (5,208)
     Decrease (increase) in deferred policy acquisition costs                       (3,655)          1,163          (1,044)
     Increase (decrease) in unpaid losses and loss adjustment expenses, net        (15,885)         16,789          47,363
     Increase (decrease) in unearned premiums, net                                  10,610          (2,914)          6,009
     Increase (decrease) in payables to insurance companies                         (6,433)          5,278           2,581
     Increase (decrease) in current income taxes                                     3,084           4,313          (2,702)
     Other                                                                          (4,516)          5,340            (275)
--------------------------------------------------------------------------------------------------------------------------
         NET CASH PROVIDED BY OPERATING ACTIVITIES                                  39,944          68,643          94,352
--------------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Proceeds from sales of fixed maturities and equity securities                      405,561         636,212         439,072
Proceeds from maturities of fixed maturities                                       127,526          55,722          66,512
Cost of fixed maturities and equity securities purchased                          (574,310)       (863,785)       (591,034)
Net change in short-term investments                                                  (484)        (40,237)         16,675
Sales (acquisition) of insurance companies, net of cash                              4,689           9,230         (35,049)
Net proceeds from sale of building                                                      --           6,500              --
Additions to property and equipment                                                 (2,717)         (4,612)         (3,952)
Other                                                                                 (446)           (177)           (248)
--------------------------------------------------------------------------------------------------------------------------
         NET CASH USED BY INVESTING ACTIVITIES                                     (40,181)       (201,147)       (108,024)
--------------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Net proceeds from issuance of Company-Obligated Mandatorily
    Redeemable Preferred Capital Securities                                             --         148,123              --
Additions to long-term debt                                                             --              --          40,500
Repayments and repurchases of long-term debt                                            --         (21,577)        (32,550)
Other                                                                                  455          (3,787)         (1,539)
--------------------------------------------------------------------------------------------------------------------------
         NET CASH PROVIDED BY FINANCING ACTIVITIES                                     455         122,759           6,411
--------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents                                       218          (9,745)         (7,261)
Cash and cash equivalents at beginning of year                                       1,309          11,054          18,315
--------------------------------------------------------------------------------------------------------------------------
         CASH AND CASH EQUIVALENTS AT END OF YEAR                                $   1,527       $   1,309       $  11,054
--------------------------------------------------------------------------------------------------------------------------
</TABLE>


See accompanying notes to consolidated financial statements.

                                                                              25

<PAGE>


Markel Corporation & Subsidiaries

Notes To Consolidated Financial Statements

1. Summary of Significant Accounting Policies

The Company underwrites specialty insurance products and programs to niche
markets. Significant areas of underwriting include excess and surplus lines,
professional/products liability, brokered excess and surplus lines, specialty
programs and specialty personal and commercial lines.

a) PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS. Generally accepted
accounting principles require management to make estimates and assumptions when
preparing financial statements. Actual results could differ from those
estimates. The consolidated financial statements include the accounts of Markel
Corporation and all subsidiaries (the Company). All significant intercompany
balances and transactions have been eliminated in consolidation.

b) INVESTMENTS. All investments are considered available-for-sale and are
recorded at estimated fair value, generally based on quoted market prices. The
net unrealized gains or losses on investments, net of deferred income taxes, are
included in accumulated other comprehensive income in shareholders' equity. A
decline in the fair value of any investment below cost that is deemed other than
temporary is charged to earnings, resulting in a new cost basis for the
security.

Premiums and discounts are amortized or accreted over the lives of the related
fixed maturities as an adjustment to yield using the effective interest method.
Dividend and interest income are recognized when earned. Realized gains or
losses are included in earnings and are derived using the first in, first out
method.

c) CASH EQUIVALENTS. The Company considers overnight deposits to be cash
equivalents for purposes of the consolidated statements of cash flows.

d) DEFERRED POLICY ACQUISITION COSTS. Costs directly related to the acquisition
of insurance premiums, such as commissions to agents and brokers, are deferred
and amortized over the related policy period, generally one year. If it is
determined that future policy revenues on existing policies are not adequate to
cover related costs and expenses, deferred policy acquisition costs are charged
to earnings.

e) PROPERTY AND EQUIPMENT. Owned property and equipment are stated at cost less
accumulated depreciation. Depreciation and amortization of buildings and
equipment are calculated using the straight-line method over the respective
estimated service lives.

f) INTANGIBLE ASSETS. Policy renewal rights represent the value attributable to
renewal rights for lines of businesses acquired and are amortized using either
the straight-line or accelerated methods over the estimated lives of the
businesses acquired, generally seven to ten years. Goodwill is amortized using
the straight-line method, generally over 40 years. The Company assesses the
recoverability of goodwill by determining whether the amortization of the
balance over its remaining life can be recovered through the undiscounted future
operating cash flows of the acquired operations.

g) REVENUE RECOGNITION. Insurance premiums are earned on a pro rata basis over
the policy period, generally one year. Profit-sharing commissions from
reinsurers are recognized when earned and are netted against policy acquisition
costs. Premiums ceded are netted against premiums written.

h) UNPAID LOSSES AND LOSS ADJUSTMENT EXPENSES. Unpaid losses and loss adjustment
expenses are based on evaluations of reported claims and estimates for losses
and loss adjustment expenses incurred but not reported. Estimates for losses and
loss adjustment expenses incurred but not reported are based on reserve
development studies. The reserves recorded are estimates, and the ultimate
liability may be greater than or less than the estimates; however, management
believes the reserves are adequate.

26

<PAGE>

1. Summary of Significant Accounting Policies (continued)

i) INCOME TAXES. Deferred tax assets and liabilities are recorded in accordance
with the provisions of Statement of Financial Accounting Standards (SFAS) No.
109, Accounting for Income Taxes. Under SFAS No. 109 the Company records
deferred income taxes which reflect the net tax effect of the temporary
differences between the carrying amounts of the assets and liabilities for
financial reporting purposes and their respective tax bases.

j) EARNINGS PER SHARE. Basic earnings per share (EPS) is computed by dividing
net income, less required dividends on redeemable preferred stock, by the
weighted average number of common shares outstanding during the year. Diluted
EPS is computed using the weighted average number of common shares and dilutive
potential common shares outstanding during the year.

k) STOCK COMPENSATION PLANS. The Company applies Accounting Principles Board
Opinion No. 25, Accounting for Stock Issued to Employees, and related
interpretations in accounting for stock-based compensation plans. The Company
has adopted the disclosure-only provisions of SFAS No. 123, Accounting for Stock
Based Compensation.

l) LONG-LIVED ASSETS. If an asset is considered to be impaired, the impairment
equals the amount by which the carrying amount of the asset exceeds the fair
value of the asset. Assets to be disposed of are reported at the lower of the
carrying amount or fair value less costs to sell.

m) COMPREHENSIVE INCOME. Comprehensive income represents all changes in equity
of an enterprise that result from recognized transactions and other economic
events of the period. Other comprehensive income refers to revenues, expenses,
gains and losses that under generally accepted accounting principles are
included in comprehensive income but excluded from net income, such as
unrealized gains or losses on certain investments in debt and equity securities
and foreign currency items.

n) DERIVATIVES. The Company occasionally uses derivative financial instruments
to hedge foreign currency risk and market risk in its investment portfolio. When
held, derivative instruments are matched against specific securities, and their
fair values are determined based on current settlement costs. Derivative
positions held by the Company at December 31, 1998 and 1997 were immaterial.

o) SEGMENT REPORTING. As of January 1, 1998, the Company adopted the provisions
of SFAS No. 131, Disclosures about Segments of an Enterprise and Related
Information, for all years presented. This statement establishes standards for
disclosing certain information about reportable operating segments. It also
requires public enterprises to present certain "enterprise wide" information,
including revenues related to products and services.

p) RECLASSIFICATIONS. Certain reclassifications of prior years' amounts have
been made to conform with 1998 presentations.

                                                                              27

<PAGE>


Markel Corporation & Subsidiaries

Notes To Consolidated Financial Statements (continued)

2. Investments

a)  Following is a summary of investments (dollars in thousands):

<TABLE>
<CAPTION>
                                                                         December 31, 1998
-------------------------------------------------------------------------------------------------------------
                                                                     Gross          Gross        Estimated
                                                     Amortized    Unrealized      Unrealized        Fair
                                                       Cost          Gains          Losses          Value
-------------------------------------------------------------------------------------------------------------
<S>                                               <C>             <C>             <C>               <C>
Fixed maturities
     U.S. Treasury securities and obligations
         of U.S. government agencies               $  199,655      $    4,376      $     (937)      $  203,094
     Obligations of states, municipalities
         and political subdivisions                   425,904          13,584            (207)         439,281
     Public utilities                                  37,086           1,030             (37)          38,079
     Convertibles and bonds with warrants              12,528             442            (151)          12,819
     All other corporate bonds                        365,982          13,219          (1,496)         377,705
--------------------------------------------------------------------------------------------------------------
     Total fixed maturities                         1,041,155          32,651          (2,828)       1,070,978
Equity securities
     Banks, trusts and insurance companies             86,526          61,898            (454)         147,970
     Industrial, miscellaneous and all other          112,780          60,917          (5,259)         168,438
     Nonredeemable preferred stock                        698             794             (13)           1,479
--------------------------------------------------------------------------------------------------------------

     Total equity securities                          200,004         123,609          (5,726)         317,887
Short-term investments                                 92,228              --              --           92,228
--------------------------------------------------------------------------------------------------------------
     Total  Investments                            $1,333,387      $  156,260      $   (8,554)      $1,481,093
</TABLE>


<TABLE>
<CAPTION>
                                                                         December 31, 1997
-------------------------------------------------------------------------------------------------------------
                                                                      Gross         Gross         Estimated
                                                     Amortized     Unrealized     Unrealized         Fair
                                                       Cost           Gains         Losses           Value
-------------------------------------------------------------------------------------------------------------
<S>                                               <C>              <C>            <C>               <C>
Fixed maturities
     U.S. Treasury securities and obligations
         of U.S. government agencies               $  299,546      $    3,344      $     (465)      $  302,425
     Obligations of states, municipalities
         and political subdivisions                   361,688          10,713            (125)         372,276
     Public utilities                                  43,614           1,689             (79)          45,224
     Convertibles and bonds with warrants               4,799             380             (14)           5,165
     All other corporate bonds                        328,160          10,442            (501)         338,101
--------------------------------------------------------------------------------------------------------------
     Total fixed maturities                         1,037,807          26,568          (1,184)       1,063,191
Equity securities
     Banks, trusts and insurance companies             53,918          43,811            (119)          97,610
     Industrial, miscellaneous and all other           89,969          63,163          (1,454)         151,678
     Nonredeemable preferred stock                      3,714             405             (22)           4,097
--------------------------------------------------------------------------------------------------------------

     Total equity securities                          147,601         107,379          (1,595)         253,385
Short-term investments                                 91,744              --              --           91,744
--------------------------------------------------------------------------------------------------------------
     TOTAL INVESTMENTS                             $1,277,152      $  133,947      $   (2,779)      $1,408,320
--------------------------------------------------------------------------------------------------------------
</TABLE>

28

<PAGE>

2. Investments (continued)

b) The amortized cost and estimated fair value of fixed maturities at December
31, 1998 are shown below by contractual maturity (dollars in thousands):

<TABLE>
<CAPTION>
                                                                      Estimated
                                                       Amortized        Fair
                                                         Cost           Value
--------------------------------------------------------------------------------
<S>                                                <C>            <C>
Due in one year or less                              $    62,610    $    62,991
Due after one year through five years                    169,934        172,975
Due after five years through ten years                   334,255        343,110
Due after ten years                                      474,356        491,902
--------------------------------------------------------------------------------
     TOTAL                                           $ 1,041,155    $ 1,070,978
--------------------------------------------------------------------------------
</TABLE>

Expected maturities may differ from contractual maturities because borrowers may
have the right to call or prepay obligations with or without call or prepayment
penalties, and the lenders may have the right to put the securities back to the
borrower. Based on expected maturities, the estimated average duration of the
fixed maturities was 4.7 years.

c) Components of net investment income are as follows (dollars in thousands):

<TABLE>
<CAPTION>
                                                             Years Ended December 31,
--------------------------------------------------------------------------------------------
                                                      1998             1997           1996
--------------------------------------------------------------------------------------------
<S>                                                 <C>             <C>           <C>
Interest
     Municipal bonds (tax-exempt)                   $ 20,169        $ 16,130      $   8,824
     Taxable bonds                                    42,560          43,051         36,823
     Short-term investments, including
         overnight deposits                            2,389           3,986          4,447
     Dividends on equity securities                    9,602           8,670          4,474
--------------------------------------------------------------------------------------------
                                                      74,720          71,837         54,568
Less investment expenses                               3,674           3,184          3,400
--------------------------------------------------------------------------------------------
     NET INVESTMENT INCOME                          $ 71,046        $ 68,653       $ 51,168
--------------------------------------------------------------------------------------------
</TABLE>


                                                                              29

<PAGE>

Markel Corporation & Subsidiaries

Notes To Consolidated Financial Statements (continued)

2. Investments (continued)

d) The following table presents the Company's realized gains and losses from
investment sales and the change in gross unrealized gains (losses) (dollars in
thousands):

<TABLE>
<CAPTION>
                                                            Years Ended December 31,
--------------------------------------------------------------------------------------------
                                                      1998            1997           1996
--------------------------------------------------------------------------------------------
<S>                                                <C>             <C>           <C>
Realized gains
     Fixed maturities                              $   6,201       $   9,454     $    5,618
     Equity securities                                19,168          12,568          5,480
--------------------------------------------------------------------------------------------
                                                      25,369          22,022         11,098
--------------------------------------------------------------------------------------------
Realized losses
     Fixed maturities                                 (1,376)         (4,615)        (5,853)
     Equity securities                                (3,435)         (1,573)          (232)
--------------------------------------------------------------------------------------------
                                                      (4,811)         (6,188)        (6,085)
--------------------------------------------------------------------------------------------
     NET REALIZED GAINS FROM INVESTMENT SALES       $ 20,558        $ 15,834     $    5,013
--------------------------------------------------------------------------------------------
Change in gross unrealized gains (losses)
     Fixed maturities                              $   4,439        $ 18,911      $ (16,014)
     Equity securities                                12,099          44,947         31,029
---------------------------------------------------------------------------------------------
     NET INCREASE                                   $ 16,538        $ 63,858      $  15,015
--------------------------------------------------------------------------------------------
</TABLE>

e) Investments with a carrying value of $28.9 million and $33.9 million were on
deposit with regulatory authorities at December 31, 1998 and 1997, respectively.

f) At December 31, 1998, there were no investments in any one issuer that
exceeded 10% of shareholders' equity.

