Markel Corp. (NYSE: MKL) released excellent FY 2014 numbers!
(The transcript of the conference call as always has been published by Seeking Alpa)
What was arguably the most important information of this earnings release?
The integration of the acquired Alterra group has been successfully completed!
This reflects in certain key numbers:
Total operating revenues grew 19%, surpassing the $5 billion threshold for the first time.
„The most significant drivers of this increase continue to be the inclusion of a full-year of underwriting revenues from legacy Alterra product offerings in 2014, higher revenue from the Hagerty business, and higher investment income due to our larger investment portfolio“ as CFO Anne Waleski explained on the call.
Net written premiums for 2014 were approximately $3.9 billion, up 21% from the prior year.
Markel’s consolidated combined ratio improved to 95% compared to 97% in 2013.
Book value per share, the most important metric in the insurance industry rose 14% to $543.96 at December 31, 2014.
Excellent results, aren’t they? … but wait, have a look at the investment results:
„In our equity portfolio we earned 18.1% in 2014 compared to the 13.7% return on the S&P 500.
In our fixed income operations, we earned 6.5% and fulfilled our goals from fixed income investment of earning a positive spread on the insurance funds we hold and protecting the balance sheet against credit losses, as well as the possibility of rising interest rates“ CIO Thomas Gayner explained. „More important in the returns of anyone here though is the fact that over the last 25 years we’ve earned over 200 basis points more than the S&P 500“.
The only still difficult beast is Markel Ventures, their rather new private equity unit.
Total revenue from the division climbed 22% to $838 million, while EBITDA hit $95 million
The profitability could be higher but perhaps we just have to give them more time to develop this division.
Until today Markel’ share price rose more than 6% to $ 749.
This translates into a price/FY 2014 book ratio of 1.4 which is slightly over the long term price range of Markel.
Patient investors could wait for a correction in order to buy a part of this high quality insurance company!