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Markel (MKL) Q2 Earnings Top Estimates on Higher Premiums
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Markel Group Inc. (MKL - Free Report) reported second-quarter 2023 net operating earnings per share of $22.43, which beat the Zacks Consensus Estimate by 17%. The bottom line increased 62.7% year over year.
Markel witnessed higher earned premiums and improved net investment income, partially offset by higher current accident year loss ratio and expense ratio.
Markel Group Inc. Price, Consensus and EPS Surprise
Total operating revenues of $3.6 billion missed the Zacks Consensus Estimate by 2.2%. The top line rose 9.2% year over year on higher earned premiums, products revenues, services and other revenues and higher net investment income.
Earned premiums increased 16.9% year over year to $2.03 billion in the quarter. The increase was due to higher gross premium volume in recent periods, driven by growth within Insurance segment. The figure matched our estimate as well as Zacks Consensus Estimate.
Net investment income increased 75.3% year over year to $169.6 million in the second quarter. The increase was due to higher interest income on short-term investments and cash equivalents due to higher short-term interest rates. The figure was lower than our estimate of $170.8 million but beat the Zacks Consensus Estimate of $167 million.
Total operating expenses of Markel increased 6.8% year over year to about $3.1 billion, primarily due to higher losses and loss adjustment expenses, underwriting, acquisition and insurance expenses and services and other expenses. The figure was lower than our estimate of $3.2 billion.
MKL’s combined ratio deteriorated 180 basis points (bps) year over year to 92.8 in the reported quarter, attributable to a higher current accident year loss ratio and expense ratio in 2023, partially offset by the impact of more favorable development on prior accident years loss reserves. The Zacks Consensus Estimate was pegged at 94.
Segment Update
Insurance: Gross premium increased 10% year over year to $2.4 billion. The uptick was driven by more favorable rates and new business growth within personal lines, marine and energy, property and general liability product lines. It was partially offset by lower premium volume within professional liability product lines. The figure was lower than our estimate of $3.1 billion.
Underwriting profit came in at $134.6 million, down 19% year over year. The combined ratio deteriorated 300 bps year over year to 92.4 due to increase in favorable development.
Reinsurance: Gross premiums decreased 3% year over year to $281.1 million. The decrease was primarily attributable to lower gross premiums with professional liability product lines, partially offset by higher gross premiums within MKL’s marine and energy product lines. The figure was lower than our estimate of $428.3 million.
Underwriting profit of $15.1 million surged nearly four-fold year over year. The combined ratio improved 420 bps year over year to 94.3 in the second quarter due to modest favorable development across several product lines and accident years.
Markel Ventures: Operating revenues of $1.38 billion improved 1.8% year over year. The growth was driven by higher revenues at construction services businesses and one of equipment manufacturing businesses, primarily due to increased demand and higher prices. It was partially offset by the impact of decreased demand at other consumer and building products businesses and consulting services businesses.
Operating income of $150.2 million increased 40% year over year, driven by products businesses, particularly consumer and building products businesses, which had higher margins in 2023.
Financial Update
Markel exited the second quarter with investments, cash and cash equivalents and restricted cash and cash equivalents of $28.7 billion as of Jun 30, 2023, up 4.7% from 2022 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 21% as of Jun 30, 2023, reflecting an improvement of 300 basis points from 2022 end. The decrease reflects a decline in senior long-term debt, primarily attributable to the retirement of 3.625% unsecured senior notes as of Mar 30, 2023, as well as an increase in shareholders' equity.
Book value per share increased 9.3% from year-end 2022 to $1,023.23 as of Jun 30, 2023.
Net cash provided by operating activities was $1 billion in the second quarter of 2023, up 9.5% year over year. The increase was primarily due to an increase in operating cash flows from Markel Ventures, partially offset by a $125.1 million payment made to complete a retroactive reinsurance transaction to cede the portfolio of policies comprised of liabilities related to run-off book of U.K. motor casualty business
General Electric Company (GE - Free Report) reported second-quarter 2023 adjusted earnings of 68 cents per share, which beat the Zacks Consensus Estimate of 46 cents per share. The bottom line decreased 12.8% year over year.
General Electric’s total revenues of $15,861 million beat the consensus estimate of $15,085 million. The top line increased 14.9% year over year, with strong growth in the Aerospace segment.
3M Company (MMM - Free Report) reported second-quarter 2023 adjusted earnings (excluding $14.52 from non-recurring items) of $2.17 per share, which surpassed the Zacks Consensus Estimate of $1.65. The bottom line declined in double digits year over year.
3M’s net sales of $8,325 million outperformed the Zacks Consensus Estimate of $7,955 million. However, the top line declined 4.3% year over year due to an adverse foreign currency impact of 0.9% and a 1.2% negative impact from divestitures. Organic sales fell 2.2%.
Honeywell International Inc.’s (HON - Free Report) second-quarter 2023 adjusted earnings (excluding a penny from non-recurring items) of $2.23 per share surpassed the Zacks Consensus Estimate of $2.20. The bottom line increased 6.2% year over year. Total revenues of $9,146 million missed the Zacks Consensus Estimate of $9,171 million. The top line inched up 2.2% from the year-ago quarter.
Organic sales increased 3% due to growth in commercial aerospace, process solutions and UOP business. Aerospace’s quarterly revenues were $3,341 million, up 15% year over year. Higher commercial aviation aftermarket sales due to continued flight hour recovery in air transport drove the segment’s performance. Our estimate for Aerospace revenues in the second quarter was $3,189.7 million. Honeywell Building Technologies’ revenues dipped 1% to $1,510 million due to a decline in building products sales as a result of softer volumes in security and building management systems.