3. Receivables

-------------------------------------------------------------------------------
Following are the components of receivables (dollars in thousands):

                                                           December 31,
                                                         -----------------
                                                          1998       1997
---------------------------------------------------------------------------

Agents' balances and premiums in course of collection   $ 52,507  $ 54,759
Less allowance for doubtful receivables                    3,113     2,763
---------------------------------------------------------------------------
                                                          49,394    51,996
Other                                                     18,744    15,577
---------------------------------------------------------------------------
     Receivables                                        $ 68,138  $ 67,573
---------------------------------------------------------------------------

30

<PAGE>

4. Deferred Policy Acquisition Costs

The following reflects the amounts of policy costs deferred and amortized
(dollars in thousands):

<TABLE>
<CAPTION>

                                                            Years Ended December 31,
--------------------------------------------------------------------------------------------
                                                      1998            1997           1996
--------------------------------------------------------------------------------------------
<S>                                                <C>             <C>            <C>
Balance, beginning of year                         $  36,816       $  37,979      $  32,024
Policy acquisition costs deferred                     85,041          79,356         76,327
Amortization charged to expense                      (81,386)        (80,519)       (70,372)
--------------------------------------------------------------------------------------------
     DEFERRED POLICY ACQUISITION COSTS             $  40,471       $  36,816      $  37,979
--------------------------------------------------------------------------------------------
</TABLE>

The following reflects the components of underwriting, acquisition and insurance
expenses (dollars in thousands):

<TABLE>
<CAPTION>

                                                            Years Ended December 31,
-------------------------------------------------------------------------------------------
                                                      1998          1997           1996
-------------------------------------------------------------------------------------------
<S>                                               <C>           <C>            <C>
Amortization of policy acquisition costs          $   81,386    $   80,519     $   70,372
Other operating expenses                              43,455        39,557         34,660

     UNDERWRITING, ACQUISITION AND
     INSURANCE EXPENSES                            $ 124,841     $ 120,076      $ 105,032
-------------------------------------------------------------------------------------------
</TABLE>

5. Property and Equipment

Following are the components of property and equipment (dollars in thousands):

<TABLE>
<CAPTION>
                                                               December 31,
--------------------------------------------------------------------------------
                                                            1998          1997
--------------------------------------------------------------------------------
<S>                                                     <C>             <C>
Land                                                    $   1,066       $    689
Building equipment                                            995            375
Furniture and equipment                                    26,292         28,154
Other                                                         121            140
--------------------------------------------------------------------------------
                                                           28,474         29,358
Less accumulated depreciation and amortization             20,493         19,290
--------------------------------------------------------------------------------
     PROPERTY AND EQUIPMENT                             $   7,981       $ 10,068
--------------------------------------------------------------------------------
</TABLE>


Depreciation and amortization expense of property and equipment was $4.1
million, $3.5 million and $6.0 million for the years ended December 31, 1998,
1997 and 1996, respectively.

Total rental expense for the years ended December 31, 1998, 1997 and 1996 was
approximately $4.9 million, $4.2 million and $2.7 million, respectively.

As part of the purchase of Shand/Evanston in 1987, the Company acquired Shand's
headquarters building in Evanston, Illinois. After the acquisition the estimated
fair value of the building fell significantly due to escalating property taxes
and reduced demand for office space in Evanston. In response to a purchase
offer, the Company decided to dispose of the building and immediately recognized
a $10.4 million ($6.8 million after tax) loss in 1996. The sale of the building
was completed in 1997.

                                                                              31

<PAGE>


Markel Corporation & Subsidiaries

Notes To Consolidated Financial Statements (continued)

5. Property and Equipment (continued)

The Company has facilities and furniture and equipment under operating leases
with remaining terms ranging from 22 months to 120 months.

Minimum annual rental commitments for noncancelable operating leases at December
31, 1998 are as follows (dollars in thousands):

<TABLE>
<CAPTION>
Years Ending December 31,
------------------------------------------------------------------
<S>                                                      <C>
     1999                                                $   5,262
     2000                                                    6,017
     2001                                                    5,484
     2002                                                    5,349
     2003                                                    5,452
     2004 and thereafter                                    22,854
------------------------------------------------------------------
     TOTAL                                                $ 50,418
------------------------------------------------------------------
</TABLE>

6. Intangible Assets

Following are the components of intangible assets (dollars in thousands):

<TABLE>
<CAPTION>
                                                      December 31,
-----------------------------------------------------------------------
                                                  1998           1997
-----------------------------------------------------------------------
<S>                                             <C>            <C>
Goodwill                                        $ 34,587       $ 35,668
Policy renewal rights                                711          1,663
-----------------------------------------------------------------------
     INTANGIBLE ASSETS                          $ 35,298       $ 37,331
-----------------------------------------------------------------------
</TABLE>

Accumulated amortization related to intangible assets was $21.6 million and
$19.6 million at December 31, 1998 and 1997, respectively.


7. Income Taxes

--------------------------------------------------------------------------------
Income tax expense (benefit) on income before income taxes, substantially all of
which was federal tax expense, consists of (dollars in thousands):

<TABLE>
<CAPTION>
                                                             Years Ended December 31,
---------------------------------------------------------------------------------------------
                                                      1998            1997             1996
---------------------------------------------------------------------------------------------
<S>                                                 <C>             <C>          <C>
Current                                             $ 11,142        $ 16,481     $    5,673
Deferred                                               6,950            (557)       (15,345)
---------------------------------------------------------------------------------------------
     INCOME TAX EXPENSE (BENEFIT)                   $ 18,092        $ 15,924     $   (9,672)
---------------------------------------------------------------------------------------------
</TABLE>

The Company made income tax payments of $8.1 million in 1998, $12.2 million in
1997 and $8.4 million in 1996. Current income taxes payable were $4.0 million at
December 31, 1998 and $0.9 million at December 31, 1997.


32

<PAGE>


7. Income Taxes (continued)

Reconciliations of the U.S. corporate income tax rate and the effective tax rate
on income before income taxes are as follows:

<TABLE>
<CAPTION>
                                                        Years Ended December 31,
--------------------------------------------------------------------------------
                                                         1998     1997     1996
--------------------------------------------------------------------------------
<S>                                                       <C>      <C>      <C>
U.S. corporate tax rate                                   35%      35%      35%
Tax-exempt investment income                              (9)      (9)      (9)
Differences between financial reporting and
     tax bases of assets acquired                         (3)      (3)     (53)
Other                                                      1        1        1
--------------------------------------------------------------------------------
     EFFECTIVE TAX RATE                                   24%      24%     (26%)
--------------------------------------------------------------------------------
</TABLE>

The components of the net deferred tax asset (liability) are as follows (dollars
in thousands):

<TABLE>
<CAPTION>
                                                                   December 31,
-----------------------------------------------------------------------------------
                                                                1998         1997
-----------------------------------------------------------------------------------
<S>                                                        <C>           <C>
Assets
     Income reported in different periods for
         financial reporting and tax purposes              $    8,840    $   9,721
     Unpaid losses and loss adjustment expenses,
         nondeductible portion for income tax purposes         46,814       51,521
     Unearned premiums, adjustment for income tax purposes     11,457       10,714
     Other                                                        976        1,573
-----------------------------------------------------------------------------------
     Total gross deferred tax assets                           68,087       73,529
-----------------------------------------------------------------------------------
Liabilities
     Property and equipment, depreciation                         620          182
     Deferred policy acquisition costs                         14,165       12,886
     Investments, net unrealized gains                         51,698       45,909
     Differences between financial reporting and
         tax bases of assets acquired                          12,126       13,420
     Other                                                      1,896          812
-----------------------------------------------------------------------------------
     Total gross deferred tax liabilities                      80,505       73,209
-----------------------------------------------------------------------------------
     NET DEFERRED TAX ASSET (LIABILITY)                     $ (12,418)  $      320
-----------------------------------------------------------------------------------
</TABLE>

The net deferred tax liability and asset are included in other liabilities on
the consolidated balance sheets at December 31, 1998 and 1997, respectively.

The Company believes that a valuation allowance with respect to the realization
of the total gross deferred tax assets is not necessary. The Company expects to
realize the majority of its gross deferred tax assets existing at December 31,
1998 through the reversal of existing temporary differences and the application
of the carryback provisions of the Internal Revenue Code. The Company expects to
generate future taxable income, excluding the effect of future originating
temporary differences, to realize the remaining gross deferred tax assets.

In 1996, the Internal Revenue Service completed its examination of the 1994 and
prior federal tax returns and made no material adjustments.

                                                                              33

<PAGE>


Markel Corporation & Subsidiaries

Notes To Consolidated Financial Statements (continued)

8. Unpaid Losses And Loss Adjustment Expenses

The following table sets forth a reconciliation of beginning and ending reserves
for losses and loss adjustment expenses (dollars in thousands):

<TABLE>
<CAPTION>
                                                       Years Ended December 31,
-------------------------------------------------------------------------------------
                                                      1998       1997         1996
-------------------------------------------------------------------------------------
<S>                                               <C>          <C>         <C>
NET RESERVES FOR LOSSES AND LOSS ADJUSTMENT
     EXPENSES, BEGINNING OF YEAR                   $ 745,752   $ 725,064   $ 575,268
     Commutations and other                             (798)        745       6,544
     Reserves for losses and loss adjustment
         expenses of acquired insurance companies         --          --     117,499
-------------------------------------------------------------------------------------
RESTATED NET RESERVES FOR LOSSES
     AND LOSS ADJUSTMENT EXPENSES,
     BEGINNING OF YEAR                             $ 744,954   $ 725,809   $ 699,311
Incurred losses and loss adjustment expenses
     Current year                                    240,732     236,037     226,495
     Prior years                                     (37,396)    (25,976)    (24,117)
-------------------------------------------------------------------------------------
TOTAL INCURRED LOSSES AND
     LOSS ADJUSTMENT EXPENSES                        203,336     210,061     202,378
-------------------------------------------------------------------------------------
Payments
     Current year                                     51,695      44,382      52,158
     Prior years                                     161,053     145,736     124,467
-------------------------------------------------------------------------------------
TOTAL PAYMENTS                                       212,748     190,118     176,625
-------------------------------------------------------------------------------------
NET RESERVES FOR LOSSES AND LOSS
     ADJUSTMENT EXPENSES, END OF YEAR                735,542     745,752     725,064
-------------------------------------------------------------------------------------
Reinsurance recoverable on unpaid losses             198,288     225,405     210,518
-------------------------------------------------------------------------------------
GROSS RESERVES FOR LOSSES AND LOSS
     ADJUSTMENT EXPENSES, END OF YEAR              $ 933,830   $ 971,157   $ 935,582
-------------------------------------------------------------------------------------
</TABLE>

The provision for prior years decreased in 1998, 1997 and 1996. Inherent in the
Company's reserving practices is the desire to establish reserves that are more
likely redundant than deficient. Furthermore, the Company's philosophy is to
price its insurance products to make an underwriting profit, not to increase
written premiums.

Management continually attempts to improve its loss estimation process by
refining its ability to analyze loss development patterns, claim payments and
other information, but many reasons remain for potential adverse development of
estimated ultimate liabilities. For example, the uncertainties inherent in the
loss estimation process have become increasingly subject to changes in social
and legal trends. In recent years, these trends have expanded the liability of
insureds, established new liabilities and reinterpreted contracts to provide
unanticipated coverage long after the related policies were written. Such
changes from past experience significantly affect the ability of insurers to
estimate reserves for unpaid losses and related expenses.

34

<PAGE>


8. Unpaid Losses And Loss Adjustment Expenses (continued)

Management recognizes the higher variability associated with certain exposures
and books of business and considers this factor when establishing loss reserves.
Management currently believes the Company's gross and net reserves, including
the reserves for environmental impairment liability and toxic tort exposures,
are adequate. The Company has shown cumulative redundancies in 1988 and
subsequent years.

The net reserves for losses and loss adjustment expenses maintained by the
Company's insurance subsidiaries are equal under both statutory and generally
accepted accounting principles. However, certain reserves for claim handling
expenses are maintained by the Company's underwriting management subsidiaries,
in accordance with the contractual obligations of these subsidiaries. As a
result, the consolidated net reserves for losses and loss adjustment expenses
will be different from the statutory net reserves for losses and loss adjustment
expenses.

9. Long-Term Debt

-------------------------------------------------------------------------------
Long-term debt consists of the following (dollars in thousands):

<TABLE>
<CAPTION>
                                                          December 31,
----------------------------------------------------------------------------
                                                         1998       1997
----------------------------------------------------------------------------
<S>                                                    <C>        <C>
7.25% notes, due November 1, 2003, interest payable
  semi-annually, net of
  unamortized discount of
  $231 in 1998 and $284 in 1997                         $ 93,219   $ 93,166
----------------------------------------------------------------------------
</TABLE>

The notes due November 1, 2003 are not redeemable or subject to any sinking fund
requirements and have an effective cost of approximately 7.54%. The estimated
fair value of the Company's long-term debt is based on quoted market prices at
the reporting date.

In 1998 the Company arranged a syndicated five year revolving credit facility
with a group of banks which provides up to $250 million for working capital and
other general corporate purposes. The Company may select from various interest
rate options for balances outstanding under the facility. The Company pays a
commitment fee of .10% on the unused portion of the facility. The facility
replaced the Company's existing $150 million credit facility.

Following is a schedule of future principal payments due on long-term debt as of
December 31, 1998 (dollars in thousands):

<TABLE>
<CAPTION>
Years Ending December 31,
----------------------------------------------------------------------
<S>                                                       <C>
     1999                                                       --
     2000                                                       --
     2001                                                       --
     2002                                                       --
     2003                                                 $ 93,219
     2004 and thereafter                                        --
----------------------------------------------------------------------
     TOTAL                                                $ 93,219
----------------------------------------------------------------------
</TABLE>

The Company paid $7.3 million, $7.6 million and $7.7 million in interest during
the years ended December 31, 1998, 1997 and 1996, respectively.

