Markel enjoys reinsurance growth in 2016 results

Markel Corporation enjoyed some growth in 2016, in its reinsurance unit in particular, while net realised gains on investments propped up its profits that would have otherwise dipped due to less favourable underwriting results.

The company’s overall gross written premiums (GWP) increased to $4.8 billion in 2016 compared with $4.6 billion in 2015; its reinsurance segment’s GWP increased to just over $1 billion compared with $965 million a year earlier.

The company posted comprehensive income to shareholders of $667.0 million in 2016, a big increase on the $232.7 million it posted in 2015. Its combined ratio was 92 percent in 2016 compared with 89 percent in 2015.

The increase was mainly because of an increase in net unrealized gains on investments, net of taxes, of $242.2 million in 2016 compared to a decrease in net unrealized gains on investments, net of taxes, of $320.5 million in 2015, partially offset by lower net income to shareholders in 2016 compared to 2015.

This difference can be seen in the company’s net income to shareholders, which was $455.7 million in 2016, a decreased on the $582.8 million it made in 2015. The company said the decrease was driven by less favorable underwriting results, a loss on early extinguishment of debt and lower net realized investment gains, partially offset by more favorable results within its non-insurance operations in 2016 compared to 2015.

The company also noted that its 2016 combined ratio included $505.2 million of favourable development on prior years' loss reserves compared to $627.8 million in 2015. It also said that due to the completion of two retroactive reinsurance transactions in 2015, it now has less variability in its consolidated loss reserves.

Its reinsurance unit posted a combined ratio of 87 percent last year compared with 90 percent for 2015. It said this was driven by more favorable development on prior years' loss reserves and a lower current accident year loss ratio, partially offset by a higher expense ratio compared to 2015.

The 2016 current accident year loss ratio included $18.7 million, or two points on the segment combined ratio, of underwriting loss related to the Canadian wildfires and $16.2 million, or two points on the segment combined ratio, of underwriting loss related to Hurricane Matthew.

Alan Kirshner, executive chairman, said: "Growth in book value per share in 2016 reflected strong results from all three of our operating engines. Our underwriting results were solid. We are seeing positive momentum in the investment portfolio, driven by favorable movements in the equity markets.

“We had a record year at Markel Ventures with double-digit growth in revenues. Despite a competitive market, we believe these results demonstrate our commitment to underwriting discipline and to building long-term shareholder value."

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