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Markel Corp. (MKL) to Buy Metromont to Expand Portfolio

Published 12/14/2021, 04:29 AM
Updated 07/09/2023, 06:31 AM

Markel (NYSE:MKL) Corporation MKL recently entered into an agreement with Metromont LLC to purchase the majority interest in the latter. Subject to certain closing conditions, the deal is expected to close in the fourth quarter of 2021. However, other terms of the deal were kept under wraps. MKL makes long-term investments in top-notch firms through Markel Ventures.

The to-be-acquired precast concrete manufacturer has its presence in the Southeast and mid-Atlantic area, and works as a third-generation family business. Metromont has six manufacturing points in four states, namely South Carolina, Virginia, Georgia and Florida. Metromont has served general contractors in the making of data centers, warehouses, multi-family residential structures, parking decks, etc.

Markel considers strategic buyouts a prudent approach to ramp up its growth profile. With this latest addition to the portfolio, MKL will be able to gain from Metromont’s solid reputation in the market and its knowhow in the precast concrete industry.

Acquisitions helped the company enhance its surety capabilities, ramp up Markel Ventures’ revenues and expand its reinsurance product offerings. In the first nine months of 2021, Markel Ventures revenues increased 34% to $2.7 billion year over year owing to a significant contribution of revenues from Lansing Building Products, which was acquired in April 2020.

Markel has been pursuing acquisitions for a while to achieve profitable growth in insurance operations and create additional value on a diversified basis in Markel Ventures operations. Markel envisions doubling the size of its insurance operations and targets $10 billion of annual insurance premiums in five years. Subsequently, this should lead to a $1 billion of annual underwriting profit.

MKL expects to achieve this goal, primarily through organic growth of its existing operations. Its recent strategic endeavors support strong growth in new business. These, coupled with ongoing favorable pricing trends across most product lines should help Markel reach its target.

Moreover, this currently Zacks Rank #3 (Hold) player boasts a solid solvency level. This helps Markel invest in organic growth initiatives for its insurance business.

Shares of Markel have gained 22.2% in a year’s time, outperforming the industry's increase of 11.7%. Its niche focus, improved pricing, effective management of insurance risk, and focus on developing and maintaining underwriting as well as pricing guidelines should drive growth.

Zacks Investment ResearchImage Source: Zacks Investment Research

Stocks to Consider

Some better-ranked property and casualty insurers are American Financial Group (NYSE:AFG), Inc. AFG, Hallmark Financial Services (NASDAQ:HALL) HALL and Berkshire Hathaway (BRK.B), each holding a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

American Financial is a holding company that engages primarily in property and casualty insurance through its subsidiaries, with focus on specialized commercial products for businesses. AFL came up with a trailing four-quarter surprise of 47.7%, on average.

Hallmark Financial and its wholly owned subsidiaries engage in the sale of property and casualty insurance products. HALL’s earnings managed to beat estimates in three of its trailing four quarters (while missing the mark in one), the average surprise being 53.62%.

Berkshire Hathaway is an Omaha, NE-based holding company, which owns more than 90 subsidiaries in insurance, rail roads, utilities, manufacturing services, retail and home building. BRK.B’s bottom line managed to beat estimates in two of its trailing four quarters (while missing the mark in the other two), the average surprise being 5.5%.

Shares of AFG, HALL and BRK.B have managed to gain 55.5%, 25.4% and 29.2%, respectively, in a year's time.

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Berkshire Hathaway Inc. (NYSE:BRKa) (BRK.B): Free Stock Analysis Report

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Markel Corporation (MKL): Free Stock Analysis Report

Hallmark Financial Services, Inc. (HALL): Free Stock Analysis Report

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