                                                                              35

<PAGE>

Markel Corporation & Subsidiaries

Notes To Consolidated Financial Statements (continued)

10. Company-Obligated  Mandatorily  Redeemable  Preferred  Capital  Securities
     (8.71% Capital Securities)

On January 8, 1997, the Company arranged the sale of $150 million of 8.71%
Capital Securities issued under an Amended and Restated Declaration of Trust
dated January 13, 1997 (The Declaration) by Markel Capital Trust I (the Trust),
a statutory business trust sponsored and wholly-owned by Markel Corporation.
Proceeds from the sale of the 8.71% Capital Securities were used to purchase
$154,640,000 aggregate principal amount of the Company's 8.71% Junior
Subordinated Deferrable Interest Debentures (the Debentures) due January 1,
2046, issued to the Trust under an indenture dated January 13, 1997 (the
Indenture). The Debentures are the sole assets of the Trust. The Company has the
right to defer interest payments on the Debentures for up to five years. The
8.71% Capital Securities and related Debentures are redeemable by the Company on
or after January 1, 2007. Taken together, the Company's obligations under the
Debentures, the Indenture, the Declaration and a guarantee made by the Company
provide, in the aggregate, a full, irrevocable and unconditional guarantee of
payments of distributions and other amounts due on the 8.71% Capital Securities.
In 1998 and 1997 the Company paid $19.6 million and $6.1 million, respectively,
in interest on the 8.71% Capital Securities.


11. Shareholders' Equity

--------------------------------------------------------------------------------
a) The Company has 15,000,000 shares of no par value common stock authorized, of
which 5,522,437 and 5,473,982 shares were outstanding at December 31, 1998 and
1997, respectively. The Company is authorized to issue up to 2,069,200 shares of
preferred stock, $1.00 par value per share, in one or more series and to fix the
powers, designations, preferences and rights of each series.

b) The Company has three stock option or stock award plans for employees and
directors; the 1986 Stock Option Plan which expired on November 3, 1996, the
1989 Non-employee Director Stock Option Plan which expired on December 31,1998
and the 1993 Incentive Stock Plan. At December 31, 1998, there were 139,939
shares, 18,000 shares and 100,000 shares reserved for issuance under the 1986
plan, the 1989 plan and the 1993 plan, respectively. The 1986 and the 1993 plans
are administered by the Compensation Committee of the Company's Board of
Directors. The 1993 plan provides for the award of incentive stock options,
stock appreciation rights or incentive stock awards to employees of the Company.
The 1989 plan is administered by the Company's Board of Directors and provides
for the award of non-statutory stock options to the non-employee directors.
Options are granted at a price not less than market price on the date of the
grant and are exercisable within a period established by the Committee or the
Board at the time of the grant, but not earlier than six months from the date of
grant. Options expire either five or ten years from the date of grant. At
December 31, 1998, the Company had

36

<PAGE>

11. Shareholders' Equity (continued)

97,500 options, stock appreciation rights or incentive stock awards available
for grant under the 1993 plan. Stock option transactions are summarized below:

<TABLE>
<CAPTION>
                                                 Years Ended December 31,
--------------------------------------------------------------------------------------------
                                         Weighted            Weighted              Weighted
                                         Average              Average               Average
                                        Exercise             Exercise              Exercise
                                 1998     Price      1997      Price      1996       Price
--------------------------------------------------------------------------------------------
<S>                            <C>        <C>       <C>      <C>        <C>         <C>
Options outstanding
     at January 1              217,279    $ 29      264,250  $   26     339,582     $ 24
Granted                             --      --        2,500     144       5,000       87
Exercised                      (56,260)     23      (48,031)     17     (75,332)      22
Canceled                          (580)     39       (1,440)     39      (5,000)      22
--------------------------------------------------------------------------------------------
Options outstanding
     at December 31            160,439    $ 31      217,279  $   29     264,250     $ 26
--------------------------------------------------------------------------------------------
Options exercisable
     at December 31            139,807              180,283             210,735
Options available for grant
     at December 31             97,500              133,500             136,000
--------------------------------------------------------------------------------------------
</TABLE>


The following table summarizes information about stock options outstanding at
December 31, 1998:

<TABLE>
<CAPTION>
                             Options Outstanding                    Options Exercisable
------------------------------------------------------------------------------------------
                                   Weighted        Weighted                     Weighted
  Range of                          Average         Average                      Average
  Exercise        Number           Remaining        Exercise        Number      Exercise
   Prices       Outstanding    Contractual Life      Price        Exercisable     Price
------------------------------------------------------------------------------------------
<S>              <C>                 <C>           <C>             <C>           <C>
$ 10 to 15        20,754             2.0 years     $   12           20,754       $ 12
  16 to 22        65,300             0.8               19           65,300         19
  23 to 33         4,500             3.4               26            4,500         26
  34 to 47        62,385             3.0               41           48,253         41
  87               5,000             7.8               87            1,000         87
  144              2,500             8.8              144               --         --
------------------------------------------------------------------------------------------
$ 10 to 144      160,439             2.2 years     $   31          139,807       $ 26
------------------------------------------------------------------------------------------
</TABLE>

The pro forma impact of stock options granted in 1997 and 1996 had no effect on
basic or diluted net income per share.

                                                                              37

<PAGE>

Markel Corporation & Subsidiaries

Notes To Consolidated Financial Statements (continued)

11. Shareholders' Equity (continued)

c) Net income per share is determined by dividing net income, as adjusted below,
by the applicable shares outstanding (in thousands):

<TABLE>
<CAPTION>
                                                            Years Ended December 31,
---------------------------------------------------------------------------------------------
                                                       1998           1997           1996
---------------------------------------------------------------------------------------------
<S>                                                  <C>            <C>            <C>
Net income as reported                               $ 57,293       $ 50,427       $ 46,672
Dividends on redeemable preferred stock                    --             (8)           (17)
---------------------------------------------------------------------------------------------
     Basic and diluted income                        $ 57,293       $ 50,419       $ 46,655
---------------------------------------------------------------------------------------------
Average common shares outstanding                       5,506          5,483          5,438
Dilutive potential common shares                          130            169            185
---------------------------------------------------------------------------------------------
     Average diluted shares outstanding                 5,636          5,652          5,623
---------------------------------------------------------------------------------------------
</TABLE>

Basic shares represent average common shares outstanding. Diluted shares include
average common shares and dilutive potential common shares outstanding. Average
closing common stock market prices are used to calculate the dilutive effect
attributable to stock options.

12. COMPREHENSIVE Income

--------------------------------------------------------------------------------
Other comprehensive income is composed of net unrealized holding gains on
securities arising during the period less reclassification adjustments for gains
included in net income. The related tax expense on net unrealized holding gains
on securities was $13.0 million, $27.9 million and $7.0 million, respectively
for 1998, 1997 and 1996. The related tax expense on the reclassification
adjustments for gains included in net income was $7.2 million for 1998, $5.5
million for 1997 and $1.8 million for 1996.

13. Employee Benefit Plan

--------------------------------------------------------------------------------
The Company maintains a defined contribution plan, the Markel Corporation
Retirement Savings Plan, in accordance with Section 401(k) of the Internal
Revenue Code. The plan requires the Company to contribute, on an annual basis,
6% of each participating employee's compensation plus a matching contribution of
100% of the first 2% and 50% of the next 2% of each participating employee's
contribution. Annual expenses relating to this plan were $2.9 million, $2.6
million and $2.2 million in 1998, 1997 and 1996, respectively.

14. Reinsurance

--------------------------------------------------------------------------------
The Company enters into reinsurance agreements in order to reduce its liability
on individual risks and enable it to underwrite policies with higher limits. In
a reinsurance transaction, an insurance company transfers, or cedes, all or part
of its exposure in return for a portion of the premium. The ceding of the
insurance does not legally discharge the ceding company from its primary
liability for the full amount of the policies, and the ceding company is
required to pay the loss and bear collection risk if the reinsurer fails to meet
its obligations under the reinsurance agreement.


38

<PAGE>

14. Reinsurance (continued)

The table below summarizes the effect of reinsurance on premiums written and
earned (dollars in thousands):

<TABLE>
<CAPTION>
                                            Years Ended December 31,
-------------------------------------------------------------------------------------------
                             1998                    1997                     1996
-------------------------------------------------------------------------------------------
                      Written     Earned      Written     Earned       Written     Earned
<S>                 <C>         <C>         <C>          <C>         <C>         <C>
Direct              $ 432,094   $ 413,752   $ 413,252    $ 422,574   $ 398,412   $ 391,942
Assumed                 4,933       5,313       7,395        6,938       8,058      11,062
Ceded                 (93,150)    (85,798)    (90,684)     (96,634)    (93,011)    (95,551)
-------------------------------------------------------------------------------------------

Net Premiums        $ 343,877   $ 333,267   $ 329,963    $ 332,878   $ 313,459   $ 307,453
-------------------------------------------------------------------------------------------
</TABLE>

Incurred losses and loss adjustment expenses are net of reinsurance recoveries
of $55.8 million, $82.0 million and $51.2 million for the years ended December
31, 1998, 1997 and 1996, respectively.

The percentage of assumed earned premiums to net earned premiums for the years
ended December 31, 1998, 1997 and 1996 was approximately 2%, 2% and 4%,
respectively.

15. Contingencies

--------------------------------------------------------------------------------
The Company has contingencies that arise in the normal conduct of its
operations. In the opinion of management, the resolutions of these contingencies
are not expected to have a material impact on the Company's financial condition.

16. Related Party Transactions

--------------------------------------------------------------------------------
The Company pays commissions for business produced by Gary Markel & Associates,
Inc. and Gary Markel Surplus Lines Brokerage, Inc., entities owned by a director
of the Company. The commissions paid were $0.4 million, $0.5 million and $0.5
million for the years ended December 31, 1998, 1997 and 1996, respectively.

17. Statutory Financial Information

--------------------------------------------------------------------------------
The following table includes selected information for the Company's wholly-owned
insurance subsidiaries as filed with insurance regulatory authorities (dollars
in thousands):

<TABLE>
<CAPTION>
                                             Years Ended December 31,
-----------------------------------------------------------------------------
                                        1998           1997           1996
-----------------------------------------------------------------------------
<S>                                  <C>           <C>            <C>
Net income                           $   48,357    $   50,427     $   27,424
-----------------------------------------------------------------------------
Statutory capital and surplus         $ 372,872     $ 334,025      $ 282,774
-----------------------------------------------------------------------------
</TABLE>

The Company's insurance subsidiaries are subject to certain regulatory
restrictions on the payment of dividends or advances to the Company. As of
December 31, 1998, $325.3 million of the insurance subsidiaries' statutory
surplus was so restricted.

In converting from statutory accounting principles to generally accepted
accounting principles, typical adjustments include deferral of policy
acquisition costs, a provision for deferred federal income taxes and the
inclusion of net unrealized holding gains or losses in shareholders' equity
relating to fixed maturities.

                                                                              39

<PAGE>

Markel Corporation & Subsidiaries

Notes To Consolidated Financial Statements (continued)

18. Segment Reporting Disclosures

The Company has five underwriting units focused on specific niches within the
Excess and Surplus Lines and Specialty Admitted markets. Excess and Surplus
Lines, Professional/Products Liability and Brokered Excess and Surplus Lines
write business in the Excess and Surplus Lines market and for purposes of
segment reporting are aggregated as one operating segment. Specialty Program
Insurance and Specialty Personal and Commercial Lines write business in the
Specialty Admitted market and for purposes of segment reporting are aggregated
as one operating segment. All investing activities are included in the Investing
operating segment.

The Company considers many factors including the nature of the underwriting
units' insurance products, production sources, distribution strategies and
regulatory environment in determining how to aggregate operating segments.

Segment profit or loss for the Excess and Surplus Lines and the Specialty
Admitted operating segments is measured by underwriting profit or loss. Segment
profit for the Investing operating segment is measured by net investment income
and net realized gains or losses.

The Company does not allocate assets to the Excess and Surplus Lines or the
Specialty Admitted operating segments for management reporting purposes. The
total investment portfolio is allocated to the Investing operating segment. The
Company does not allocate capital expenditures for long-lived assets to any of
its operating segments for management reporting purposes.

a) Following is a summary of segment profit (loss) (dollars in thousands):

<TABLE>
<CAPTION>
                                                 Year Ended December 31, 1998
-----------------------------------------------------------------------------------------------------
                                    Excess &
                                     Surplus    Specialty
                                      Lines     Admitted      Investing         Other        Total
-----------------------------------------------------------------------------------------------------
<S>                          <C>             <C>              <C>          <C>            <C>
Earned premiums              $   229,541     $   103,726     $        --   $        --    $   333,267
Net investment income                 --              --          71,046            --         71,046
Net realized gains                    --              --          20,558            --         20,558
Segment expenses                (222,663)       (105,514)             --            --       (328,177)
Amortization expense                  --              --              --        (2,033)        (2,033)
Interest expense                      --              --              --       (20,406)       (20,406)
-----------------------------------------------------------------------------------------------------
Underwriting profit (loss)         6,878          (1,788)             --            --          5,090
Investing results                     --              --          91,604            --         91,604
-----------------------------------------------------------------------------------------------------
     SEGMENT PROFIT (LOSS)    $    6,878     $    (1,788)    $    91,604   $   (22,439)   $    74,255
-----------------------------------------------------------------------------------------------------
Combined ratio                        97%            102%             --            --             98%
Segment assets                $       --     $        --     $ 1,481,093   $   440,171    $ 1,921,264
-----------------------------------------------------------------------------------------------------
</TABLE>

