Markel (US:MKL)2023-04-27 16:55Financial Data and Key Metrics Changes - The consolidated combined ratio for Q1 2023 was 94%, up from 89% in Q1 2022, reflecting higher attritional loss ratios and less favorable development on prior accident year's loss reserves [4] - Net income to common shareholders was $489 million for Q1 2023, compared to a net loss of $52 million in the same period last year, largely due to changes in public equity portfolio valuation [33] - Recurring investment income grew to $159 million, up from $92 million year-over-year, driven by higher interest rates [11][39] Business Line Data and Key Metrics Changes - Gross written premiums in the insurance segment increased to $2.7 billion in Q1 2023, a 6% rise from $2.5 billion in Q1 2022, with notable growth in personal lines, property, and marine and energy product lines [10] - Markel Ventures revenues increased by 16% to $1.1 billion in Q1 2023, up from $950 million in the same quarter last year, with EBITDA rising 25% to $120 million [5][17] - The reinsurance segment reported a combined ratio of 91, improved from 95 a year ago, despite a 4% decrease in gross written premiums [15] Market Data and Key Metrics Changes - The retention of gross written premiums was 83% in 2023, down 3 points from the previous year, attributed to higher session rates in professional liability and personal lines [10] - Rates across the portfolio are holding up well, with increases of 5% to 10% in many products, although property rates have accelerated more significantly [16] Company Strategy and Development Direction - The company emphasizes long-term growth and profitability, focusing on underwriting discipline and rate adequacy, willing to walk away from business that does not meet profitability targets [8][35] - Management is optimistic about mid and long-term profitable growth objectives, despite acknowledging current market uncertainties [16][58] Management's Comments on Operating Environment and Future Outlook - Management expressed caution regarding the current level of uncertainty in insurance market conditions, particularly around loss trends and inflation [14][63] - The company is seeing a strong new business pipeline, particularly in specialty market solutions, despite some competitive pressures [16][25] Other Important Information - The company repurchased $81 million of its shares in Q1 2023, consistent with its share repurchase program [9][12] - The fair value of the equity portfolio included cumulative unrealized holding gains of $4.9 billion as of March 31, 2023 [11][18] Q&A Session Summary Question: Are you seeing signs of economic slowdown within Markel Ventures? - Management noted that the 16% growth rate suggests resilience, but acknowledged the diverse nature of the business [23] Question: Can you elaborate on the reserve release related to the CATCo unit? - The reserve release is neutralized by a higher minority interest charge, highlighting favorable reserve runoff [42][43] Question: How do you reconcile the pricing environment with the need for higher accident year margins? - Management indicated that rising interest rates and social inflation necessitated a cautious approach, leading to increased margins for safety [44] Question: What are your thoughts on achieving the 10-5-1 aspirational goals? - Management emphasized that while premium growth is important, underwriting profitability remains the primary focus, and they are not strictly bound to numerical targets [57][58]