MKL - Markel Corp

[eggbriar]

An article on Markel from the Insurance Journal regarding a talk from Anthony Markel at a recent insurer conference:

 

http://www.insurancejournal.com/news/national/2017/07/21/458261.htm

 

"Markel told the story of the Markel Corp., a company that he helped grow from a small long-haul trucking wholesale specialty agency with a net worth of about $6 million, into a global holding company for insurance, reinsurance and investment operations with total revenue of more than $14 billion today."

 

“You take in some money, you spend some money and you lose some money, and God willing, you have some left at the end of the day,” according to Anthony (Tony) Markel..."

[Crip1]

 

Is anyone familiar with the company? I'm not, despite the fact that they're located less than 20 miles from my office.

 

https://finance.yahoo.com/news/markel-acquire-state-national-124700054.html

 

 

-Crip

 

 

 

[muscleman]

http://www.marketwatch.com/story/state-national-to-be-acquired-by-markel-in-deal-valuing-the-insurer-at-nearly-890-million-2017-07-26

 

I hate this... $21 cash per share? I am losing all future potential upside on SNC.  :(

[Liberty]

Going into farming too:

 

https://www.markelcorp.com/About-Markel/NewsRoom/Reuters2289141

[Liberty]

Q2: https://www.markelcorp.com/About-Markel/NewsRoom/Reuters2289153

 

 

Markel Corporation (NYSE:MKL) reported book value per common share outstanding of $643.37 at June 30, 2017, up 6% from $606.30 at December 31, 2016. Comprehensive income to shareholders was $342.4 million for the second quarter of 2017 compared to $209.9 million for the same period of 2016. Comprehensive income to shareholders was $565.6 million for the six months ended June 30, 2017 compared to $606.9 million for the same period of 2016. The combined ratio was 89% for the second quarter of 2017 compared to 93% for the second quarter of 2016. The combined ratio was 95% for the six months ended June 30, 2017 compared to 90% for the same period of 2016. The combined ratio for the six months ended June 30, 2017 included $85.0 million, or four points on the combined ratio, of previously reported adverse development on prior years' loss reserves resulting from the decrease in the Ogden rate, which is used to calculate lump sum awards in U.K. bodily injury cases. Diluted net income per share was $10.31 for the quarter ended June 30, 2017 compared to $5.41 for the second quarter of 2016. Diluted net income per share was $14.20 for the six months ended June 30, 2017 compared to $16.55 for the same period of 2016.

[obtuse_investor]

I own SNC and am disappointed with the $21/share offer. This is a remarkable business that deserves a lot higher valuation. The insurer broker is a low risk toll collection business while the general insurer is exceptional with a mid 80s combined ratio. Markel is buying this for a song. I hope there's a higher offer or a counter bid. I don't see how any of the shareholders would be happy with what Markel is offering.

 

I don't know anything about SNC. If what you say is true, then as a MKL owner, I am quite glad. But then I also wonder what's wrong with SNC that the management valued themselves at a low valuation. Perhaps, it isn't such a good deal for Markel after all. (just speculating here)

 

 

[Txvestor]

Devils_shadow,

Agree it is a growing insurer, but MKL is paying over 3x BV here. Can you explain why you beleive that is cheap?

[Txvestor]

http://ir.statenational.com/phoenix.zhtml?c=253762&p=irol-newsArticle&ID=2272043

 

From their last quarterly statement up to Mar 31st, BV is $307M. Eps for FY 2017 guided to 1.18-1.26. I do not think MKL would have gone too much higher, and I think part of the motivation of the seller, is to find a home in a high quality organization.

[Crip1]

That's why half a dozen law firms are seeking to file a class action against this miserable offer. If it's such an average business why bother buying at all. And if it's as good as it seems, pay up.

 

 

Doesn't that happen with the vast majority of proposed acquisitions? Law firms are not business owners, but they can generate revenue by claiming they're "defending the rights" of business owners. And...the shareholders get to vote on it, don't they?

 

 

-Crip

[Crip1]

An offer 7% above the last close. Are they kidding? This is not some drab business about to go bust that is desperate to find a home. It is an ouststanding well run business. I am sure the shareholder vote from the 63% minorities will reflect the angst properly. I'm sure nobody loves being screwed like that.

 

 

So be it if that's how they vote. I just did not get how the alleged class action suits were relevant.

 

 

-Crip

[LightWhale]

If it's such an average business why bother buying at all. And if it's as good as it seems, pay up.

