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Markel’s results are better than they appear at first glance

November 4th, 2019

Markel Corp. (NYSE:MKL) our speciality insurance company reported Q3 2019 results which appear worse than they really are:

Operating revenue declined 9.1% from $2.236 billion in Q3 2018 to $2.033 billion this quarter.

Net income to shareholders declined much more. Down 49.8% from $409.4 in Q3 2018 billion to $205.6 billion this quarter.

But these declines can be explained by a change in accounting rules: adjustments to the fair value of equity securities have to be reported and integrated into the quarterly operating results. So, if the stock market has a volatile period this will be reflected by the reported numbers.

Knowing this it is not surprising that the much more important metric in the insurance industry the book value/share ratio actually rose 9.1% yoy to $768.98 !

At Markel’s investing operations, net investment income climbed 6.7% year over year to $113.4 million

At Markel’s insurance operations the consolidated combined ratio was 94% and earned premiums increased 9.3% to $1.3 billion.

At Markel Ventures the operating revenue grew 5.7% to $496.2 million and operating income jumped 50% to $35.5 million.

All this shows clearly that Markel’s long term success story continued this quarter as in the years before.

Markel’s stock today is valued at a price/book value per share of 1.5 , which is the „normal“ valuation of Markel’s stock in the last months, not cheap and not very expensive either.

Patient investors could wait and buy after the next market correction.

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