A month has gone by since the last earnings report for Markel (MKL Quick QuoteMKL - Free Report) . Shares have lost about 1.7% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Markel due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Markel's Q2 Earnings Miss, Revenues Beat Estimates

Markel Corporation reported second-quarter 2022 earnings of $13.78 per share, which missed the Zacks Consensus Estimate by 35.7%. The bottom line decreased 28% year over year.

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

Quarterly Operational Update    

Total operating revenues of $3.4 billion beat the Zacks Consensus Estimate by 1.7%. The top line rose 18.4% 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 16.9% in the quarter. The increase was due to continued growth in gross premium volume from new business, more favorable rates and expanded product offerings. Net investment income decreased 2.7% year over year to $93.7 million in the second quarter. The decrease was due to the losses on equity method investments.

Total operating expenses of Markel increased 22.7% year over year to about $3 billion, primarily due to higher losses and loss adjustment expenses, underwriting, acquisition and insurance expenses, products expenses, services and other expenses and amortization of intangible assets. Markel’s combined ratio deteriorated 400 basis points (bps) year over year to 91 in the reported quarter, attributable to the impact of less favorable development on prior accident years’ loss reserves.

Segment Update

Insurance: Gross premium increased 23% year over year to $2.2 billion. The uptick was driven by new business volume, more favorable rates and expanded product offerings, resulting in growth across all of its product lines, most notably its professional liability and general liability product lines. Underwriting profit came in at $166.4 million, down 19% year over year. The combined ratio deteriorated 520 bps year over year to 89.4.

Reinsurance: Gross premiums increased 3% year over year to $289.1 million. The uptick was driven by increases in renewals within its professional liability product lines due to increased exposure arising from growth in underlying portfolios and more favorable rates, as well as a new business, primarily on its professional liability and general liability product lines. Underwriting profit of $3.8 million rebounded from the year-ago quarter’s loss of $5.1 million. The combined ratio improved 340 bps year over year to 98.5 in the second quarter.

Markel Ventures: Operating revenues of $1.4 billion improved 27% year over year. Operating income of $107 million decreased 1% year over year.

Financial Update

Markel exited the second quarter with investments, cash and cash equivalents of $4.9 billion as of Jun 30, 2022, up 0.6% from 2021 end. The debt balance increased 3.2% year over year to $4.4 billion as of Jun 30, 2022. The debt-to-capital ratio was 26% as of Jun 30, 2022, reflecting a deterioration of 300 basis points from 2021 end. It reflected a decline in shareholders' equity, primarily attributable to decreases in the fair value of investment portfolio, driven by unfavorable movements in the public equity markets and increases in interest rates in 2022.

Book value per share decreased 13.3% from year-end 2021 to $898.53 as of Jun 30, 2022. The decrease was primarily due to other comprehensive losses to shareholders for the six months ended Jun 30, 2022.

Net cash provided by operating activities was $921 million in the second quarter of 2022, up 13.3% year over year, driven by higher net premium volumes in the Insurance segment, partially offset by $101.9 million of payments made in connection with the Markel CATCo buy-out transaction.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review.

The consensus estimate has shifted -10.56% due to these changes.

VGM Scores

At this time, Markel has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Markel has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.

Performance of an Industry Player

Markel is part of the Zacks Insurance - Property and Casualty industry. Over the past month, Arch Capital Group (ACGL Quick QuoteACGL - Free Report) , a stock from the same industry, has gained 5.1%. The company reported its results for the quarter ended June 2022 more than a month ago.

Arch Capital reported revenues of $2.42 billion in the last reported quarter, representing a year-over-year change of +8.1%. EPS of $1.34 for the same period compares with $1 a year ago.

Arch Capital is expected to post earnings of $0.98 per share for the current quarter, representing a year-over-year change of +32.4%. Over the last 30 days, the Zacks Consensus Estimate has changed +0.6%.

Arch Capital has a Zacks Rank #1 (Strong Buy) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.