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Markel (MKL) Banks on Solid Segmental Growth Amid Cost Woes

Markel Corporation MKL has been gaining momentum on the back of new business volume, favorable rates, higher retention of renewals, higher earned premiums and a solid cash position.

Riding on solid growth in new business, ongoing favorable pricing trends across most of the product lines, especially within the professional liability and general liability product lines in both the Insurance and Reinsurance segments, premiums in the professional liability and general liability product lines are likely to improve in the long run.

Higher new business volume, favorable rates and higher retention of renewals are likely to boost the performance of the Insurance segment. Continued expansion of the classic cars business should boost the personal lines product business.

The favorable impact of higher earned premiums as well as lower compensation and general expenses across both the Insurance and Reinsurance segments is likely to improve the expense ratio of Markel.

The combined ratio of Markel should continue to benefit from a lower attritional loss ratio, a favorable pricing environment and the impact of underwriting actions taken to enhance profitability.

The property and casualty insurer remains focused on strategic acquisitions to enhance its reinsurance product offerings. The buyouts have helped MKL to enhance its surety capabilities and ramp up Markel Ventures’ revenues and expand its reinsurance product offerings.

Markel seeks to maintain prudent levels of liquidity and financial leverage for the protection of policyholders, creditors and shareholders. Higher net premium volumes across both the underwriting segments should boost operating cash flow.

Markel has been experiencing an increase in operating expenses due to higher losses and loss adjustment expenses, underwriting, acquisition and insurance expenses. A persistent elevation of expenses might weigh on its margins.

Other Industry Players

Other key players in the property and casualty insurance industry include Arch Capital Group Ltd. ACGL, American Financial Group, Inc. AFG and ProAssurance Corporation PRA.

The bottom line of Arch Capital surpassed earnings estimates in three of the last four quarters and missed in one, the average being 33.64%.

Arch Capital stands to gain from rate increases, new business opportunities and growth in existing accounts, and in travel, primarily due to new business and growth in existing accounts. This leading specialty property and casualty and mortgage insurer actively pursues acquisitions to expand internationally, enhance capabilities, boost operations and diversify the business.

American Financial’s earnings surpassed estimates in each of the last four quarters, the average beat being 37.09%.

Sustained solid performances across Property and Transportation, Specialty Casualty, and Specialty Financial lines of business should continue to drive American Financial. Premiums should benefit from new business opportunities, growth in the surplus lines and excess liability businesses, rate increases and higher retentions in renewal business.

The bottom line of ProAssurance surpassed earnings estimates in three of the last four quarters and missed in one, the average being 150.9%.

ProAssurance is poised well for growth, owing to solid volumes and a diversified footprint. PRA achieved significant inorganic growth via successful acquisitions and integrations of companies owing to its financial size and strength.

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ProAssurance Corporation (PRA): Free Stock Analysis Report
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