 

But they have paid up. This is from Markel's press release:

"The agreement, which has been unanimously approved by both companies' board of directors, represents a 38% premium to State National's 30-day volume-weighted average stock price as of May 18, 2017, the last trading day prior to published market speculation regarding a potential sale of State National"

[Txvestor]

These are quite clearly parasitic lawyers filing frivolous lawsuits. They happen in virtually every acquisition. Quoting those as a reason why this is undervalued is frankly laighable. I am not necessarily commneting on whether this is over or under valued here, but the evidence presented ie. 6 lawsuits is not anything worthy.

[rkbabang]

A 7% premium over recent close is enough evidence. The PE multiple is enough evidence. The rest as they say is willful blindness to ignore facts. The lawsuits may or may not be useless but to think this is in anyway a fair offer is just delusional

 

If that is the case that it isn't a sufficient offer then SNC shareholders will not approve the deal.  I never understood these type of lawsuits.  If the majority of shares approve a deal then there is nothing to argue about.

 

[KJP]

A 7% premium over recent close is enough evidence. The PE multiple is enough evidence. The rest as they say is willful blindness to ignore facts. The lawsuits may or may not be useless but to think this is in anyway a fair offer is just delusional

 

If that is the case that it isn't a sufficient offer then SNC shareholders will not approve the deal.  I never understood these type of lawsuits.  If the majority of shares approve a deal then there is nothing to argue about.

 

Based on earlier posts in this thread, the controlling family is going to stick around and manage the company, and thus presumably enjoin a portion of the future upside in the business, which other shareholders will not enjoy.  That creates a potential conflict between the people who structured the transaction (i.e., management) and outside shareholders, because management could funnel a portion of the money that should have gone pro rata to all shareholders to themselves via their new compensation arrangements with Markel.

 

Part of what plaintiffs' lawyers do is make sure potential conflicts like this are fully aired and shareholders have all relevant facts before they vote.  I would also note that based on the press release it appears that the potentially conflicted insiders control 37% of the vote.  They could have required the deal to be approved by a majority of the other shareholders, but they chose not to do so.  I also could not tell from a quick read of the release whether the board created a committee independent of the continuing insiders to shop the company.  All of those facts (or the lack of them) raise potential issues about the process that I would think are worth investigating.

[rkbabang]

A 7% premium over recent close is enough evidence. The PE multiple is enough evidence. The rest as they say is willful blindness to ignore facts. The lawsuits may or may not be useless but to think this is in anyway a fair offer is just delusional

 

If that is the case that it isn't a sufficient offer then SNC shareholders will not approve the deal.  I never understood these type of lawsuits.  If the majority of shares approve a deal then there is nothing to argue about.

 

Based on earlier posts in this thread, the controlling family is going to stick around and manage the company, and thus presumably enjoin a portion of the future upside in the business, which other shareholders will not enjoy.  That creates a potential conflict between the people who structured the transaction (i.e., management) and outside shareholders, because management could funnel a portion of the money that should have gone pro rata to all shareholders to themselves via their new compensation arrangements with Markel.

 

Part of what plaintiffs' lawyers do is make sure potential conflicts like this are fully aired and shareholders have all relevant facts before they vote.  I would also note that based on the press release it appears that the potentially conflicted insiders control 37% of the vote.  They could have required the deal to be approved by a majority of the other shareholders, but they chose not to do so.  I also could not tell from a quick read of the release whether the board created a committee independent of the continuing insiders to shop the company.  All of those facts (or the lack of them) raise potential issues about the process that I would think are worth investigating.

 

What would be the point of owning 37% of a business if you didn't control 37% of the vote on decisions like this?  Isn't that just the risk you take as a minority shareholder when you buy a company with large inside ownership?  This strikes me as wanting to use the legal system to control a company without putting up the capital to buy 51% of the company.

 

[villainx]

There's different fiduciary responsibilities depending on your role, right?  Acting as shareholder, management, and directors are all different. 

 

There are some safeguards that they can put in place, majority of non insider shareholders, independent committee, etc. So ... not all conflict of interest is frivolous.  Even if this one ends up being frivolous.

[educatedidiot]

Markel filed their Q2 13-F on Friday: http://www.rocketfinancial.com/Holdings.aspx?id=2419&fC=1

 

Not many major changes in it.  They bought small positions in CHH, UA, GE, BER, and HRL.  And pretty much sold out of SLB.

