MKL - Markel Corp

[Crip1]

OK, this is not anything really new for the members of this board, but it bears asking when was the last time MKL traded at a mere 15% premium to BV?

-Crip

[misterstockwell]

When was the last time they did anything impressive enough to trade at ANY premium to book value?

[Partner24]

Crip, as far as I know, it's been cheaper than that just a few years ago, and in the beginnings of the 90's. That being said, their historical average multiple has been far higher than that.

Are you still a shareholder?

Cheers!

[Parsad]

When was the last time they did anything impressive enough to trade at ANY premium to book value?

I would carefully watch what they do with Markel Ventures.  It is getting bigger, and they will put more capital into acquiring private businesses for a long time to come.  People ask about companies that do what Buffett does...well here is one that has, and they continue to evolve the process.  They have the expertise, investment acumen and operational skills to pull it off.  They also have the correct fundamentals in all of their actions.  The large premiums to book weren't appropriate in the past based solely on the insurance business, but it will be warranted over time as more quality, private businesses come under the fold.  Cheers!

[dealraker]

Parsad,

I've been a Markel shareholder for 18 years and have personally met the Markel's.  When you say they have the expertise, who specifically are you thinking has this?  Thanks if you can reply.

[Crip1]

When was the last time they did anything impressive enough to trade at ANY premium to book value?

That could be taken as kind of an inflamitory response, but perhaps not.

Well, of course, that depends on what one would call "impressive".

Markel has acheived a 13% average growth in BV/Share for the past 5 years (assuming BV remains flat through the end of 2010) which is not bad, certainly. But it's more impressive considering that the past 5 years has included a global financial meltdown and a protracted soft pricing market. This 13% is on the low end of what this company has been acheiving over the past 20 or so years. The question begs to be asked whether this means that their average growth in BV is at a cyclical low or whether we are looking at something akin to mean reversion.

-Crip

[Viking]

I have been thinking more about insurers lately; market looks interesting given it is trading at a multi-year low.

It looks to me that BV for all insurers is inflated today; with bond yields at historic lows, BV growth has been boosted in recent years and I think this multi-year benefit is done. Top line growth will be nonexistant given the crazy amount of capital that exists in the industry. Interest and dividend income will be under pressure as investments roll over and lower yielding securities are purchased. Current year CR appears to be 100 for well run p&c insurers; one has to wonder how long prior year reserve releases can continue to keep reported CR's under 100. And most well run companies are trading dirt cheap based on historical valuation metrics; the best part is the best run companies are not trading at much of a premium to the poorly run companies.

On the flip side, should bond yields increase insurers will see interest and div income increase (offsetting BV issues). Should the economy improve, top line should improve. Many insurers are using excess capital to re-purchase crazy amounts of cheap stock (particularly the re-insurers); some are taking out 10 to 15% of their float (and I expect this to continue into 2011). Assuming underwriting standards have not been relaxed top quality insurers should continue to report pretty decent reserve releases.

When I weave it all together, I really like the best run companies in the insurance/re-insurance space. Many look to remain reasonably profitable in 2011. Right now it is easy to see the issues and what I have learned is there will be positive surprises (we just can't see them right now). And yes, this is insurance so we could also get some nasty surprises as well.  

Regarding Markel, my read is it is a longer term play than most insurers (it will take a little longer for value proposition to play out).

[Parsad]

Parsad,

I've been a Markel shareholder for 18 years and have personally met the Markel's.  When you say they have the expertise, who specifically are you thinking has this?  Thanks if you can reply.

Forget Steve, Tony, and Tom...they built it and they can run it fantastic themselves.  But take a look at the promotions they've made over the last few years.  Listen to the conference call and hear the terrific people they've brought on board.  Their team is smaller than Fairfax's or Berkshire's, but they are talented and it seems as though they've been given the opportunity to learn about all aspects of Markel, not just any specific area.  I'm surprised by the depth of knowledge of everyone on their team.  Cheers!

[dealraker]

"That could be taken as kind of an inflamitory response, but perhaps not."

This writer responds:

Those on this board may find it interesting how long this poster has been invested with those considered hero's on this board.  I'll bet longer than anyone else by years.

And Parsad is a resource I'm courting so leave out the judgement and body guarding. 

I'm listening to the conference call.

[stahleyp]

"That could be taken as kind of an inflamitory response, but perhaps not."

 I'll bet longer than anyone else by years.

are you like 100 or something?