Markel profits despite adverse loss reserve development
Markel Corporation made a healthy profit in the second quarter of 2014 in contrast to a loss a year earlier caused in part by costs relating to its acquisition of Alterra and catastrophe losses.
Its turnaround in fortunes was also complemented by a healthy increase in gross written premiums, which were partly boosted by the effects of the Alterra deal last year.
The company delivered income to shareholders of $250.6 million for the second quarter of 2014 compared to a loss of $149.1 million for the second quarter of 2013. Its operating income for the quarter was $41.1 million compared with $28.6 million the year before. Its combined ratio was 101 percent in the period compared with 103 percent a year earlier.
Driven partly by the Alterra deal, the company’s gross written premiums were $1.3 billion for the quarter, a jump of 18 percent compared with the $1.1 billion it posted a year earlier. For the first six months of 2014, its gross written premiums jumped by 50 percent to $2.7 billion compared with $1.8 billion in the first half of 2013.
The company stressed the big difference between its year on year performance was acquisition-related expenses related to the Alterra deal which hit its 2013 second quarter results by $61.8 million combined with $25.4 million of catastrophe losses in the same period. Together these items added 11 points and six points to the consolidated combined ratio for the quarter and six months ended June 30, 2013, respectively.
In terms of influences on this year’s results, the company said they included less favourable development on prior years' loss reserves compared to the same periods in 2013, primarily in its US insurance segment. Prior year losses for the quarter and six months ended June 30, 2014 included $27.2 million of adverse development on asbestos and environmental exposures within its discontinued lines segment.
Alan Kirshner, chairman and chief executive of Markel, says: “We are pleased with our growth in book value for 2014, which was driven by strong performance in our equity and fixed income investment portfolios. Our underwriting results in 2014 included unfavourable development on our asbestos and environmental exposures, which have continued to adversely impact the property and casualty insurance industry. We continue to expand our non-insurance operations and are excited about our most recent acquisition of Cottrell in July 2014.”
The company acquired Cottrell for $130 million in July. It is a manufacturer of over-the-road car hauler equipment and related car hauler parts.
