Markel Corp is like a mini Berkshire Hathaway. Its primary business is property and casualty insurance. However, it uses the income from its insurance business to buy non-insurance businesses in diverse areas. The company’s primary driver of long term growth comes from its investment activities. Its CIO has a reputation of beating the S&P500 by 2 percentage points on average over the past 5 years. One of Markel’s biggest risks is the scenario where the claims exceed the amount reserved for such costs. Any negative performance of Markel’s investment portfolio can also negatively impact the company.
Why Is Markel Corporation Among The Best Insurance Stocks Of 2020
Markel Corporation operates differently from other insurance companies. Most insurers tend to return a large chunk of their free cash flows to its shareholders. However, Markel retains this cash flow. It then invests this cash flow with the goal of compounding it at superior rates of returns. This strategy has yielded some results for the company. However, the M&A track record is a mixed bag. For excess and surplus lines, Markel is the sixth-largest writer in the US. Markel has also historically been able to maintain an attractive loss ratio. The purchase of Alterra in 2013 allows Markel to significantly expand its reinsurance business.
The Stock Performance Of Markel Corporation
Markel’s stock has been somewhat flat for the past month. The stock closed at $997.35 on 20th November 2020. Markel’s stock has recovered 34% since the March market fall but is down 13% for the year 2020. On a 5-year basis, the stock has grown 8%. It was up 46% until January 2020 before the pandemic broke out. The recovery in the stock market is poised to positively impact Markel as it has substantial investments in public companies. Markel has investments worth $18 billion and cash of $4.5 billion as of September 2020.