Markel Corp. (NYSE: MKL) the speciality insurer this blog follows for years now released excellent FY 2015 underwriting results!
“Unfortunately the favorable impact from underwriting was muted by investing results which were adversely affected by volatility in the equity markets”, as pointed out CFO Anne Waleski on the conference call.
Gross written premiums were $4.6 billion for 2015 compared to $4.8 billion in 2014, a decrease of 4%, driven by a decline within the reinsurance segment.
Market conditions continued to be very competitive but Markel’s consolidated combined ratio for 2015 was an outstanding 89%, compared to 95% a year ago.
“The decrease in the consolidated combined ratio was driven by more favorable development on prior year loss reserves in each of our underwriting segments in 2015 compared to 2014 as well as a lower current accident year loss ratio in 2015 compared to 2014.“
Book value/share the all important ratio of an insurance company was $561.23 at the end of 2015, up 3% from $543.96 at the end of 2014.
Over the five-year period ended December 31, 2015, compound annual growth in book value per common share outstanding was 11%.
And what happened on the investment side?
“In 2015 we emphasized defense in the investment operations“ declared CIO Tom Gayner. “We maintained our high credit quality profile in our fixed income operations and we kept our equity exposure at the low end of our range for equity investments over the last 25 years.”
Markel reported an overall return in local currency of .5%. In the equity portfolio they were down 2.9%, and in the fixed income portfolio they were up 1.6%. After a 1.2% drag from the foreign currency effects, the net return is a negative .7%.
The results of Markel Ventures were ok but not sensational:
2015 revenues were $1 billion compared to $838 million in 2014. Net income to shareholders from Markel Ventures for 2015 was $11 million, compared to just under $10 million in 2014. EBITDA was $91 million in 2015 compared to $81 million in 2014.
For sure the investment results could not match the quality of the underwriting results in 2015. The slowing signs of the overall stock market were already visible.
But this does not change the big picture of Markel as an outstanding longterm compounding machine of shareholder value!
Markel shares closed Friday at $ 841.22 which translates into a price /book ratio per share of 1.5
Not cheap but not too expensive either.
If you want to add to your position this is certainly not a bad moment, but your time horizon with this type of company should be „longterm“ (at least 5 years from now) in order to reap the benefits of your investment!
