Markel Results

[Guest misterstockwell]

Someone tell me again why Markel deserves a premium multiple?

[Crip1]

Uh...this is my #2 holding but...WOW...I am stunned.

 

Just a quick skim and this is really bad.

[Parsad]

I think the investment losses were somewhat expected.  They had about $1.4B in equity investments at September 30, 2008.  It didn't look like they had alot of hedges.  Wipe out about 30% from that $1.4B and you get about $500M in mark-to-market investment losses.  There weren't too many insurers like Fairfax...hell, there weren't too many companies like Fairfax out there with their hedged positions and CDS portfolio.  Even Berkshire will get sideswiped when their report comes out.  Cheers!

[oldye]

Probably better than what we'll see industry wide as the numbers start to come out

[Uccmal]

Those results are dismal.  It looks like they took a hit on actual sales of investments as well.

 

I dont get this comment:  These guys hold FFH and invest beside them from time to time:

 

Alan I. Kirshner, Chairman and Chief Executive Officer, commented, "At this time last year, it would have been almost impossible to predict the significant deterioration in general economic conditions and considerable dislocation of the global financial markets that we have experienced in 2008.

[Partner24]

"Someone tell me again why Markel deserves a premium multiple?"

 

Because it has a great long term track record of book value per share CAGR and because you don't value a business only by using it's last year financial results...;

 

Because it is more likely to have it's reserves stated too much conservatively than the contrary;

 

Because it has an investment leverage to equity of more than 3 and it's float has so far been at no cost overall.

 

 

[Guest misterstockwell]

In their own words:

 

Book value per common share outstanding decreased 16% to $222.20 at December 31, 2008 from $265.26 at December 31, 2007. Over the five-year period ended December 31, 2008, compound annual growth in book value per common share outstanding was 10%.

 

There is nothing great about that 5 year growth in book value.

[Partner24]

Well, 5 years is not enough, and even if it was, given the actual condition of the industry, 10% CAGR over the last 5 years is great.

 

And if I take the long term view, over it's last 20 years, MKL book value per share went from 9.22$ to 222,20$.

 

And finally, since it is where the puck is going to be that interest me most, I think that Markel is well positionned to thrive when the insurance market will finally begin to harden more significantly.

 

 

 

 

[Crip1]

"There is nothing great about that 5 year growth in book value."

 

True, 10% per annum over 5 years is not legendary, but it makes sense to frame this properly and consider that this 5 year period includes a worldwide financial meltdown and the costliest hurricane ever. It will be interesting to see how MKL stands up in comparison to the Berkshires, Chubbs, etc, of the world.

 

Interestingly enough, if Fairfax ends up with a BV of $310 for Y/E 2008, they will also have acheived a BV CAGR of 10% per annum.

 

Trust me, I am disappointed in the results, but thinking that the folks over at Markel have gotten stupid all of a sudden does not make sense to me.

 

-Crip

[dcollon]

I would take some time to review the operating results.  The Q4 results are interesting and don't appear as bad as some have suggested.  However, I can understand the frustration about multiples/valuations. 

 

 

[dcollon]

Below is the link to the Markel transcript.  I think it is worth a read for those involved with the company.  Tom Gayner had some interesting comments on the investment portfolio.

 

http://seekingalpha.com/article/118242-markel-q4-2008-earnings-call-transcript

 

[T-bone1]

I think Crip makes the right point . . . these results might look crappy, but they have about the same 5 year BV growth rate as FFH.

 

MKL is a phenomonal insurer (always over-reserved, great specialty businesses, 85% combined ratios), and a slightly above average investor (no huge mistakes, will outperform the market over time)

 

FFH is a phenomonal investment vehicle (in the top 1% of all hedge funds, mutual funds and financial companies over the last ten years. Great long term record, and we know how they do it . . . it isn't a fluke) and an above average insurer (conservative reserving, and combined ratios around 100%)

 

I think these companies should see similar book value growth over time (say over the ten year period that we are in the middle of right now). If you assume that going forward they will both grow book value at 20% (at least for the next five years) then they are probably worth 1.5 to 2 times book.

 

I think MKL has a book value premium to FFH because their underwriting is obviously repeatable, whereas you need to have a good amount of understanding and/or faith to think that Prem and Brian's investment performance is repeatable. The market believed this about FFH once, I think they will again.

 

MKL will never grow like FFH can in the future because there just isn't that much business you can write at 85% combined ratios, no matter what your culture is.

 

I for one would love to see FFH get their hands on some specialty businesses with low combined ratios, and then really knock the cover off the ball.

 

My money is on FFH, but if MKL was available at FFH prices (probably about 1 to 1.1 times FFH's adjusted current book value right now) I would definately buy some.