By Michael Loney

Feb 5 - (The Insurer) - Markel has reported an improved combined ratio for the fourth quarter and full-year 2024, provided a $90mn to $130mn estimate for January’s California wildfires and revealed it will conduct a review of its business.

After markets closed on Wednesday, Richmond, Virginia-based Markel said its $90mn to $130mn estimate for January’s wildfires includes the impact of reinstatement premiums and is before income taxes.

“This estimated range of losses was derived based on a high-level review of in-force contracts and an analysis of ceded reinsurance contracts, as well as preliminary industry loss estimates,” it said.

Markel also provided an update to shareholders in which it noted Jana Partners in December 2024 “publicly shared their perspectives on Markel Group and offered suggestions we might consider”.

As this publication previously reported, this included Jana calling on Markel to separate or sell its Markel Ventures investment business.

“We took this as an opportunity for broader self-reflection, in line with our commitment to the ‘zealous pursuit of excellence’,” Markel said on Wednesday.

Markel noted it asked shareholders for feedback, and has decided to conduct a review of its business.

“It will be an opportunity to reflect on the changes over the past two years and ensure our goals and direction align with our shareholders' priorities,” it said.

The board will lead this review, assisted by external consultants and advisors.

“Our foremost focus will be the performance of our market-leading specialty insurance business. Insurance is at the heart of what we do, and we're fully committed to supporting areas within insurance that are excelling while also addressing underperformance,” Markel said.

“Additionally, as part of the review we will consider ways to simplify our structure, optimize our approach to capital allocation, and enhance our disclosures. During this period, we expect to focus capital deployment on repurchasing shares under the recently announced $2bn stock buyback program,” it continued.

"We're focused on improving and building on our strengths to keep growing for the long term,” said Markel CEO Tom Gayner.

Markel noted that a few years ago it “entered a pivotal period of transition that would shape the future of our company”, and since then has made progress but faced challenges.

“Our financial performance and stock price growth didn't fully reflect our potential or long-term trends. In 2023, we took meaningful steps to move beyond this transitional phase and set the stage for the next chapter of our success,” it said.

Markel noted that it reported operating earnings in excess of $3.7bn for 2024, and its stock price has increased over 30 percent since the beginning of 2023.

“Nonetheless, we believe the value and potential of our combined group of businesses is not fully reflected in our current stock price,” it added.

The $3.71bn total operating income for 2024 that Markel reported on Wednesday was up from $2.93bn in 2024.

Q4 CR improves 9.2 pts

For the fourth quarter of 2024, operating income was $595.5mn, down from $1.13bn in Q4 2023.

The consolidated combined ratio improved to 95.7 percent in Q4 2024 from 106.9 percent in the same period of 2023.

The insurance combined ratio improved to 96.1 percent in the quarter from 104.8 percent in Q4 2023 and the reinsurance combined ratio improved to 94.3 percent from 124.6 percent.

Total gross premium volume increased to $3.37bn in the fourth quarter, from $3.10bn in Q4 2023.

Total underwriting gross premium volume fell to $2.32bn in the quarter from $2.38bn in Q4 2023, with insurance decreasing to $2.27bn from $2.29bn, and reinsurance dropping to $55.7mn from $87.3mn in Q3 2023.

Program services and ILS fronting gross premium volume grew to $1.05bn from $720.5mn.

Markel Ventures’ operating income improved to $132.0mn in the fourth quarter of 2024, from $127.2mn in the same period of 2023.

Full-year CR improves 3.2 pts

For the full year, Markel reported insurance operating income of $601.0mn, up from $348.2mn in 2023.

The underwriting profit was $402.3mn in 2024, compared with $132.7mn in 2023.

The 2024 combined ratio was 95.2 percent, an improvement on 2023's 98.4 percent. The improvement, Markel noted, was primarily attributable to more favourable development on prior years loss reserves in 2024 compared with 2023.

In 2024, underwriting results included $70.6mn of net losses and loss adjustment expenses attributed to Hurricane Helene and Hurricane Milton, while 2023 underwriting results included $40.1mn of net losses and loss adjustment expenses attributed to Hawaiian wildfires and Hurricane Idalia.

The insurance segment's operating income increased to $421.9mn in 2024 from $162.2mn in 2023, while the reinsurance segment's operating loss narrowed to $5.4mn from 2023's deficit of $19.3mn.

Gross premium volume grew 3 percent to $10.55bn, while net premiums written dropped 1 percent to $8.30bn.

Insurance gross premium volume increased 2 percent to $9.40bn while reinsurance gross premium volume increased 10 percent to $1.15bn.

“Our insurance operations grew on both the top and bottom lines, driven by targeted premium growth and improved underwriting performance within our insurance segment,” Markel said.

Operating revenues from other insurance operations increased to $291.9mn from $280.1mn, while operating income from these operations fell to $184.5mn from $205.2mn.

This included fronting operating revenues increasing to $155.4mn from $135.0mn and ILS operating revenues growing to $127.5mn from $118.3mn.

Program services gross premium volume fronted through State National grew 26 percent to $3.64bn while ILS gross premium volume fronted increased 55 percent to $1.31bn.

Total fronting gross premium volume was up 33 percent to $4.94bn in 2024, from $3.72bn in 2023.

“The increase in operating revenues and gross premium volume from our program services operations in 2024 was attributable to expansion of existing programs and new business,” Markel said.

“The increase in gross premium volume fronted through our ILS operations in 2024 was primarily due to growth of Nephila's property catastrophe and specialty programs,” it added.

"In 2024, we exceeded our target with strong returns from our public equity portfolio, continued growth in Ventures, and notable performance in many areas of our insurance business, all while staying true to our values and striving for excellence," said CEO Gayner.

He added: "Over the past two years, Markel Group has made significant strides in improving accountability, capital allocation, and leadership. As we continue to build on this progress, we are committed to enhancing our insurance performance and driving profitable growth across our entire family of businesses."