Markel Q3 Income Drops on Investments but Insurance ‘Solidly Profitable’

On the heels of a third quarter that saw increased earned premiums compared to the same stretch in 2021, leaders at Markel Corp. recently reflected on their recent earnings and examined how current events are shaping their future approach.

“You can picture Markel as a pizza,” Tom Gayner, co-CEO, said during the organization’s third-quarter conference call. “The size of the overall pizza is growing, and we’re cutting it into fewer slices. Seems to me like the value of each slice is growing.”

Markel recorded Q3 net income attributable to common shareholders of about $65.4 million, down 65% compared to the same time a year ago. Earned premiums grew 20% in Q3, but Markel recorded a net investment loss of $281.5 million during the quarter.

Gayner said Markel’s insurance operations are “solidly profitable and growing at the same time.” The company also reported favorable reserve development in the face of external elements, such as Hurricane Ian and increased inflation. Reinsurance operations also posted solid profitability in the face of those challenging factors.

Q3 underwriting results included $70 million of net losses and loss adjustment expenses from Hurricane Ian, Markel said. Ian contributed four points to the Q3 combined ratio of 93 – the same result as Q3 2021.

Richie Whitt, co-CEO, said the strong quarter of operating results in the insurance businesses benefited from reduced volatility within underwriting operations, including adjustments to the company’s property and casualty underwriting strategy and appetite over the past few years.

“In previous years, the impact of a catastrophe event of [Ian’s] size would have had a more adverse impact on our underwriting results,” Whitt said. “We continue to see strong top-line growth across our product lines, achieving 19% growth for both the quarter and year-to-date periods within our underwriting operations.”

In the reinsurance segment, gross written and earned premiums within the segment were up 5% for the first nine months of the year. Premium growth was driven by higher premiums in general and professional liability lines from both new business and higher renewals, due in part to more favorable rates along with the impact from favorable premium adjustments in the company’s general liability and credit surety lines.

“This growth was partially offset by lower premiums in our property and workers’ compensation lines due to non-renewals,” Whitt explained. “Our property line continues to run off as part of our catastrophe strategy, with the transition of our reinsurance property line to Nephila, and the decision to discontinue writing retro property business within our underwriting operations.”

This transition of reinsurance property lines – and the exit of retro reinsurance lines – resulted in reduced volatility, which significantly benefited the Markel reinsurance segments’ underwriting results.

Whitt noted that rates continue to gradually moderate in most lines. Exceptions continue to be cat-exposed property in lines such as aviation, terrorism, war and political violence, which has been impacted by the Ukraine War and other large events, including Hurricane Ian.

“We continue to see strong submissions, new business opportunities and total premium writings despite uncertain financial markets and fears related to a potential economic slowdown,” Whitt said. “Inflation in all its forms continues to be a significant focus for us and the industry.”

Inflation costs had been baked into pricing and loss reserving going into 2022. During the third quarter, an even more cautious approach was adopted – impacting both prior accident year reserve releases and current accident year loss picks, Markel said.

Topics Profit Loss