Markel Corp. (NYSE:MKL) Q3 2016 Earnings Conference Call - Final Transcript

Nov 02, 2016 • 09:30 am ET

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Markel Corp. (NYSE:MKL) Q3 2016 Earnings Conference Call - Final Transcript

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Executive
Anne Waleski

period a year ago, redundancies on prior year loss reserves during 2016 were net of $71 million or two points of adverse development on our medical malpractice and specified medical product line.

Additionally, redundancies are prior your loss reserves in the first nine months of 2015 included $36 million, or one point a favorable development attributable to a decrease in the estimated volatility of our consolidated net reserves for unpaid losses and loss adjustment expenses.

As a result of ceding a significant portion of our assessed as an environmental exposures to a third party in the first quarter of last year. It's 2016 current accident your loss ratio includes $26 million, or approximately one point on the consolidate combined ratio of underwriting loss related to the Canadian wildfires that occurred in the second quarter.

These losses were more than offset by lower loss ratios in 2016 as compared to 2015 across the number of products in all three of our underwriting segments. In our US insurance segment prior year redundancies for 2016 were $126 million compared to $211 million a year ago.

This segment was impacted in 2016 by adverse development on our medical malpractice and specified medical product line. The adverse development on both of these books was driven by an increase in the proportion of business written on classes with higher claim frequencies over the last several years, including correctional facilities and contract physician staffing.

Beginning in late 2016 we saw an increase in claims frequency on these classes, which continued into the third quarter of 2016. We've also began to see increases in claims payments on these classes of business. While not consistent with our historical trends in these classes, we are now giving more credibility to this new trend and have increased loss reserves accordingly.

We are also taking corrective actions for business written in the affected classes. As a reminder, for the first nine months of 2015, the US insurance segment included $19 million, or one point of redundancies related to the decrease in reserve volatility that I just mentioned. In our international insurance segments, favorable development on prior year reserves was $111 million down from $178 million last year.

This decrease in lost reserve redundancies was driven by less favorable development on our marine and energy product lines in 2016. Additionally, the first nine months of 2015 included $17 million of redundancy each related to the decrease in reserve volatility.

In our reinsurance segment, we have recognized $90 million a prior year redundancy for the first nine months of 2016 compared to $66 million for the first nine months of 2015.

More favorable and prior year reserved in 2016 was across various product lines, but the most significant getting year-over-year improvements were seen in our workers comp and property product bonds.

Now, on to the results of Markel ventures, revenues from Markel ventures for the first nine months of 2016 increased to $906 million, compared to $784 million, the comparable period in 2015. The