Asmus Puhl Finance Blog

Markel Corp. (NYSE: MKL) released Q3 2017 results last week.

Markel reported book value per common share outstanding of $ 641.20 up 6% from $ 606.30 at December 31, 2016.

The insurance segment incurred huge losses because of the hurricanes and the Mexico City earthquake.

Therefore the combined ratio came in at 134% for the third quarter of 2017 compared to 98% for the third quarter of 2016.

This was largely expected by the market as Markel announced the loss estimate of $mil 503 already in advance of the earnings release.

But income and performance of their investment portfolio and of Markel Ventures more than compensated for the payments to policy holders. As CIO and Co-CEO Tomas Gayner pointed out on the conference call: “… there are positive returns from two of our three engines that total well over $1 billion of pre-tax ins, compared to the $0.5 billion of pre-tax outs.”

Markel’s strong balance sheet and conservative loss reserve policy once again demonstrated their importance in difficult times which in the insurance business can occur at any moment!

Markel’s stock today trades at a price / book ratio of 1.7, rather expensive compared to the valuation over the last years.

For new investment perhaps wait for a lower entry point!

Colfax (NYSE: CFX) sells its fluid handling business to Circor International Inc. for $860 mil.

For Colfax this deal provides liquidity to grow its ESAB and Howden business as it exits the fluid handling business.

For shareholders this deal points to growing profitibility of Colfax going forward. They came to the conclusion not to be able to grow the fluid handling division enough by own means in order to be more profitable. So they decided to exit the business completely and to use the liquidity for acquisitions.

Certainly another interesting step of their Colfax Business System philosophy!

This news by itself did not move the share price but stay tuned until we get a clearer picture of their acquisition strategy!

Colfax (NYSE: CFX) the gas and fluid handling company reported good Q2 2017 results.

Adjusted earnings per share came in at $0.43

Net sales generated were $965.8 million, rising 0.9% year over year.

Colfax thinks that it will benefit from its organic and inorganic growth initiatives as well as from improving end-market conditions. It predicts the Gas and Fluid segment to witness organic growth in the third quarter.

The company increased its adjusted earnings guidance to $1.65−$1.75 per share from the previous projection of $1.60−$1.75.

This means that Colfax shares trade at a p/e of 24. Seems rather expensive with the still limited perspective of their industry. Colfax is not a buy at this moment!

Markel (NYSE:MKL) reported very good operating results in Q2 2017.

Book value/share outstanding climbed more than 6% from the end of 2016.

The combined ratio fell to a very impressive 89%.

But even more interesting this time was the acquisition activity:

After completing the acquisition of Sure Tec Financial Corporation in April, Markel now announced the acquisition of a majority interest in Costa in Miami, Florida, the largest producer of ornamental plants in the world.

And finally in July Markel announced the acquisition of the speciality property and casualty insurance services company State National (NASDAQ:SNC)

Markel’s stock trades at 1,7 times/book value per share, not cheap but perhaps a good moment to add some shares to existing positions!

Markel reported good Q2 2017 results!

Book value per common share outstanding, the all important metric of the insurance industry climbed to $643.37at June 30, 2017, up 6% from $606.30 at December 31, 2016.

Markel Corp. (NYSE: MKL) the speciality insurer released Q1 2017 results.

Book value per common share outstanding at the end of the quarter was $620.30, representing 2.3% growth from $606.30 at the end of 2016 and up 5.2% from $589.86 at this time last year.

At first glance the combined ratio of 100% appeared to be a deterioration but it could be attributed enterily to the „Odgen rate“ as executive chairman Alan Kirshner explained:

“The combined ratio for the quarter ended March 31, 2017 included $85.0 million, or nine points on the combined ratio, of adverse development on prior years’ loss reserves resulting from the decrease in the Ogden rate, which is used to calculate lump sum awards in U.K. bodily injury cases.”

Markel’s investment operations had a good quarter: net investment income increased 9.9%, to $100.4 million, driven by a combination of dividends, higher short-term interest rates, and interest from Markel’s fixed income portfolio.

Unfortunately Markel Ventures’ net income to shareholders declined 0.5%, to $14 million but this can be attributed to the influence of the “cyclical related businesses which began to feel a bit of the topping out we expected to see in their normal cyclical pattern“ as CIO Thomas Gayner explained in the conference call.

Overall this was a decent quarterly result and Markel – as always – remains focused on building long-term shareholder value.

Markel’s stock ended Friday’s trade at $ 969.60 which means a price / book ratio of 1.6
Not cheap but not too expensive either to build up a long-term oriented position!

Markel Corp. (NYSE: MKL) FY and Q4 results were certainly good, but do not appear sensational.

But at a second glance Markel is the excellent speciality insurer and investment company it always was!

Book value/share only increased 8% to $606.30 compared to $561.23 at December 31, 2015.

The combined ratio increased 3% to 92% in the year over year comparison, but this is still very good in a competitive and difficult insurance market.

Markel Ventures the private equity division of Markel also reported very good results:

Revenue increased by 20% to $1.2 billion and EBITDA increased by an astonishing 81% to $165 million, very good indeed!

Perhaps the most interesting remarks on the conference call came from CIO Tom Gayner regarding the investment results:

“First, we earned 13% on our equity investments during the year, which exceeded the S&P 500 return to 12%, 500 basis points.”

The fixed income portfolio for all of 2016 earned 2.4% in local currency terms.

But wait! This is the number that will improve over time in a rising interest environment:

“While the mark-to-market price of that portfolio dropped a bit in the fourth quarter, with rising interest rates, the reinvestment of new funds took place at higher rates.”

Markel stock trades at 1.5 times book value. This is not cheap but a reasonable price for a long term investment in a high quality company!

Markel Corp. (NYSE: MKL) our speciality insurer just released FY and Q4 2016 results!

Book value/share outstanding was $606.30, up 8% from $561.23 at December 31, 2015!

The combined ratio was 92% in 2016 up 3% compared to 89% in 2015

Colfax Corp. (NYSE: CFX) released FY and Q4 2016 results!

Earnings per share for the quarter came in $0.02 ahead of expectations!

Colfax also released a slide presentation of the results and Seeking Alpha published the conference call transcript!

The company continued to restructure and to improve profitibility while still waiting for their markets to fully recover. CEO Matt Trerotola emphasized that Colfax is committed to drive segment operating margins to mid teens over the next 3 to 5 years.

As a first positive sign from the industrial markets gas and fluid handling orders grew 7% organically.

Another goal is to improve the ability to drive growth: “An important part of building that muscle is leveraging the power of the Colfax Business System to improve commercial processes, such as new product development, customer service, segmentation, and channel management”.

And finally after the acquisition of the relatively small Arc Machines business, a leader in high precision, welding and mission for mission-critical applications the M&A pipeline appears to be filled with other candidates to drive future growth.

We think investors are best advised to build up a position and then to wait until Colfax’ industrial markets will fully recover. Then the company should profit in an enormous way because of their slim and very competitive internal structures and this again should propel the stock price!

Colfax Corp. (NYSE: CFX) is updating the outlook for 2017!

Have a look at the slides of their presentation!

Very interesting is Colfax’ statement that the markets they are operating in have reached the bottom, but they expect a major uptick not before the second half of 2017!

Seems that the market sees it the same way: Colfax stock is up 59% year to date!

Enjoy the ride!

To all our readers we wish a Happy Christmas and a Prosperous New Year 2017!