Author Topic: MKL - Markel Corp  (Read 283152 times)

scorpioncapital

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Re: MKL - Markel Corp
« Reply #710 on: February 14, 2019, 01:47:33 PM »
I read a report that it is not expected or rising inflation that causes insurers to go belly up but unexpected large changes in inflation. This makes sense. If suddenly your policyholders are making claims at a much higher cost in a short period of time, you won't have made enough on your asset side to pay the claims. You could delay I suppose by agreement.
Would reinusrance combined ratio dynamics be the same as principle p/c? I would think reinsurance is potentially even more risky or volatile.


walkie518

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Re: MKL - Markel Corp
« Reply #711 on: February 15, 2019, 02:29:53 PM »
I read a report that it is not expected or rising inflation that causes insurers to go belly up but unexpected large changes in inflation. This makes sense. If suddenly your policyholders are making claims at a much higher cost in a short period of time, you won't have made enough on your asset side to pay the claims. You could delay I suppose by agreement.
Would reinusrance combined ratio dynamics be the same as principle p/c? I would think reinsurance is potentially even more risky or volatile.
I would add here it will be policy dependent.

Chubb might pay you the day after an adjuster shows up your place to assess damage from a leaking toilet.

A policy that might be syndicated or any kind of commercial policy might take months to pay out

and depending on the policy, you might see an entire quarter of payments in one go that has been deferred by a quarter...

Adam Value

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Re: MKL - Markel Corp
« Reply #712 on: March 05, 2019, 12:36:16 PM »
How should we view the divergence from the s&p since January? Can it be explained as simply multiple compression? If so where do we see fair value?

Spekulatius

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Re: MKL - Markel Corp
« Reply #713 on: March 05, 2019, 01:23:33 PM »
How should we view the divergence from the s&p since January? Can it be explained as simply multiple compression? If so where do we see fair value?
I believe part of MKL’s halo has disappeared, due to recent missteps ( Reinsurance writeoff, annual loss - both are related) and hence the premium to other insurers in term of P/ B is shrinking. Fair value is in the eye of the beholder, but if this P/ B shrinks to the level of Y, AXS or RE then MKL has another~20% to go. MKL deserves to trade at a premium to above group imo, but I felt it was larger than deserved until recently. I feel that the price is getting interesting, but I haven’t put much work in it.
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obtuse_investor

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Re: MKL - Markel Corp
« Reply #714 on: March 05, 2019, 04:48:50 PM »
I mainly view the recent price decline as a much overdue multiple contraction. As of this writing, MKL is exactly it's 5yr average P/B ratio: https://ycharts.com/companies/MKL/price_to_book_value
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khturbo

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Re: MKL - Markel Corp
« Reply #715 on: March 06, 2019, 07:23:18 AM »
I did a couple of writeups on Markel if anyone is interested. The first one just goes through and adds up all the different buckets of value:

https://concentratedcompounding.com/some-thoughts-on-markel-after-a-tough-year/

Looks roughly fairly valued to me.

The second one looks at how they've done with their ventures investments and why the intrinsic value hasn't compounded much over the last few years:

https://concentratedcompounding.com/markel2/

IMO the intrinsic value growth should be better than it was the last few years over time but unless they really get going on the insurance side I don't think it compounds more than maybe 10% or so per year. At that point, I'd prefer BRK over MKL.

Would be interested to get people's thoughts.

CorpRaider

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Re: MKL - Markel Corp
« Reply #716 on: March 06, 2019, 08:06:01 AM »
I will check out your posts perhaps this evening.  Thanks for sharing.  Does anyone have the current/MRQ investments per share figure handy?

I also want to heat check the buybacks over the last couple of years.  Kind of using that as a bs barometer with this one. 
« Last Edit: March 06, 2019, 08:21:54 AM by CorpRaider »

Spekulatius

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Re: MKL - Markel Corp
« Reply #717 on: March 06, 2019, 04:55:16 PM »
I will check out your posts perhaps this evening.  Thanks for sharing.  Does anyone have the current/MRQ investments per share figure handy?

I also want to heat check the buybacks over the last couple of years.  Kind of using that as a bs barometer with this one.

The analysis seems sound to me. Note that it comes essentially to the same conclusion, than the ychart P/B chart indicating that MKL trades at about its average valuation. I think the stock would be interesting at around $900 to me. That would be an about 10% discount to fair value. I think P/B still works well for MKL, because it is still basically an insurance company, unlike BRK, which generates the majority of its  earnings from business other than insurance.
« Last Edit: March 07, 2019, 03:55:08 AM by Spekulatius »
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scorpioncapital

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Re: MKL - Markel Corp
« Reply #718 on: March 07, 2019, 02:13:29 AM »
How has Markel been investing its float? I remember they held a large amount of Berkshire stock. I think over time , the smart investment of the float is key to outperformance. Really insurers offer one key benefit - low, zero, or negative cost leverage. If this criteria is not met, there is no point for the structure to exist versus say a mutual, hedge, or investment conglomerate using shareholder equity or some small amount of paid debt to operate. If this criteria is met, then zero cost leverage + intelligent portfolio allocation = outperformance. I would also add another element which is the human desire to stray from the core and start doing extra, fancy things to accelerate things. This can be starting new startups that don't work and waste money and time.

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