Markel Corp. saw its net income plunge during the 2016 third quarter and its combined ratio soar by 10 points versus the previous year. The insurer blamed, in part, “unfavorable development” in its U.S. medical malpractice cover.
Markel said its Q3 net income came in just under $83.8 million, or $5.60 per diluted share. That’s down from $102.5 million, or $7.39 per share in the 2015 third quarter. The combined ratio landed at 98 for the quarter, versus 88 over the same, year-ago period.
Investors were alarmed enough at the results that they drove Markel’s share price down about 5 percent in early trading on Nov. 2, before the price stabilized in later afternoon trading.
Markel’s share price closed at $844.35, down 2.35 percent.
The insurer explained in its regulatory filing that $50.1 million, or five points on the consolidated combined ratio, included “losses and loss adjustment expenses resulting from management actions” concerning medical malpractice and specified medical product lines claim trends in its US. Insurance segment.
Out of that number, $36.5 million involved reserve strengthening on prior accident years.
Markel’s regulatory filing noted the adverse development on both lines stemmed from a higher proportion of business “written on class with high claim frequencies relative to other classes of business within these product lines over the last several years, including correctional facilities and contract physician staffing.”
Markel said that in late 2015, it started to see higher claim frequencies on those classes, “inconsistent with the historical trends indicated by our actuarial analyses.” The insurer said in its filing that it has taken “corrective actions” for business written in the affected classes.
Additionally, however, it saw less favorable development of previous years’ loss reserves across a number of other product lines of its ongoing underwriting segments.
Here are highlights of Markel’s consolidated Q3 results:
- Markel reported $22.3 million in underwriting profit during the quarter, compared to more than $113.3 million a year ago.
- Net earned premiums were booked at $974.2 million, up from $963.7 million in the 2015 third quarter.
- Net investment income hit $93.1 million, compared to $87 million in Q3 2015.
- Gross premiums written surpassed $1.1 billion in Q3, virtually flat compared to $1.15 billion last year.
- Net premiums written nearly reached $929.4 million, but that’s down from just under $953.2 million in the 2015 third quarter.
- Merkel’s U.S. Insurance combined ratio was 101, compared to 90 in Q3 2015. International Insurance and Reinsurance produced combined ratios of 91 and 94, respectively, compared to 87 and 86, respectively over the same period last year.
- Markel Ventures reported $321.3 million in revenues during Q3, and nearly $13.5 million in income to shareholders. The division produced $299 million in operating revenues and just under $6.4 million in income to shareholders in the 2015 third quarter.