Markel Corporation (MKL - Free Report) reported first-quarter 2017 net income of $2.82 per share, which missed the Zacks Consensus Estimate of $4.17 by 32.4%. Also, earnings plummeted 74.1% year over year.
The first-quarter results were adversely impacted by the decrease in the Ogden rate. However, the company’s underwriting results were in line with expectations. Return on investment portfolio drove growth in book value in the reported quarter. Markel Ventures operations continued to make positive contributions and the property and casualty (P&C) insurer expects the trend to continue.
Operational Update
Total operating revenue of $1.39 billion missed the Zacks Consensus Estimate of $1.44 billion. However, the top line improved 2.6% year over year on higher premiums, investment income as well as other revenues.
Total operating expenses of Markel Corp. increased 13.6% year over year to $1.3 billion.
Markel Corp.’s combined ratio deteriorated 1200 basis points (bps) year over year to 100% in the reported quarter.
Segment Update
U.S. Insurance: Net written premiums were down 1.4% year over year to $545.1 million in the reported quarter.
Underwriting profit was $39.3 million, down 31.4% year over year.
Combined ratio deteriorated 400 bps year over year to 93% in the quarter.
International Insurance: Net written premiums dipped 0.4% year over year to $225.4 million.
Underwriting profit skyrocketed 123.1% year over year to $24.4 million in the quarter.
Combined ratio improved 700 bps year over year to 88% in the quarter.
Reinsurance Segment: Net written premiums increased 21.6% year over year to $489.6 million.
Underwriting loss was $71.3 million in the reported quarter, which compared unfavorably with underwriting profit of about $37 million in the year-ago quarter.
Combined ratio deteriorated 5000 bps year over year to 132% in the quarter.
Other Insurance (Discontinued Lines) Segment: Net written premiums of $0.1 million jumped 28.9% from the prior-year quarter.
Underwriting profit of $5.3 million plummeted 61.9% year over year.
Financial Update
Markel exited the first quarter with total cash, cash equivalents and investments of $19.1 billion compared with $18.7 billion at year-end 2016.
Book value per share rose 2.3% from year-end 2016 to $620.30 as of Mar 31, 2017.
Net cash from operating activities was $11.9 million, which compared favorably with net loss from operating activities of $104.6 million at year-end 2016.
Acquisition Update
On Feb 1, 2017, Markel Corp. entered into a definitive merger agreement to buy SureTec Financial Corp. for about $250 million, a portion of which is contingent on post-acquisition earnings of SureTec. The transaction is expected to be completed by early second-quarter 2017, on fulfillment of customary closing conditions. Upon completion of the acquisition, SureTec's operating results will be included in the company's U.S. Insurance segment.
Zacks Rank
Markel currently carries a Zacks Rank #5 (Strong Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other P&C Insurers
Among other players from the same space that have reported their first-quarter earnings so far, the bottom line at The Progressive Corporation (PGR - Free Report) , The Travelers Companies, Inc. (TRV - Free Report) and RLI Corp. (RLI - Free Report) missed their respective Zacks Consensus Estimate.
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Markel Corporation (MKL - Free Report) reported first-quarter 2017 net income of $2.82 per share, which missed the Zacks Consensus Estimate of $4.17 by 32.4%. Also, earnings plummeted 74.1% year over year.
The first-quarter results were adversely impacted by the decrease in the Ogden rate. However, the company’s underwriting results were in line with expectations. Return on investment portfolio drove growth in book value in the reported quarter. Markel Ventures operations continued to make positive contributions and the property and casualty (P&C) insurer expects the trend to continue.
Operational Update
Total operating revenue of $1.39 billion missed the Zacks Consensus Estimate of $1.44 billion. However, the top line improved 2.6% year over year on higher premiums, investment income as well as other revenues.
Total operating expenses of Markel Corp. increased 13.6% year over year to $1.3 billion.
Markel Corp.’s combined ratio deteriorated 1200 basis points (bps) year over year to 100% in the reported quarter.
Segment Update
U.S. Insurance: Net written premiums were down 1.4% year over year to $545.1 million in the reported quarter.
Underwriting profit was $39.3 million, down 31.4% year over year.
Combined ratio deteriorated 400 bps year over year to 93% in the quarter.
International Insurance: Net written premiums dipped 0.4% year over year to $225.4 million.
Underwriting profit skyrocketed 123.1% year over year to $24.4 million in the quarter.
Combined ratio improved 700 bps year over year to 88% in the quarter.
Reinsurance Segment: Net written premiums increased 21.6% year over year to $489.6 million.
Underwriting loss was $71.3 million in the reported quarter, which compared unfavorably with underwriting profit of about $37 million in the year-ago quarter.
Combined ratio deteriorated 5000 bps year over year to 132% in the quarter.
Other Insurance (Discontinued Lines) Segment: Net written premiums of $0.1 million jumped 28.9% from the prior-year quarter.
Underwriting profit of $5.3 million plummeted 61.9% year over year.
Financial Update
Markel exited the first quarter with total cash, cash equivalents and investments of $19.1 billion compared with $18.7 billion at year-end 2016.
Book value per share rose 2.3% from year-end 2016 to $620.30 as of Mar 31, 2017.
Net cash from operating activities was $11.9 million, which compared favorably with net loss from operating activities of $104.6 million at year-end 2016.
Acquisition Update
On Feb 1, 2017, Markel Corp. entered into a definitive merger agreement to buy SureTec Financial Corp. for about $250 million, a portion of which is contingent on post-acquisition earnings of SureTec. The transaction is expected to be completed by early second-quarter 2017, on fulfillment of customary closing conditions. Upon completion of the acquisition, SureTec's operating results will be included in the company's U.S. Insurance segment.
Zacks Rank
Markel currently carries a Zacks Rank #5 (Strong Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other P&C Insurers
Among other players from the same space that have reported their first-quarter earnings so far, the bottom line at The Progressive Corporation (PGR - Free Report) , The Travelers Companies, Inc. (TRV - Free Report) and RLI Corp. (RLI - Free Report) missed their respective Zacks Consensus Estimate.
Zacks' Hidden Trades
While we share many recommendations and ideas with the public, certain moves are hidden from everyone but selected members of our portfolio services. Would you like to peek behind the curtain today and view them?
Starting now, for the next month, I invite you to follow all Zacks' private buys and sells in real time from value to momentum...from stocks under $10 to ETF to option movers...from insider trades to companies that are about to report positive earnings surprises (we've called them with 80%+ accuracy). You can even look inside portfolios so exclusive that they are normally closed to new investors.
Click here for Zacks' secret trade>>
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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