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Markel (MKL) Fits Your Portfolio like a Glove: Here’s Why


Markel Corporation MKL has made a name for itself and established a firm foothold in the industry, providing specialty insurance products to its clients and helping their businesses to perform efficiently and generate favorable results. Here, we will discuss about the factors constantly driving the company’s impressive results over a substantial period of time and are anticipated to repeat the trend in the near term.

Salient Features of an Encouraging Performance

Banking on a strong performance by its segments — U.S. Insurance, International Insurance and Reinsurance — Markel has been able to grow its premium by about 97.8% over the last five years.

Niche focus, effective insurance risk management, attempts to develop and maintain underwriting as well as pricing guidelines on existing products and new product development help the company enjoy an improved underwriting profit, a key measure of underwriting performance for insurers.

A gradual improvement in interest rates has come as a blessing for Markel. Moreover, Fed has announced intention of two more hikes this year, cushioning higher net investment income in the near term.

Moreover, Markel remains focused on replacing lower yielding fixed maturity corporate and mortgage-backed securities with higher yielding fixed maturity tax-exempt municipal securities.

Higher returns from the investment portfolio have helped the company’s book value per share grow at a five-year CAGR of 14.1%.

Markel has been ramping up its growth through strategic acquisitions, which not only have helped boosting the property and casualty (P&C) insurer’s surety capabilities but also expanding its reinsurance product offerings. Besides adding capabilities to the company’s portfolio, strategic acquisitions will enhance its insurance operations, paving the way for long-term growth. We believe a solid capital position will support the insurer to pursue buyouts to boost inorganic portfolio.

A robust capital position has also helped the company engage in shareholder-friendly moves.

Shares of this Zacks Rank #2 (Buy) P&C insurer have outperformed the industry in a year’s time. The stock has rallied 19.7% compared with the industry’s increase of 17.0%. We expect the company’s shares to trend higher in the near term on the back of the aforementioned positives.

Moreover, the company’s growth projections look promising. The Zacks Consensus Estimate for current-year earnings per share is pegged at $36.87 and at $38.21 for 2019, marking a year-over-year surge of 918.5% and 3.6%, respectively. While the top line represents 8.7% and 4.1% year-over-year increase for 2018 and 2019, respectively.

Furthermore, recent positive revisions have raised the Zacks Consensus Estimate reflecting analysts’ confidence in the company. The consensus mark for current-year earnings moved up 11.1% and by 14.6% for 2019 over the last 60 days.

Other Stocks to Consider

Investors interested in other top-ranked stocks from the insurance industry may also check out Alleghany Corporation Y, CNA Financial Corporation CNA and National General Holdings Corp. NGHC, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Alleghany Corporation provides property and casualty reinsurance and insurance products in the United States and internationally. The company delivered positive surprises in two of the last four quarters with an average beat of 5.2%.

CNA Financial offers commercial property and casualty insurance products primarily in the United States. The company pulled off positive surprises in all the last four quarters with an average beat of 46.9%.

National General Holdings provides various insurance products and services in the United States. The company came up with positive surprises in two of the last four quarters with an average beat of 11.5%.

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