On Nov 7, Zacks Investment Research upgraded Markel Corp. (MKL - Snapshot Report) to a Zacks Rank #1 (Strong Buy).
Why the Upgrade?
Markel has been experiencing rising earnings estimates on the back of improved core fundamentals in third-quarter 2013. Moreover, the company’s strong underwriting capabilities as well as improved coverage ratios have been impressive.
Additionally, this property-casualty insurer delivered positive earnings surprises in all of the last 4 quarters with an average beat of 92.4%. Markel also outperformed the year-to-date S&P 500, which posted an increase of 22.5% against the modest return of 23.4% clocked by the company.
On Nov 6, Markel reported third-quarter 2013 operating earnings of $4.68 per share, which missed the Zacks Consensus Estimate of $6.55 but exceeded the year-ago quarter number of $3.55 per share.
Although higher operating, tax and underwriting expenses marred the bottom line, the top line surged 55.6% over the prior-year quarter, driven by higher earned premiums, net investment income and other revenues. Consequently, combined ratio improved to 96% from 101% in the year-ago quarter. Even book value per share increased 14% at 2012-end.
Markel’s strategy of growth through acquisitions has been scoring well with the ratings agencies. Despite the latest acquisition of Alterra Capital Holdings Ltd. (ALTE), in May 2013, Markel’s debt to capital ratio improved to 26% at Sep 2013-end from 28% at the end of 2012. Overall, the acquisition along with enhanced operating leverage and sturdy balance sheet of the company continue to boost investors’ confidence in the stock.
Based on Markel’s capital strength and underwriting discipline, the Zacks Consensus Estimate for 2013 rose 0.8% to $23.38 per share in the last 30 days. The estimate for 2014 is pegged at $25.85, up two pennies in the last 30 days. Meanwhile, no downward revision in estimates was witnessed for both the years.
Other Stocks to Consider
Apart from Markel, other stocks that are outperforming in the insurance sector include Cigna Corp. (CI - Analyst Report), Endurance Specialty Holdings Ltd. (ENH - Snapshot Report) and White Mountains Insurance Group . All these stocks carry a Zacks Rank #1 (Strong Buy).