Back to top

Image: Bigstock

Here's Why Investing in Markel (MKL) is a Prudent Move Now

Read MoreHide Full Article

Markel Corporation (MKL - Free Report) has been favored by investors on the back of its strong new business, rate increases across its product lines, strategic buyouts, and sufficient liquidity.

Growth Projections

The Zacks Consensus Estimate for 2021 and 2022 earnings per share is pegged at $59.76 and $74.66, indicating a year-over-year increase of 127.7% and 24.9%, respectively.

Estimate Revision

Estimates for 2021 and 2022 have moved up nearly 1.9% and 4.2%, respectively, in the past seven days. This should instill investors' confidence in the stock.

Earnings Surprise History

Markel surpassed estimates in three of the last four reported quarters and missed in one, with the average beat being 133.11%.

Zacks Rank & Price Performance

Markel currently carries a Zacks Rank #2 (Buy). In the past year, the stock has rallied 28.1% compared with the industry’s increase of 23%.

Zacks Investment Research
Image Source: Zacks Investment Research

Return on Equity (ROE)

The company’s ROE for the trailing 12 months is 5.9%, better than the industry average of 5.7%. This reflects the company’s efficiency in utilizing shareholders’ fund.

Style Score

It has an impressive Value Score of B, which reflects an attractive valuation of the stock.  Back-tested results show that stocks with a Value Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2 offer the best opportunities in the value investing space.

Business Tailwinds

Markel’s Insurance segment, which contributes the lion’s share of premiums, has been gaining momentum on the back of continued strong new business growth, rate increases across professional liability, and general liability product lines.

Lower attritional loss ratios within the general liability, property, and professional liability lines continue to improve the combined ratio as well. The favorable impact of higher earned premiums and a lower policy acquisition cost ratio are likely to benefit the expense ratio of the Insurance segment.

The Reinsurance segment is likely to gain from strong growth in new business as well as ongoing favorable pricing trends across professional liability and general liability product lines and changes in the mix of business within the segment.

Markel expects strong growth and price increases in the remainder of 2021.

Markel remains focused on strategic acquisitions to improve its surety capabilities, ramp up Markel Ventures’ revenues, and expand its reinsurance product offerings. Riding on higher sales volumes and significant contribution from Lansing Building Products, which was acquired in April 2020, the top-line growth and EBITDA for Markel Ventures segment are likely to improve.

Markel seeks to maintain prudent levels of liquidity and financial leverage.
Higher net premium volumes in the Insurance segment, lower claims settlement activity across both the underwriting segments should benefit net cash flows from operations.

Courtesy of its solid financial strength, the property and casualty insurer engages in capital deployment to enhance shareholder value. Currently, it has $180.9 million remaining under the share repurchase authorization.

Other Stocks to Consider

Some other top-ranked property and casualty insurers include American Financial Group, Inc. (AFG - Free Report) , Everest Re Group, Ltd. (RE - Free Report) , and Cincinnati Financial Corporation (CINF - Free Report) , each carrying a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

The bottom line of American Financial surpassed estimates in each of the last four quarters, the average being 52.82%.

Everest Re surpassed estimates in two of the last four quarters and missed in the other two, the average earnings surprise being 20.33%.

Cincinnati Financial’s earnings surpassed estimates in three of the last four quarters and missed in the other one, the average being 36.01%.