40

<PAGE>


18. Segment Reporting Disclosures (continued)


<TABLE>
<CAPTION>
                                                  Year Ended December 31, 1997
-------------------------------------------------------------------------------------------------
                                    Excess &
                                     Surplus    Specialty
                                      Lines     Admitted     Investing    Other      Total
-------------------------------------------------------------------------------------------------
<S>                               <C>         <C>          <C>          <C>        <C>
Earned premiums                   $ 216,478   $ 116,400    $       --   $      --  $  332,878
Net investment income                     --          --       68,653          --      68,653
Net realized gains                        --          --       15,834          --      15,834
Segment expenses                    (202,446)   (127,691)          --          --    (330,137)
Amortization expense                      --          --           --      (2,435)     (2,435)
Interest expense                          --          --           --     (20,124)    (20,124)
-------------------------------------------------------------------------------------------------
Underwriting profit (loss)            14,032     (11,291)          --          --       2,741
Investing results                         --          --       84,487          --      84,487
-------------------------------------------------------------------------------------------------
     Segment Profit (Loss)        $   14,032  $  (11,291)  $   84,487   $ (22,559) $   64,669
-------------------------------------------------------------------------------------------------
Combined ratio                            94%        110%         --           --          99%
Segment assets                    $       --  $       --   $1,408,320   $ 461,780  $1,870,100
-------------------------------------------------------------------------------------------------
</TABLE>


<TABLE>
<CAPTION>
                                                   Year Ended December 31, 1996
-------------------------------------------------------------------------------------------------
                                   Excess &
                                    Surplus    Specialty
                                     Lines     Admitted      Investing      Other       Total
-------------------------------------------------------------------------------------------------
<S>                                <C>         <C>         <C>            <C>       <C>
Earned premiums                    $ 193,445   $ 114,008   $        --    $     --  $   307,453
Net investment income                     --          --        51,168          --       51,168
Net realized gains                        --          --         5,013          --        5,013
Segment expenses                    (178,773)   (128,637)           --          --     (307,410)
Amortization expense                      --          --            --      (2,655)      (2,655)
Interest expense                          --          --            --      (8,016)      (8,016)
-------------------------------------------------------------------------------------------------
Underwriting profit (loss)            14,672     (14,629)           --          --           43
Investing results                         --          --        56,181          --       56,181
-------------------------------------------------------------------------------------------------
     SEGMENT PROFIT (LOSS)         $  14,672   $ (14,629)  $    56,181    $(10,671)  $   45,553
-------------------------------------------------------------------------------------------------
Combined ratio                            92%        113%           --          --          100%
Segment assets                     $      --   $      --   $ 1,130,776    $474,521   $1,605,297
-------------------------------------------------------------------------------------------------
</TABLE>


                                                                              41

<PAGE>


Markel Corporation & Subsidiaries


Notes To Consolidated Financial Statements (continued)

18. Segment Reporting Disclosures (continued)

b) The following summary reconciles significant segment items to the Company's
consolidated financial statements (dollars in thousands):

<TABLE>
<CAPTION>
                                                     Years Ended December 31,
--------------------------------------------------------------------------------------
                                                1998            1997          1996
--------------------------------------------------------------------------------------
<S>                                         <C>            <C>           <C>
Operating revenues
     Earned premiums                        $   333,267    $   332,878    $   307,453
     Investing results                           91,604         84,487         56,181
     Other                                        1,130          1,682          3,102
-------------------------------------------------------------------------------------
     TOTAL OPERATING REVENUES               $   426,001    $   419,047    $   366,736
-------------------------------------------------------------------------------------
Income before income taxes
     Underwriting profit                    $     5,090    $     2,741    $        43
     Investing results                           91,604         84,487         56,181
     Unallocated amounts
         Loss on building                            --             --        (10,380)
         Amortization expense                    (2,033)        (2,435)        (2,655)
         Interest expense                       (20,406)       (20,124)        (8,016)
         Other                                    1,130          1,682          1,827
-------------------------------------------------------------------------------------
     INCOME BEFORE INCOME TAXES             $    75,385    $    66,351    $    37,000
-------------------------------------------------------------------------------------
Total assets
     Total assets from operating segments   $ 1,481,093    $ 1,408,320    $ 1,130,776
     Unallocated amounts                        440,171        461,780        474,521
-------------------------------------------------------------------------------------
     TOTAL ASSETS                           $ 1,921,264    $ 1,870,100    $ 1,605,297
-------------------------------------------------------------------------------------
</TABLE>


19. Acquisition

On October 31, 1996, the Company acquired Investors Insurance Holding Corp. and
its subsidiaries (Investors). The acquisition was accounted for using the
purchase method of accounting. Total consideration paid to the shareholders of
Investors was $38.1 million which approximated the fair value of the net assets
acquired. The Company funded the transaction with available cash and borrowings
of approximately $15.0 million under existing lines of credit. The acquisition's
effect on the Company's earnings was not significant in 1996.

The table below summarizes, on a pro forma basis, the Company's consolidated
results of operations as if the purchase of Investors had taken place as of
January 1, 1996 (dollars in thousands, except per share amounts):

<TABLE>
<CAPTION>
                                                       Year Ended
                                                    December 31, 1996
-----------------------------------------------------------------------
<S>                                                    <C>
Total operating revenues                               $ 405,899
Net income                                                39,469
-----------------------------------------------------------------------
Net income per share
     Basic                                             $    7.26
     Diluted                                                7.02
-----------------------------------------------------------------------
</TABLE>

Investors' results had a dilutive effect on the Company's pro forma results of
operations in 1996 due to significant loss reserve strengthening at Investors.

42

<PAGE>

20. Subsequent Event

On January 15, 1999, the Company acquired Gryphon Holdings, Inc. and its
subsidiaries (Gryphon) as the result of the completion of a public tender offer.
The acquisition will be accounted for using the purchase method of accounting.
Total consideration paid for Gryphon was approximately $150.7 million. The
excess of the purchase price over the fair value of the net tangible and
identifiable intangible assets acquired will be recorded as goodwill and will be
amortized using the straight-line method over 20 years. The Company funded the
transaction with available cash of approximately $100.7 million and borrowings
of approximately $50 million.

21. Markel Corporation (Parent Company Only) Financial Information

--------------------------------------------------------------------------------
Condensed Balance Sheets

<TABLE>
<CAPTION>
                                                                          December 31,
------------------------------------------------------------------------------------------
                                                                         1998       1997
------------------------------------------------------------------------------------------
                                                                    (dollars in thousands)
<S>                                                                     <C>       <C>
ASSETS
Investments, available-for-sale, at estimated fair value
     Fixed maturities (cost of $86,669 in 1998 and $129,109 in 1997)$     87,267   $129,530
     Equity securities (cost of $48,007 in 1998 and $13,439 in 1997)      50,637     15,793
     Short-term investments (estimated fair value approximates cost)      58,726     35,494
-------------------------------------------------------------------------------------------
     TOTAL INVESTMENTS, AVAILABLE-FOR-SALE                               196,630    180,817
-------------------------------------------------------------------------------------------
Cash and cash equivalents                                                    624        649
Investments in consolidated subsidiaries                                 431,836    393,174
Notes receivable due from subsidiaries                                    52,764     48,226
Current income taxes recoverable                                             200         --
Other assets                                                              25,328     20,500
-------------------------------------------------------------------------------------------
     Total Assets                                                       $707,382   $643,366

LIABILITIES AND SHAREHOLDERS' EQUITY
Current income taxes payable                                            $     --   $    810
Deferred income taxes                                                      6,570      6,297
Long-term debt                                                            93,219     93,166
Other liabilities                                                         27,652     31,649
8.71% Junior Subordinated Deferrable Interest Debentures                 154,640    154,640
-------------------------------------------------------------------------------------------
     TOTAL LIABILITIES                                                   282,081    286,562
-------------------------------------------------------------------------------------------
     TOTAL SHAREHOLDERS' EQUITY                                          425,301    356,804
-------------------------------------------------------------------------------------------
     TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                         $707,382   $643,366
-------------------------------------------------------------------------------------------
</TABLE>


                                                                              43

<PAGE>

Markel Corporation & Subsidiaries

Notes To Consolidated Financial Statements (continued)

21. Markel Corporation (Parent Company Only) Financial Information (continued)

Condensed Statements of Income and Comprehensive Income

<TABLE>
<CAPTION>
                                                                      Years Ended December 31,
------------------------------------------------------------------------------------------------
                                                                   1998        1997       1996
------------------------------------------------------------------------------------------------
                                                                       (dollars in thousands)
<S>                                                              <C>         <C>         <C>
REVENUES
Net investment income                                            $ 12,900    $ 11,816    $  2,585
Cash dividends on common stock of
     consolidated subsidiaries                                     35,637      29,125      31,841
Net realized gains from investment sales                            3,980       1,036       1,456
Other                                                                   6          15          15
-------------------------------------------------------------------------------------------------
     TOTAL REVENUES                                                52,523      41,992      35,897
-------------------------------------------------------------------------------------------------

EXPENSES
Interest                                                           20,167      20,306       8,016
Other                                                               1,001         644         205
-------------------------------------------------------------------------------------------------
     TOTAL EXPENSES                                                21,168      20,950       8,221
-------------------------------------------------------------------------------------------------

     INCOME BEFORE EQUITY IN UNDISTRIBUTED
         EARNINGS OF CONSOLIDATED SUBSIDIARIES
         AND INCOME TAXES                                          31,355      21,042      27,676
Equity in undistributed earnings of
     consolidated subsidiaries                                     19,734      23,666      15,655
Income tax benefit                                                  6,204       5,719       3,341
-------------------------------------------------------------------------------------------------
     NET INCOME                                                  $ 57,293    $ 50,427    $ 46,672
-------------------------------------------------------------------------------------------------

OTHER COMPREHENSIVE INCOME
Unrealized gains on securities, net of taxes
     Net unrealized holding gains arising
         during the period                                       $  2,881    $  2,477    $     --
     Consolidated subsidiaries' net unrealized holding
         gains arising during the period                           21,231      49,323      13,018
-------------------------------------------------------------------------------------------------
                                                                   24,112      51,800      13,018
-------------------------------------------------------------------------------------------------

     Less reclassification adjustments for gains
         included in net income                                    (2,587)       (673)       (931)
     Less consolidated subsidiaries' reclassification
         adjustments for gains included in net income             (10,776)     (9,619)     (2,327)
-------------------------------------------------------------------------------------------------
                                                                  (13,363)    (10,292)     (3,258)
-------------------------------------------------------------------------------------------------
     TOTAL OTHER COMPREHENSIVE INCOME                              10,749      41,508       9,760
-------------------------------------------------------------------------------------------------
     COMPREHENSIVE INCOME                                        $ 68,042    $ 91,935    $ 56,432
-------------------------------------------------------------------------------------------------
</TABLE>

44

<PAGE>

21. Markel Corporation (Parent Company Only) Financial Information (continued)

Condensed Statements of Cash Flows

<TABLE>
<CAPTION>
                                                        Years Ended December 31,
--------------------------------------------------------------------------------------
                                                      1998         1997        1996
--------------------------------------------------------------------------------------
                                                              (dollars in thousands)
<S>                                                <C>          <C>          <C>
OPERATING ACTIVITIES
Net income                                         $  57,293    $  50,427    $  46,672
Adjustments to reconcile net income to net cash
     provided by operating activities                (34,186)     (15,471)      (3,608)
--------------------------------------------------------------------------------------
     NET CASH PROVIDED BY OPERATING ACTIVITIES        23,107       34,956       43,064
--------------------------------------------------------------------------------------

INVESTING ACTIVITIES
Proceeds from sales of fixed maturities
     and equity securities                            15,410        5,918        1,472
Proceeds from maturities of fixed maturities          82,846        2,047        2,524
Cost of fixed maturities and equity
     securities purchased                            (92,991)    (152,551)      (4,030)
Net change in short-term investments                 (23,232)     (17,876)      (3,878)
Decrease (increase) in notes receivable due
     from subsidiaries                                (4,538)       1,468       (4,470)
Capital contribution to subsidiary                        --       (4,640)          --
Sale (acquisition) of insurance companies                 --       15,791      (38,050)
Other                                                 (1,082)      (1,424)      (1,263)
--------------------------------------------------------------------------------------
     NET CASH USED BY INVESTING ACTIVITIES           (23,587)    (151,267)     (47,695)
--------------------------------------------------------------------------------------

FINANCING ACTIVITIES
Net proceeds from issuance of 8.71% Junior
     Subordinate Deferrable Interest Debentures           --      152,763           --
Dividends to subsidiaries                                 --          (51)      (1,080)
Additions to long-term debt                               --           --       40,500
Repayments and repurchases of long-term debt              --      (21,527)     (32,500)
Repurchase of preferred stock from subsidiaries           --      (12,000)          --
Other                                                    455       (3,787)      (1,539)
--------------------------------------------------------------------------------------
     NET CASH PROVIDED BY FINANCING ACTIVITIES           455      115,398        5,381
--------------------------------------------------------------------------------------

Increase (decrease) in cash and cash equivalents         (25)        (913)         750
Cash and cash equivalents at beginning of year           649        1,562          812
--------------------------------------------------------------------------------------
     CASH AND CASH EQUIVALENTS AT END OF YEAR      $     624    $     649    $   1,562
--------------------------------------------------------------------------------------
</TABLE>

                                                                              45

<PAGE>

Markel Corporation & Subsidiaries

Independent Auditors' Report

[logo]
KPMG

The Board of Directors and Shareholders
Markel Corporation:

We have audited the accompanying consolidated balance sheets of Markel
Corporation and subsidiaries as of December 31, 1998 and 1997, and the related
consolidated statements of income and comprehensive income, changes in
shareholders' equity, and cash flows for each of the years in the three-year
period ended December 31, 1998. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Markel Corporation
and subsidiaries as of December 31, 1998 and 1997, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1998 in conformity with generally accepted accounting
principles.

