Combined ratio up three points for Markel

Markel Corp. reported this week a 7.8% increase in net premiums written while the combined ratio deteriorated by three points in 2016 as the Richmond, Va.-based insurer experienced a $46.6-million underwriting loss related to Hurricane Matthew.

Markel released Wednesday its financial results for 2016. Net premiums written were $839.1 million in the latest quarter, up 5.3% from $796.3 million in Q4 2015. All figures are in United States dollars.

For the full year, Markel reported net premiums written of $4 billion in 2016, up 7.8% from $3.8 billion in 2015.

Markel writes both commercial primary and reinsurance. Its operations include a Canadian managing general agent formerly known as Elliott Special Risks.

In a filing with the U.S. Securities and Exchange Commission, Markel reported its combined ratio deteriorated by three points, from 89% in 2015 to 92% last year.

“The 2016 consolidated current accident year loss ratio included $22.1 million of underwriting loss related to the Canadian wildfires that occurred in the second quarter and $46.6 million of underwriting loss related to Hurricane Matthew, which occurred in the fourth quarter,” Markel stated. “The impact of these losses on the 2016 consolidated current accident year loss ratio was more than offset by a decrease in management’s best estimate of ultimate loss ratios on various product lines in 2016, due in part to lower attritional losses in all three of our ongoing underwriting segments.”

Markel breaks its underwriting results out by U.S., international operations and reinsurance.

Its international division writes coverage for liability, property and marine and energy, among others. It conducts its Lloyd’s business through Syndicate 3000.

In U.S. insurance, the combined ratio increased from 89% in 2016 to 93% last year. In international insurance, the combined ratio deteriorated 8 points, from 86% in 2016 to 94% last year.

“The International Insurance segment’s 2016 combined ratio included $164.7 million of favorable development on prior years’ loss reserves compared to $248.8 million of favorable development in 2015,” Markel stated. “The decrease in loss reserve redundancies in 2016 compared to 2015 was driven by less favorable development on our marine and energy and general liability product lines in 2016.”

The combined ratio in reinsurance improved from 90% in 2015 to 87% last year, “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.”

Markel added that in its reinsurance segment, 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.”

Also in reinsurance in 2016 there was $125.5 million of favorable development on prior years’ loss reserves, up from $97.9 million in 2015.

“The increase in loss reserve redundancies in 2016 compared to 2015 was driven by more favorable development on our property product lines,” Markel reported. “Favorable development on prior years’ loss reserves during 2016 was most significant on our property and marine and energy product lines.”

During the most recent quarter, Markel reported net written premiums of $543 million in U.S. insurance (up 4.5% from $519.4 million in Q4 2015), $183.8 million international insurance (down 2.2% from $188 million in Q4 2015) and $112.2 million in reinsurance (up 27.5% from $88 million in Q4 2015).

Net income to shareholders was $133 million in the latest quarter, down 33% from $198 million in Q4 2015. For the 23 months ending Dec. 31, net income to shareholders was $456 million, down 22% from $583 million in calendar year 2015.