Markel doubles profit in 2017 despite combined ratio jump

Commercial insurer Markel reported a comprehensive income to shareholders of $1.2 billion for 2017 compared to $667.0 million in 2016.

The improvement was due to an increase in net unrealized gains on investments, net of taxes, of $763.0 million in 2017 compared to $242.2 million in 2016. The increase in net unrealized gains on investments, net of taxes, in 2017 was attributable to growth in the fair value of Markel’s equity portfolio.

As a result of US tax changes, Markel recorded a one-time tax benefit of $339.9 million in the fourth quarter of 2017.

"We finished 2017 with record comprehensive income of more than $1 billion which drove double-digit growth in book value over the past one-year and five-year periods,” said executive chairman Alan Kirshner. “This was largely due to outstanding performance in our equity portfolio and reflects the benefit of our diversified operations. Our revenues also set a record, exceeding $6 billion, and reflect both organic growth and contributions from recent acquisitions.

“In the fourth quarter, we completed the acquisition of State National, which adds a premier fronting platform and collateral protection coverages to our insurance operations. Earlier this year we added Costa Farms to our portfolio of Markel Ventures companies and we also completed the acquisition of SureTec in our insurance operations. We are excited about the opportunities each of these acquisitions brings to Markel as we continue to focus on building long-term value for our shareholders."

Markel recorded a combined ratio of 105 percent in 2017 compared to 92 percent in 2016.

Underwriting results in 2017 included $565.3 million, or 13 points, of underwriting loss from Hurricanes Harvey, Irma, Maria and Nate as well as the earthquakes in Mexico and wildfires in California. The underwriting loss on the 2017 catastrophes was comprised of $585.4 million of estimated net losses and $20.1 million of net assumed reinstatement premiums.

The combined ratio for the reinsurance segment was 132 percent for 2017 compared to 87 percent for 2016. The increase in the 2017 combined ratio was driven by the impact of the 2017 catastrophes and adverse development on prior years' loss reserves attributable to the decrease in the Ogden rate in 2017. Gross written premiums in the reinsurance segment grew slightly to $1,11 billion in 2017 compared to $1.04 billion in 2016.

Overall, Markel grew gross premiums to $5.51 billion from $4.80 billion over the period.

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