Markel (MKL 1.69%) had an excellent March, as its share price increased 18.7%, according to S&P Global Market Intelligence. Markel beat the market by a wide margin, as the S&P 500 was up just 3.6% in the month. Markel is currently trading at about $1,475 per share, up 19% year to date as of April 5.
Markel has been called a "baby Berkshire," because it has a similar business model to Berkshire Hathaway. Its core business is specialty insurance, with a focus on excess and surplus (E&S) insurance and reinsurance. It also has an investment portfolio, which it invests in using its earned premiums. The $8.7 billion portfolio includes 115 investments with Berkshire Hathaway, Brookfield Asset Management, and Alphabet as its largest holdings. The third business line is Markel Ventures, which its private equity investment arm that buys stakes in companies.
Markel reported Q4 and year-end earnings in February, and all three businesses were firing on all cylinders. Earned premiums were up 16%, while the loss ratio (ratio of losses to earned premiums) dropped 6.7 percentage points to 55%. The combined ratio (ratio of losses an expenses to earned premiums) fell 7.4 points to 90.3%. Also, the investment portfolio returned 29.6% in 2021, beating the S&P 500, and Markel Ventures saw revenue jump 30% for the year -- a record. In the fourth quarter, revenue was up 12% year over year to $3.7 billion and net income jumped 3% YoY.
The stock price jumped sharply on March 8 from about $1,200 and climbed to its present level of about $1,475 at the end of the month.
The stock price got a boost in March, most likely because the Federal Reserve raised interest rate for the first time in more than three years. Because insurance companies benefit from higher interest rates in general, the whole industry got a bump, even though Markel doesn't invest in as many interest rate-sensitive assets as other insurers do.
But Markel is in good shape, coming off a record year at Markel Ventures, record underwriting profits, and a combined ratio near a 30-year low. It is known for its exceptional and discerning underwriting and that should continue to serve it well. Co-CEO Richie Whitt said on the fourth-quarter earnings call that the company expects to boost rates in 2022. Markelʻs investment portfolio that focuses on good, sturdy value stocks should also help it navigate market turmoil, although its return wonʻt be as high as last year. It's also extremely cheap, with a price-to-earnings ratio of around 8.