Markel Corporation (NYSE:MKL) just announced third-quarter 2015 results, and with shares up more than 2% Thursday, it's evident investors are pleased (as per usual) with the specialty insurer. Quarterly operating revenue rose 3.3% year over year, to $1.34 billion, and translated to net income of $7.39 per diluted share, up from net income of $5.30 per share in the same year-ago period. Wall Street's models were less optimistic, with consensus estimates calling for third-quarter revenue of $1.31 billion, and earnings of $6.26 per share.

Book value per share -- arguably the most important measure of Markel's success -- declined slightly on a sequential basis, to $551.63, as of September 30, 2015, but also stood around 1.4% higher than it started the year. Relatedly, Markel's comprehensive loss to shareholders in Q3 was $51.1 million, compared to comprehensive income to shareholders of $36.5 million in the same year-ago period.

The (temporary) culprit
"Comprehensive income to shareholders [...] was unfavorably affected by declines in our equity portfolio," explained Markel CEO Alan Kirshner. "However, we continue to maintain a long-term focus with our investment strategy." Markel Chief Investment Officer Tom Gayner strives to find stocks he can buy and never sellso a short-term decline in equities is unlikely to be of great concern.

Nonetheless, Markel's net investment income during the quarter fell 4.4% year over year, to $87.1 million, while total invested assets as of September 30, 2015 remained roughly steady from last quarter, at $18.5 billion. Equity securities comprised $4.2 billion, or 23%, of that total, up from 22% at the end of 2014, and now representing around 54% of shareholder's equity.

Net unrealized gains (net of taxes) decreased to $1.5 billion from $1.7 billion three months ago, again primarily due to the decline in equities. Once again, investors should remember that, by holding equities for long periods of time without selling, Gayner ensures net unrealized investment gains should trend upward over the long term, thus avoiding an unnecessary tax bill, and further compounding Markel shareholders' returns.

Strong underwriting
Compensating for investments' underperformance was an impressive showing from Markel's insurance businesses. On on a consolidated basis, insurance operations achieved a combined ratio of 88% -- meaning they earned $12 for every $100 in premiums they wrote -- including a 90% combined ratio from U.S. insurance, 87% from international insurance, and 86% from Markel's reinsurance operations. That's an enormous improvement over a consolidated 97% combined ratio in last year's third quarter, which was driven by a combination of favorable developments on prior year's loss reserves, and a lower current accident year-loss ratio so far in 2015, and brings Markel's year-to-date combined ratio to 89%.

Even so, Markel's typical combined ratio sits around 95% to 97%. That's still solidly profitable, but shows it may be prudent not to assume such exceptional underwriting performance will be repeated consistently.

On Markel Ventures
Finally, don't forget Markel's diversified group of non-insurance businesses operating under the wing of Markel Ventures. In total, Markel Ventures' operating revenue in Q3 climbed 24.6% year over year, to $299.2 million, notably including a 27.3% increase from manufacturing-centric businesses, to $216.1 million, and a roughly flat performance from the non-manufacturing segment at $83.1 million. Growth in the former was once again driven mostly by Markel's acquisition of auto transport trailer-maker Cottrell just more than a year ago.

Markel Ventures' net income to shareholders also fell more than 40%, to $6.4 million, while earnings before interest, taxes, depreciation, and amortization dropped 5%, to $29.5 million. Similar to last quarter, part of the purchase of Cottrell was based on its post-acquisition performance. And because Cottrell has continued to perform significantly better than Markel's initial projections, the company had to increase its contingent-consideration obligation related to the purchase by another $9 million during the quarter, which, in turn, put a temporary damper on Markel Ventures' earnings relative to last year.

As it stands, the fair value of that outstanding contingent-consideration obligation stands at $40.1 million, which Markel will pay in 2016. As Gayner noted in the subsequent conference call today, however, this is a "high-class problem" that Markel doesn't mind having.

In the end, despite the underperformance of Markel's equities portfolio relative to its other segments, this was another solid quarter from Markel, with no big surprises.