Markel Corp. (NYSE:MKL) Q2 2017 Earnings Conference Call - Final Transcript

Jul 27, 2017 • 09:30 am ET


Markel Corp. (NYSE:MKL) Q2 2017 Earnings Conference Call - Final Transcript


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Thomas S. Gayner

for any questions you might have.

With that, Anne?

Anne G. Waleski

Thank you, Tom, and good morning, everyone. I'll steal Tom's phrase and just say that during the first half of the year we also scored a hat-trick relative to acquisitions. Yesterday, as Tom said, we announced our agreement to acquire State National within our insurance operations and Costa Farms within our Markel Ventures operations.

State National is a leading specialty provider of property and casualty insurance services that include both fronting services and collateral protection insurance coverage. Costa Farms is a Florida-based privately held grower of house and garden plants. We couldn't be more excited about the strategic opportunities these acquisitions will provide and are proud to join forces with each of these industry leaders.

During the second quarter, we also completed the acquisition of SureTec Financial Corporation; one of the largest privately owned surety companies in the US. Operating results attributable to this acquisition are included in our US Insurance segment. We are very excited about all three of these. I'm also happy to report that our financial performance for the first half of 2017 was strong and reflects positive contributions from our underwriting investing and Markel Ventures operation. Growth in book value per share was driven by significant returns on our investment portfolio.

Now let's move into the results for the first six months of 2017. Total operating revenues grew 5% to approximately $2.9 billion in 2017. The increase was primarily attributable to a 6% increase in earned premiums which reflects higher earnings in all three of our underwriting segments. We also had higher investment income and higher revenues from Markel Ventures as compared to last year. Starting with our underwriting results, gross written premiums were $2.8 billion for the first half of 2017 compared to $2.7 billion in 2016, an increase of 6%. The increase in gross premium volume was attributable to premium growth in all three of our underwriting segments with the largest increases in the Reinsurance and US Insurance segments.

Higher gross written premiums in our Reinsurance segment were attributable to two large specialty quota share treaties that were written in the first quarter of 2017. Partially offsetting these new contracts was lower premium volume in our property, auto and general liability lines of business. The increase in gross written premiums in the US Insurance segment was attributed to our personal line, general liability and workers' compensation product lines, as well as premiums from our new surety business.

In the International Insurance segment, higher gross written premiums were due to new business in our marine and energy and excess liability product line, partially offset by an unfavorable impact from foreign currency exchange rate movements. Market conditions remain competitive. Consistent with our historical practices, we will not write business when we believe prevailing market rates will not support our underwriting targets.

Net written premiums for the first six months of 2017 were $2.4 billion, up 7% from last year for the same reasons I just discussed, as