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Markel's (MKL) Q4 Earnings, Revenues Top Estimates, Rise Y/Y

Markel Corporation MKL reported fourth-quarter 2022 earnings of $26.15 per share, which beat the Zacks Consensus Estimate by about 41.5%. The bottom line increased 66.5% year over year.

Markel witnessed higher earned premiums and net investment income, which were offset by higher expenses and deterioration in the combined ratio.

Markel Corporation Price, Consensus and EPS Surprise

 

Markel Corporation price-consensus-eps-surprise-chart | Markel Corporation Quote

Quarterly Operational Update   

Total operating revenues of $3.6 billion beat the Zacks Consensus Estimate by 4.6%. The top line rose 22% year over year on higher earned premiums, products revenues, services and other revenues as well as higher net investment income.

Earned premiums increased 12.8% in the quarter. The increase was due to continued growth in gross premium volume from new business, strong policy retention levels, more favorable rates and expanded product offerings.

Net investment income increased 50.8% year over year to $145.1 million in the fourth quarter, driven by higher interest income on short-term investments as a result of higher short-term interest rates in 2022.

Total operating expenses of Markel increased 22.2% year over year to about $3.2 billion, primarily due to higher losses and loss adjustment expenses, underwriting, acquisition and insurance expenses, products expenses, services and other expenses and amortization of intangible assets.

Markel’s combined ratio deteriorated 550 bps year over year to 93.3 in the reported quarter.

Segment Update

Insurance: Gross premium increased 13.1% year over year to $2.1 billion. The uptick was driven by new business volume, strong policy retention levels, more favorable rates and expanded product offerings, resulting in growth across all its product lines.

Underwriting profit came in at $110.4 million, down 51.4% year over year. The combined ratio deteriorated 860 bps year over year to 93.8.

Reinsurance: Gross premiums decreased 27% year over year to $185 million, attributable to lower gross premiums within professional liability and property product lines, partly offset by higher gross premiums within several of other product lines, driven by more favorable premium adjustments and a favorable impact from the timing of renewal.

Underwriting profit of $23.5 million increased nearly sevenfold year over year. The combined ratio improved 790 bps year over year to 90.8 in the fourth quarter.

Markel Ventures: Operating revenues of $4.8 billion improved 31% year over year in 2022. Operating income of $325.2 million increased 19% year over year.

Full-Year Highlights

Markel incurred a net loss of $23.57 against $176.51 earned in 2021.

Operating revenues of $13.2 billion increased 22.1% from 2021 and beat the consensus estimate of $13.1 billion.

Earned premiums increased 16.7% to $7.6 billion.

The combined ratio deteriorated 200 bps year over year to 92.

Financial Update

Markel exited 2022 with investments, cash and cash equivalents and restricted cash and cash equivalents of $27.4 billion as of Dec 31 2022, down 3.2% from 2021 end.

The debt balance decreased 5.9% year over year to $4.1 billion as of Dec 31, 2022. The debt-to-capital ratio was 31.4% as of Dec 31, 2022, reflecting a deterioration of 177 basis points from 2021 end.

Book value per share decreased 10.2% from year-end 2021 to $929.27 as of Dec 31, 2022.

Operating cash flow of $2.7 billion in 2022 increased 19% year over year, reflecting strong cash inflows from underwriting operations, given the growth in premium volume in recent periods.

Zacks Rank

Markel currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Property & Casualty Insurers

The Travelers Companies, Inc. TRV reported fourth-quarter 2022 core income of $3.40 per share, which matched the Zacks Consensus Estimate. The bottom line decreased 35% year over year. Total revenues increased 7.5% from the year-ago quarter to about $9.6 billion, primarily driven by higher premiums and fee income. The top-line figure beat the Zacks Consensus Estimate by 0.2%.

Net written premiums increased 10% year over year to $8.8 billion. The figure was higher than our estimate of $8.6 billion. Catastrophe losses totaled $459 million pre-tax, wider than $36 million pre-tax in the prior-year quarter. Travelers witnessed an underwriting gain of $449 million, down 51.5% year over year.  The combined ratio deteriorated 650 bps year over year to 94.5.

The Progressive Corporation’s PGR fourth-quarter 2022 earnings per share of $1.50 beat the Zacks Consensus Estimate of $1.49 as well as our estimate of $1.34. The bottom line improved 42.9% year over year

Net premiums earned grew 11% to $12.9 billion and beat our estimate of $12.3 billion. The combined ratio — the percentage of premiums paid out as claims and expenses — improved 80 bps from the prior-year quarter’s level to 93.9.

RLI Corp. RLI reported fourth-quarter 2022 operating earnings of $1.53 per share, beating the Zacks Consensus Estimate by 41.7%. The bottom line improved 26.4% from the prior-year quarter. Operating revenues for the reported quarter were $329.5 million, up 19.4% year over year. The top line beat the Zacks Consensus Estimate by 0.4%.

Gross premiums written increased 14% year over year to $383.8 million. Underwriting income of $54 million increased 8.7%, primarily due to higher profitability at its Property segment. The combined ratio deteriorated 140 bps year over year to 82.1.

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