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Markel (MKL) Q2 Earnings Surpass Estimates, Revenues Miss

Zacks Equity Research

Markel Corporation MKL reported second-quarter 2019 earnings of $11.84 per share, which beat the Zacks Consensus Estimate by 16.7%. The bottom line however declined 40.7% year over year.

The company’s investment portfolio delivered a solid performance. Operating results attributable to Markel Ventures operations improved substantially and reflected premium growth in underwriting operations.

Operational Update

Total operating revenues of $2 billion missed the Zacks Consensus Estimate by 1.7%. The top line however rose 6.9% year over year on higher premiums, investment income, product and services plus other revenues.

Total operating expenses of Markel increased 5.9% year over year to $1.8 billion.

Markel’s combined ratio deteriorated 300 basis points (bps) year over year to 95% in the reported quarter.

Markel Corporation Price, Consensus and EPS Surprise

Markel Corporation Price, Consensus and EPS Surprise

Markel Corporation price-consensus-eps-surprise-chart | Markel Corporation Quote

Segment Update

Insurance: Net written premiums were up 12.5% year over year to $1.1 billion in the quarter under review.

Underwriting profit came in at $47.6 million, down 35.9% from the year-ago quarter.

Combined ratio deteriorated 300 bps year over year to 95% in the quarter under discussion.

Reinsurance: Net written premiums inched up 0.04% year over year to $178.7 million.

Underwriting profit plunged 62.6% year over year to $8.8 million.

Combined ratio deteriorated 600 bps year over year to 96% in the second quarter.

Markel Ventures: Total revenues were $617 million, up 6.6% year over year driven by higher revenues from products businesses, higher sales volumes from transportation-related businesses and growth in one of the consulting services businesses.  Income of $81.7 million increased more than sixfold year over year.

Financial Update

Markel exited the second quarter with cash and cash equivalents of $2.6 billion, up 10.2% from the level at year-end 2018.

Debt balance increased 20.5% to $3.6 billion as of Mar 31, 2019 from 2018 end.

Book value per share increased 15% from year-end 2018 to $751.94 as of Jun 30, 2019.

Net cash from operating activities was $249.2 million in the first half of 2019, down 19% year over year.

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

Of the insurance industry players that have reported second-quarter results so far, The Progressive Corporation PGR and RLI Corp. RLI beat the respective Zacks Consensus Estimate for earnings. However, The Travelers Companies, Inc. TRV missed the same.

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