Markel Scales New 52-Week High on Improved Fundamentals - Analyst Blog

Riding on steady growth drive, shares of Markel Corp. MKL hit a new 52-week high of $646.18 on Jun 9. Notably, this property-casualty insurer's shares have risen 12.4% since the beginning of 2014.

Markel also delivered positive earnings surprise in 2 of the last 4 quarters, with an average beat of 3.4%. The improving momentum of this Zacks Rank #3 (Hold) stock is fueled by improved underwriting experience and risk-based capital position.

Yesterday's closing price represented a robust one-year return of about 21.6% against a return of 18.7% clocked by the S&P 500 index. Average volume of shares traded over the last three months stands at approximately 42.5K.

Earnings Review

On May 7, Markel reported first-quarter 2014 earnings per share of $6.25, which beat the Zacks Consensus Estimate by 8.5%. However, earnings fell short of the year-ago figure of $9.50, primarily due to expenses that escalated about 61% on year over year basis.

Nevertheless, core growth remained strong with increases of 51% in top line, 7.5% in underwriting profit and 34% in investment income, while tax expense remained stable.

Rationale

The acquisition and successful integration of Alterra (in 2013) are improving Markel's business and branding. Moreover, the company has ventured overseas with the acquisition of London-based Abbey Protection earlier this year. This integrated specialty insurance and consultancy group is also expected to bolster the company's growth prospects and add to its diversified product portfolio.

Furthermore, despite expenses related to acquisitions and restructuring in order to consolidate operations and improve operating leverage, Markel holds adequate liquidity to cushion business risks. The recent affirmation of Markel's credibility by Moody's Investor Service of Moody's Corp. MCO is another positive and instils confidence in investors about the company's growth prospects.

Meanwhile, some better-ranked insurers include Endurance Specialty Holdings Ltd. ENH and Hallmark Financial Services Inc. HALL, both of which sporta Zacks Rank #1 (Strong Buy).