Markel’s Combined Ratio
In the last 8 years Markel’s (NYSE:MKL) combined ratio has varied considerably:
| 2000 | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 |
| 114 | 124 | 103 | 99 | 96 | 101 | 87 | 88 | 99 |
(Source: Markel Annual Report 2008)
The 2000 combined ratio was affected by the acquisition of Terra Nova and Gryphon which today form Markel International. Markel had to turn these companies around from insurance underwritten at unprofitable rates.
2001 was hit by a loss on the World Trade Center and another writedown at Markel International.
Despite the losses on hurricanes Katrina and Rita the combined ratio of FY 2005 was not worse than 101%.
In 2008 Markel achieved a combined ratio of 99% despite $ 95 mil of hurricane losses and competitive market conditions
Over the past 20 years Markel produced underwriting profits in 14 out of 20 years.
But the most appealing aspect of Markel is its ability to produce consistently superior investment income!
Like Buffett’s Berkshire Hathaway and unlike most insurers, Markel makes significant equity investments.
Roughly said Markel’s equity investments equal its stockholder’s equity. Its fixed income portfolio equals the float from policy holders.
The above mentioned Thomas Gayner is chief investment officer of Markel.
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