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Markel Hits New High on Acquisitive Growth, Insurance Profits

By Steve Symington – Aug 1, 2018 at 2:25PM

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The mini-Berkshire delivered yet another strong quarter despite recent investment volatility.

Markel Corporation (MKL -0.59%) announced second-quarter 2018 results on Tuesday after the market closed, detailing continued near-term declines in its investment portfolio that only partially offset strong showings from from both its insurance and Markel Ventures operations. Markel management also made it clear that it's more than happy taking advantage of recent market volatility.

With shares up 3% on Wednesday in response, let's take a closer look at what the specialty insurance and financial holding company accomplished over the past few months.

Stock market arrow charts indicating gains, with forex data in the background

Image source: Getty Images.

Markel results: The raw numbers


Q2 2018

Q2 2017

Year-Over-Year Growth

Operating revenue

$1.987 billion

$1.481 billion


Net income (loss) to shareholders

$278.2 million

$149.7 million


Net income (loss) per diluted share




Book value per share




Data source: Markel Corporation.

What happened with Markel this quarter?

  • Comprehensive income to shareholders was $164.3 million, down from $342.4 million in the same year-ago period. The decline was primarily driven by short-term declines in the value of Markel's investment portfolio.
  • At investment operations: 
    • Net investment income grew 6.1% year over year to $105.4 million, driven by driven by higher short-term interest rates and dividend income.
    • Total invested assets were $20.4 billion at the end of the quarter, up from $20.3 billion last quarter and down from $20.6 billion at the end of 2017. Equity securities were $6.1 billion of that total, or 30% of total invested assets, up from $5.9 billion at the end of last quarter.
    • Net unrealized gains on investments, net of taxes, were $3.4 billion at June 30, flat from last quarter. 
  • At insurance operations: 
    • Markel's consolidated combined ratio was 92% -- meaning it earned $8 for every $100 in premiums it wrote -- including combined ratios of 90% from reinsurance, and 92% from U.S. and international insurance.
    • Gross premium volume in underwriting operations grew 6.3% to $1.442 billion. That doesn't include $554.8 million of gross premiums written through Markel's program services business acquired through its purchase of State National last year, the vast majority of which were ceded to third parties.
  • At Markel Ventures:
    • Operating revenue increased 84.6% to $578.9 million, largely driven by the acquisition of Costa Farms late last year.
    • Ventures' net income to shareholders fell to $565,000, compared with $20.5 million in last year's second quarter, with the decline driven by roughly $48 million in charges stemming from an investigation and remediation related to the manufacture of products at one of Markel Ventures' businesses.
    • Segment EBITDA declined by 31.4% to $35.9 million.
    • The company announced the formation of Rosemont Investment Group within Markel Ventures, a business that will aim to invest in the ownership of the "best of asset management firms."

What management had to say

Co-CEOs Richard Whitt and Tom Gayner jointly stated:

Operating revenues increased 23% in the first half of 2018, reflecting contributions from recent acquisitions within both our insurance and Markel Ventures operations. Comprehensive income to shareholders was unfavorably impacted by declines in our investment portfolio, primarily attributable to the fixed income portfolio; however, we continue to maintain a long-term focus with our investment strategy.

During this morning's conference call, Gayner further highlighted Markel's opportunistic view of the markets: "We continue to modestly and steadily add to our equity portfolio, and we think the recent volatility allows us the chance to purchase wonderful long-term businesses at attractive prices. That is exactly what we are doing."

Looking forward

Markel does not provide specific financial guidance. But as usual, and as evidenced by the stock's hitting a fresh all-time high following the earnings release, the company's focus on generating superior long-term value for shareholders was evident throughout this quarter's report.

Steve Symington owns shares of Markel. The Motley Fool owns shares of and recommends Markel. The Motley Fool has a disclosure policy.

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