                                        /s/ KPMG LLP
                                        -----------------------


Richmond, Virginia
February 2, 1999

46

<PAGE>

Quarterly Information

The following table presents the quarterly  results of  consolidated  operations
for 1998, 1997 and 1996 (dollars in thousands, except per share amounts):

<TABLE>
<CAPTION>
                                             Mar. 31      June 30     Sept. 30      Dec. 31
--------------------------------------------------------------------------------------------
<S>                                         <C>         <C>          <C>          <C>
1998
     Operating revenues                     $ 100,083   $ 108,148    $ 105,094    $ 112,676
     Income before income taxes                16,896      19,653       15,914       22,922
     Net income                                12,841      14,936       12,095       17,421
     Comprehensive income                      31,874      11,764        3,151       21,253
     Net income per share
         Basic                              $    2.34   $    2.71    $    2.20    $    3.16
         Diluted                                 2.27        2.64         2.14         3.09
     Common stock price ranges
         High                               $ 177 1/2   $ 180 1/2    $     185    $ 183 3/4
         Low                                      150     158 1/2          141      132 3/4

1997
     Operating revenues                     $  98,473   $ 101,700    $ 110,612    $ 108,262
     Income before income taxes                11,878      12,476       21,039       20,958
     Net income                                 8,790       9,722       15,988       15,927
     Comprehensive income                       3,082      37,614       32,742       18,497
     Net income per share
         Basic                              $    1.61   $    1.77    $    2.91    $    2.90
         Diluted                                 1.56        1.72         2.82         2.81
     Common stock price ranges
         High                               $ 113 1/2   $     131    $ 157 1/2    $     161
         Low                                       89     102 1/2      127 1/2          144

1996
     Operating revenues                     $  92,990   $  83,672    $  90,367    $  99,707
     Income before income taxes                10,554      10,117       11,144        5,185
     Net income                                 7,810      26,090        8,469        4,303
     Comprehensive income                      (3,925)     22,740       14,721       22,896
     Net income per share
         Basic                              $    1.44   $    4.81    $    1.56    $    0.79
         Diluted                                 1.38        4.61         1.50         0.76
     Common stock price ranges
         High                               $      91   $  94 1/2    $      93    $      92
         Low                                   72 1/2          78           85           83
</TABLE>


 Effective June 11, 1997, the Company's common stock began trading on the New
York Stock Exchange under the symbol MKL. Prior to that time, the Company's
stock traded in the NASDAQ stock market under the symbol MAKL.

                                                                              47

<PAGE>
Markel Corporation & Subsidiaries

Management's Discussion & Analysis
of Financial Condition and Results of Operations

Results of Operations
-------------------------------------------------------------------------------

In 1998 gross premium volume  totaled $437.5 million  compared to $423.3 million
in 1997 and $413.6  million in 1996.  Following is a comparison of gross premium
volume by significant underwriting unit (dollars in thousands):

<TABLE>
<CAPTION>
                                                           Years Ended December 31,
-------------------------------------------------------------------------------------------
GROSS PREMIUM VOLUME                                  1998          1997           1996
-------------------------------------------------------------------------------------------
<S>                                                <C>           <C>            <C>
Excess and Surplus Lines                           $ 121,959     $ 130,028      $ 121,356
Professional/Products Liability                      123,607       113,704        118,891
Brokered Excess and Surplus Lines                     65,257        45,795          6,809
Specialty Program Insurance                           83,562        85,645         92,333
Specialty Personal and Commercial Lines               39,770        44,871         64,706
Other                                                  3,323         3,300          9,511
-------------------------------------------------------------------------------------------
   Total                                           $ 437,478     $ 423,343      $ 413,606
-------------------------------------------------------------------------------------------
</TABLE>
Excess and Surplus Lines premiums totaled $122.0 million in 1998 compared to
$130.0 million in 1997 and $121.4 million in 1996. In 1998 continued growth in
the inland marine program was more than offset by lower production due to
competition in the casualty and Markel special property programs. The 1997
increase was due to growth in the inland marine, excess and umbrella and Markel
special property programs. Both years were affected by intense competition in
the E&S market.

Premiums from Professional/Products Liability insurance rose 9% to $123.6
million in 1998 from $113.7 million in 1997 and $118.9 million in 1996. In 1998
growth in the employment practices and specified professions product lines was
partially offset by lower production from other lines, including scaffolding,
financial institutions and the directors' and officers' liability programs. In
1997 growth in the employment practices product line was more than offset by
lower production in the directors' and officers' liability, specified medical,
financial institutions and the medical malpractice programs. Both years were
affected by continued aggressive competition in the professional liability
markets and changes in risk selection in certain programs.

Premiums from Brokered Excess and Surplus Lines increased to $65.3 million in
1998 from $45.8 million in 1997 and $6.8 million in 1996. The increase in 1998
was due to growth in the casualty and excess and umbrella programs. Brokered
Excess and Surplus Lines was created with the purchase of Investors Insurance
Holding Corp. (Investors) on October 31, 1996. The first full year of premium
production was 1997.

Premiums from Specialty Program Insurance totaled $83.6 million in 1998 compared
to $85.6 million in 1997 and $92.3 million in 1996. In 1998 growth in the
agriculture, sports liability, accident and medical and surety programs was more
than offset by declines in the camp and youth recreation and health and fitness
programs. Lower premium volume due to intense competition in the camp and youth
recreation division accounted for the majority of the decrease in 1997.

Specialty Personal and Commercial Lines premiums were $39.8 million in 1998
compared to 1997 premiums of $44.9 million and 1996 premiums of $64.7 million.
The decrease in 1998 was primarily due to the restructuring of the property
program and aggressive competition. During 1997 an improved economy helped
increase production in the recreational products division which was more than
offset by the discontinuance of two unprofitable auto insurance programs.

     Premiums
  $ in millions
[graph appears here]

          gross     net
         premium  premium
         volume   written
        -------- --------
1996      414      313
1997      423      330
1998      437      344

48

<PAGE>


Other gross premium volume was $3.3 million in 1998 and 1997 and $9.5 million in
1996. In 1998 and 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 brokerage unit which was sold in the fall of
1996.

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. 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 1998
compared to 78% in 1997 and 76% in 1996. The 1998 increase was primarily due to
a new reinsurance treaty structure in the Specialty Program Insurance unit and
higher retentions in the Professional/Products Liability unit. The increase in
1997 reflected higher retentions in the Specialty Personal and Commercial Lines
unit.

Total operating revenues were $426.0 million in 1998 compared to $419.0 million
in 1997 and $366.7 million in 1996. In 1998 the increase was due to
substantially higher realized gains and a 3% increase in net investment income.
In 1997 growth in earned premiums and substantially higher net investment income
and realized gains accounted for the increase in total operating revenues.

Earned premiums were $333.3 million in 1998 compared to $332.9 million in 1997
and $307.5 million in 1996. Following is a comparison of earned premiums by
significant underwriting unit (dollars in thousands):

<TABLE>
<CAPTION>
                                                           Years Ended December 31,
------------------------------------------------------------------------------------------
EARNED PREMIUMS                                        1998         1997           1996
------------------------------------------------------------------------------------------
<S>                                               <C>           <C>           <C>
Excess and Surplus Lines                          $   86,439    $   84,244    $    76,089
Professional/Products Liability                      105,177       102,075        110,154
Brokered Excess and Surplus Lines                     37,911        30,170          4,957
Specialty Program Insurance                           63,438        67,778         68,906
Specialty Personal and Commercial Lines               40,288        48,622         45,102
Other                                                     14           (11)         2,245
------------------------------------------------------------------------------------------
   Total                                           $ 333,267     $ 332,878      $ 307,453
------------------------------------------------------------------------------------------
</TABLE>

                                                                              49

<PAGE>

Markel Corporation & Subsidiaries

Management's Discussion & Analysis
of Financial Condition and Results of Operations (continued)


Excess and Surplus Lines earned premiums rose in 1998 to $86.4 million and in
1997 to $84.2 million from $76.1 million in 1996. Higher gross premium volume
over the past several years accounted for the increases. Premiums earned from
Professional/Products Liability insurance increased 3% in 1998 to $105.2 million
and decreased 7% in 1997 to $102.1 million from $110.2 million in 1996. The
increase in 1998 was due to 9% growth in gross premium volume in 1998 and
steadily increasing net retentions over the past several years. The 1997 decline
resulted from lower gross premium volume in the preceding years as a result of
the competitive professional liability market. Premiums earned from Brokered
Excess and Surplus Lines increased 26% in 1998 to $37.9 million and increased to
$30.2 million in 1997 from $5.0 million in 1996. The increase in 1998 was due to
growth in the casualty and excess and umbrella programs. The increase in 1997
was the result of the first full year of premium production at Investors
following its purchase on October 31, 1996. Specialty Program Insurance earned
premiums decreased 6% to $63.4 million in 1998 and decreased 2% to $67.8 million
in 1997 from $68.9 million in 1996. The decline in 1998 and 1997 was due to
lower gross premium volume. Specialty Personal and Commercial Lines earned
premiums decreased 17% in 1998 to $40.3 million and increased 8% in 1997 to
$48.6 million from $45.1 million in 1996. The 1998 decrease was due to declining
gross premium production in 1998 and 1997. The increase in 1997 was due to
growth in gross premium volume in prior years from new programs as well as
established programs.

Net investment income increased 3% in 1998 to $71.0 million and 34% in 1997 to
$68.7 million from $51.2 million in 1996. The 1998 increase was the result of
operating cash flows which added to the Company's investment portfolio,
partially offset by lower interest rates. The increase in 1997 reflected the
impact of significant growth in the Company's investment portfolio due to the
acquisition of Investors, the issuance of $150.0 million of 8.71% Capital
Securities in January 1997 and operating cash flows. Invested assets grew 5% in
1998 to $1.5 billion and 25% in 1997 to $1.4 billion from $1.1 billion in 1996.

Net realized gains from the sales of investments totaled $20.6 million in 1998
compared to $15.8 million in 1997 and $5.0 million in 1996. Over the past three
years, the Company has experienced variability in its realized and unrealized
investment gains. The fluctuations are primarily the result of interest rate
volatility which influences the market values of fixed maturity and equity
investments. The Company's investment strategy seeks to maximize total
investment returns over a long-term period. The Company's focus on long-term
total investment returns may result in variability in the level of realized and
unrealized investment gains or losses from one period to the next.

Investment Earnings
   $ in millions
[graph appears here]

          net        net
        realized  investment    investment
         gains      income       earnings
       ---------  ---------- -------------
1996       5         51            56
1997      16         69            85
1998      21         71            92




Total operating expenses, which include losses and loss adjustment expenses,
underwriting, acquisition and insurance expenses, other operating expenses,
amortization of intangible assets and a nonrecurring item in 1996, were $330.2
million in 1998 compared to $332.6 million in 1997 and $321.7 million in 1996.
In 1998 lower operating expenses were primarily due to continued favorable loss
reserve development. Higher variable expenses associated with higher earned
premiums accounted for the majority of the increase in 1997. As part of the
purchase of Shand/Evanston in 1987, the Company acquired Shand's headquarters
building in Evanston, Illinois. After the acquisition the estimated fair value
of the building fell significantly due to escalating property taxes and reduced
demand for office space in Evanston. In response to a purchase offer, the
Company decided to dispose of the building and immediately recognized a $10.4
million, nonrecurring, non-cash loss in 1996.

50

<PAGE>

The following is a comparison of selected data from the Company's operations
(dollars in thousands):

<TABLE>
<CAPTION>
                                                            Years Ended December 31,
------------------------------------------------------------------------------------------
                                                      1998          1997          1996
------------------------------------------------------------------------------------------
<S>                                                <C>           <C>            <C>
Gross premium volume                               $ 437,478     $ 423,343      $ 413,606
Net premiums written                               $ 343,877     $ 329,963      $ 313,459
Net retention                                             79%           78%            76%
Earned premiums                                    $ 333,267     $ 332,878      $ 307,453
Losses and loss adjustment expenses                $ 203,336     $ 210,061      $ 202,378
Underwriting, acquisition and insurance expenses   $ 124,841     $ 120,076      $ 105,032
Underwriting profit                                $   5,090     $   2,741      $      43

GAAP Ratios
Loss ratio                                                61%           63%            66%
Expense ratio                                             37%           36%            34%
------------------------------------------------------------------------------------------
      Combined Ratio                                      98%           99%           100%
------------------------------------------------------------------------------------------
</TABLE>

The combined ratio measures the relationship of incurred losses, loss adjustment
expenses and underwriting, acquisition and insurance expenses to earned
premiums. The loss ratio for 1998 decreased to 61% from 63% in 1997 and from 66%
in 1996. The lower loss ratio in 1998 was due to continued favorable loss
reserve development and favorable results from corrective actions taken in
certain lines of business. The 1997 loss ratio compared 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 ratio was 37% in
1998 compared to 36% in 1997 and 34% in 1996. The increase in the 1998 expense
ratio was due to higher acquisition costs, primarily producer commissions, and
lower contingent profit commissions from reinsurers compared to 1997. The 1997
expense ratio increased due to higher policy acquisition and overhead expenses
which were partially offset by contingent profit commissions from reinsurers.

The Company's five underwriting units focus on specific niches within the Excess
and Surplus Lines and Specialty Admitted markets. Excess and Surplus Lines,
Professional/Products Liability and Brokered Excess and Surplus Lines write
business in the Excess and Surplus Lines market and for purposes of segment
reporting are aggregated as one operating segment. Specialty Program Insurance
and Specialty Personal and Commercial Lines write business in the Specialty
Admitted market and for purposes of segment reporting are aggregated as one
operating segment.

The combined ratio for the Excess and Surplus Lines segment increased to 97% in
1998 compared to 94% in 1997 and 92% in 1996. The increase in the 1998 combined
ratio was due to reserve strengthening for toxic tort and environmental
impairment claims, partially offset by favorable development in other lines of
business. The increase was also due to higher producer commissions and lower
contingent profit commissions from reinsurers compared to 1997. The increase in
the 1997 combined ratio compared to 1996 was due to higher policy acquisition
costs.

The combined ratio for the Specialty Admitted segment decreased to 102% in 1998
compared to 110% in 1997 and 113% in 1996. The decreases in 1998 and 1997 were
the result of improving loss ratios, partially offset by higher acquisition
costs.

Interest expense was $20.4 million in 1998 compared to $20.1 million in 1997 and
$8.0 million in 1996. The 1997 increase was due to the issuance of the 8.71%
Capital Securities in January 1997.

                                                                              51

<PAGE>

Markel Corporation & Subsidiaries

Management's Discussion & Analysis
of Financial Condition and Results of Operations (continued)

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 performance because it reduces the variability
in results associated with realized gains or losses and also eliminates the
impact of accounting transactions which do not reflect current operating costs.
Income from core underwriting and investing operations advanced to $45.6 million
in 1998 which represented a 9% increase over 1997. In 1997 income from core
operations rose 23% to $42.0 million from $33.9 million in 1996. The 1998 and
1997 increases were due to continued underwriting profitability and higher net
investment income, resulting primarily from larger investment portfolios.

