Markel CEO Discusses Q3 2010 Results - Earnings Call Transcript
Markel Corporation (
)
Q3 2010 Earnings Call Transcript
November 8, 2010 10:30 am ET
Executives
Tom Gayner – President and Chief Investment Officer
Anne Waleski – VP, CFO and Treasurer
Mike Crowley – President and Co-COO
Richie Whitt – President and Co-COO
Analysts
Beth Malone – Wunderlich Securities
Jack Shirk – SunTrust
John Fox – Fenimore Asset Management
Meyer Shields – Stifel Nicolaus
Amit Kumar – Macquarie
Mark Dwelle – RBC Capital Markets
John Processon [ph] – Moore Asset Management
Gail Golightly – Wells Fargo
Matt Rohrmann – KBW
Peter Zeus [ph] – Surveyor Capital
David West – Davenport & Company
Raymond Iardella – Oppenheimer
Presentation
Operator
Compare to:
Previous Statements by MKL
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Markel Corp. Q2 2010 Earnings Call Transcript
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Markel Corporation Q1 2010 Earnings Call Transcript
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Markel Corp. Q4 2009 Earnings Call Transcript
Greetings and welcome to the Markel Third Quarter 2010 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded.
It is now my pleasure to introduce your host, Mr. Tom Gayner, President and Chief Investment Officer. Thank you, Mr. Gayner, you may now begin.
Tom Gayner
Good morning. I am Tom Gayner and it's my privilege to welcome you to the third quarter conference call for the Markel Corporation. Let me begin by reminding you that the comments we make today are covered by the Safe Harbor provision we all know well. Specifically, during our call today, we may make forward-looking statements.
Additional information about factors that could cause actual results to differ materially from those projected in the forward-looking statements is described under the captions Risk Factors and Safe Harbor and Cautionary Statement in our most recent Annual Report on Form 10-K and quarterly report on Form 10-Q.
Our quarterly report on Form 10-Q, which is filed on our Web site at www.markelcorp.com, also provides reconciliation to GAAP of certain non-GAAP financial measures we may discuss in the call today.
This morning, Anne Waleski will review our year-to-date numbers; Mike Crowley and Richie Whitt will comment on our current operations and our insurance operations and then I will discuss our investments and non-insurance operations. Following our comments, we will open the floor for question-and-answer period. Steve Markel is here with us as well and will be available for the Q&A.
With that, Anne?
Anne Waleski
Thank you, Tom, and good morning everyone. I will follow the same format as in past quarters. As Tom mentioned, I will focus my comments primarily on year-to-date results. I will start by discussing our underwriting operations, followed by a brief discussion of our investment results and bringing the two together with a discussion of our total results for the nine months.
Moving right into the underwriting results, gross premium was up 3% at $1.5 billion for the first nine months of 2010. Higher gross premium volume in the London Insurance Market segment, which was due in part to our acquisition of Elliott Special Risks in late 2009, was partially offset by continuing competition across many of our product lines, particularly within the Excess and Surplus Lines segment.
For the quarter and nine months of 2010, gross written premium included approximately $19 million related to our settlement with Guaranty Bank. Net written premium was up 3% from the prior year at $1.4 billion. Retentions were flat at 90% in both periods.
Earned premiums decreased 7% compared to 2009 due to lower gross and net written premiums over the past several quarters. This decrease was partially offset by earned premium of approximately $19 million related to our settlement with Guaranty Bank.
Our combined ratio was 99% for the first nine months of 2010 compared to 97% in 2009. The increase was due to a higher current accident year loss ratio and a higher expense ratio, partially offset by more favorable development of prior year's loss reserve compared to the same period of 2009.
The combined ratio for the first nine months of 2010 includes approximately $72 million or six points of underwriting loss for two programs that were exposed to losses associated with the adverse conditions in the residential mortgage market in recent years as compared to approximately $26 million or two points of underwriting loss in the same period in 2009.
The combined ratio also includes $33 million or three points of underwriting loss from the Chilean earthquake and the Deepwater Horizon drilling rig explosion, which occurred in February 2010 and April 2010, respectively.
The 2010 current accident year loss ratio was 73% compared to 69% in 2009. The 2010 current accident year loss ratio includes approximately four points of underwriting loss for two programs that were exposed to losses associated with the adverse conditions in the residential mortgage market in recent years as compared to approximately 1 point of underwriting loss in the same period in 2009.
Favorable redundancies on prior year's loss reserves increased to $181 million or 14 points of favorable development compared to $156 million or 11 points of favorable development in 2009. The increase was primarily due to more favorable development of prior year's losses in E&S segment.
Our 2010 expense ratio increased approximately 1.41%. The increase in the expense ratio is partially the result of lower earned premiums compared to the same period last year.
Costs related for our One Markel systems project, also referred to as Atlas, represents approximately 3 points on the combined ratio for the nine months in 2010. During the third quarter of 2010, we decided to defer the implementation of certain aspects of the Atlas initiative and expensed $7.7 million of previously capitalized costs which were included in the expense ratio for the period.
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