Markel Sees 2Q Net Income Dip 32%

Richmond, Va.-based specialty insurer Markel Corp. reported second-quarter net income dropped 32 percent driven down by falling prices and investment losses from turbulent equity markets.

The insurer reported net income for the second quarter of this year fell $39 million to $82 million. Earnings per share fell $3.86 compared to the same period last year to $8.29 a share. Revenues declined 8 percent, or $55 million, to $605 million.

For the six months, net income has fallen 47 percent compared to last year, or $104 million, to $116 million. Earnings per share have dropped $10.33 to $11.69 a share. Revenues are off 12 percent for the period, or $154 million, to $1.13 billion.

During an analyst's conference call, Steven A. Markel, vice chairman of the company, said, "Both the insurance and investment world are in somewhat of a turmoil, and we are facing a number of headwinds in a number of different areas, but we are pleased with the way we are sailing through this environment."

Despite the challenges, he said the company is in a good position to take advantage of market changes once the turnaround begins in both the insurance and investment areas.

But executives said premium pricing is down 6 percent with competition from the standard markets, despite an increase in policy count of up to 10 percent.

The company said it continues to exert underwriting discipline, refusing to write risks at a price that doesn't make sense. The soft market, it said, is expected to last through the rest of this year. Markel did not predict when a turnaround would take place.

Combined ratio for the quarter rose six points to 95 from last year's 89, Markel said. For the six months, the combined ratio has deteriorated five points, going from 88 last year to 93.

In its filing with the Securities and Exchange Commission, Markel said the combined ratio increase was due primarily to lower underwriting profits in its excess and surplus line segment that can be traced back to soft market competitive pressures.

Markel reported in the filing that its net income was affected by write-downs amounting to $20.5 million for the second quarter and $92.5 million in the estimated fair value of investments.

During the conference call Richard R. Whitt III, senior vice president and chief financial officer, said the company took a $4.1 million loss on a credit default swap, a credit protection it sold on a portfolio of fixed income securities that will remain on its books and "will add volatility to our investment income results in future periods."