Net income was $57.3 million in 1998 compared to $50.4 million in 1997 and $46.7
million in 1996. The 1998 increase was due to increased realized investment
gains and higher underwriting profitability. The growth in 1997 was due to
substantial increases in net investment income and realized investment gains.
Also, during 1996 the Company recognized an $18.4 million nonrecurring tax
benefit which was partially offset by the recognition of the building loss of
$6.8 million, net of taxes.

Comprehensive income was $68.0 million in 1998 compared to $91.9 million in 1997
and $56.4 million in 1996. The decrease in comprehensive income in 1998 was due
to lower other comprehensive income as a result of lower increases in unrealized
holding gains on equity and fixed maturity securities compared to 1997 partially
offset by higher net income. The growth in 1997 was due to higher net income and
higher other comprehensive income as a result of increased unrealized holding
gains on equity and fixed maturity securities.

Claims And Reserves
--------------------------------------------------------------------------------

The Company maintains reserves for specific claims incurred and reported,
reserves for claims incurred but not reported (IBNR) and reserves for
uncollectible reinsurance. Reserves for reported claims are based primarily on
case-by-case evaluations of the claims and their potential for adverse
development. Reserves for reported claims consider the Company's estimate of the
ultimate cost to settle the claims, including investigation and defense of
lawsuits resulting from the claims, and may be subject to adjustment for
differences between costs originally estimated and costs subsequently
re-estimated or incurred.

Generally accepted accounting principles require that reserves for claims
incurred but not reported be based on the estimated ultimate cost of settling
claims, including the effects of inflation and other social and economic
factors, using past experience adjusted for current trends and any other factors
that would modify past experience. The Company also evaluates and adjusts
reserves for uncollectible reinsurance in accordance with its collection
experience and the development of the gross reserves.

Ultimate liability may be greater or less than current reserves. In the
insurance industry there is always the risk that reserves may prove inadequate.
Reserves are continually monitored by the Company using new information on
reported claims and a variety of statistical techniques. Anticipated inflation
is reflected implicitly in the reserving process through analysis of cost trends
and the review of historical development. The Company does not discount its
reserves for losses and loss adjustment expenses to reflect estimated present
value.

      Earnings from
     Core Operations
   $ per diluted share
   [graph appears here]
     1996       6.03
     1997       7.43
     1998       8.10

52

<PAGE>

The following table represents the development of the Company's balance sheet
reserves for the period 1988 through 1998 (in thousands):

<TABLE>
<CAPTION>
                            1988     1989     1990      1991     1992      1993     1994     1995      1996     1997     1998
-------------------------------------------------------------------------------------------------------------------------------
<S>                     <C>         <C>      <C>      <C>       <C>      <C>       <C>      <C>      <C>      <C>       <C>
Net reserves restated
for commutations,
acquisitions and other  $ 486,647   507,719  510,388  556,938   569,153  597,883   618,978  670,831  724,449  744,954   735,542
-------------------------------------------------------------------------------------------------------------------------------

Paid (cumulative)
as of:
One year later             54,180    65,810   52,545   83,720    95,084  151,413   135,947  124,467  145,736  161,053
Two years later            89,973   116,418  107,209  156,256   217,180  253,418   219,133  227,640  266,248
Three years later         131,899   154,798  160,808  253,424   297,034  307,831   286,926  305,217
Four years later          160,942   194,199  242,670  318,298   331,709  353,325   337,712
Five years later          199,982   258,412  297,914  346,009   361,214  387,224
Six years later           261,185   310,448  320,766  367,636   385,347
Seven years later         312,210   331,842  337,735  386,721
Eight years later         332,622   346,213  353,380
Nine years later          346,002   360,575
Ten years later           360,012

Reserves
re-estimated as of:
One year later            496,591   502,253  506,010  547,349   562,914  560,684   610,185  646,714  698,473  707,558
Two years later           477,249   500,164  494,132  542,287   535,882  581,947   585,494  619,941  674,450
Three years later         474,373   492,817  490,135  521,758   537,328  564,306   562,535  602,917
Four years later          479,537   486,007  477,408  513,367   521,329  558,684   558,072
Five years later          476,708   474,438  463,513  500,538   523,734  559,790
Six years later           465,777   458,466  452,205  506,978   529,312
Seven years later         448,932   447,954  463,470  516,183
Eight years later         440,502   460,581  472,666
Nine years later          454,174   471,004
Ten years later           465,900

Cumulative
redundancy             $   20,747   36,715    37,722   40,755    39,841   38,093    60,906   67,914   49,999   37,396
-------------------------------------------------------------------------------------------------------------------------------
Cumulative %                    4%        7%       7%       7%        7%       6%       10%      10%       7%       5%

Gross liability, end of year, restated for acquisitions
  and other                                                   $ 904,143  874,922   796,892  850,063  914,372  959,288   933,830
Reinsurance recoverable, restated for commutations,
  acquisitions and other                                        334,990  277,039   177,914  179,232  189,923  214,334   198,288
---------------------------------------------------------------------------------------------------------------------------------
Net liability, end of year, restated for commutations,
  acquisitions and other                                        569,153  597,883   618,978  670,831  724,449  744,954   735,542
---------------------------------------------------------------------------------------------------------------------------------
Gross re-estimated liability                                    856,017  802,884   718,946  777,616  875,413  915,654
Re-estimated recoverable                                        326,705  243,094   160,874  174,699  200,963  208,096
---------------------------------------------------------------------------------------------------------------------------------
Net re-estimated liability                                      529,312  559,790   558,072  602,917  674,450  707,558
---------------------------------------------------------------------------------------------------------------------------------
Gross cumulative redundancy                                  $   48,126   72,038    77,946   72,447   38,959   43,634
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                                                              53

<PAGE>

Markel Corporation & Subsidiaries

Management's Discussion & Analysis
of Financial Condition and Results of Operations (continued)


The first line of the table shows net reserves for losses and loss adjustment
expenses restated for reinsurer commutations, acquisitions and other items, and
is the result of adding the reserves for losses and loss adjustment expenses as
originally estimated at the end of each year and all prior years to reserves
reassumed through commutations and other activities, including acquisitions,
completed in recent years.

The upper portion of the table shows the cumulative amount paid with respect to
the previously recorded liability as of the end of each succeeding year. The
lower portion of the table shows the re-estimated amount of the previously
recorded reserves based on experience as of the end of each succeeding year,
including cumulative payments made since the end of the respective year. For
example, the 1993 liability for losses and loss adjustment expenses at the end
of 1993 for 1993 and all prior years, adjusted for commutations, acquisitions
and other, was originally estimated to be $597.9 million. Five years later, as
of December 31, 1998, this amount was re-estimated to be $559.8 million, of
which $387.2 million had been paid, leaving a reserve of $172.6 million for
losses and loss adjustment expenses for 1993 and prior years remaining unpaid as
of December 31, 1998.

Cumulative redundancy represents the change in the estimate from the original
balance sheet date to the date of the current estimate. For example, the 1993
liability for losses and loss adjustment expenses developed a $38.1 million
redundancy from December 31, 1993 to December 31, 1998, five years later.
Conditions and trends that have affected the development of liability in the
past may not necessarily occur in the future. Accordingly, it may not be
appropriate to extrapolate future redundancies or deficiencies based on the
table. The gross cumulative redundancies for 1997 and prior years are presented
before deductions for reinsurance. Gross deficiencies and redundancies may be
significantly more or less than net deficiencies and redundancies depending on
the nature and extent of applicable reinsurance.

The re-estimated reserves for 1988 and prior increased $11.7 million in 1998.
This development was the result of reserve strengthening by management for
environmental impairment liability (EIL) and toxic tort claims. Inherent
volatility in EIL and toxic tort claims and management's desire to maintain
reserves for all lines of business that are more likely redundant than deficient
necessitated the reserve increases.

Environmental Matters
--------------------------------------------------------------------------------

From 1980 to 1985, Shand/Evanston offered EIL insurance to large companies which
generated or transported toxic wastes. The EIL coverage was designed to fill
gaps in an insured's general liability coverage to the extent a gap would have
existed and was offered as a primary policy with an "Other Insurance" clause. To
the extent that other insurance was not valid and collectible, Shand/Evanston's
EIL policy was intended to perform as primary coverage provided that all other
terms and conditions of the policy were met. To the extent that other insurance
was valid and collectible, the policy was intended to perform as excess
coverage. All EIL policies were underwritten on a claims made basis, and in
almost all instances, with policy limits that included the costs of defense and
related expenses. This book of business was reinsured with numerous reinsurers,
and Shand/Evanston's original retentions were less than 5% of policy limits.
Policy limits ranged from $1 million per impairment with $2 million in the
aggregate to $30 million per impairment with $60 million in the aggregate.

Shand/Evanston's defenses in EIL claims have generally been policy specific and
have included defenses of non-disclosure and misrepresentation on policy
applications, policy exclusions including site limitations, late assertion of
claims and the existence of other valid and collectible insurance.

54

<PAGE>

Following is an analysis of the Company's net outstanding reserves for
Shand/Evanston's EIL exposures. Commutations include reinsurer commutations
completed in 1998 as well as changes in reserves related to reinsurer
commutations occurring in earlier years (dollars in thousands):

<TABLE>
<CAPTION>
                                                           Years Ended December 31,
------------------------------------------------------------------------------------------
                                                       1998          1997           1996
------------------------------------------------------------------------------------------
<S>                                               <C>           <C>            <C>
Case reserves                                      $     762     $     685      $     665
Case and IBNR reserves reassumed
   through commutations                               17,808        19,653         14,730
------------------------------------------------------------------------------------------
   Total                                           $  18,570     $  20,338      $  15,395
------------------------------------------------------------------------------------------
Net paid losses and loss adjustment expenses       $   3,903     $   2,905      $   3,616
------------------------------------------------------------------------------------------
</TABLE>

Shand/Evanston carried net EIL case and IBNR reserves for losses and loss
adjustment expenses of $18.6 million at December 31, 1998 compared to $20.3
million at December 31, 1997 and $15.4 million at December 31, 1996. The
Company's goal is to close EIL claims as aggressively as reasonably possible.
The increase in 1998 and 1997 incurred losses was due to development on existing
claims as well as limited new claim activity.

In some cases, the Company may be entitled to subrogation against other primary
insurers. No specific provision for these potential recoveries is made when
establishing loss and loss adjustment expense reserves for EIL. As of December
31, 1998, Shand/Evanston's net retention of case and IBNR reserves related to
EIL was approximately 81% of gross EIL case and IBNR reserves.

Inception to date net paid losses and loss adjustment expenses for EIL related
exposures totaled $121.8 million at December 31, 1998, of which approximately
$10.4 million was litigation related expense.

There were 10 active site exposures related to EIL at December 31, 1998, 1997
and 1996. The 10 active site exposures at December 31, 1998 represented 10
insureds. Management believes future exposure to valid claims is limited because
coverage was afforded on a claims made basis.

Shand/Evanston's exposure to toxic tort related claims originated from umbrella,
excess and commercial general liability (CGL) insurance it underwrote on an
occurrence basis from the late 1970's to mid-1980's. The majority of the
policies attach over a self-insured retention, deductible or other insurance.
This book of business was reinsured with numerous reinsurers, and
Shand/Evanston's original retention was less than 5% of policy limits. Policy
limits ranged from $125,000 to $30 million. Toxic tort claims include property
damage and clean-up related to pollution, as well as personal injury allegedly
arising from exposure to hazardous materials. After 1986 Shand/Evanston
underwrote CGL coverage using a claims made form which included a pollution
exclusion that significantly reduced its exposure to toxic tort claims.

                                                                              55

<PAGE>

Markel Corporation & Subsidiaries

Management's Discussion & Analysis
of Financial Condition and Results of Operations (continued)


Insurance coverage issues and other uncertainties have made the estimation of
reserves for toxic tort exposures difficult. The outcome of legal actions to
determine general liability coverages related to toxic tort issues has been
inconsistent among the states with respect to whether insurance coverage exists
at all, what policies provide the coverage, when and if an insurer has a duty to
defend, whether the release of contaminants is one or more "occurrence" for
purposes of determining applicable policy limits, how pollution exclusions in
policies should be applied and whether clean-up costs constitute property
damage. Regulatory requirements regarding environmental matters are also
inconsistent and change frequently.

Following is an analysis of the Company's net outstanding reserves for
Shand/Evanston's toxic tort exposures. Commutations include reinsurer
commutations completed in 1998 as well as changes in reserves related to
reinsurer commutations occurring in earlier years (dollars in thousands):

<TABLE>
<CAPTION>
                                                           Years Ended December 31,
-------------------------------------------------------------------------------------------
                                                       1998          1997          1996
-------------------------------------------------------------------------------------------
<S>                                                <C>           <C>            <C>
Case reserves                                      $   1,977     $   1,660      $   1,782
IBNR reserves                                          1,239         2,147          1,354
Case and IBNR reserves reassumed
   through commutations                               55,402        50,280         37,751
-------------------------------------------------------------------------------------------
   Total                                            $ 58,618      $ 54,087       $ 40,887
-------------------------------------------------------------------------------------------
Net paid losses and loss adjustment expenses       $   5,019     $   8,152       $ 10,849
-------------------------------------------------------------------------------------------
</TABLE>

Shand/Evanston carried net toxic tort case and IBNR reserves for losses and loss
adjustment expenses of $58.6 million at December 31, 1998 compared to $54.1
million at December 31, 1997 and $40.9 million at December 31, 1996. The
increase in net toxic tort reserves in 1998 and 1997 was due to reserve
strengthening by management. As of December 31, 1998, Shand/Evanston's net
retention of case and IBNR reserves related to toxic torts was approximately 86%
of gross toxic tort case and IBNR reserves.

Inception to date net paid losses and loss adjustment expenses for toxic tort
related exposures totaled $32.4 million, of which approximately $3.3 million was
litigation related expense.

During 1998, 1997 and 1996 the Company paid $2.2 million, $3.8 million and $7.4
million, respectively, for breast implant product liability claims. The exposure
had been fully reserved in prior years. At December 31, 1998, the Company has
either paid or fully reserved all of its breast implant product liability
exposure.

There were 131 open claims related to toxic torts at December 31, 1998 compared
to 165 at December 31, 1997 and 210 at December 31, 1996. Of the toxic tort
claims open at December 31, 1998, approximately 10% were products liability
asbestos or related claims. The average severity of toxic tort claims is
substantially lower than the average severity of EIL claims.

