Markel product kills done, but 10% of book still taking strong action

US re/insurance group Markel has already terminated the business lines destined for the chopping block under its current portfolio restructuring and can now devote its remaining attention to bolstering a “handful” of lower-margin lines. 

“As far as product exits go, I don’t anticipate anything else in the foreseeable future,” Markel’s chief of insurance operations Jeremy Noble told his company's first quarter earnings call. “There is nothing else we are taking a hard look at.”

“Our work now is largely focused on improving the overall profitability of a handful of lines that we feel are either not as rate adequate as they need to be or aren't delivering the overall profitability profile we want,” he said. 

Comments follow a quarter in which Markel was forced to do some serious portfolio reworking, having acknowledged at end-2023 that difficulties in general and professional liability lines, resulting in rising loss trends and major new reserves, had pushed the group to razor thin margins with a  combined ratio at 98.4%. 

Exits, reductions and re-underwriting ensued, offset  by new growth in lines bearing a stronger outlook.  

“We've taken strong and decisive actions to deliver improved combined ratio performance going forward,” Noble said. “It will take time for these underwriting actions to work through ... but we are confident we are on the right track.” 

Markel identified lines for Q1 termination amongst those "not expected to be profitable," not sufficiently core to the Markel offer to merit a fight and totalling less than 2% of the Markel book. Select retail primary casualty and some architects and engineers products were amongst the casualties. 

In reinsurance, a “handful” of professional liability quota share deals went non-renewed after failing the Markel pricing litmus tests, Noble also noted.  

Markel put its next strongest actions to a roughly 10% portion of its portfolio which is missing its profitability targets and where Q1 GWP was down by some 16% year on year, Noble said. 

“For each product, we have a robust set of underwriting action plans to get us back to acceptable level of profitability in a reasonable period of time,” Noble said, noting that “many of these lines” show an underwriting profit, simply with a below-target margin. 

Those plans have included a mix of rate increases, changes in term & conditions, valuation of limits and attachment points and redistribution of geographical or industry mix, including a reduction in construction, he said. 

The steepest Q1 premium declines hit several US and Bermuda product classes in casualty and professional liability, Noble said, calling out brokerage excess and umbrella and brokerage primary contractors general liability within casualty and large account E&O and D&O within professional liability. 

On the positive side, Markel also has identified 40% of its book which is outperforming targets and from which it took 15% GWP growth in Q1.   

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