Attractive market conditions were a factor in improved second quarter underwriting results at Markel as the carrier reported strong growth in gross written premiums (GWP) and said rate increases drove higher earned premium that helped lower its expense ratio and attritional loss ratios.

Markel Q2 results

  • Comprehensive income down 22% to $849.7mn on lower investment gains
  • But strong 52% growth in insurance segment profits (partially offset by reinsurance loss)
  • Consolidated CR 1.5 pts lower at 86.9%, with underlying CR 1.7 pts lower at 86.9%
  • GWP up 18%, NWP up 20% and NEP up 15% as UW profits climb 30% to $204.7mn
  • Markel highlights strong growth in general and professional liability driven by rate tailwinds

Overall, the Richmond, Virginia-based insurer generated comprehensive income to shareholders that dipped from $1.09bn to $849.7mn including the impact of lower profits in its investing segment.

The lower profits from its investing segment included the impact of a decrease in pre-tax net investment gains from $911.2mn to $674.8mn in Q2 2021.

But there was strong growth in the contribution from its insurance segment, which climbed from $135.1mn to $205.3mn, although reinsurance fell to a loss of $4.9mn from a profit of $24.8mn.

At the consolidated level, GWP was up 18 percent to $2.10bn, net written premium up 20 percent to $1.75bn, and earned premium up 15 percent to $1.57bn, as Markel reported an underwriting profit that increased 30 percent to $204.7mn.

That tallied to a combined ratio that was 1.5 points lower at 86.9 percent, despite a lesser impact from prior-year reserve releases of 8.6 points, down from 12.1 points in Q2 2020.

Stripping out Covid-19 and current year catastrophe losses the underlying combined ratio was 1.7 points lower at 86.7 percent.

Markel said that the jump in consolidated GWP reflected significant growth most notably in professional liability and general liability product lines.

Markel YTD share price…

“We continue to see more favourable rates across most of our product lines, particularly within our general liability and professional liability product lines, based on general market conditions.

“Additionally, following the high level of catastrophes that have occurred in recent years, we are also seeing more favourable rates on catastrophe-exposed lines of business,” said the carrier.

It said the increase in earned premiums was also driven by the higher GWP volume in professional and general liability product lines.

The lower combined ratio for the quarter was driven by a lower current accident year loss ratio in insurance and lower expense ratio across both underwriting segments.

Higher earned premium this year had a favourable impact on Markel’s expense ratio and an unfavourable impact on the prior year accident years loss ratio.

Insurance CR drops 3.7 pts

In its larger insurance division, Markel was able to deliver strong top and bottom line growth.

GWP was up 17 percent to $1.82bn, NWP up 18 percent to $1.49bn, and NEP up 16 percent to $1.30bn as the carrier generated underwriting profits in the division that climbed 52 percent to $205.3mn.

The combined ratio for insurance narrowed by 3.7 points to 84.2 percent, with the underlying combined ratio the same as 0.3 points of cat losses in the accident year were offset by 0.3 points of favourable prior-year development relating to Covid.

Prior accident year reserve releases took 11.9 points from the loss ratio, down from 13.5 percent in Q2 2020.

Reinsurance UW loss

Reinsurance fell to an underwriting loss of $5.0mn, however, with a combined ratio that climbed 12.2 points to 101.9 percent.

Markel said the higher combined ratio included the impact of an increased current accident year loss ratio with less favourable premium adjustments on prior accident years in professional liability, partially offset by lower ceded re costs in property.

As previously reported, Markel stopped writing property reinsurance in its reinsurance division at the start of this year.

The quarter also included $21.7mn of adverse development on prior accident year loss reserves, largely in property. There was an increase in reserves for Covid-19 as a result of changes in the company’s allocation of ceded reinsurance recoveries on its enterprise agg treaty between insurance and reinsurance.

Reinsurance saw higher top line growth than insurance, despite the exit from property, with GWP up 25 percent to $279.4mn, and NWP up 36 percent to $257.4mn, although NEP lagged at an increase of 10 percent to $265.0mn.

The increase in GWP was the result of more business being written in general liability, professional liability and credit and surety products, partially offset by lower writings in property.

ILS revenues up

Markel’s fund manager Nephila contributed to revenues in its insurance-linked securities operations increasing from $50.7mn in the prior-year period to $55.8mn. The unit includes Nephila as well as its Lodgepine vehicle.

Meanwhile, services and other revenues from the program services and other fronting unit that houses State National increased from $25.2mn to $28.0mn.