56

<PAGE>

The Company's reserves for losses and loss adjustment expenses related to EIL
and toxic tort exposures represent management's best estimate of ultimate
settlement values. These reserves are continually monitored by management, and
the Company's statistical analysis of these reserves is reviewed by independent
consulting actuaries. In addition, the Company continues to maintain unallocated
IBNR reserves to further mitigate the impact of adverse development, if any, in
these and other reserves.

During 1997 the Company sold Lincoln Insurance Company (LIC) with the Company
retaining all of LIC's loss reserves and related assets including LIC's rights
to indemnity from the former owners of LIC. The former owners of LIC have
indemnified the Company against adverse development of losses and loss
adjustment expenses and uncollectible reinsurance, if any, in an amount up to
the Company's purchase price for LIC of approximately $24 million. This
indemnification covers all of LIC's reserves, including environmental matters.
At December 31, 1998, case and IBNR reserves for toxic tort claims attributable
to LIC were $7.8 million.

Exposures of these types are generally subject to significant uncertainty due to
potential severity and an uncertain legal climate. Reserves for these types of
claims could be subject to increases in the future; however, these reserves have
been established in accordance with the Company's desire to have reserves of all
types that are more likely redundant than deficient.

Liquidity And Capital Resources
-------------------------------------------------------------------------------

The Company seeks to maintain prudent levels of liquidity and financial leverage
for the protection of its policyholders, creditors and shareholders. The
Company's targeted capital structure is approximately one-third debt to
two-thirds equity. At December 31, 1998, the Company's debt to total capital
ratio was 25%. In calculating its debt to total capital ratio, the Company
treats the 8.71% Capital Securities as one-half debt and one-half equity. From
time to time, the Company's debt to total capital ratio may increase due to
business opportunities that may be financed in the short term with debt.

In order to maintain strong liquidity, the Company seeks to maintain minimum
cash, short-term investments and fixed maturities of approximately two times
annual interest expense at its holding company (Markel Corporation). At December
31, 1998, $146.6 million of cash, short-term investments and fixed maturities
were held at Markel Corporation which approximated 7.3 times annual interest
expense.

On January 15, 1999, as the result of the completion of a public tender offer,
the Company acquired Gryphon Holdings Inc. and its insurance subsidiaries
(Gryphon). Total consideration paid for Gryphon was approximately $150.7
million. The Company funded the transaction with holding company cash of
approximately $100.7 million and borrowings of $50.0 million under existing
lines of credit. In addition, the Company assumed $55.0 million of Gryphon's
debt and refinanced it under existing lines of credit.

The Company's insurance operations collect premiums and pay current claims,
reinsurance costs and operating expenses. Premiums collected and positive cash
flow from the insurance operations are invested primarily in short-term
investments and long-term bonds. Short-term investments held by the Company's
insurance subsidiaries provide liquidity for projected claims, reinsurance costs
and operating expenses. As a holding company, the Company receives cash from its
subsidiaries as reimbursement for operating and other administrative expenses it
incurs. The reimbursements are executed within the guidelines of various
management agreements between the holding company and its subsidiaries.


                                                                              57

<PAGE>

Markel Corporation & Subsidiaries

Management's Discussion & Analysis
of Financial Condition and Results of Operations (continued)

The holding company has historically relied upon dividends from its subsidiaries
to meet debt service obligations. Under the insurance laws of the various states
in which the Company's insurance subsidiaries are incorporated, an insurer is
restricted in the amount of dividends it may pay without prior approval of
regulatory authorities. Pursuant to such laws, at December 31, 1998, the
Company's insurance subsidiaries could pay dividends of $47.6 million without
prior regulatory approval.

The Company's invested assets increased to $1.5 billion at December 31, 1998
from $1.4 billion at December 31, 1997. The increase in invested assets was due
to operating cash flows and the increase in the market value of the Company's
fixed maturity and equity investments.

  Invested Assets
 $ in millions
[graph appears here]
  1996    1,131
  1997    1,408
  1998    1,481


Long-term debt was $93.2 million at December 31, 1998 and 1997. During 1997 the
Company repurchased $6.55 million of its 7.25% notes. In April of 1998, the
Company arranged a $250.0 million, five year, revolving credit facility with a
group of banks which replaced the Company's existing $150.0 million credit
facility. As of December 31, 1998 and 1997, there were no balances outstanding
under the revolving credit facilities. After the acquisition of Gryphon and the
refinancing of its debt on January 15, 1999, outstanding balances under the new
$250.0 million revolving credit facility were $105.0 million.

In January 1997 the Company arranged the sale of $150.0 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 8.71% Capital
Securities were used to purchase the Company's 8.71% Junior Subordinated
Deferrable Interest Debentures due January 1, 2046. The 8.71% Capital Securities
and related Debentures are redeemable by the Company on or after January 1,
2007.

The Company's insurance operations require capital to support premium writings.
The National Association of Insurance Commissioners (NAIC) developed a model law
and risk-based capital formula designed to help regulators identify P&C insurers
that may be inadequately capitalized. Under the NAIC's requirements, an insurer
must maintain total capital and surplus above a calculated threshold or face
varying levels of regulatory action. The capital and surplus at December 31,
1998 of each of the Company's insurance subsidiaries was above the minimum
regulatory threshold.

Year 2000
--------------------------------------------------------------------------------

The Year 2000 issue affects virtually all companies and organizations. Many
companies have existing computer applications which use only two digits to
identify a year in the date field. These applications were designed and
developed without considering the impact of the century change. If not corrected
these computer applications may fail or create erroneous results in the year
2000.

The Company's Year 2000 Strategy

The Company has created a Year 2000 team involving associates from all areas of
the organization and has charged them with implementing the Company's Year 2000
project. The team has been in place since September of 1997. The project's scope
includes all information technology (IT), both internally developed and
purchased from third parties, material vendors, producer and customer
relationships, and an assessment of the Company's underwriting exposure as a
result of the insurance products written by the Company's underwriting units. In
addition, the Company is evaluating the Year 2000 exposure to issuers included
as part of its investment portfolio.


58

<PAGE>

The Company has completed all phases of its Year 2000 compliance project for its
material IT systems. The Company has also completed the assessment and
remediation phases for its ancillary IT systems and is currently in the testing
phase. The Company anticipates completion of all testing of its ancillary IT
systems by October 31, 1999.

The Company has been in contact with its material business partners to determine
their state of readiness with regard to the Year 2000 issue and the potential
impact on the Company. The Company has identified the following general
categories of business partners as material to the Company's ability to conduct
its operations: software, hardware and telecommunication providers, banks and
investment brokers, material holdings in the Company's investment portfolio,
insurance producers, reinsurers and reinsurance intermediaries, major insurance
clients and utilities.

Where the Company has determined that the relationship with a business partner
is material to its ability to conduct normal operations, the Company has sent
letters to the business partner requesting an update on the status of the
business partner's Year 2000 initiative. Where deemed necessary, the Company is
following up with the business partner to obtain further information. Based on
the assurances of these business partners and the Company's internal reviews of
information provided, the Company has not currently identified a material
business partner that will be noncompliant. However, there can be no assurances
that all material business partners will be compliant, and such noncompliance
could have a material effect on the Company's financial position and results of
operations. The Company expects to complete its review of material business
partners by October 31, 1999.

The Company has conducted a comprehensive review of its underwriting guidelines
and has made the decision to exclude Year 2000 exposures from virtually all
insurance policies. The Company began adding exclusions to policies in early
1998. Additionally it is the Company's position that Year 2000 exposures are not
fortuitous losses and thus are not covered under insurance policies even without
specific exclusions. For these reasons, the Company believes that its exposure
to Year 2000 claims will not be material. However, as was the case with
environmental exposures, changing social and legal trends may create unintended
coverage for exposures by reinterpreting insurance contracts and exclusions. It
is impossible to predict what, if any, exposure insurance companies may
ultimately have for Year 2000 claims whether coverage for the issue is
specifically excluded or included.

The cost of the Company's Year 2000 project is estimated to be $1.0 million.
Approximately $0.5 million of this amount was incurred as of December 31, 1998.
The remainder of the estimated cost of the project is expected to be incurred
throughout 1999. All costs of the Year 2000 project have been expensed as
incurred.

As all of its material IT systems were deemed Year 2000 compliant at December
31, 1998, the Company has not established a contingency plan for noncompliance
of its IT systems. At this time, the Company is not aware of any material
business partners that will not be Year 2000 compliant. If the Company becomes
aware of noncompliant business partners, one option will be to evaluate using
other vendors. In many instances the establishment of a contingency plan is not
possible or is cost prohibitive. In these situations, noncompliance by the
Company or its material business partners could have a material adverse impact
on the Company's financial position and results of operations.

Subsequent to the Company's acquisition of Gryphon in January 1999, the Company
began an assessment of Gryphon's material IT systems for Year 2000 compliance.
The Company expects the assessment and remediation phases to continue through
the first half of 1999. One option for ensuring Year 2000 compliance for Gryphon
will be to convert Gryphon's business to the Company's Year 2000 compliant
systems.

                                                                              59

<PAGE>

Markel Corporation & Subsidiaries

Management's Discussion & Analysis
of Financial Condition and Results of Operations (continued)

Market Risk Disclosures
--------------------------------------------------------------------------------

Market risk is the risk of economic losses due to adverse changes in the
estimated fair value of a financial instrument as the result of changes in
equity prices, interest rates, foreign exchange rates and commodity prices. The
Company's consolidated balance sheets include assets and liabilities whose
estimated fair values are subject to market risk. The primary market risks to
the Company are equity price risk associated with investments in equity
securities and interest rate risk associated with investments in fixed
maturities. The Company has no direct commodity risk, and its exposure to
foreign exchange risk is immaterial.

Equity Price Risk

The estimated fair value of the Company's investment portfolio at December 31,
1998 was $1.5 billion, 79% of which was invested in fixed maturities and
short-term investments, and 21% of which was invested in equity securities. The
Company invests shareholder funds in equity securities which have historically,
over long periods of time, produced higher returns relative to fixed income
investments. The Company seeks to invest at reasonable prices in companies with
solid business plans and capable management. The Company intends to hold these
investments over the long term. This focus on long-term total investment returns
may result in variability in the level of unrealized investment gains or losses
from one period to the next. The changes in the estimated fair value of the
equity portfolio are presented as a component of shareholders' equity in
accumulated other comprehensive income, net of taxes.

At December 31, 1998,the Company's equity portfolio was concentrated in terms of
the number of issuers and industries. At December 31, 1998, the Company's top
ten equity holdings represented $170.3, million or 54% of the equity portfolio.
Investments in the property and casualty insurance industry represented $143.2
million, or 45% of the equity portfolio at December 31, 1998. Such concentration
can lead to higher levels of short-term price volatility. Due to its long-term
investment focus, the Company is not as concerned with short-term market
volatility as long as its insurance subsidiaries' ability to write business is
not impaired. The Company has investment guidelines that set limits on the
amount of equities its insurance subsidiaries can hold.

The table below summarizes the Company's equity price risk and shows the effect
of a hypothetical 20% increase or decrease in market prices as of December 31,
1998. The selected hypothetical changes do not indicate what could be the
potential best or worst case scenarios (dollars in thousands):

<TABLE>
<CAPTION>
                                                        Estimated         Hypothetical
                      Estimated                      Fair Value after  Percentage Increase
                     Fair Value at    Hypothetical     Hypothetical       (Decrease) in
                   December 31, 1998  Price Change   Change in Prices Shareholders' Equity
-------------------------------------------------------------------------------------------
<S>                   <C>              <C>              <C>                   <C>
Equity Securities     $ 317,887        20% increase     $ 381,464             9.7
                                       20% decrease     $ 254,310            (9.7)
</TABLE>

60

<PAGE>

Interest Rate Risk

The Company's fixed maturity investments and borrowings are subject to interest
rate risk. Increases and decreases in interest rates typically result in
decreases and increases in the fair value of these financial instruments.

Approximately three quarters of the Company's investable assets come from
premiums paid by policyholders. These funds are invested predominately in high
quality corporate, government and municipal bonds with relatively short
durations. The fixed maturity portfolio has an average duration of 4.7 years and
an average rating of "AA." The fixed maturity portfolio is exposed to interest
rate fluctuations; as interest rates rise, fair values decline and as interest
rates fall, fair values rise. The changes in the fair value of the fixed
maturity portfolio are presented as a component of shareholders' equity in
accumulated other comprehensive income, net of taxes.

The Company works to manage the impact of interest rate fluctuations on its
fixed maturity portfolio. The effective duration of the fixed maturity portfolio
is managed with consideration given to the estimated duration of the Company's
liabilities. The Company has investment policies which limit the maximum
duration and maturity of the fixed maturity portfolio.

The Company utilizes bonds with embedded put options to manage the effect of
changing interest rates on the fixed maturity portfolio. At December 31, 1998
the Company held $260.1 million of corporate bonds with embedded put options.
These put bonds have long maturity dates, generally 30 years, with shorter put
dates, generally 10 years. Put bonds provide the holder the option to force
redemption of the bonds on the put dates. These bonds are assumed to outperform
in price should interest rates decline while performing like a shorter dated
security, if interest rates rise. This asymmetrical price performance is shown
in the following model by greater price appreciation in the fixed maturity
portfolio if rates decline by 200 basis points than price depreciation if rates
increase by 200 basis points.

The Company utilizes a commonly used model to estimate the effect of interest
rate risk on the fair values of its fixed maturity portfolio and borrowings. The
model estimates the impact of interest rate changes on a wide range of factors,
including duration, prepayment, put options and call options. Fair values are
estimated based on the net present value of cash flows, using a representative
set of possible future interest rate scenarios. The model requires that numerous
assumptions be made about the future. To the extent that any of the assumptions
are invalid, incorrect estimates could result. The usefulness of a single-point
in time model is to a degree limited, as it is unable to accurately incorporate
the full complexity of market interactions.


