Gross premium volume up 11% at Markel

Markel Corp. reported Wednesday its third-quarter combined ratio improved 11 points, driven mainly by favourable development on prior years’ loss reserves, while gross premium volume increased 6% due in part to higher premium volume in credit and surety reinsurance.

Glen Allen, Virginia-based Markel released its financial results for the three months ending Sept. 30, reporting a combined ratio of 88% in the latest quarter, down from 97% during the same period in 2014.

Gross premium volume was $1.15 billion, compared to $1.096 billion in Q3 2014. All figures are in United States dollars.

In Canada, Markel provides commercial insurance from London-based Markel International Insurance Company Limited. Markel acquired Toronto-based managing general agent Elliott Special Risks in 2009. Elliott Special Risks – which also has offices in Montreal, Calgary and Vancouver – was rebranded as Markel in July, 2015.

Markel breaks down its results by U.S. and international insurance, as well as by reinsurance.

In the most recent quarter, Markel reported combined ratios of 90% in U.S. insurance (down from 95% in Q3 2014), 87% in international insurance (down from 97% in Q3 2014), and 86% in reinsurance (down from 97% in 2014).

The 10-point improvement, in its Q3 combined ratio international insurance, “was driven by more favorable development on prior years’ loss reserves compared to the same period of 2014,” Markel stated Wednesday in its filing with the U.S. Securities and Exchange Commission.

In reinsurance, the 11-point improvement in the Q3 combined ratio was “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 the same period of 2014.”

Markel’s gross premium volume, in Q3 2015, was $646 million in U.S. insurance (up from $619.5 million in Q3 2014), $284.6 million in international insurance (up from $271 million in Q3 2014) and $239 million in reinsurance (up from $206 million in Q3 2014).

Markel did not specifically report Q3 results from Canada. However, in its annual report for 2014 – released in February, 2015 – Markel reported that 67% of its 2014 international insurance premium volume was related to foreign risks, and of that, 14% was from Canada.

In international insurance, the firm’s Markel Capital unit is provides capital for its Lloyd’s underwriter, Markel Syndicate 3000. That syndicate is managed by Markel Syndicate Management Limited (MSM). Coverages include primary and excess of loss property, casualty, excess liability, professional liability, equine, marine, energy and trade credit insurance.

Company-wide, Markel reported net written premiums of $953 million and earned premiums of $963.7 million in the most recent quarter.

“Gross premium volume increased 6% for the quarter ended September 30, 2015 and decreased 3% for the nine months ended September 30, 2015, compared to the same periods of 2014,” Markel stated. “At a constant rate of exchange, gross premium volume would have increased 8% for the quarter ended September 30, 2015 and decreased 1% for the nine months ended September 30, 2015, compared to the same periods of 2014. In both periods, the change in gross written premiums was primarily attributable to the Reinsurance segment.”

In reinsurance, the increase in gross premium volume would have been 23% at a constant rate of exchange, Markel noted, adding that increase “was due to higher gross premium volume in our credit and surety product line, as a result of a contract that was re-written and extended during the quarter.”

In its international segment, Markel’s Q3 gross premium volume would have increased 10% year over year at a constant exchange rate, “primarily driven” by a change in its estimate of gross premiums in marine and energy.

“We have continued to see small price increases across many of our product lines during 2015,” Markel noted. “However, beginning in 2014 and continuing into 2015, we have experienced softening prices across most of our property product lines, as well as on our marine and energy lines. Our large account business is also subject to more pricing pressure. When we believe the prevailing market price will not support our underwriting profit targets, the business is not written. As a result of our underwriting discipline, gross premium volume may vary when we alter our product offerings to maintain or improve underwriting profitability.”

Markel reported an underwriting profit of $113.3 million in Q3 2015 (more than three times the underwriting profit of $32.5 million in Q3 2014) and net investment income of 87 million (down 4.3% from $91 million in Q3 of 2014).

Net income was $104.4 million in the most recent quarter, up from 76.8 million in Q3 2014.

For the nine months ending Sept. 30, Markel reported net income of $390.9 million, up from $203.6 million in 2014.