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Markel (MKL) Q2 Earnings Beat on Solid Underwriting, Up Y/Y

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Markel Corporation (MKL - Free Report) reported second-quarter 2017 net income of $9.94 per share, beating the Zacks Consensus Estimate of $6.27 by 3.7%. Also, earnings surged 84% year over year.

Markel Corporation Price, Consensus and EPS Surprise

The company’s second-quarter results benefited from excellent underwriting operations, with improved performance across all three of its underwriting segments.

Operational Update

Total operating revenue of $1.464 billion beat the Zacks Consensus Estimate of $1.461 billion. However, the top line improved 7.7% year over year on higher premiums, investment income as well as other revenues.

Total operating expenses of Markel increased 5.1% year over year to $1.2 billion.

Markel’s combined ratio deteriorated 400 basis points (bps) year over year to 89% in the reported quarter.

Segment Update

U.S. Insurance: Net written premiums were up 8.8% year over year to $630.4 million in the reported quarter.

Underwriting profit was $43 million, up 24.3% year over year.

Combined ratio improved 100 bps year over year to 93% in the quarter.

International Insurance: Net written premiums increased 17.2% year over year to $286.8 million.

Underwriting profit was $32.1 million in the quarter, substantially reversing the loss of $1 million in the year-ago quarter.

Combined ratio improved 1400 bps year over year to 86% in the quarter.

Reinsurance Segment: Net written premiums increased about 3% year over year to $220.5 million.

Underwriting profit was $34.8 million, up 8.3% year over year.

Combined ratio improved 100 bps year over year to 85% in the quarter.

Other Insurance (Discontinued Lines) Segment: Net written premiums of ($95) million compared with ($4) million in the prior-year quarter.

Underwriting profit of $0.7 million rebounded from the year-ago loss of $0.3 million.  

Financial Update

Markel exited the second quarter with total cash, cash equivalents and investments of $19.6 billion compared with $19 billion at year-end 2016.

Debt balance declined 3.1% from year-end 2016 to $2.5 billion as of Jun 30, 2017.

Book value per share rose 6% from year-end 2016 to $643.37 as of Jun 30, 2017.

Net cash from operating activities was $237.9 million in the first six months of 2017, which compared favorably with $70.2 million in the year-ago period.

Acquisition Update

On Apr 28, 2017, Markel acquired SureTec Financial Corp. for about $250 million

On Jul 19, 2017, Markel agreed to acquire 81% of Costa Farms, a Florida-based privately held grower of house and garden plants for $225 million.

On Jul 26, 2017, Markel agreed to acquire State National Companies, Inc., a leading specialty provider of property and casualty insurance services, for $919 million.

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 Other Insurers

Among other players from the insurance industry that have reported their second-quarter earnings so far, the bottom line at Brown & Brown, Inc. (BRO - Free Report) and Fidelity National Financial, Inc. (FNF - Free Report) beat their respective Zacks Consensus Estimate, while The Progressive Corporation (PGR - Free Report) missed the same.

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