                                                                              61

<PAGE>

Markel Corporation & Subsidiaries

Management's Discussion & Analysis
of Financial Condition and Results of Operations (continued)

The table below summarizes the Company's interest rate risk and shows the effect
of a hypothetical change in interest rates as of December 31, 1998. The selected
hypothetical changes do not indicate what could be the potential best or worst
case scenarios (dollars in thousands):

<TABLE>
<CAPTION>
                                                       Estimated         Estimated           Hypothetical
                                   Estimated           Change in      Fair Value after    Percentage Increase
                                  Fair Value at     Interest Rates   Hypothetical Change     (Decrease) in
                                December 31, 1998  (bp=basis points)  in Interest Rates  Shareholders' Equity
--------------------------------------------------------------------------------------------------------------
Fixed Maturity
     Investments
--------------------------------------------------------------------------------------------------------------
<S>                             <C>                 <C>               <C>                         <C>
U.S. TREASURY SECURITIES AND    $    146,369        200 BP DECREASE   $    155,438                1.4
     OBLIGATIONS OF U.S.                            100 BP DECREASE        150,774                0.7
     GOVERNMENT AGENCIES                            100 BP INCREASE        142,140               (0.6)
                                                    200 BP INCREASE        138,036               (1.3)
--------------------------------------------------------------------------------------------------------------
OBLIGATIONS OF STATES,          $    439,281        200 BP DECREASE   $    493,354                8.3
     MUNICIPALITIES AND                             100 BP DECREASE        465,597                4.0
     POLITICAL SUBDIVISIONS                         100 BP INCREASE        414,228               (3.8)
                                                    200 BP INCREASE        390,345               (7.5)
--------------------------------------------------------------------------------------------------------------
COLLATERALIZED MORTGAGE        $      56,725        200 BP DECREASE  $      59,014                0.3
     OBLIGATIONS                                    100 BP DECREASE         57,887                0.2
                                                    100 BP INCREASE         54,811               (0.3)
                                                    200 BP INCREASE         52,476               (0.6)
--------------------------------------------------------------------------------------------------------------
CORPORATE BONDS (INCLUDING      $    520,831        200 BP DECREASE   $    600,991               12.3
     SHORT-TERM INVESTMENTS)                        100 BP DECREASE        555,483                5.3
                                                    100 BP INCREASE        497,716               (3.5)
                                                    200 BP INCREASE        478,806               (6.4)
--------------------------------------------------------------------------------------------------------------
TOTAL FIXED MATURITY             $ 1,163,206        200 bp decrease    $ 1,308,797               22.3
     INVESTMENTS (INCLUDING                         100 bp decrease      1,229,741               10.2
     SHORT-TERM INVESTMENTS)                        100 bp increase      1,108,895               (8.3)
                                                    200 bp increase      1,059,663              (15.8)
--------------------------------------------------------------------------------------------------------------
Liabilities
--------------------------------------------------------------------------------------------------------------
7.25% LONG-TERM DEBT           $      96,931        200 BP DECREASE   $    105,187                *
                                                    100 BP DECREASE        100,954                *
                                                    100 BP INCREASE         93,100                *
                                                    200 BP INCREASE         89,449                *
--------------------------------------------------------------------------------------------------------------
8.71% CAPITAL SECURITIES        $    144,453        200 BP DECREASE   $    168,765                *
                                                    100 BP DECREASE        159,045                *
                                                    100 BP INCREASE        130,200                *
                                                    200 BP INCREASE        118,440                *
--------------------------------------------------------------------------------------------------------------
</TABLE>

* changes in estimated fair value have no impact on shareholders' equity.

62

<PAGE>

Impact Of Inflation
--------------------------------------------------------------------------------

Property and casualty insurance premiums are established before the amount of
losses and loss adjustment expenses, or the extent to which inflation may affect
such expenses, is known. Consequently, in establishing premiums, the Company
attempts to anticipate the potential impact of inflation. Inflation is also
considered by the Company in the determination and review of reserves for losses
and loss adjustment expenses since portions of these reserves are expected to be
paid over extended periods of time. The importance of continually reviewing
reserves is even more pronounced in periods of extreme inflation.


Impact Of Accounting Standards
--------------------------------------------------------------------------------

In March 1998 the American Institute of Certified Public Accountants issued
Statement of Position (SOP) 98-1, Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use. SOP 98-1 is effective for years
beginning after December 15, 1998. The SOP specifies the types of costs that
should be capitalized and those that should be expensed as incurred in
connection with an internal-use software project. Capitalized costs begin
amortizing when the software is ready for its intended use, regardless of when
it is placed in service. Companies are required to evaluate capitalized costs
for impairment using estimated future cash flows to determine if the asset is
impaired. The Company expects that adoption of SOP 98-1 will have no material
impact on the Company's consolidated financial position and results of
operations.

In June 1998 the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative
Instruments and Hedging Activities. SFAS No. 133 is effective for years
beginning after June 15, 1999. The standard requires that all derivatives be
recorded as an asset or liability, at estimated fair value, regardless of the
purpose or intent for holding the derivative. If a derivative is not utilized as
a hedge, all gains or losses from the change in the derivative's estimated fair
value are recognized in earnings. The gains or losses from the change in
estimated fair value of certain derivatives utilized as hedges are recognized in
earnings or other comprehensive income depending on the type of hedge
relationship. Due to the Company's limited use of derivatives, the Company
expects that adoption of SFAS No. 133 will have no material impact on the
Company's consolidated financial position and results of operations.

"Safe Harbor" Statement
--------------------------------------------------------------------------------

This is a "Safe Harbor" statement under the Private Securities Litigation Reform
Act of 1995. Certain statements contained herein are forward-looking statements
that involve risks and uncertainties. Future actual results may materially
differ from those in these statements because of many factors. For example, the
Company will be significantly reorganizing Gryphon's operations, and the scope
and impact of these changes cannot be determined at this time. Insurance
industry price competition has made it more difficult to attract and retain
adequately priced business. Changing legal and social trends can adversely
impact the adequacy of loss reserves. State regulatory actions can impede the
Company's ability to charge adequate rates and efficiently allocate capital. The
frequency and severity of natural catastrophes are highly variable. Economic
conditions and interest rate volatility can have significant impacts on the
market value of fixed maturity and equity investments. The business community's
state of readiness for the Year 2000, the readiness of the Company's vendors and
business partners and the Company's potential underwriting exposure to Year 2000
claims are difficult to predict with any certainty. Accordingly, the Company's
premium growth, underwriting and investing results have been and will continue
to be potentially materially affected by these factors.

                                                                              63

<PAGE>

Markel Corporation & Subsidiaries

Market And Dividend Information
--------------------------------------------------------------------------------

Effective June 11, 1997, the Company's common stock began trading on the New
York Stock Exchange under the symbol MKL. Prior to that time, the Company's
stock traded in the NASDAQ stock market under the symbol MAKL. The number of
shareholders of record as of January 31, 1999 was 523. The total number of
shareholders, including those holding shares in "street name" or in brokerage
accounts is estimated to be in excess of 3,800. The Company's current strategy
is to retain earnings, permitting the Company to take advantage of expansion and
acquisition opportunities. Consequently, the Company has never paid a cash
dividend on its common stock.

High and low closing sales prices as reported on the New York Stock Exchange
composite tape for 1998 were $185.00 and $132.75, respectively. See "Quarterly
Information" on page 47 for additional quarterly sales price information.

Shareholder Relations, Form 10-K
--------------------------------------------------------------------------------

This document represents Markel Corporation's Annual Report and Form 10-K which
is filed with the Securities and Exchange Commission.

Information about Markel Corporation, including exhibits filed as part of this
Form 10-K, may be obtained by writing Mr. Bruce Kay, Vice President-Investor
Relations, at the corporate offices, or by calling (800) 446-6671.

Annual Shareholders' Meeting
--------------------------------------------------------------------------------

Shareholders of Markel Corporation are invited to attend the Annual Meeting to
be held at The Jefferson Hotel, Franklin and Adams Streets, Richmond, Virginia
at 4:30 p.m., May 13, 1999.

Transfer Agent
--------------------------------------------------------------------------------

First Union National Bank
Corporate Trust Department
Finance Group -NC 1196
1525 West W.T. Harris Boulevard 3C3
Charlotte, North Carolina 28288-1196
(800) 829-8432

Corporate Offices
--------------------------------------------------------------------------------

Markel Corporation
4551 Cox Road
Glen Allen, Virginia 23060
(804) 747-0136
(800) 446-6671

64

<PAGE>

Directors And Executive Officers

Directors
--------------------------------------------------------------------------------

Alan I. Kirshner
Chairman of the Board and Chief Executive Officer

Thomas S. Gayner
Vice President of Equity Investments

Leslie A. Grandis
Partner
McGuire Woods Battle & Boothe, LLP

Stewart M. Kasen
Chairman, President and Chief Executive Officer
Factory Card Outlet

Anthony F. Markel
President and Chief Operating Officer

Gary L. Markel
President
Gary Markel & Associates, Inc.

Steven A. Markel
Vice Chairman

Darrell D. Martin
Executive Vice President and Chief Financial Officer

Executive Officers
--------------------------------------------------------------------------------

Alan I. Kirshner
Chairman of the Board and Chief Executive Officer since 1986.
He served as President from 1979 until March of 1992 and has
been a Director of the Company since 1978. Age 63.

Anthony F. Markel
President and Chief Operating Officer since March of 1992. He
served as Executive Vice President from 1979 until March of
1992 and has been a Director of the Company since 1978.
Age 56.

Steven A. Markel
Vice Chairman since March of 1992. He served as Treasurer
from 1986 to August of 1993, and Executive Vice President
from 1986 to March of 1992 and has been a Director of the
Company since 1978. Age 50.

Darrell D. Martin
Executive Vice President and Chief Financial Officer since
March of 1992. He served as Chief Financial Officer from 1988
to March of 1992 and has been a Director of the Company since
January 1991. Age 50.

                                                                              65

<PAGE>

APPENDIX

MARKEL CORPORATION ANNUAL REPORT ON FORM 10-K
Statement of Differences

1.   The pages in the electronic filing do not correspond to the pages in the
     printed document because there is more material on each page of the printed
     document. The printed Annual Report and Form 10-K also contains numerous
     charts, graphs and pictures not incorporated into the electronic Form 10-K.

2.   The information on pages 66 and 67 of the printed document, i.e. the 10-K
     cover sheet and index, have been repositioned on pages 1 and 2 of the
     electronic document for ease of reference.

3.   The information on pages 20 and 21 of the printed document, i.e. the
     Selected Financial Data has been repositioned over 2 consecutive pages of
     the electronic document for ease of use. The footnotes to the Selected
     Financial Data are meant to apply to all three pages of the electronic
     document.

<PAGE>

Markel Corporation & Subsidiaries

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

MARKEL CORPORATION

By:    Steven A. Markel
      -----------------------
       Vice Chairman
       March 24, 1999

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.

Signatures                Title
-----------               -------
Alan I.  Kirshner,*       Chief Executive Officer and Chairman of
---------------------     the Board of Directors

Anthony F.  Markel,*      President, Chief Operating Officer and
---------------------     Director

Steven A.  Markel,*       Vice Chairman and Director
---------------------

Darrell D.  Martin,*      Executive Vice President, Chief
---------------------     Financial Officer and Director
                          (Principal Accounting Officer)

Thomas S. Gayner,*        Director
---------------------

Leslie A.  Grandis,*      Director
---------------------

Stewart M.  Kasen,*       Director
---------------------

Gary L.  Markel,*         Director
---------------------

*Signed as of March 24, 1999

<PAGE>

Index to Exhibits

3(i)   Amended and Restated Articles of Incorporation, as amended (3.1)a

3(ii) Bylaws, as amended (3.2)b

4 Credit Agreement dated April 23,1998 among Markel Corporation, the lenders
referred to therein and First Union National Bank, as Agent (4)c

The registrant hereby agrees to furnish to the Securities and Exchange
Commission a copy of all instruments defining the rights of holders of long-term
debt of the registrant and subsidiaries shown on the Consolidated Balance Sheet
of registrant at December 31, 1998, and the respective Notes thereto, included
in this Annual Report on Form 10-K.

Management Contracts or Compensatory Plans required to be filed (Items 10.1 --
10.7)

10.1 Markel Corporation 1986 Stock Option Plan as amended (4(d))d

10.2 Markel Corporation 1989 Non-Employee Directors Stock Option Plan (A)e

10.3 Markel Corporation 1993 Incentive Stock Plan (10.3)f

10.4 Executive Employment Agreement between Markel Corporation and Alan I.
Kirshner dated as of October 1, 1991 (10.5)g

10.5 Executive Employment Agreement between Markel Corporation and Anthony F.
Markel dated as of October 1, 1991 (10.6)g

10.6 Executive Employment Agreement between Markel Corporation and Steven A.
Markel dated as of October 1, 1991 (10.7)g

10.7 Executive Employment Agreement between Markel Corporation and Darrell D.
Martin dated as of March 1, 1992 (10.8)g

10.8 Agreement and Plan of Merger dated as of November 25, 1998 among Markel
Corporation, MG Acquisition Corp., and Gryphon Holdings Inc. (g6) h

21 Subsidiaries of Markel Corporation

23 Consents of independent auditors to incorporation by reference of certain
reports into the Registrant's Registration Statements on Form S-8

27 Financial Data Schedule

a. Incorporated by reference from the exhibit shown in parentheses filed with
the Commission in the Registrant's 1990 Form 10-K Annual Report

b. Incorporated by reference from the exhibit shown in parentheses filed with
the Commission in the Registrant's 1992 Form 10-K Annual Report

c. Incorporated by reference from the exhibit shown in parentheses filed with
the commission in the Registrant's Report on Form 10-Q for the quarter ended
March 31, 1998

d. Incorporated by reference from the exhibit shown in parentheses filed with
the Commission on May 25, 1989 in the Registrant's Registration Statement on
Form S-8 (Registration No. 33-28921)

e. Incorporated by reference from the exhibit shown in parentheses filed with
the Commission in the Registrant's Proxy Statement for the Annual Meeting of
Shareholders held on May 15, 1989, as filed with the Commission

<PAGE>

Markel Corporation & Subsidiaries

f. Incorporated by reference from the exhibit shown in parentheses filed with
the Commission in the Registrant's 1994 Form 10-K Annual Report

g. Incorporated by reference from the exhibit shown in parentheses filed with
the Commission in the Registrant's 1991 Form 10-K Annual Report

h. Incorporated by reference from the exhibit shown in parentheses filed with
the Commission in the Registrant's Amendment No. 7 to Schedule 14D-1 filed
November 25, 1998

68