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Markel (MKL) Q3 Earnings and Revenues Surpass Estimates

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Markel Corporation (MKL - Free Report) reported third-quarter 2020 net income of $4.41 per share, which surpassed the Zacks Consensus Estimate by 444%.  However, the bottom line declined 68.4% year over year.

The company witnessed higher premiums at Insurance Segment, offset by higher expenses and higher catastrophe losses.

Markel Corporation Price, Consensus and EPS Surprise

  Markel Corporation Price, Consensus and EPS Surprise

Operational Update

Total operating revenues of $2.4 billion outpaced the Zacks Consensus Estimate by 8.3%. The top line also rose 18.5% year over year on higher premiums, and services and other revenues.

Net written premiums increased 1.9% year over year to $1.4 billion, primarily driven by higher premiums at Insurance segment, offset by lower premium at Reinsurance segment.

Net investment income plunged 20.3% year over year to $90.4 million in the third quarter.  The downside was driven primarily by lower short-term investment income due to lower short-term interest rates, and lower interest income on fixed maturity investment portfolio, primarily due to decreased holdings of fixed maturity securities.

Total operating expenses of Markel increased 25.3% year over year to $2.2 billion, primarily due to higher losses and loss adjustment expenses, underwriting, acquisition and insurance expenses, services and other expenses and amortization of intangible assets.

In the third quarter, Markel reported consolidated underwriting profit of $38.3 million, which reduced 47.2% year over year. Consolidated combined ratio deteriorated 300 basis points (bps) year over year to 97% in the reported quarter due to higher catastrophe losses and an increase in estimate of net losses and loss adjustment expenses attributed to COVID-19 during the third quarter of 2020, partially offset by a lower attritional loss ratio and a lower expense ratio within Insurance segment.

Segment Update

Insurance: Net written premiums were up 3.2% year over year to $1.2 billion in the third quarter.

Underwriting profit came in at $74.9 million, which decreased 78% year over year.

Combined ratio deteriorated 200 bps year over year to 94% in the quarter under review.

Reinsurance: Net written premiums reduced 4.4% year over year to $179 million.

Underwriting loss was $34.9 million, wider than year-over-year underwriting loss $6.5 million.

Combined ratio deteriorated 1300 bps year over year to 116% in the third quarter.

Markel Ventures: Segment profit of $79.6 million surged 124% year over year.

Financial Update

Markel exited the third quarter with cash and cash equivalents of $4.6 billion, up 49.5% from 2019 end.

Debt balance decreased 1% to $3.5 billion as of Sep 30, 2020 from 2019 end.

Book value per share increased 2% from year-end 2019 to $819.71 as of Sep 30, 2020.

In the first nine months of 2020, net cash from operating activities was $1.3 billion, which skyrocketed 77.2% from the first nine months of 2019 due to higher net premium collections in Insurance segment.

Zacks Rank & Performance of Other Insurers

Markel carries a Zacks Rank #4 (Sell). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Third-quarter earnings of Brown & Brown, Inc. (BRO - Free Report) , RLI Corp. (RLI - Free Report) and W.R. Berkley Corporation (WRB - Free Report) beat the respective Zacks Consensus Estimate.

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