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Why Is Markel Group (MKL) Up 10.6% Since Last Earnings Report?
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It has been about a month since the last earnings report for Markel Group (MKL - Free Report) . Shares have added about 10.6% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Markel Group due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Markel Q2 Earnings Top Estimates on Higher Premiums
Markel Group Inc. 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.
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.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month.
VGM Scores
At this time, Markel Group has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Markel Group has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Markel Group belongs to the Zacks Diversified Operations industry. Another stock from the same industry, Carlisle (CSL - Free Report) , has gained 6.5% over the past month. More than a month has passed since the company reported results for the quarter ended September 2023.
Carlisle reported revenues of $1.26 billion in the last reported quarter, representing a year-over-year change of -29.8%. EPS of $4.68 for the same period compares with $5.66 a year ago.
Carlisle is expected to post earnings of $3.38 per share for the current quarter, representing a year-over-year change of -13.8%. Over the last 30 days, the Zacks Consensus Estimate has changed -0.7%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #4 (Sell) for Carlisle. Also, the stock has a VGM Score of C.
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Why Is Markel Group (MKL) Up 10.6% Since Last Earnings Report?
It has been about a month since the last earnings report for Markel Group (MKL - Free Report) . Shares have added about 10.6% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Markel Group due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Markel Q2 Earnings Top Estimates on Higher Premiums
Markel Group Inc. 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.
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.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month.
VGM Scores
At this time, Markel Group has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Markel Group has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Markel Group belongs to the Zacks Diversified Operations industry. Another stock from the same industry, Carlisle (CSL - Free Report) , has gained 6.5% over the past month. More than a month has passed since the company reported results for the quarter ended September 2023.
Carlisle reported revenues of $1.26 billion in the last reported quarter, representing a year-over-year change of -29.8%. EPS of $4.68 for the same period compares with $5.66 a year ago.
Carlisle is expected to post earnings of $3.38 per share for the current quarter, representing a year-over-year change of -13.8%. Over the last 30 days, the Zacks Consensus Estimate has changed -0.7%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #4 (Sell) for Carlisle. Also, the stock has a VGM Score of C.