[fareastwarriors]

SNC is trading a bit down lately. Why? Shouldn't the price be narrowing to the buyout price?

[zippy1]

Markel Reports Third Quarter And Nine-Months Results

 

arkel Corporation (MKL) reported book value per common share outstanding of $641.20 at September 30, 2017, up 6% from $606.30 at December 31, 2016. Comprehensive loss to shareholders was $19.9 million for the third quarter of 2017 compared to comprehensive income of $89.2 million for the same period of 2016. Comprehensive income to shareholders was $545.7 million for the nine months ended September 30, 2017 compared to $696.1 million for the same period of 2016. The combined ratio was 134% for the third quarter of 2017 compared to 98% for the third quarter of 2016. The combined ratio was 108% for the nine months ended September 30, 2017 compared to 93% for the same period of 2016. The combined ratio for the quarter and nine months ended September 30, 2017 included $503.0 million, or 46 points and 16 points, respectively, of underwriting losses, net of reinstatement premiums, from Hurricanes Harvey, Irma and Maria as well as the earthquakes in Mexico. The combined ratio for the nine months ended September 30, 2017 also included $85.0 million, or three points on the combined ratio, of previously reported adverse development on prior years' loss reserves resulting from the decrease in the Ogden rate, which is used to calculate lump sum awards in U.K. bodily injury cases. Diluted net loss per share was $18.82 for the quarter ended September 30, 2017 compared to diluted net income of $5.60 for the third quarter of 2016. Diluted net loss per share was $4.52 for the nine months ended September 30, 2017 compared to diluted net income of $22.16 for the same period of 2016.

 

 

 

https://finance.yahoo.com/news/markel-reports-third-quarter-nine-204600674.html

[wolverine890]

This quarter was worse than expected for MKL. But, was anyone else especially off put by the 183% combo ratio on reinsurance? It kind of echoes what Buffett has been saying for the last two years? Seems to me like it would be okay if they were using that float to growing their capital faster than the rest of the market in other places (MV or investments); but their results are okay at best.

[CorpRaider]

This quarter was worse than expected for MKL. But, was anyone else especially off put by the 183% combo ratio on reinsurance? It kind of echoes what Buffett has been saying for the last two years? Seems to me like it would be okay if they were using that float to growing their capital faster than the rest of the market in other places (MV or investments); but their results are okay at best.

 

Yeah, I've mulled this over a bit.  Several of these berk-a-like/outfits seem to parrot Buffett to investors but seem to ignore his views with respect to their operations.

[racemize]

This quarter was worse than expected for MKL. But, was anyone else especially off put by the 183% combo ratio on reinsurance? It kind of echoes what Buffett has been saying for the last two years? Seems to me like it would be okay if they were using that float to growing their capital faster than the rest of the market in other places (MV or investments); but their results are okay at best.

 

Yeah, I've mulled this over a bit.  Several of these berk-a-like/outfits seem to parrot Buffett to investors but seem to ignore his views with respect to their operations.

 

Seems a bit harsh--Book value barely changed in a quarter with huge hurricanes and an earthquake.  Berkshire is going to take a hit too this Q I would imagine.

[CorpRaider]

Yeah, sorry I was thinking more broadly not really concerning MKLs quarter (or just Markel).  Just thinking about the ones that make large macro bets or acquire or massively charge into reinsurance while their supposed mentor/idol is decrying the inadequate premiums and likely large future losses.  Just routine calibration on the bullshit detector.

[Crip1]

I've been a MKL shareholder for longer than I can remember (having a father-in-law who worked at a company MKL bought years ago helped!) and they've been the single biggest, in dollar terms, investment gain in my life. That said. I'm considering selling some. The recent run up has them right now at close to 1.8x BV and, though I love the company, that's pretty rich.

 

I want to say that they got as low as 1.2x-1.3x BV a couple of years ago and I did add a teenie bit to my position. In hindsight, it showed to be effective to sell when the company was trading at 2x BV and buy closer to 1x. I think the days of MKL trading 2x or 1x BV are gone forever, so 1.2x and 1.8x may be the entry/exit points.

 

 

Just thinking out loud here.

 

 

-Crip

[petey2720]

Look man, I don't post that often, so listen up.  Hold onto your Markel.  Find something else to think about.  If you sell, you will pay taxes and possibly do something dumb with the money.  If you keep holding you be got a world class company whose interests are aligned with yours and if the market cracks they will be opportunistic and add assets at low prices.  Nobody ever said they are relieved to have sold their Brk shares.