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Markel Corp. Nearly Triples 2Q Net Income on Rate Hikes, Stronger Underwriting

Source: A.M. Best

Posted on 14 Aug 2012 by Neilson

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MarkelSpecialty insurer Markel Corp. nearly tripled its second-quarter net income over the prior-year period as the company benefitted from rate hikes, increased premiums and stronger underwriting in its North American businesses and moderate price increases in international business, company officials said.

Markel's second-quarter net income to shareholders jumped to $89.7 million from $30.3 million. The company's combined ratio dropped 16 points in the second quarter to finish at 87.

The company's net premiums written increased by 6.77% in the second quarter to finish at $566.6 million. The company saw the largest increase in net premiums written in its specialty admitted line, which grew by 24.2% in the quarter to $169.3 million. F. Michael Crowley, Markel co-president and co-chief operating officer, said growth in this line was fueled by $26 million of premium from Thomco, an acquisition announced by Markel in late 2011.

Thomco is a program administrator functioning as a nonrisk-bearing wholesale provider. In announcing the acquisition Markel said it was attracted to the company's niches. In a recent filing with the U.S. Securities and Exchange Commission, Markel said the total consideration for the acquisition was $108.5 million, which included cash consideration of $100.5 million, according to the filing.

While Markel's speciality admitted line benefitted from the Thomco infusion, the line posted a loss in the quarter of $823,000, which is improved from a loss of $9.2 million in the prior-year quarter.

Markel benefitted greatly in the second quarter from stronger performance in its London business, which posted a profit of $45.2 million, compared to a loss of $18 million in the prior-year quarter. The line benefitted primarily from stronger underwriting performance and lower losses in the accident year.

The company's North American businesses have seen price increases throughout the year over last year, Crowley said.

"Last year the majority of North American business segments had rate decreases and the total book generated a minimal increase through the first six months of 2011," Crowley said during a conference call with investors.

Richard R. Whitt III, Markel president and co-chief operating officer, said the company is seeing significant international growth in marine, energy and catastrophe-exposed property, with prices increasing through the quarter in these areas.

"However as the year progressed, these price increases appeared to be moderating to some extent," he said.

Overall average price increase in renewal business in the first six months of the year was about 5%. Cat-exposed property was in the 10% to 20% increase range, while energy saw low single-digit increases. All of the company's other international lines are stable, he said.

"Despite solid price increases in several of the lines of business ... there is still a pretty competitive market and there is still quite a bit of capacity out there," Whitt said.