It has been about a month since the last earnings report for Markel (MKL Quick QuoteMKL - Free Report) . Shares have lost about 0.7% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Markel due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Markel Q1 Earnings Beat on Premium Growth, Rise Y/Y

Markel reported first-quarter 2023 earnings of $17.35 per share, which beat the Zacks Consensus Estimate by 6.9% and our estimate of $15.3. The bottom line increased 53.1% year over year.

Total operating revenues of $3,270.8 million missed the Zacks Consensus Estimate by 3.4% and our estimate of $3,349.3 million. The top line rose 10.3% year over year in the first quarter.

Markel witnessed a rise in earned premiums, product revenues, and higher net investment income, offset by an increase in expenses and a deterioration in the combined ratio.

Quarterly Operational Update

Earned premiums increased 11.8% year over year to $1,967.7 million in the quarter. The increase was due to continued growth in gross premium volume from new business, and more favorable rates in the period. This metric missed the Zacks Consensus Estimate by 2.5% but beat our estimate of $1,871.6 million.

Net investment income increased 72.6% year over year to $159.3 million in the first quarter, driven by higher interest income on short-term investments as a result of a high interest rate environment. It beat the Zacks Consensus Estimate by 7.1% and our estimate of $144.5 million.

Total operating expenses of Markel increased 9.2% year over year to $2,889.5 million primarily due to higher losses and loss adjustment expenses, underwriting, acquisition and insurance expenses, and product expenses. Our estimate for the metric stood at $2,917.6 million.

Markel’s combined ratio deteriorated 500 bps year over year to 94 in the reported quarter.

Segmental Update

Insurance: Gross premium increased 8% year over year to $2,097.9 million. The uptick was driven by new business volume, more favorable rates and expanded product offerings, resulting in growth across all its product lines.

Underwriting profit was $96.5 million, down 49% year over year. The combined ratio deteriorated 710 bps year over year to 94.4 due to higher attritional loss ratios resulting from the negative impacts of recent claim trends, and social and economic inflation.

Reinsurance: Gross premiums decreased 4% year over year to $552.1 million, attributable to lower gross premiums within professional liability and surety and credit product lines, partly offset by higher gross premiums within several other product lines, driven by the favorable impacts of the timing of renewal.

Underwriting profit of $24.2 million skyrocketed 82% year over year. The combined ratio improved 470 bps year over year to 90.6 in the first quarter due to favorable developments in property product and professional liability lines.

Markel Ventures: Operating revenues of $1,104.7 million improved 16.2% year over year in 2023. Operating income of $72.6 million increased 46% year over year.

Financial Update

Markel exited 2023 with investments, cash and cash equivalents, and restricted cash and cash equivalents of $28,008.9 million as of Mar 31, 2023, up from $27,419.5 million at 2022-end.

The debt balance decreased year over year to $3,896.8 million as of Mar 31, 2023, from $4,103.6 million at 2022-end. The debt-to-capital ratio was 22% as of Mar 31, 2023, reflecting an improvement of 200 basis points from the 2022 end.

Book value per share increased 5.2% from the 2022 end to $984.33 as of Mar 31, 2023.

Operating cash flow of $284.2 million in the first quarter deteriorated 31.5% year over year due to a huge amount paid to complete a retroactive transaction for reinsurance.

How Have Estimates Been Moving Since Then?

It turns out, estimates review flatlined during the past month.

VGM Scores

At this time, Markel has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Markel has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.