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Markel's (MKL) Q1 Earnings Miss Estimates, Increase Y/Y

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Markel Corporation (MKL - Free Report) reported first-quarter 2022 earnings of $11.33 per share, which missed the Zacks Consensus Estimate by about 32.5%. The bottom line, however, increased 11.9% year over year.

Markel witnessed an improved combined ratio and higher earned premiums, which were partially offset by higher expenses and lower net investment income.

Markel Corporation Price, Consensus and EPS Surprise

Markel Corporation Price, Consensus and EPS Surprise

Markel Corporation price-consensus-eps-surprise-chart | Markel Corporation Quote

Quarterly Operational Update     

Total operating revenues of $2.9 billion beat the Zacks Consensus Estimate by 7.7%. The top line rose 24.9% year over year on higher earned premiums, products revenues, services and other revenues. The increase was partly offset by lower net investment income.

Earned premiums increased 17% in the quarter. The increase was due to continued growth in gross premium volume from new business and more favorable rates.

Net investment income decreased 25% year over year to $72.7 million in the first quarter. The decrease was due to the losses on equity method investments.

Total operating expenses of Markel increased 22.9% year over year to $2.6 billion, primarily due to higher losses and loss adjustment expenses, underwriting, acquisition and insurance expenses, products expenses, services and other expenses, amortization of intangible assets.

Markel’s combined ratio improved 500 basis points (bps) year over year to 89 in the reported quarter. The combined ratio in the reported quarter improved due to a lower current accident year loss ratio as a result of lower catastrophe losses as well as a lower attritional loss ratio.

Segment Update

Insurance: Gross premium increased 19% year over year to $1.9 billion. The uptick was driven by new business volume, more favorable rates and expanded product offerings which resulted in growth across all product lines, notably professional liability and general liability product lines.

Underwriting profit came in at $187.5 million, up 60% year over year.  The combined ratio improved 330 bps year over year to 87.3.

Reinsurance: Gross premiums increased 8% year over year to $576.3 million. The uptick was due to higher renewals and new business within professional liability and general liability product lines. More favorable premium adjustments within credit and surety, professional liability and general liability product lines also contributed to the increase. It was partially offset by lower gross premiums within workers' compensation and property product lines.

Underwriting profit of $13.3 million rebounded from the year-ago quarter’s loss of $23.2 million. The combined ratio improved 1380 bps year over year to 95.3 in the first quarter.

Markel Ventures: Operating revenues of $950.4 million improved 34.5% year over year. Operating income of $49.7 million decreased 3% year over year.

Financial Update

Markel exited the first quarter with investments, cash and cash equivalents and restricted cash and cash equivalents (invested assets) of $28.3 billion as of Mar 31, 2022, unchanged from 2021 end.

The debt balance increased 1.5% year over year to $4.4 billion as of Mar 31, 2022.

The debt-to-capital ratio was 24% as of Mar 31, 2022, down 100 basis points from 2021 end. It reflects a decrease in shareholders' equity, primarily attributable to other comprehensive losses to shareholders for the three months ended Mar 31, 2022.

Book value per share decreased 4% from year-end 2021 to $995.53 as of Mar 31, 2022. The decrease was primarily due to other comprehensive losses to shareholders for the three months ended Mar 31, 2022.

Net cash provided by operating activities was $414.9 million in the first quarter of 2022, up 30.4% year over year. The increase was primarily driven by higher net premium volumes across both of the underwriting segments. It was partially offset by higher claims settlement activity in the Insurance segment and $101.9 million of payments made in connection with the Markel CATCo buyout.

Zacks Rank

Markel currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Some Other Insurers

RLI Corp. (RLI - Free Report) reported first-quarter 2022 operating earnings of $1.43 per share, beating the Zacks Consensus Estimate by 40.2%. The bottom line improved 64.4% from the prior-year quarter.

RLI’s gross premiums written increased 22% year over year to $359.2 million. This uptick can be attributed to the solid performance of Casualty (up 14.3%), Surety (up 47%) and Property segments (up 7.2%). Net investment income increased about 9% year over year to $17.9 million.

The Travelers Corporation, Inc. (TRV - Free Report) reported first-quarter 2022 core income of $4.22 per share, which beat the Zacks Consensus Estimate by 14%. The bottom line increased 54.6% year over year.

Travelers’ net written premiums increased 11% year over year to $8.4 billion, driven by strong retention rates, higher new business premiums and positive renewal premium changes across all the segments.

The Progressive Corporation’s (PGR - Free Report) first-quarter 2022 earnings per share of $1.12 missed the Zacks Consensus Estimate of $1.24. Also, the bottom line declined 34.9% from the year-ago quarter.

Progressive’s net premiums written were $13.2 billion in the quarter, up 12% from $11.7 billion a year ago. Net premiums earned grew 13% to nearly $11.8 billion.

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