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Markel (MKL) Q2 Earnings Top Estimates on Higher Premiums
Markel Group Inc. (MKL - Free Report) reported second-quarter 2023 net operating earnings per share of $22.43, which beat the Zacks Consensus Estimate by 17%. The bottom line increased 62.7% year over year.
Markel witnessed higher earned premiums and improved net investment income, partially offset by higher current accident year loss ratio and expense ratio.
Markel Group Inc. Price, Consensus and EPS Surprise
Markel Group Inc. price-consensus-eps-surprise-chart | Markel Group Inc. Quote
Quarterly Operational Update
Total operating revenues of $3.6 billion missed the Zacks Consensus Estimate by 2.2%. The top line rose 9.2% year over year on higher earned premiums, products revenues, services and other revenues and higher net investment income.
Earned premiums increased 16.9% year over year to $2.03 billion in the quarter. The increase was due to higher gross premium volume in recent periods, driven by growth within Insurance segment. The figure matched our estimate as well as Zacks Consensus Estimate.
Net investment income increased 75.3% year over year to $169.6 million in the second quarter. The increase was due to higher interest income on short-term investments and cash equivalents due to higher short-term interest rates. The figure was lower than our estimate of $170.8 million but beat the Zacks Consensus Estimate of $167 million.
Total operating expenses of Markel increased 6.8% year over year to about $3.1 billion, primarily due to higher losses and loss adjustment expenses, underwriting, acquisition and insurance expenses and services and other expenses. The figure was lower than our estimate of $3.2 billion.
MKL’s combined ratio deteriorated 180 basis points (bps) year over year to 92.8 in the reported quarter, attributable to a higher current accident year loss ratio and expense ratio in 2023, partially offset by the impact of more favorable development on prior accident years loss reserves. The Zacks Consensus Estimate was pegged at 94.
Segment Update
Insurance: Gross premium increased 10% year over year to $2.4 billion. The uptick was driven by more favorable rates and new business growth within personal lines, marine and energy, property and general liability product lines. It was partially offset by lower premium volume within professional liability product lines. The figure was lower than our estimate of $3.1 billion.
Underwriting profit came in at $134.6 million, down 19% year over year. The combined ratio deteriorated 300 bps year over year to 92.4 due to increase in favorable development.
Reinsurance: Gross premiums decreased 3% year over year to $281.1 million. The decrease was primarily attributable to lower gross premiums with professional liability product lines, partially offset by higher gross premiums within MKL’s marine and energy product lines. The figure was lower than our estimate of $428.3 million.
Underwriting profit of $15.1 million surged nearly four-fold year over year. The combined ratio improved 420 bps year over year to 94.3 in the second quarter due to modest favorable development across several product lines and accident years.
Markel Ventures: Operating revenues of $1.38 billion improved 1.8% year over year. The growth was driven by higher revenues at construction services businesses and one of equipment manufacturing businesses, primarily due to increased demand and higher prices. It was partially offset by the impact of decreased demand at other consumer and building products businesses and consulting services businesses.
Operating income of $150.2 million increased 40% year over year, driven by products businesses, particularly consumer and building products businesses, which had higher margins in 2023.
Financial Update
Markel exited the second quarter with investments, cash and cash equivalents and restricted cash and cash equivalents of $28.7 billion as of Jun 30, 2023, up 4.7% from 2022 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 21% as of Jun 30, 2023, reflecting an improvement of 300 basis points from 2022 end. The decrease reflects a decline in senior long-term debt, primarily attributable to the retirement of 3.625% unsecured senior notes as of Mar 30, 2023, as well as an increase in shareholders' equity.
Book value per share increased 9.3% from year-end 2022 to $1,023.23 as of Jun 30, 2023.
Net cash provided by operating activities was $1 billion in the second quarter of 2023, up 9.5% year over year. The increase was primarily due to an increase in operating cash flows from Markel Ventures, partially offset by a $125.1 million payment made to complete a retroactive reinsurance transaction to cede the portfolio of policies comprised of liabilities related to run-off book of U.K. motor casualty business
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 Conglomerates
General Electric Company (GE - Free Report) reported second-quarter 2023 adjusted earnings of 68 cents per share, which beat the Zacks Consensus Estimate of 46 cents per share. The bottom line decreased 12.8% year over year.
General Electric’s total revenues of $15,861 million beat the consensus estimate of $15,085 million. The top line increased 14.9% year over year, with strong growth in the Aerospace segment.
3M Company (MMM - Free Report) reported second-quarter 2023 adjusted earnings (excluding $14.52 from non-recurring items) of $2.17 per share, which surpassed the Zacks Consensus Estimate of $1.65. The bottom line declined in double digits year over year.
3M’s net sales of $8,325 million outperformed the Zacks Consensus Estimate of $7,955 million. However, the top line declined 4.3% year over year due to an adverse foreign currency impact of 0.9% and a 1.2% negative impact from divestitures. Organic sales fell 2.2%.
Honeywell International Inc.’s (HON - Free Report) second-quarter 2023 adjusted earnings (excluding a penny from non-recurring items) of $2.23 per share surpassed the Zacks Consensus Estimate of $2.20. The bottom line increased 6.2% year over year. Total revenues of $9,146 million missed the Zacks Consensus Estimate of $9,171 million. The top line inched up 2.2% from the year-ago quarter.
Organic sales increased 3% due to growth in commercial aerospace, process solutions and UOP business. Aerospace’s quarterly revenues were $3,341 million, up 15% year over year. Higher commercial aviation aftermarket sales due to continued flight hour recovery in air transport drove the segment’s performance. Our estimate for Aerospace revenues in the second quarter was $3,189.7 million. Honeywell Building Technologies’ revenues dipped 1% to $1,510 million due to a decline in building products sales as a result of softer volumes in security and building management systems.