Markel reports 3-point drop in combined ratio in Q2 2016 to 93%, US$25.3 million underwriting loss related to Fort McMurray wildfire

Markel Corporation has reported a 3 point drop in its combined ratio for the second quarter of 2016 ending June 30, from 96% in Q2 2015 to 93% in the most recent quarter, despite a US$25.3 million underwriting loss related to the Fort McMurray wildfire.

For the first six months of the year, the combined ratio was 90% for both 2015 and 2016, Glen Allen, Va.-based Markel reported in its financial results, released on Tuesday.

Markel, a financial holding company serving niche markets, said in its quarterly report that the decrease in the consolidated combined ratio for Q2 2016 was driven by a lower current accident year loss ratio and more favourable development of prior years’ loss reserves compared to the same period of 2015. The Q2 2016 consolidated combined ratio included US$25.3 million of underwriting loss related to the Fort McMurray wildfire that occurred in the second quarter of 2016. For the first six months of the year, the consolidated combined ratio was flat compared to 2015, as a lower current accident year loss ratio was offset by less favourable development on prior years’ loss reserves in 2016 compared to 2015, Markel said in the report.

For the company’s International Insurance segment, the combined ratio was 100% and 98%, respectively, for the quarter and six months ending June 30, compared to 98% and 86%, respectively, for the same periods of 2015. For the quarter, the increase in the combined ratio was driven by a higher expense ratio, partially offset by a lower current accident year loss ratio compared to the same period of 2015, Markel said in the quarterly report.

The current accident year loss ratio for Q2 2016 also included US$4.6 million, or two points on the segment combined ratio, of underwriting loss related to the Fort McMurray wildfire. “The impact of these losses on the 2016 current accident year loss ratio was more than offset by lower attritional loss ratios in 2016 compared to 2015, primarily on our professional liability product lines, and a decrease in management’s best estimate of ultimate loss ratios on various product lines,” Markel said.

Regarding the company’s Reinsurance segment, the combined ratio was 86% for Q2 2016 and 84% for H1 2016, compared to 100% for Q2 2015 and 94% for H1 2015. The current accident year loss ratio included US$20.7 million, or ten points on the segment combined ratio, of underwriting loss related to the Fort McMurray wildfire.

Overall, net written premiums (NWP) from underwriting operations were US$1.05 million in Q2 2016, up from US$1.03 million in the same quarter in 2015. For the first half of the year, NWP were US$2.67 million compared to about US$2.52 million in H1 2015. Underwriting earned premiums were US$950,859 in Q2 2016, down from US$957,557 in Q2 2015 (H1 2016: about US$1.91million compared to US$1.90 million in H1 2015).

“The second quarter of 2016 results continued to reflect strong performance from our underwriting, investing and Markel Ventures operations,” said Markel’s executive chairman Alan I. Kirshner. “We were pleased with our underwriting results which had minimal impact from the industry-wide large loss events that occurred during the quarter.”