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Markel (MKL) Banks on Solid Premiums, Robust Capital Position

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Markel Corporation (MKL - Free Report) is well-poised for growth on the back of organic growth, rate increases, acquisition and solid capital position.

The company is well poised for progress as is evident from its favorable VGM Score of B. Here V stands for Value, G for Growth and M for Momentum, with the score being a weighted combination of all three factors.

The company has a decent surprise history. It surpassed the Zacks Consensus Estimate in three of the trailing four quarters, the average beat being 143.46%.

The company’s performance has been improving over the past several years, attributable to premium growth at Insurance and Reinsurance segment.

The Insurance segment continues to benefit from continued organic growth and rate increases in professional liability and general liability products, along with growth in personal line product lines. The Reinsurance segment is well poised to gain from general liability lines due primarily to new business written and higher rates on that business.

Moreover, the Markel Ventures segment also witnessed growth due to the contribution of revenues from recent acquisition of Lansing Building Products, which was completed in late April and the acquisition of VSC Fire & Security, which closed during the fourth quarter of 2019.

Improved operating cash flows at third-quarter end reflect higher premium collections on the back of strong growth in the insurance segment over the past several quarters.

The insurer seeks to maintain prudent levels of liquidity and financial leverage to protect policyholders, creditors and shareholders. Its leverage ratio reduced 100 basis points (bps) year over year at third-quarter end. Moreover, it has access to $300 million revolving credit facility. It continues to maintain a fixed maturity portfolio comprising high credit quality and investment grade securities with an average rating of "AA." It focuses on expense reductions across the company.

It is believed that the insurer is well positioned to meet ongoing capital liquidity needs, including sustaining the growth in insurance operations as it expects more opportunities in the specialty insurance marketplace.

Over the past 60 days, the company’s 2020 and 2021 earnings estimates have moved 43.3% and 15.2% north, respectively.

However, shares of Markel, carrying a Zacks Rank #3 (Hold), have lost 11.1% in the past year compared with the industry’s decline of 3.3%.


 

Nonetheless, the Zacks Consensus Estimate for 2021 earnings per share is pegged at $51.31, indicating year-over-year increase of nearly 167.26%.

Stocks to Consider

Some better-ranked players in the property and casualty industry include Alleghany (Y - Free Report) , Fidelity National Financial (FNF - Free Report) and First American Financial Corporation (FAF - Free Report) . While Alleghany sports a Zacks Rank #1 (Strong Buy), Fidelity National and First American Financial carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Alleghany’s bottom line surpassed estimates in two of the last four quarters, the average beat being 34.08%.

Fidelity National Financial surpassed earnings estimates in each of the last four quarters, with the average being 30.48%.

First American Financial surpassed estimates in three of the last four quarters, the average beat being 16.83%.

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