Markel Projects $503M Q3 Cat Loss From Hurricanes, Tremors

Markel Corporation (NYSE:MKL) recently announced pre-tax catastrophe loss estimates, originating from hurricanes Harvey, Irma and Maria and two Mexican earthquakes. The company projects catastrophe loss of about $503 million, net of reinstatement premiums.

The Zacks Consensus Estimate for the third quarter is currently pegged at $7.02 per share, reflecting year-over-year growth of 25.4%. We expect estimates to move downward as analysts incorporate impact of catastrophe losses.

Being a property and casualty insurer, Markel will bear the brunt of the disaster caused by these catastrophe events, weighing on its underwriting profitability. Nonetheless, the company’s underwriting profit has been improving over the years owing to its niche focus, effective management of insurance risk and focus on developing and maintaining underwriting as well as pricing guidelines on existing products and new product development.

Notably, the company’s combined ratio has been better than the industry average over the last five years through 2016, though the same deteriorated 500 basis points in the first half of 2017 due to less favorable development on prior-year loss reserves.

Irrespective of catastrophe alleviating techniques, severe blows from weather-related calamities make earnings unstable and hazardous. Nonetheless, Markel is capable of meeting insurance claims, courtesy a sturdy balance sheet.

Shares of Markel have rallied 20.8% year, outperforming the industry’s increase of 12.3%. Strong operational results driven by insurance, investments and Markel ventures should continue to drive shares.

Markel carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Recently, Assurant Inc. (NYSE:AIZ) has estimated between $134 million and $140 million pre-tax of reportable catastrophe losses from Harvey and expects gross losses from Irma to exceed its retention of $125 million pre-tax. The Travelers Companies, Inc. (NYSE:TRV) counts loss from Harvey between $245 million and $490 million after-tax. Chubb Limited (NYSE:CB) estimates $200 million post-tax cat losses from Maria, $24 million from Mexican earthquakes, $520 million from Harvey and between $640 million and $760 million from Irma.

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