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Markel Group (MKL) Down 7.7% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Markel Group (MKL - Free Report) . Shares have lost about 7.7% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Markel Group due for a breakout? 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.

MKL Q4 Earnings Beat Estimates on Higher Net Investment Income

Markel Group Inc. reported fourth-quarter 2024 net operating earnings per share of $20.51, which beat the Zacks Consensus Estimate by 5%. However, the bottom line decreased 63.6% year over year. MKL reported net income of $38.74 per share. Markel’s fourth-quarter results reflected improved net investment income, reduced operating expenses, and more favorable development on the prior year’s loss reserves, offset by lower earned premiums.

Quarterly Operational Update   

Total operating revenues of $3.7 billion missed the Zacks Consensus Estimate by 1%. The top line rose 0.3% year over year on higher net investment income and services and other revenues. Earned premiums decreased 2.6% year over year to $2.1 billion in the quarter. The modest decrease was due to lower gross premium volume in the Insurance and Reinsurance segments. The figure was lower than our estimate of $2.2 billion.

Net investment income increased 14.2% year over year to $243.7 million in the fourth quarter. The figure was lower than our estimate of $245.2 million and matched the Zacks Consensus Estimate. Total operating expenses of Markel decreased 7.5% year over year to $3.2 billion, primarily due to lower losses and loss adjustment expenses and products expenses. The figure matched our estimate.

MKL’s combined ratio improved 1,120 basis points (bps) year over year to 95.7 in the reported quarter. The decrease in the consolidated combined ratio was primarily attributable to more favorable development on the prior year’s loss reserves in 2024 compared with 2023. The figure matched the Zacks Consensus Estimate.

Segment Update

Insurance: Gross premiums decreased 1% year over year to $2.3 billion. The figure was lower than our estimate of $2.6 billion. The combined ratio improved 870 bps year over year to 96.1 in the reported quarter.

Reinsurance: Gross premiums dclined 36.2% year over year to $55.7 million. The figure was lower than our estimate of $418.4 million. The combined ratio improved 3,030 bps year over year to 94.3 in the reported quarter.

Markel Ventures: Total operating revenues of $1.27 billion improved 1.5% year over year. The increase in operating revenues was primarily driven by the consumer and building products businesses, as well as a partial-year contribution from Valor Environmental. Operating income of $132 million increased 3.8% year over year. Markel Ventures segment EBITDA of $164.3 million increased 6.5% year over year.

Financial Update

Markel exited the fourth quarter with investments, cash and cash equivalents and restricted cash and cash equivalents of $34.2 billion as of Dec. 31, 2024, up 10.6% from 2023-end. The increase was primarily attributable to operating cash flows and an increase in the fair value of equity portfolio. Senior long-term debt and other debt balance increased 14.5% year over year to $4.3 billion as of Dec. 31, 2024. 

Shareholders' equity was $16.9 billion at fourth-quarter 2024-end, up 13% from 2023-end. Net cash provided by operating activities was $2.6 billion in 2024, down 7.1% year over year. It reflected a decrease in operating cash flows from the insurance and Markel Ventures operations, partially offset by an increase in operating cash flows from investments.

Full-Year Highlights     

Underwriting profit surged three-fold year over year to $402.3 million. Net income per share of $199.32 rose 35.6% year over year. Total operating revenues grew 5.2% year over year to $16.6 billion. The combined ratio improved 320 bps year over year to 95.2.

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 -8% due to these changes.

VGM Scores

At this time, Markel Group has a poor Growth Score of F, a grade with the same score on the momentum front. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. 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. Notably, Markel Group has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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