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Markel’s (MKL) Q4 Earnings Miss, Revenues Beat Estimates


Markel Corporation MKL reported fourth-quarter 2017 income of $6.64 per share, missing the Zacks Consensus Estimate of $8.55. The bottom line also declined 27.1% year over year.

Markel Corporation Price, Consensus and EPS Surprise

Markel Corporation Price, Consensus and EPS Surprise | Markel Corporation Quote

Higher expenses weighed on the bottom line.

Operational Update

Total operating revenues of $1.7 billion beat the Zacks Consensus Estimate by 5.57%. Also, the top line improved 16.7% year over year on higher premiums, investment income and other revenues.

Total operating expenses of Markel increased nearly 22% year over year to $1.5 billion.

Markel’s combined ratio deteriorated 600 basis points (bps) year over year to 95% in the reported quarter.

Full-Year Highlights

Net income came in at $25.81 per share on revenues of $6.1 billion. While the metric decreased 17.5%, the top line increased 8%, both on a year-over-year basis.

Segment Update

U.S. Insurance: Net written premiums were up 11% year over year to $602.9 million in the quarter under review.

Operating income was $108.7 million, up 88% year over year.

Combined ratio improved by 500 bps year over year to 83% in the quarter.

International Insurance: Net written premiums increased nearly 31% year over year to $240.8 million.

Operating loss was $3 million in the quarter against a profit of $17.2 million in the year-ago quarter.

Combined ratio deteriorated 900 bps year over year to 101% in the quarter.

Reinsurance Segment: Net written premiums decreased about 30.1% year over year to $78.5 million.

Operating loss was $47.9 million against a profit of $26.7 million in the prior-year period.

Combined ratio deteriorated 3500 bps year over year to 122% in the quarter.

Other Insurance (Discontinued Lines) Segment: Net written premiums were ($12) million compared with $80 million in the comparable quarter last year.

Operating loss of $6.6 million was narrower than the year-earlier loss of $7.6 million.

Financial Update

Markel exited 2017 with investments, cash and cash equivalents plus restricted cash and cash equivalents of $20.6 billion compared with $19.1 billion at year-end 2016.

Debt balance increased to $3.1 billion as of Dec 31, 2017 from $2.6 billion at 2016-end.

Book value per share rose 12.7% from year-end 2016 to $683.55 as of Dec 31, 2017.

Net cash from operating activities was $858.5 million in 2017, up 60.6% from 2016.

Zacks Rank

Markel 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 Insurers

Among other players from the insurance industry that have reported fourth-quarter earnings so far, the bottom line of The Progressive Corp. PGR, The Travelers Companies, Inc. TRV and RLI Corp. RLI beat the respective Zacks Consensus Estimate.

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