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Markel underwriting income up almost threefold to $113mn on strong underlying gain

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Richmond-based specialty company Markel grew underwriting income by almost threefold – to $113mn – as the company improved underwriting performance according to virtually every metric.

On Tuesday, the carrier reported $15.09 in operating earnings per share. That is about half of last year’s $31.03, but well in advance of analysts’ $11.49 consensus estimate. The turnabout was the result of a sharp reversal in investment performance, with $539mn in investment gains last year turning into $26mn loss.

On the underwriting side, Markel’s combined ratio dropped 4.1 points to 93.1%. The improvement came from a 6.8-point reduction in its underlying loss ratio, a better expense ratio (34.9% versus 35.3%), and a lower overall level of catastrophes, when factoring $47mn in Covid-19 claims last year. The (re)insurer reported $102mn in natural catastrophe claims last year.

Cat losses fall overall, reserve releases slow

This year, Markel reported $114mn in cat losses overall, which included claims from Hurricane Ida and the floods in Europe. According to the carrier, $89mn of the cat losses were attributable to the insurance division, versus $68mn in reinsurance.

Companywide reserve releases slowed to $140mn from $167mn last year, adding 3.4 points less of a combined ratio benefit in the most recent quarter. About $124mn of those releases came from insurance, versus $16mn for reinsurance.

The reinsurance division fell to a $30mn underwriting loss in the quarter, narrowing its loss of $35mn from a year ago. Markel’s insurance business had a $147mn underwriting profit. However, the reinsurance segment’s underlying loss ratio improved to 61.2% from 64.6%. Catastrophes added 27.2 points to the reinsurance unit’s combined ratio, up from 15.8 points last year.

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Insurance GWP jumps 20%; reinsurance down 19%

Gross written premiums (GWP) increased 20% overall, to just shy of $2.1bn, when excluding premiums ceded as part of fronting and program services arrangements. The insurance business expanded GWP by 20% to $1.9bn, versus a 19% fall in reinsurance to $181mn.

The increase in premiums in the insurance division came from “significant growth” in the carrier’s general liability and professional liability product lines.

Markel said the lower premiums in reinsurance were due to the timing of contracts, including multi-year deals. The reinsurance business shrank most notably in general liability, credit and surety, and property product lines, while growing in professional liability.

"Our third-quarter and year-to-date results reflect the strength and balance of our three-engine operating model of insurance, investments and Markel Ventures," said Markel’s co-CEOs Tom Gayner and Richie Whitt.

"This quarter our insurance operations saw the benefit of recent changes in our property catastrophe underwriting strategy as we delivered a combined ratio in the low 90s, despite significant natural catastrophe events,” they continued.

“Our premium growth accelerated in the third quarter as we continued to attract new business and achieved double-digit rate growth, particularly on our preferred product lines."

"As we enter the final quarter of 2021, we believe we are well-positioned to finish the year strong, and we will look to all three operating engines to power us through the finish line," they concluded.

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