Markel Posts $89.7M Q2 Profit, Buoyed by Improved Underwriting Results

August 9, 2012

Glen Allen, Va.-headquartered Markel Corp. on Thursday posted $89.69 million net income to shareholders for its 2012 second quarter, a 197 percent increase from $30.31 million income reported a year earlier.

Markel benefited from stronger underwriting results — especially from its London insurance market division. Overall, the insurer reported $67.18 million underwriting profit for the quarter, in contrast to an underwriting loss of $13.33 million one year ago.

Net written premiums for the quarter were $566.61 million, up 6.8 percent from $530.69 million a year ago. Overall GAAP combined ratio for the second quarter was 87 percent, improving from 103 percent a year earlier.

The investment income for the quarter was $63.60 million, down 1 percent from $64.25 million a year earlier. Net realized investment gains for the quarter were $8.22 million, up from $1.34 million.

Markel said that combined ratios in 2012 have improved, thanks to a lower current accident year loss ratio and to more favorable development of prior years’ loss reserves within the London insurance market segment compared to the same periods of 2011. The improvement in the current accident year loss ratio was mostly due to lower attritional losses in the excess-and-surplus lines and London insurance market segments.

The company also observed that one year ago — during the 2011 second quarter — it had underwriting loss related to U.S. storms and additional losses from the Japanese earthquake and tsunami that occurred during the first quarter of 2011, which amounted to $30.4 million.

Looking at individual segment results, the excess-and-surplus lines reported underwriting profit of $25.29 million for the quarter, improving from underwriting profit of $14.37 million a year earlier. Net written premiums were $193.29 million, up from $194.04 million one year ago. The GAAP combined ratio was 87 percent, improving from 92 percent. (Excess-and-surplus lines segment writes property/casualty insurance outside of the standard market for hard-to-place risks including catastrophe-exposed property, professional liability, products liability, general liability, commercial umbrella and other coverages tailored for unique exposures.)

The specialty admitted segment reported an underwriting loss of $3.10 million, improving from an underwriting loss of $8.98 million a year ago. Net written premiums were $169.28 million, increasing from $136.29 million a year earlier. The GAAP combined ratio was 102 percent, improving from 107 percent. (The specialty admitted segment writes risks that, although unique and hard-to-place in the standard market, must remain with an admitted insurance company for marketing and regulatory reasons. The underwriting units in this segment write specialty program insurance for well-defined niche markets, personal and commercial property and liability coverages and workers’ comp.)

The London insurance market reported the biggest improvement. It posted underwriting profit of $45.87 million, in contrast to an underwriting loss of $18.02 million a year ago. Net written premiums were $204.05 million, up from $200.47 million. The GAAP combined ratio was 74 percent, improving from 110 percent. (The London insurance market segment writes specialty property, casualty, professional liability, equine, marine, energy and trade credit insurance and reinsurance on a worldwide basis.)

Other insurance (discontinued lines) reported an underwriting loss of $880,000 for the second quarter, compared with an underwriting loss of $700,000 a year earlier. (The other insurance segment includes lines of business that have been discontinued in conjunction with acquisitions. This segment also includes development on asbestos and environmental loss reserves.)

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