Markel Corporation (NYSE: MKL) reported their Q1 2014 results and held the usual conference call. The transcript has been published by Seeking Alpha.
Markel is rapidly integrating all Alterra business lines and is now aggregating the underwriting results in 4 segments:
U.S. Insurance, International Insurance, Reinsurance and Other Discontinued Lines.
And increasingly, they are not thinking legacy Alterra or legacy Markel, they are just thinking „our company“, as CFO Anne Waleski put it on the conference call. Therefore it will be more difficult each quarter to separately identify and quantify legacy Alterra results.
Earned premiums increased 68% to $949 million for the first quarter of 2014. The increase in 2014 was driven by the inclusion of the full quarter of legacy Alterra product offerings included in each of the three ongoing underwriting segments, as well as a full quarter from the Hagerty business.
The consolidated combined ratio for the first quarter of 2014 was 95% compared to 91% a year ago. This reflects among other factors the application of a more conservative loss reserving philosophy to legacy Alterra product offerings.
The results of Markel Ventures were a bit disappointing but CIO Thomas Gayner attributed this to seasonality.
Revenues were $171 million compared to $162 million a year ago. Net income to shareholders for the period was just over $1 million in 2014 compared to $3.6 million for the first quarter of 2013.
The all important metric in the insurance industry, book value per share increased 4% since the end of 2013 to $493.96 a share.
Good news came from the investment portfolio: the overall investment return for the first 90 days of the year was a positive 2.0%, with equities up 3%, and fixed income up 1.7%.
Perhaps the most exciting information for the long term return of Markel is that equity investments now comprise 49% of shareholders equity up from the roughly 40% level immediately following the Alterra acquisition and over time they will approach a more normal equity allocation of roughly 80% of shareholders equity and equity investments.
Markel yesterday traded at $640.23 which translates into a price/book ratio of 1.3
As we can expect improving results by applying the more conservative standards of Markel to all legacy Alterra business lines and also improving results from Markel Ventures and the equity investments in general, this stock remains a buy!