Markel Beats on Q4 Earnings and Revenues; Improves Y/Y - Analyst Blog
Markel Corp. (MKL) reported fourth-quarter 2014 net income of $8.05 per share, surpassing the Zacks Consensus Estimate of $5.56 per share by 44.8%. Results also improved 15.8% year over year on the back of solid performance by the underwriting and investing operations.
Markel Corporation - Earnings Surprise | FindTheBest
Operational Update
Total operating revenue of the property and casualty insurer during the fourth quarter amounted to $1.3 billion, ahead of the Zacks Consensus Estimate of $1.1 billion by 18.2%. Moreover, the top line surged 4.4% year over year on account of higher premiums written and increased investment income.
Total operating expenses of Markel during the quarter declined marginally by 0.13% year over year to $1.14 billion.
Markel’s combined ratio during the fourth quarter rose 700 basis points (bps) year over year to 89% due to improvements in the combined ratio at International insurance and Reinsurance segments.
Full-Year Highlights
Markel’s net income for 2014 came in at $22.27 per share, surpassing the Zacks Consensus Estimate of $18.58. However, the number declined 0.9% year over year.
Operating revenues during 2014 increased 18.7% year over year to $5.13 billion. The improvement was primarily driven by strong growth in Markel Ventures operations both organically and by acquisition. The results also surpassed the Zacks Consensus Estimate by 21.4%.
Segment Update
U.S. Insurance – Net written premiums increased 6.3% to $516.6 million year over year in the reported quarter.
However, operating income of the segment declined 19.7% to $48.8 million year over year.
Combined ratio deteriorated 300 bps year over year to 90% in the fourth quarter of 2014. This was due to a less favorable development of prior-year loss reserves, partially due to an adverse development in the architectural and engineering lines of business earlier in 2014.
International Insurance − Net written premiums declined 2.6% year over year to $195 million.
Operating income improved to $30.9 million in the reported quarter compared with $5.8 million in the year-ago quarter.
Combined ratio improved 1100 bps year over year to 86% in fourth-quarter 2014. The lower combined ratio was driven by more favorable prior-year takedowns, partially offset by higher current accident year loss ratio.
Reinsurance Segment – Net written premiums fell 14.1% year over year to $100.6 million during the quarter under review.
Operating income of $15.3 million rebounded from a loss of $24.6 million in the year-earlier quarter.
Combined ratio improved 1900 bps year over year to 93% in the fourth quarter due to more favorable prior-year takedowns in the lower expense ratio.
Financial Updates
Markel exited the fourth quarter with total cash and cash equivalents of $18.6 billion, improving 5.8% from 2013-end level.
Book value per common share increased 14% from 2013-end to $543.96 at the end of 2014.
Net cash provided by the operating activities declined 3.8% year over year to $716.8 million in 2014. Higher income taxes payments resulted in the decline.
Zacks Rank
Currently, Markel carries Zacks Rank #3 (Hold).
Performance of Other Property and Casualty Insurers
RLI Corp. (RLI) reported fourth-quarter 2014 operating earnings of 71 cents per share, outpacing the Zacks Consensus Estimate by 18.3%. However, operating earnings declined marginally by 1.4% from the year-ago quarter.
The Travelers Companies Inc. (TRV) posted operating earnings of $3.07 per share in the fourth quarter of 2014, outperforming the Zacks Consensus Estimate by 21%. Earnings improved 14.6% year over year.
Progressive Corp.’s (PGR) earnings per share for fourth-quarter 2014 came in at 60 cents, 40% above the Zacks Consensus Estimate and up about 43% year over year.
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