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Markel reported a difficult Q4 and FY 2018

February 9th, 2019

Markel Corporation (NYSE: MKL) reported Q4 and FY 2018 results.

Operating revenues came in at $6.8 billion for the year ended December 31, 2018 compared to $6.1 billion in 2017.

Comprehensive loss to shareholders was $375.8 million for the year ended December 31, 2018 compared to comprehensive income to shareholders of $1.2 billion in 2017.

Diluted net loss per share was $9.55 for the year ended December 31, 2018 compared to diluted net income per share of $25.81 in 2017

The combined ratio was 98% in 2018 compared to 105% in 2017.

Book value per common share outstanding the single most important ratio in the insurance industry declined 4% to $653.85 at December 31, 2018, down from $683.55 at December 31, 2017.

This was certainly a difficult quarter and fiscal year for Markel.

One problem was the steep decline of the stock market at the end of 2018. Therefore Markel had to recognize a comprohensive loss.

In addition the results were also impacted by a goodwill and intangible asset impairment of Markel CatCo operations.

The investment results weren’t so bad.

Net investment income surged 12.8% year over year to $114.5 million, driven by higher short-term interest rates, dividend income from equities, and higher interest income on the fixed-maturity investments.

The investment portfolio of Markel will always be more volatile than the one of other insurers as they maintain a rather high equity portion of 30% of total invested assets.

In Markel Ventures total revenue climbed 18% year over year, to $472 million.

Despite the above mentioned setbacks Markel looks optimisticly into the future:

The underwriting results for the year 2018 were positive, despite significant catastrophe losses.

In Q4 they completed the acquisition of Nephila of Bermuda, the industry’s preeminent insurance-linked securities investment manager. So Markel remains committed to there strategy in this market segment.

For investors the big picture and the long term perspective hasn’t changed at all.

Markel’s stock is valued at a price/book value per share ratio of only 1,6

At this price Markel remains a buy!

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